sv4za
As filed
with the Securities and Exchange Commission on June 25,
2010
Registration
No. 333-167417
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Amendment No. 1
to
Form S-4
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF
1933
Williams Partners
L.P.
(Exact name of registrant as
specified in its charter)
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Delaware
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4922
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20-2485124
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(State or other jurisdiction
of
Incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number)
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One Williams Center
Tulsa, Oklahoma
74172-0172
(918) 573-2000
(Address, including zip code,
and telephone number, including area code, of registrants
principal executive offices)
James J.
Bender, Esq.
General Counsel
Williams Partners GP
LLC
One Williams Center,
Suite 4900
Tulsa, Oklahoma
74172-0172
(918) 573-2000
(Name, address, including zip
code, and telephone number, including area code, of agent for
service)
Copies to:
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Richard M. Russo
Gibson, Dunn & Crutcher LLP
1801 California Street, Suite 4200
Denver, CO 80202
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Peggy A. Heeg
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, TX 77010
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Approximate date of commencement of proposed sale to the
public: As soon as practicable after this
registration statement becomes effective and upon consummation
of the merger described in the enclosed joint proxy
statement/prospectus.
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. o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) 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. o
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. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the Exchange Act. (Check one):
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Large accelerated filer þ
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Accelerated filer o
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Non-accelerated filer o
(Do not check if a smaller reporting company)
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Smaller Reporting company o
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** If applicable, place an X in the box to designate the
appropriate rule provision relied upon in conducting this
transaction:
Exchange Act
Rule 13e-4(i)
(Cross-Border Issuer Tender Offer)
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Exchange Act
Rule 14d-1(d)
(Cross-Border Third-Party Tender Offer)
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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, as amended, or until the
Registration Statement shall become effective on such date as
the Commission, acting pursuant to Section 8(a), may
determine.
The
information in this joint proxy statement/prospectus may be
changed. These securities may not be sold until the registration
statement filed with the Securities and Exchange Commission is
effective. This joint proxy statement/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 or sale is not
permitted.
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SUBJECT TO COMPLETION, DATED
JUNE 25, 2010.
Dear Unitholders:
Pursuant to an Agreement and Plan of Merger dated as of
May 24, 2010 (the Merger Agreement), the
general partner of Williams Partners L.P. (Williams
Partners), which is Williams Partners GP LLC (the
Williams Partners General Partner), and the general
partner of Williams Pipeline Partners L.P. (WMZ),
which is Williams Pipeline GP LLC (the WMZ General
Partner), have agreed to combine the businesses of
Williams Partners and WMZ. Pursuant to the Merger Agreement, WPZ
Operating Company Merger Sub LLC (Merger Sub), a
direct wholly owned subsidiary of Williams Partners Operating
LLC (the Operating Company), which is a direct
wholly owned subsidiary of Williams Partners, will be merged
with and into WMZ, with WMZ being the sole surviving entity and
becoming an indirect wholly owned subsidiary of Williams
Partners (the Merger).
As a result of the Merger, each holder of outstanding common
units of WMZ (WMZ Common Units), other than the WMZ
General Partner, will receive 0.7584 of one common unit of
Williams Partners in consideration for each WMZ Common Unit that
such holder owns at the effective time of the Merger.
The approval and adoption of the Merger Agreement and the Merger
by WMZ requires approval by holders of at least a majority of
the outstanding WMZ Common Units that are not held by the WMZ
General Partner or its affiliates (Non-affiliated WMZ
Common Units) and by holders of at least a majority of the
outstanding subordinated units of WMZ (WMZ Subordinated
Units), with each group of holders of WMZ Common Units and
WMZ Subordinated Units voting as a separate class. As of the
record date, there
were
Non-affiliated WMZ Common Units outstanding. All of the
currently outstanding WMZ Subordinated Units are held by the WMZ
General Partner, and the WMZ General Partner has agreed in the
Merger Agreement to vote all of the WMZ Subordinated Units in
favor of the Merger Agreement and the Merger. WMZ has scheduled
a special meeting for the limited partners of WMZ to vote on
these matters
on ,
2010. Regardless of the number of units that you own or whether
you plan to attend the special meeting, it is important that
your units be represented and voted at the special meeting.
Voting instructions are set forth inside this joint proxy
statement/prospectus.
The conflicts committee of the board of directors of the WMZ
General Partner (the WMZ Conflicts Committee) has
unanimously approved the Merger Agreement and the Merger and
determined that they are in the best interests of WMZ and the
holders of Non-affiliated WMZ Common Units. Based upon such
approval, the WMZ General Partner, acting through its board of
directors (the WMZ Board), has unanimously approved
and adopted the Merger Agreement and the Merger. Accordingly,
the WMZ Conflicts Committee and the WMZ Board (on behalf of the
WMZ General Partner) recommend that holders of Non-affiliated
WMZ Common Units vote to approve and adopt the Merger Agreement
and the Merger. The Williams Partners General Partner (on behalf
of Williams Partners, the Operating Company and Merger Sub) has
approved and adopted the Merger Agreement and the Merger.
This joint proxy statement/prospectus provides you with detailed
information about the proposed Merger and related matters.
Williams Partners and WMZ both encourage you to read the entire
document carefully. In particular, please read Risk
Factors beginning on page 21 of this joint proxy
statement/prospectus for a discussion of risks relevant to the
Merger and the combined company.
The common units of Williams Partners are listed on the New York
Stock Exchange under the symbol WPZ, and WMZ Common
Units are listed on the New York Stock Exchange under the symbol
WMZ.
Steven J. Malcolm
Chairman of the Board and Chief
Executive Officer,
Williams Partners GP LLC and
Williams Pipeline GP LLC
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE COMMON
UNITS TO BE ISSUED IN THE MERGER OR DETERMINED IF THIS JOINT
PROXY STATEMENT/PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this joint proxy statement/ prospectus
is ,
2010 and it was first mailed to unitholders on or
about ,
2010.
This joint proxy statement/prospectus incorporates by
reference important business and financial information about
Williams Partners and WMZ and their respective subsidiaries from
documents filed with the Securities and Exchange Commission
(SEC) that have not been included in or delivered
with this joint proxy statement/prospectus. This information is
available without charge at the SECs website at
www.sec.gov, as well as from other sources. See Where You
Can Find More Information.
Holders of outstanding common units of WMZ (the WMZ
Common Units) may also request copies of these
publicly-filed documents from Williams Partners, without charge,
upon written request to Investor Relations, Williams Partners
L.P., One Williams Center, Suite 5000, Tulsa, Oklahoma
74172-0172
or by calling Williams Partners at
(918) 573-2078.
In order to receive timely delivery of the documents in advance
of the special meeting of limited partners of WMZ, holders of
WMZ Common Units must make such request no later
than ,
2010.
Except as otherwise specifically noted, or the context
otherwise requires, as used in this joint proxy
statement/prospectus:
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Dropdown refers to the transaction among Williams
Partners, the Williams Partners General Partner, the Operating
Company, Williams and certain subsidiaries of Williams pursuant
to which Williams (through such subsidiaries) contributed to
Williams Partners the ownership interests in the entities that
made up Williams Gas Pipeline and Midstream
Gas & Liquids businesses, to the extent not already
owned by Williams Partners, including Williams limited and
general partner interests in WMZ, but excluding Williams
Canadian, Venezuelan and olefin operations and 25.5% of
Gulfstream Natural Gas System, L.L.C. The Dropdown closed on
February 17, 2010.
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Merger Sub refers to WPZ Operating Company Merger
Sub LLC, a direct wholly owned subsidiary of the Operating
Company;
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Operating Company refers to Williams Partners
Operating LLC, a direct wholly owned subsidiary of Williams
Partners;
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Williams refers to The Williams Companies, Inc.
and its subsidiaries;
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Williams Partners refers to Williams Partners
L.P. and its subsidiaries;
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Williams Partners General Partner refers to
Williams Partners GP LLC, the general partner of Williams
Partners;
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WMZ refers to Williams Pipeline Partners L.P. and
its subsidiaries; and
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WMZ General Partner refers to Williams Pipeline
GP LLC, the general partner of WMZ.
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In Questions and Answers and in the
Summary below, selected information from this joint
proxy statement/prospectus is highlighted, but not all of the
information that may be important to you is included. To better
understand the Agreement and Plan of Merger, dated as of
May 24, 2010, by and among Williams Partners, the Williams
Partners General Partner, the Operating Company, Merger Sub,
WMZ, and the WMZ General Partner, as it may be amended from time
to time (the Merger Agreement), and the merger of
Merger Sub with and into WMZ contemplated thereby (the
Merger), and for a more complete description of its
legal terms, you should carefully read this entire joint proxy
statement/prospectus, including the section entitled Risk
Factors on page 21, as well as the documents that are
incorporated by reference into this joint proxy
statement/prospectus. See Where You Can Find More
Information.
You should rely only on the information contained or
incorporated by reference in this joint proxy
statement/prospectus. Neither Williams Partners, WMZ nor any of
their affiliates has authorized anyone to provide you with
information different from that contained or incorporated by
reference in this joint proxy statement/prospectus. Therefore,
if anyone gives you information of this sort, you should not
rely on it. The information contained in this joint proxy
statement/prospectus and the documents incorporated by reference
are accurate only as of their respective dates, regardless of
the time of delivery of this joint proxy statement/prospectus.
Williams Partners and WMZs business, financial
condition, results of operations and prospects may have changed
since those dates.
Tulsa,
Oklahoma
,
2010
Notice of
Special Meeting of Limited Partners of Williams Pipeline
Partners L.P.
To the Limited Partners of Williams Pipeline Partners L.P.:
A special meeting of limited partners (the Special
Meeting) of Williams Pipeline Partners L.P.
(WMZ) will be held
on ,
2010 at a.m., local time, at the Williams
Resource Center Theater at One Williams Center, Tulsa, Oklahoma,
74172-0172,
for the following purposes:
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To consider and vote upon the approval and adoption of the
Agreement and Plan of Merger dated as of May 24, 2010 by
and among Williams Partners L.P., Williams Partners GP LLC (the
Williams Partners General Partner), Williams
Partners Operating LLC, WPZ Operating Company Merger Sub LLC
(Merger Sub), WMZ, and Williams Pipeline GP LLC, the
general partner of WMZ (the WMZ General Partner), as
it may be amended from time to time (the Merger
Agreement), and the merger of Merger Sub with and into WMZ
contemplated by the Merger Agreement (the
Merger); and
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To transact other business as may properly be presented at the
Special Meeting or any adjournments of the Special Meeting.
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Approval of the proposal described above requires the
affirmative vote of holders of at least a majority of the
outstanding common units of WMZ (the WMZ Common
Units) that are not held by the WMZ General Partner or its
affiliates (each such WMZ Common Unit, a Non-affiliated
WMZ Common Unit) and of holders of at least a majority of
the outstanding subordinated units of WMZ (WMZ
Subordinated Units), with each group of holders of WMZ
Common Units and WMZ Subordinated Units voting as a separate
class. All of the currently outstanding WMZ Subordinated Units
are owned by the WMZ General Partner, and the WMZ General
Partner has agreed in the Merger Agreement to vote all of these
units at the Special Meeting in favor of the Merger Agreement
and the Merger.
The conflicts committee of the board of directors of the WMZ
General Partner (the WMZ Conflicts Committee) has
unanimously approved the Merger Agreement and the Merger and
determined that they are in the best interests of WMZ and the
holders of Non-affiliated WMZ Common Units. Based upon such
approval, the WMZ General Partner, acting through its board of
directors (the WMZ Board), has unanimously approved
and adopted the Merger Agreement and the Merger. Accordingly,
the WMZ Conflicts Committee and the WMZ Board (acting on behalf
of the WMZ General Partner) recommend that holders of
Non-affiliated WMZ Common Units vote to approve and adopt the
Merger Agreement and the Merger.
Only record holders of WMZ Common Units and WMZ Subordinated
Units as of the close of business
on ,
2010 are entitled to notice of and to vote at the Special
Meeting and any adjournments of the Special Meeting. WMZ will
keep at its offices in Tulsa, Oklahoma, a list of record holders
of WMZ Common Units and WMZ Subordinated Units entitled to vote
at the Special Meeting available for inspection for any purpose
relevant to the Special Meeting during normal business hours for
the 10 days before the Special Meeting and at the Special
Meeting. Failures to vote, abstentions and broker non-votes will
have the same effect as a vote against the proposal.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND
THE SPECIAL MEETING, PLEASE VOTE IN ONE OF THE FOLLOWING
WAYS:
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use the toll-free telephone number shown on the proxy card;
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use the Internet website shown on the proxy card; or
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mark, sign, date and promptly return the enclosed proxy card in
the postage-paid envelope. It requires no postage if mailed in
the United States.
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By order of the Board of Directors of Williams Pipeline GP LLC,
as the general partner of Williams Pipeline Partners L.P.
Secretary,
Williams Pipeline GP LLC
TABLE OF
CONTENTS
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EX-8.1 |
EX-8.2 |
EX-23.1 |
EX-23.2 |
iii
CERTAIN
DEFINITIONS
The following oil and gas measurements and industry terms are
used in this joint proxy statement/prospectus:
Barrel: One barrel of petroleum products
equals 42 U.S. gallons.
bpd: Barrels per day.
British Thermal Units (Btu): When used in
terms of volumes, Btu is used to refer to the amount of natural
gas required to raise the temperature of one pound of water by
one degree Fahrenheit at one atmospheric pressure.
BBtu/d: One billion Btus per day.
Dth: One dekatherm, which is the approximate
energy content of 1,000 cubic feet of natural gas.
MMBtu: One million Btus.
MMdt: One million dekatherms or approximately
one trillion Btus.
TBtu: One trillion Btus.
Other terms used in this joint proxy statement/prospectus
include:
FERC: Federal Energy Regulatory Commission.
Fractionation: The process by which a mixed
stream of natural gas liquids is separated into its constituent
products, such as ethane, propane and butane.
LNG: Liquefied natural gas.
NGLs: Natural gas liquids. Natural gas liquids
result from natural gas processing and crude oil refining and
are used as petrochemical feedstocks, heating fuels and gasoline
additives, among other applications.
NGL margins: NGL revenues less Btu replacement
cost, plant fuel, transportation and fractionation.
Partially Owned Entities: Entities in which
Williams Partners does not own a 100% ownership interest,
including principally Discovery Producer Services LLC,
Gulfstream Natural Gas System, L.L.C., Northwest Pipeline GP,
and Laurel Mountain Midstream LLC.
Pipeline Entities: Williams Partners
regulated pipeline entities, including principally Northwest
Pipeline GP, Transcontinental Gas Pipe Line Company, LLC,
Gulfstream Natural Gas System, L.L.C., Discovery Producer
Services LLC, and Black Marlin Pipeline LLC.
Throughput: The volume of product transported
or passing through a pipeline, plant, terminal or other facility.
iv
QUESTIONS
AND ANSWERS
The following section provides brief answers to certain
questions that you may have regarding the proposed Merger and
the special meeting for the limited partners of WMZ to vote on
the Merger Agreement and the Merger (the Special
Meeting). Please note that this section does not address
all issues that may be important to you in deciding whether to
vote to approve the Merger Agreement and the Merger.
Accordingly, you should carefully read this entire joint proxy
statement/prospectus, including each of the annexes, and the
documents that have been incorporated by reference into this
joint proxy statement/prospectus.
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Q. |
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Why am I receiving these materials? |
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This joint proxy statement/prospectus is being provided to
holders of common units of WMZ (WMZ Common Units) in
connection with the Special Meeting. The Williams Partners
General Partner and the WMZ General Partner have agreed to
combine the businesses of Williams Partners and WMZ by merging
Merger Sub, an indirect wholly owned subsidiary of Williams
Partners, into WMZ. The Merger Agreement and the Merger require
the approval of holders of at least a majority of the
outstanding WMZ Common Units that are not held by the WMZ
General Partner or its affiliates (such WMZ Common Units,
Non-affiliated WMZ Common Units) and by holders of
at least a majority of the outstanding subordinated units of WMZ
(WMZ Subordinated Units), with each group of holders
of WMZ Common Units and WMZ Subordinated Units voting as a
separate class. A vote of holders of common units of Williams
Partners (each, a Williams Partners Common Unit) is
not required to complete the Merger. |
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There were 51,862 WMZ Common Units held by individuals who are
officers or directors of the WMZ General Partner as of
June 23, 2010. Although the WMZ Common Units held by these
individuals will not be counted in determining whether a
majority of Non-affiliated WMZ Common Units have approved the
Merger Agreement and the Merger, if the Merger Agreement and the
Merger are approved at the Special Meeting, these individuals
will be able to exchange their WMZ Common Units in the Merger.
All WMZ Common Units that are not held by the WMZ General
Partner will be exchanged for Williams Partners Common Units if
the Merger Agreement and the Merger are approved at the Special
Meeting, and such units are referred to in this joint proxy
statement/prospectus as Publicly Owned WMZ Common
Units. |
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Q. |
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How is Williams Partners currently related to WMZ? |
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A. |
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Williams Partners, through its 100% ownership of the WMZ General
Partner, currently indirectly owns 4,700,668 WMZ Common Units
and 10,957,900 WMZ Subordinated Units representing an
approximate 45.7% limited partner interest in WMZ; 684,869
general partner units in WMZ representing a 2% general partner
interest in WMZ; and certain incentive distribution rights to
distributions by WMZ. All of the currently outstanding WMZ
Subordinated Units are held by the WMZ General Partner, and the
WMZ General Partner has agreed in the Merger Agreement to vote
all of the WMZ Subordinated Units at the Special Meeting in
favor of the Merger Agreement and the Merger. |
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Q. |
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Why does Williams Partners want to complete the Merger? |
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Williams Partners currently indirectly owns an approximate 45.7%
limited partner interest and a 2% general partner interest in
WMZ. Williams Partners wants to complete the Merger because
Williams Partners believes that merging Merger Sub into WMZ and
fully integrating WMZ into Williams Partners will reduce
organizational complexity and administrative costs and provide
greater overall operational efficiency, while at the same time
providing the holders of Publicly Owned WMZ Common Units with
the opportunity to become owners of a much larger, diversified
pipeline and midstream partnership that has an investment grade
credit profile and is better able to finance growth
opportunities. |
|
Q. |
|
Who is soliciting my proxy? |
|
A. |
|
The WMZ General Partner is sending you this joint proxy
statement/prospectus in connection with its solicitation of
proxies for use at the Special Meeting. Certain directors,
officers and employees of the WMZ General Partner or its
affiliates and Mackenzie Partners, Inc. (a proxy solicitor) may
also solicit proxies on WMZs behalf by mail, telephone,
fax or other electronic means, or in person. |
v
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Q. |
|
What will happen to WMZ as a result of the Merger? |
|
A. |
|
If the Merger is successfully completed, all outstanding WMZ
Common Units and WMZ Subordinated Units will be canceled, Merger
Sub will be merged with and into WMZ, and WMZ will become an
indirect wholly owned subsidiary of Williams Partners. |
|
Q. |
|
What will holders of Publicly Owned WMZ Common Units and
holders of WMZ Subordinated Units receive in the Merger? |
|
A. |
|
Each holder of Publicly Owned WMZ Common Units will be entitled
to receive Williams Partners Common Units in exchange for such
holders Publicly Owned WMZ Common Units at an exchange
ratio of 0.7584 of one Williams Partners Common Unit for each
Publicly Owned WMZ Common Unit (the Exchange Ratio)
that such holder owns at the effective time of the Merger. If
the Exchange Ratio would result in a holder of Publicly Owned
WMZ Common Units being entitled to receive, after combining all
fractional units to which such holder of Publicly Owned WMZ
Common Units would otherwise be entitled to receive in
connection with the Merger, a fraction of a Williams Partners
Common Unit, such holder will receive cash (payable in dollars,
without interest) in lieu of such fractional Williams Partners
Common Unit in an amount equal to the product obtained by
multiplying (1) the fraction of one Williams Partners
Common Unit to which such holder would otherwise be entitled by
(2) the average of the closing prices of Williams Partners
Common Units as reported on the New York Stock Exchange
(NYSE) Composite Transaction Reporting System as
reported in The Wall Street Journal (but subject to correction
for typographical or other manifest errors in such reporting)
over the five trading day period ending on the third trading day
immediately preceding the effective date of the Merger. For
additional information regarding exchange procedures, please
read The Merger Agreement Exchange of Units;
Fractional Units. The WMZ General Partner will receive no
consideration in the Merger for the WMZ Common Units and the WMZ
Subordinated Units that it holds. |
|
Q. |
|
Where will my units trade after the Merger? |
|
A. |
|
Williams Partners Common Units will continue to trade on the
NYSE under the symbol WPZ. WMZ Common Units
will no longer be publicly traded and will be delisted from the
NYSE. |
|
Q. |
|
What happens to my future distributions? |
|
A. |
|
If the Merger is successfully consummated, all outstanding WMZ
Common Units will be canceled and holders of Publicly Owned WMZ
Common Units will be entitled to receive Williams Partners
Common Units and to receive future distributions on such
Williams Partners Common Units to the same extent as other
holders of Williams Partners Common Units in accordance with
Williams Partners partnership agreement and at the
discretion of the board of directors of the Williams Partners
General Partner (the Williams Partners Board). On a
comparative basis, assuming a $2.63 annualized distribution rate
for Williams Partners (based on the Williams Partners quarterly
distribution for the first quarter of 2010) and giving
effect to the Exchange Ratio, a WMZ unitholders quarterly
distribution would increase 49% from the current $0.3350 per
existing WMZ Common Unit ($1.34 annualized) to $0.6575 per
existing Williams Partners Common Unit ($2.63 annualized)
following the closing of the Merger. Williams Partners and WMZ
will coordinate the record dates of any quarterly distributions
during the period from the execution of the Merger Agreement to
the date that the Merger is consummated so that no holder of
Publicly Owned WMZ Common Units will fail to be entitled to
receive any quarterly distribution by WMZ unless it becomes
entitled to receive a quarterly distribution from Williams
Partners with respect to the same quarter. For a description of
the distribution provisions of Williams Partners
partnership agreement, please read Comparison of the
Rights of Holders of Williams Partners Common Units and Holders
of WMZ Common Units. |
|
Q. |
|
Should holders of WMZ Common Units tender their WMZ Common
Units now? |
|
A. |
|
No. After the Merger is completed, holders of WMZ Common
Units who hold their WMZ Common Units in certificated or book
entry form will receive written instructions for exchanging
their WMZ Common Units. Please do not attempt to tender any WMZ
Common Units with your proxy card. If you own WMZ |
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Common Units in street name, the Merger
consideration should be credited to your account in accordance
with the policies and procedures of your broker or nominee
within a few days following the closing date of the Merger. |
|
Q. |
|
What constitutes a quorum? |
|
A. |
|
The holders of a majority of each class of units voting at the
Special Meeting (WMZ Common Units and WMZ Subordinated Units)
outstanding on the record date present in person or by proxy at
the Special Meeting will constitute a quorum and will permit WMZ
to conduct the proposed business at the Special Meeting.
Representatives of the WMZ General Partner will be present on
behalf of the WMZ General Partner at the Special Meeting. Your
units will be counted as present at the Special Meeting if you
are present and vote in person at the Special Meeting or have
submitted a properly executed proxy card by mail or properly
voted by telephone or Internet. |
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Proxies received but marked as abstentions will be counted as
units that are present and entitled to vote for purposes of
determining the presence of a quorum. If an executed proxy is
returned by a broker or other nominee holding units in
street name indicating that the broker does not have
discretionary authority as to certain units to vote on the
proposals (a broker non-vote), such units will be
considered present at the Special Meeting for purposes of
determining the presence of a quorum but will not be considered
entitled to vote. |
|
Q. |
|
What unitholder approvals are needed to complete the
Merger? |
|
A. |
|
The affirmative vote of holders of at least a majority of the
outstanding Non-affiliated WMZ Common Units is required to
approve and adopt the Merger Agreement and the Merger. As of the
record date, there
were
Non-affiliated WMZ Common Units outstanding. For purposes of
determining whether the Merger Agreement and the Merger have
been approved and adopted by the Non-affiliated WMZ Common
Units, WMZ Common Units held by directors and officers of the
WMZ General Partner will not be counted toward the required
majority vote of outstanding Non-affiliated WMZ Common Units. |
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|
The affirmative vote of holders of at least a majority of the
outstanding WMZ Subordinated Units is also required to approve
and adopt the Merger Agreement and the Merger. The WMZ General
Partner owns all of the currently outstanding WMZ Subordinated
Units and has agreed in the Merger Agreement to vote all of
these units at the Special Meeting in favor of the Merger
Agreement and the Merger. |
|
Q. |
|
When will the Merger be completed? |
|
A. |
|
Williams Partners and WMZ are working to complete the Merger as
soon as possible. A number of conditions must be satisfied
before Williams Partners and WMZ can complete the Merger,
including approval of the Merger Agreement and the Merger by
holders of at least a majority of the outstanding Non-affiliated
WMZ Common Units. Although Williams Partners and WMZ cannot be
sure when all of the conditions to the Merger will be satisfied,
Williams Partners and WMZ expect to complete the Merger as soon
as practicable following the Special Meeting (assuming the
proposal is approved at the Special Meeting as described in the
preceding question and answer). Please read The Merger
Agreement Conditions to the Merger. |
|
Q. |
|
What is the recommendation of the conflicts committee of the
board of directors of the WMZ General Partner and the board of
directors of the WMZ General Partner? |
|
A. |
|
The conflicts committee of the board of directors of the WMZ
General Partner (the WMZ Conflicts Committee) and
the board of directors of the WMZ General Partner (the WMZ
Board) recommend that you vote FOR the merger
proposal. |
|
|
|
The WMZ partnership agreement requires that the WMZ General
Partner approve the Merger Agreement before submitting it to a
vote of the limited partners of WMZ. In light of potential
conflicts of interest between Williams Partners, the WMZ General
Partner and its affiliates, including Williams, on the one hand,
and the interests of WMZ and the holders of Non-affiliated WMZ
Common Units, on the other hand, the WMZ Board requested that
the WMZ Conflicts Committee, consisting exclusively of directors
who |
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meet the independence requirements established in the WMZ
partnership agreement, review, negotiate and evaluate the Merger
Agreement and the Merger. On May 21, 2010, the WMZ
Conflicts Committee unanimously determined that the Merger
Agreement and the Merger are in the best interests of WMZ and
the holders of Non-affiliated WMZ Common Units and recommended
that the Merger Agreement and the Merger be approved by the WMZ
Board and the holders of Non-affiliated WMZ Common Units. Based
on the WMZ Conflicts Committees recommendation, the WMZ
Board, acting on behalf of the WMZ General Partner, unanimously
approved the Merger Agreement and the Merger and recommended
that the holders of Non-affiliated WMZ Common Units vote to
approve and adopt the Merger Agreement and the Merger. |
|
Q. |
|
What are the WMZ Conflicts Committees reasons for its
recommendation? |
|
|
|
The WMZ Conflicts Committee considered a number of factors in
determining that the Merger and the Merger Agreement are in the
best interests of WMZ and the holders of Non-affiliated WMZ
Common Units and recommending the approval of the Merger and the
Merger Agreement to the WMZ Board and to holders of
Non-affiliated WMZ Common Units. The material factors are
summarized below. |
|
|
|
The WMZ Conflicts Committee viewed the following factors as
being generally positive or favorable in coming to its
determination and recommendation: |
|
|
|
Simmons & Company International
(Simmons & Company), independent financial
advisor to the WMZ Conflicts Committee, rendered to the WMZ
Conflicts Committee on April 21, 2010 and on May 21,
2010 its opinion that the Exchange Ratio set forth in the Merger
Agreement is fair, from a financial point of view, to the
holders of Non-affiliated WMZ Common Units.
|
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|
The financial analyses of Simmons &
Company were favorable, and they were reviewed and discussed by
Simmons & Company with the WMZ Conflicts Committee on
April 21, 2010 and May 21, 2010.
|
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|
The current quarterly cash distribution on the
Williams Partners Common Units is significantly higher than the
current quarterly cash distribution on the WMZ Common Units. The
first quarter 2010 cash distribution on each Williams Partners
Common Unit represented a 49% premium over the distribution paid
by WMZ for the first quarter of 2010 on the number of WMZ Common
Units that would be exchanged into one Williams Partners Common
Unit in the Merger.
|
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|
Because the proposed exchange ratio was announced at
the same time as the Dropdown, holders of Publicly Owned WMZ
Common Units would be able to benefit from any increase in the
market price of the Williams Partners Common Units as a result
of the Dropdown. The closing market price of the Williams
Partners Common Units increased 18% from January 15, 2010,
the last trading day prior to the announcement of the Dropdown
and the proposed exchange ratio, through May 21, 2010.
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The WMZ Conflicts Committee believed, based, among
other things, on statements of Williams Partners
management, that the Exchange Ratio represented the highest per
unit consideration that Williams Partners would pay for Publicly
Owned WMZ Common Units.
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|
From January 19, 2010, the date that the
Dropdown and Williams Partners intention to offer to
acquire the Publicly Owned WMZ Common Units were announced, to
the time of the WMZ Conflicts Committees determination and
recommendations, no third parties indicated any interest in
pursuing a combination transaction with WMZ or the WMZ General
Partner.
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|
Given that WMZs only significant asset is a
35% interest in a single pipeline system controlled by Williams
Partners and that Williams Partners already controls
approximately 48% of WMZs partnership interests, including
all of WMZs general partner interests, it appeared
unrealistic for the WMZ Conflicts Committee to believe that a
more attractive alternative proposal would be forthcoming from
an unrelated third party.
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Williams Partners is a much larger and more
diversified energy master limited partnership with an investment
grade credit rating that, among other things, is expected to
have increased access to capital and increased scale, scope and
diversification of revenue sources and, based on historic
trading volumes for its units, is expected to offer greater
trading liquidity.
|
viii
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Williams recently transferred a substantial majority
of its natural gas transportation assets in the Dropdown to
Williams Partners and incurred substantial expenses in
connection with the Dropdown. As a result, the possibility that
any of such assets would be further dropped down to WMZ by
Williams as an avenue for WMZs future growth has been
substantially diminished. While WMZ still may be able to grow
organically or through third party acquisitions, the pace of
such growth will likely be slower than if WMZ could obtain
contributions of assets to WMZ by Williams.
|
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|
The Merger will provide holders of WMZ Common Units
with the benefits of the combination while eliminating the
potential of conflicts of interests between Williams Partners
and WMZ, both operationally and with respect to asset sales and
joint ventures, that can arise because they share common
management teams and operate in the same industry.
|
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The Merger is expected to result in cost savings,
principally from general and administrative costs.
|
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|
Generally, except with respect to cash received in
lieu of fractional WMZ Common Units, no gain or loss is expected
to be recognized for U.S. federal income tax purposes by the
holders of Publicly Owned WMZ Common Units as a result of the
Merger.
|
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|
The terms of the Merger Agreement included, among
other things:
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the requirement that the Merger Agreement and the
Merger be approved by the holders of a majority of the
Non-affiliated WMZ Common Units;
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provisions allowing the WMZ Board or the WMZ
Conflicts Committee to withdraw or change its recommendation of
the Merger Agreement and the Merger in certain circumstances if
it makes a good faith determination that the failure to change
its recommendation would be reasonably likely to constitute a
breach of its fiduciary duties under applicable law;
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provisions allowing for WMZ to participate, in
certain circumstances, in negotiations with a third party in
response to an unsolicited alternative proposal that is
reasonably likely to result in a superior proposal;
|
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the lack of a
break-up fee
for termination of the Merger Agreement in accordance with its
terms;
|
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limited conditions and exceptions to the material
adverse effect closing condition and other closing conditions;
and
|
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the lack of a need by Williams Partners to finance
any component of the purchase price because the consideration is
composed of Williams Partners Common Units.
|
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|
The WMZ Conflicts Committee considered the following factors to
be generally negative or unfavorable in making its determination
and recommendation: |
|
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|
It is possible that the price for Williams Partners
Common Units could diminish prior to closing, reducing the value
of the Williams Partners Common Units to be received by virtue
of the Exchange Ratio from their value at the time of the
signing of the Merger Agreement.
|
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|
The Merger might not be completed in a timely
manner, or at all, which could result in significant costs and a
decline in the trading price of WMZ Common Units.
|
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|
One of WMZs primary business objectives is to
generate stable cash flows through the ownership and operation
of natural gas transportation and storage assets. Williams
Partners was formed to own, operate and acquire a diversified
portfolio of complementary energy assets, which may not generate
cash flows as stable as natural gas transportation and storage
assets.
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The Merger Agreement limits WMZs ability to
solicit third party offers, although it does allow the WMZ Board
and WMZ Conflicts Committee in certain circumstances to
withdraw, modify or qualify their recommendations of the Merger
or recommend, adopt or approve a takeover proposal.
|
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Finally, the WMZ Conflicts Committee considered as favorable to
approval of the Merger Agreement and the Merger a number of
procedural factors associated with the Merger, including the
following: |
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|
The WMZ Board of Directors unanimously delegated to
the WMZ Conflicts Committee the authority to review, evaluate
and negotiate the Merger and the Merger Agreement.
|
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The WMZ Conflicts Committee consists solely of
directors each of whom (a) is not a security holder,
officer or employee of the WMZ General Partner, (b) is not
an officer, director or employee of any affiliate of the WMZ
General Partner, (c) is not a holder of any ownership
interest in WMZ and its subsidiaries other than WMZ Common Units
and awards under the WMZ Long Term Incentive Plan (as defined in
the WMZ partnership agreement) and (d) meets the
independence standards required of a director who serves on an
audit committee established under the Securities Exchange Act of
1934, as amended (the Exchange Act) and the NYSE.
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The members of the WMZ Conflicts Committee were
adequately compensated for their services and their compensation
was in no way contingent on their approving the Merger Agreement
or the Merger.
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The members of the WMZ Conflicts Committee will not
personally benefit from the completion of the Merger in a manner
different from the holders of Non-affiliated WMZ Common Units.
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The WMZ Conflicts Committee was given authority to
select and compensate legal, financial and other independent
advisors as it deemed appropriate.
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The WMZ Conflicts Committee retained and was advised
by independent legal counsel, Fulbright & Jaworski
L.L.P. (Fulbright), and an independent financial
advisor, Simmons & Company, who was also engaged to
render an opinion as to the fairness, from a financial point of
view, to the holders of Non-affiliated WMZ Common Units of the
consideration proposed to be paid in the Merger.
|
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The WMZ Conflicts Committee and its legal counsel
and financial advisor conducted due diligence regarding Williams
Partners and WMZ.
|
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The WMZ Conflicts Committee had the ultimate
authority to decide whether or not to proceed with the proposed
merger.
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The WMZ Conflicts Committee, with the assistance of
its legal and financial advisors, negotiated the terms of the
Merger Agreement on an arms-length basis with Williams
Partners and its legal and financial advisors.
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The structure of the acquisition was changed from an
exchange offer by Williams Partners to the negotiated Merger,
thereby (i) requiring approval by holders of a majority of
Non-affiliated WMZ Common Units, an additional form of approval
of a conflict of interest transaction under the WMZ partnership
agreement, and, (ii) if so approved, assuring that all
holders of Publicly Owned WMZ Common Units would receive the
same consideration in a Williams Partners acquisition of
100% of Publicly Owned WMZ Common Units.
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The structure of the acquisition was changed at the
request of the WMZ Conflicts Committee to a merger in which WMZ
would survive, thereby decreasing the risk of adverse tax
consequences to WMZ and the holders of Non-affiliated WMZ Common
Units as a result of the Merger.
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The WMZ Conflicts Committee was aware that it had no
obligation to recommend any transaction, including the merger
proposal put forth by Williams Partners.
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|
Q. |
|
What is some of the other information you should consider in
evaluating the Merger? |
|
A. |
|
You should consider, among other matters, the following
information in evaluating the Merger Agreement and the Merger: |
|
|
|
WMZs only significant asset is a 35% interest
in Northwest Pipeline GP (Northwest Pipeline).
Williams Partners owns a diversified group of midstream and
pipeline assets (including the controlling 65% interest in
Northwest Pipeline) with a book value of approximately 27 times
the book value of
|
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WMZs assets as of March 31, 2010, and has an
investment grade rating from the three major credit rating
agencies. As a result, Williams Partners believes that it will
have greater access to capital and growth opportunities and
offer greater potential for acquisitions and increased
unitholder value than WMZ would have as a stand-alone owner of a
minority interest in a single pipeline system. |
|
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|
The timing of the Merger provides holders of WMZ
Common Units the opportunity to participate in any value created
from Williams Partners February 2010 acquisition from
Williams of approximately $12 billion of assets in the
Dropdown.
|
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|
The initial public offering price of WMZ Common
Units in January 2008 was $20.00. The highest closing price of
the WMZ Common Units on any trading day from the date of the WMZ
initial public offering (the WMZ IPO) to
January 15, 2010, the last NYSE trading day prior to the
announcement of Williams Partners intention to offer to
acquire the Publicly Owned WMZ Common Units, was $24.50. The
closing price of the WMZ Common Units on January 15, 2010
was $23.35. Based on the closing price of the Williams Partners
Common Units on June 23, 2010, the Exchange Ratio
represents an approximate 29% premium to the highest closing
price for WMZ Common Units on any trading day from the date of
the WMZ IPO and prior to the announcement of Williams
Partners intention to offer to acquire the Publicly Owned
WMZ Common Units, and an approximate 35% premium to the closing
price of the WMZ Common Units on the last trading day prior to
the announcement of Williams Partners intention to offer
to acquire the Publicly Owned WMZ Common Units.
|
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|
Q. |
|
What are some of the risks you should consider in evaluating
the Merger? |
|
A. |
|
There are general risks associated with Williams Partners
business, which may not apply to WMZ or may affect Williams
Partners and WMZ differently. There are also risks associated
with the Merger, including tax risks. For a description of these
and other risks you should consider in deciding whether to vote
to approve the Merger Agreement and the Merger, please see the
section titled Risk Factors beginning on
page 21. |
|
Q. |
|
What percentage of Williams Partners Common Units will
current holders of Publicly Owned WMZ Common Units own after the
successful consummation of the Merger? |
|
A. |
|
If the Merger is successfully consummated, holders of Publicly
Owned WMZ Common Units will collectively own approximately 5% of
the outstanding Williams Partners Common Units. |
|
Q. |
|
What are the expected U.S. federal income tax consequences of
the Merger to holders of Publicly Owned WMZ Common Units? |
|
A. |
|
It is expected that holders of Publicly Owned WMZ Common Units
who receive Williams Partners Common Units in exchange for their
WMZ Common Units will not recognize any income or gain for U.S.
federal income tax purposes as a result of the Merger, except
with respect to cash received in lieu of fractional Williams
Partners Common Units. It is possible (as discussed below) that
a holder of Publicly Owned WMZ Common Units will recognize
taxable income or gain if there is a net decrease in such
holders share of nonrecourse liabilities as a result of
the Merger. For additional information, please read
Material U.S. Federal Income Tax Consequences. |
|
Q. |
|
Under what circumstances could the Merger result in holders
of Publicly Owned WMZ Common Units recognizing income or gain
for U.S. federal income tax purposes? |
|
A. |
|
Under Section 752 of the Internal Revenue Code of 1986, as
amended (the Code), each holders tax basis in
its Publicly Owned WMZ Common Units includes such holders
share of the nonrecourse liabilities of WMZ. For U.S. federal
income tax purposes, nonrecourse liabilities are generally
liabilities for which no partner has liability. As a result of
the Merger, each holders share of nonrecourse liabilities
will be recalculated, and each holder will be treated as
receiving a deemed cash distribution equal to the excess, if
any, of such holders share of nonrecourse liabilities of
WMZ immediately before the Merger over such holders share
of nonrecourse liabilities of Williams Partners immediately
following the Merger. If the amount of the deemed cash
distribution received by such holder exceeds the holders
basis in its Williams Partners Common Units immediately after
the Merger, such holder will recognize income or gain |
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in an amount equal to such excess. Williams Partners and WMZ do
not expect any holders of Publicly Owned WMZ Common Units to
recognize income or gain in this manner. For additional
information, please read Material U.S. Federal Income Tax
Consequences. |
|
Q. |
|
How is the Merger expected to affect the taxes for which
holders of Publicly Owned WMZ Common Units are liable? |
|
A. |
|
Currently, WMZ issues an annual report to each holder of
Publicly Owned WMZ Common Units stating the distributive share
of WMZs income, gain, loss and deduction that WMZ has
determined the holder must report on its U.S. federal income tax
return. Holders of Publicly Owned WMZ Common Units may also be
liable for state and local taxes, unincorporated business taxes
and estate, inheritance or intangible taxes that are imposed by
the various jurisdictions in which WMZ does business or owns
property or in which the holder is resident. |
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After the Merger, in which holders of Publicly Owned WMZ Common
Units will become holders of Williams Partners Common Units,
Williams Partners will issue an annual report to each such
holder stating the distributive share of Williams Partners
income, gain, loss and deduction that Williams Partners
determines such holder must report on its U.S. federal income
tax return. Such holders may also be liable for state and local
taxes, unincorporated business taxes and estate, inheritance or
intangible taxes that are imposed by the various jurisdictions
in which Williams Partners does business or owns property or in
which the holder is resident. |
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The Merger may also require a holder of Publicly Owned WMZ
Common Units who does not use a calendar tax year to include
more than twelve months of WMZ income in the U.S. federal income
tax return of such holder for the tax year of such holder in
which the Merger occurs. |
|
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For additional information, please read Material U.S.
Federal Income Tax Consequences. |
|
Q. |
|
Are WMZ unitholders entitled to appraisal rights? |
|
A. |
|
No. Holders of WMZ Common Units do not have appraisal
rights under applicable law or contractual appraisal rights
under the WMZ partnership agreement or the Merger Agreement. |
|
Q. |
|
How do I vote my units? |
|
A. |
|
You should read this joint proxy statement/prospectus carefully.
Then, if you choose to vote by proxy, you should do so as soon
as possible by completing, signing and dating your proxy card
and returning it in the enclosed postage-paid envelope as soon
as possible or vote by telephone or Internet in accordance with
the instructions provided under The Special Meeting
Voting Procedures beginning on page 56. |
|
Q. |
|
What if I do not vote? |
|
A. |
|
If you do not return your proxy or if you abstain from voting or
a broker non-vote is made, it will have the same effect as a
vote against the proposal. If you sign and return your proxy
card but do not indicate how you want to vote, your proxy will
be counted as a vote in favor of the proposal. If the Merger
Agreement and the Merger are approved by a majority of the
Non-affiliated WMZ Common Units at the Special Meeting, the
Merger will take place and your WMZ Common Units will be
exchanged for Williams Partners Common Units at the Exchange
Ratio even if you do not vote. |
|
Q. |
|
If my units are held in street name by my broker
or other nominee, will my broker vote my units for me? |
|
A. |
|
Your broker cannot vote your WMZ Common Units for or against
approval and adoption of the Merger Agreement and the Merger
unless you tell the broker or other nominee how you wish to
vote. To tell your broker or other nominee how to vote, you
should follow the directions that your broker or other nominee
provides to you. Please note that you may not vote your WMZ
Common Units held in street name by returning a
proxy card directly to WMZ or by voting in person at the Special
Meeting unless you provide a legal proxy, which you
must obtain from your broker or other nominee. A non-vote by
your broker will have the same effect as a vote against the
proposal. |
xii
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Q. |
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Who can attend and vote at the Special Meeting? |
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All holders of WMZ Common Units and WMZ Subordinated Units of
record as of the close of business
on ,
2010, the record date for the Special Meeting, are entitled to
receive notice of and to vote at the Special Meeting. |
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When and where is the Special Meeting? |
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The Special Meeting will be held
on ,
2010, at a.m., local time, in the Williams
Resource Center Theater at One Williams Center, Tulsa, Oklahoma,
74172-0172. |
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If I am planning to attend the Special Meeting in person,
should I still vote by proxy? |
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Yes. Whether or not you plan to attend the Special Meeting, you
should vote by proxy by using your proxy card. Your WMZ Common
Units will not be voted if you do not vote your proxy or if you
do not vote in person at the Special Meeting. This would have
the same effect as a vote against the proposal. |
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Can I change my vote after I have voted by proxy? |
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Yes. You can change your vote at any time before your proxy is
voted at the Special Meeting by following the procedures set
forth in The Special Meeting Voting
Procedures. |
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What should I do if I receive more than one set of voting
materials for the Special Meeting? |
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A. |
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You may receive more than one set of voting materials for the
Special Meeting and the materials may include multiple proxy
cards or voting instruction cards. For example, you will receive
a separate voting instruction card for each brokerage account in
which you hold units. If you are a holder of record registered
in more than one name, you will receive more than one proxy
card. Please complete, sign, date and return each proxy card and
voting instruction card that you receive according to the
instructions on the card. |
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Who do I call if I have further questions about voting, the
Special Meeting or the Merger? |
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A. |
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Holders of WMZ Common Units may call WMZs Investor
Relations Department at
(918) 573-3679
if they have further questions or if they would like additional
copies, without charge, of this joint proxy statement/prospectus. |
xiii
SUMMARY
This summary highlights selected information in this joint
proxy statement/ prospectus and does not contain all the
information that may be important to you. To fully understand
the Merger Agreement and the Merger, and for a more complete
description of the terms of the Merger, you should read
carefully this entire joint proxy statement/prospectus,
including the annexes, as well as the documents incorporated by
reference into this joint proxy statement/prospectus, and the
other documents to which you are referred. For information on
how to obtain the documents that Williams Partners and WMZ have
filed with the SEC, see Where You Can Find More
Information.
The
Merger (page 57)
The Williams Partners General Partner and the WMZ General
Partner have agreed to combine the businesses of Williams
Partners and WMZ by merging Merger Sub, an indirect wholly owned
subsidiary of Williams Partners, into WMZ. The Merger cannot be
completed without the approval of holders of at least a majority
of the outstanding Non-affiliated WMZ Common Units and the WMZ
Subordinated Units, with each group of holders of WMZ Common
Units and WMZ Subordinated Units voting as a separate class. A
vote of holders of Williams Partners Common Units is not
required to complete the Merger. Each holder of Publicly Owned
WMZ Common Units will be entitled to receive 0.7584 of one
Williams Partners Common Unit in exchange for each WMZ Common
Unit that such holder owns at the effective time of the Merger.
If the Merger is successfully consummated, all outstanding WMZ
Common Units and WMZ Subordinated Units will be canceled, Merger
Sub will be merged with and into WMZ, and Williams Partners will
issue approximately 13.6 million Williams Partners Common
Units to holders of WMZ Common Units as consideration therefor.
WMZ and its subsidiaries will become subsidiaries of the
Operating Company, and the Williams Partners General
Partners management team will continue in their current
roles and manage the combined company.
The
Merger Parties (page 94)
Williams
Partners
Williams Partners is a publicly traded Delaware limited
partnership formed by Williams in February 2005 to own, operate
and acquire a diversified portfolio of complementary energy
assets. Williams Partners operations are divided into two
business segments: Gas Pipeline and Midstream Gas &
Liquids.
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Gas Pipeline this segment includes Williams
Partners interstate natural gas pipelines, including its
100% interest in Transcontinental Gas Pipe Line Company, LLC
(Transco) and its 65% interest in Northwest Pipeline
(the remaining 35% of which is WMZs only significant
asset). Transco and Northwest Pipeline own and operate a
combined total of approximately 13,900 miles of pipelines
with a total annual throughput of approximately 2,700 TBtu of
natural gas and
peak-day
delivery capacity of approximately 12 MMdt of natural gas.
Gas Pipeline also holds interests in joint venture interstate
and intrastate natural gas pipeline systems including a 24.5%
interest in Gulfstream Natural Gas System, L.L.C.
(Gulfstream), which owns an approximate
745-mile
pipeline with the capacity to transport approximately
1.26 million Dth per day of natural gas. Gas Pipeline also
includes Williams Partners indirect 45.7% limited partner
interest and 2% general partner interest in WMZ, which holds the
remaining 35% interest in Northwest Pipeline.
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Midstream Gas & Liquids this
segment includes Williams Partners natural gas gathering,
treating and processing businesses and has primary service areas
concentrated in major producing basins in Colorado, New Mexico,
Wyoming, the Gulf of Mexico and Pennsylvania. Midstream
Gas & Liquids primary businesses
natural gas gathering, treating, and processing; NGL
fractionation, storage and transportation; and oil
transportation fall within the middle of the process
of taking raw natural gas and crude oil from the producing
fields to the consumer.
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On February 17, 2010, Williams Partners closed the Dropdown
with the Williams Partners General Partner, the Operating
Company, Williams and certain subsidiaries of Williams, pursuant
to which Williams (through such subsidiaries) contributed to
Williams Partners the ownership interests in the entities that
made
1
up Williams Gas Pipeline and Midstream Gas &
Liquids businesses, to the extent not already owned by Williams
Partners, including Williams limited and general partner
interests in WMZ, but excluding Williams Canadian,
Venezuelan and olefin operations and 25.5% of Gulfstream. The
Dropdown was made in exchange for aggregate consideration of:
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$3.5 billion in cash, less certain expenses incurred by
Williams Partners relating to the Dropdown. This cash
consideration was financed through the private sale of
$3.5 billion of Williams Partners senior unsecured
notes;
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203 million of Williams Partners Class C limited
partnership units, which were identical to Williams Partners
Common Units except with respect to distributions for the first
quarter of 2010, for which they received a prorated quarterly
distribution as they were not outstanding during the full
quarterly period. The Class C units automatically converted
into Williams Partners Common Units on May 10, 2010, the
first business day following the record date for the
distribution with respect to the first quarter of 2010; and
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an increase in the capital account of the Williams Partners
General Partner to allow it to maintain its 2% general partner
interest.
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In connection with the Dropdown, Williams Partners entered into
a new $1.75 billion senior unsecured revolving three-year
credit facility with Transco and Northwest Pipeline, as
co-borrowers with borrowing sublimits of $400 million each,
Citibank, N.A., as administrative agent, and other lenders named
therein (the Credit Facility). The Credit Facility
replaced Williams Partners then existing $450 million
senior unsecured credit facility.
As part of the negotiations surrounding the Dropdown, the
members of the Williams Partners Conflicts Committee (which
consists entirely of directors who are not affiliated with
Williams) also negotiated with Williams the Exchange Ratio that
Williams Partners would offer to holders of WMZ Common Units in
the then-contemplated exchange offer. The initial making of that
exchange offer at the Exchange Ratio was approved by the
Williams Partners Conflicts Committee and was addressed from the
point of view of fairness to the holders of Williams Partners
Common Units by the fairness opinion it received from its
independent financial advisor.
Williams Partners principal executive offices are located
at One Williams Center, Tulsa, Oklahoma
74172-0172,
and its telephone number is
(918) 573-2000.
Williams Partners website is located at
http://www.williamslp.com.
Williams Partners makes its periodic reports and other
information filed with or furnished to the SEC available, free
of charge, through its website, as soon as reasonably
practicable after those reports and other information are
electronically filed with or furnished to the SEC. Information
on Williams Partners website or any other website is not
incorporated by reference into this joint proxy
statement/prospectus and does not constitute a part of this
joint proxy statement/prospectus.
The
Operating Company
The Operating Company is a wholly owned subsidiary of Williams
Partners, through which Williams Partners conducts its
operations. The Operating Company is a Delaware limited
liability company formed on May 23, 2005. The Operating
Companys principal executive offices are located at One
Williams Center, Tulsa, Oklahoma
74172-0172,
and its telephone number is
(918) 573-2000.
WPZ
Operating Company Merger Sub LLC
WPZ Operating Company Merger Sub LLC, which is referred to in
this joint proxy statement/prospectus as Merger Sub, is a
Delaware limited liability company and a wholly owned subsidiary
of the Operating Company. Merger Sub was formed on May 10,
2010 solely for the purpose of consummating the Merger and has
no operating assets. Merger Sub has not carried on any
activities to date, except for activities incidental to its
formation and activities undertaken in connection with the
Merger.
2
The principal executive offices of Merger Sub are located at One
Williams Center, Tulsa,
Oklahoma 74172-0172,
and its telephone number is
(918) 573-2000.
WMZ
WMZ is a Delaware limited partnership formed on August 31,
2007 by Williams to own and operate natural gas transportation
and storage assets. WMZs primary business objectives are
to generate stable cash flows and, over time, to increase its
quarterly cash distributions per unit. WMZs only
significant asset is a 35% general partnership interest in
Northwest Pipeline, which is an interstate natural gas
transportation company that owns and operates a natural gas
pipeline system extending from the San Juan basin in
northwestern New Mexico and southwestern Colorado through
Colorado, Utah, Wyoming, Idaho, Oregon, and Washington to a
point on the Canadian border near Sumas, Washington. Northwest
Pipeline provides services for markets in California, Arizona,
New Mexico, Colorado, Utah, Nevada, Wyoming, Idaho, Oregon, and
Washington directly or indirectly through interconnections with
other pipelines. WMZ accounts for its 35% interest in Northwest
Pipeline as an equity investment, and, therefore, does not
consolidate its financial results. The 35% of Northwest Pipeline
owned by WMZ was owned by Williams prior to the WMZ IPO.
Williams Partners owns the remaining 65% interest in
Northwest Pipeline.
WMZs principal executive offices are located at One
Williams Center, Tulsa, Oklahoma
74172-0172,
and its telephone number is
918-573-2000.
Its website is located at
http://www.williamspipelinepartners.com.
WMZ makes its periodic reports and other information filed with
or furnished to the SEC available, free of charge, through its
website, as soon as reasonably practicable after those reports
and other information are electronically filed with or furnished
to the SEC. Information on its website or any other website is
not incorporated by reference into this joint proxy
statement/prospectus and does not constitute a part of this
joint proxy statement/prospectus.
The
Special Meeting (page 55)
Where and when: The Special Meeting will take
place in the Williams Resource Center Theater at One Williams
Center, Tulsa, Oklahoma,
74172-0172
on ,
2010 at a.m., local time.
What you are being asked to vote on: At the
Special Meeting, holders of WMZ Common Units and WMZ
Subordinated Units will vote on the approval and adoption of the
Merger Agreement and the Merger. Holders of WMZ Common Units and
WMZ Subordinated Units may also be asked to consider other
matters as may properly come before the Special Meeting. At this
time, WMZ knows of no other matters that will be presented for
consideration at the Special Meeting.
Who may vote: You may vote at the Special
Meeting if you owned WMZ Common Units at the close of business
on the record
date, ,
2010. On that date, there
were
WMZ Common Units outstanding. You may cast one vote for each
outstanding WMZ Common Unit entitled to vote at the Special
Meeting that you owned on the record date. The WMZ General
Partner has agreed in the Merger Agreement to vote all of the
WMZ Subordinated Units in favor of the Merger Agreement and the
Merger.
What vote is needed: The affirmative vote of
holders of at least a majority of the outstanding Non-affiliated
WMZ Common Units and the WMZ Subordinated Units, with each group
of holders of WMZ Common Units and WMZ Subordinated Units voting
as a separate class, is required to approve and adopt the Merger
Agreement and Merger.
Williams
Partners Ownership Interest in and Control of WMZ
(page 57)
Holders of Publicly Owned WMZ Common Units should be aware that
WMZ is indirectly controlled by Williams Partners through
Williams Partners 100% ownership of the WMZ General
Partner, which owns all of the outstanding general partner
interests in WMZ. As a result, Williams Partners appoints the
members of the WMZ Board, a majority of whom are affiliated with
Williams and its affiliates, and thereby could be seen as
controlling all of WMZs decisions other than those
involving certain conflicts of interest with Williams Partners
or that require an affirmative vote of holders of the limited
partner interests in WMZ pursuant to and
3
in the percentages specified by the WMZ partnership agreement.
In addition, Williams Partners, through its ownership of the WMZ
General Partner, owns an approximate 45.7% limited partner
interest (comprised of 20.8% of the currently outstanding WMZ
Common Units and 100% of the currently outstanding WMZ
Subordinated Units) in WMZ.
Certain persons associated with Williams Partners and its
affiliates have a relationship with WMZ. Steven J. Malcolm,
Chairman of the Board and Chief Executive Officer of the WMZ
General Partner, also serves as Chairman of the Board and Chief
Executive Officer of the Williams Partners General Partner and
as a director, executive officer,
and/or
member of the management committee of certain of its affiliates,
including Williams. Donald R. Chappel, a director and the Chief
Financial Officer of the WMZ General Partner, also serves as a
director and the Chief Financial Officer of the Williams
Partners General Partner and as a director, executive officer,
and/or
member of the management committee of certain of its affiliates,
including Williams. Phillip D. Wright, a director and
the Chief Operating Officer of the WMZ General Partner, also
serves as a director and the Senior Vice President Gas Pipeline
of the Williams Partners General Partner and as a director,
executive officer,
and/or
member of the management committee of certain of its affiliates,
including Williams. Rodney J. Sailor, a director and the
Treasurer of the WMZ General Partner, also serves as the
Treasurer of the Williams Partners General Partner and as a
director, officer,
and/or
member of the management committee of certain of its affiliates,
including Williams. Ted T. Timmermans, Chief Accounting Officer
of the WMZ General Partner, also serves as Vice President,
Controller and Chief Accounting Officer of the Williams Partners
General Partner and as an officer of certain of its affiliates,
including Williams. James J. Bender, General Counsel of the WMZ
General Partner, also serves as General Counsel of the Williams
Partners General Partner, and as general counsel, director
and/or executive officer of certain of its affiliates, including
Williams. None of these individuals are members of the WMZ
Conflicts Committee.
Williams
Partners Reasons for the Merger (page 65)
Williams Partners currently indirectly owns an approximate 45.7%
limited partner interest and a 2% general partner interest in
WMZ. Williams Partners wants to merge Merger Sub with and into
WMZ because Williams Partners believes that fully integrating
WMZ into Williams Partners will reduce organizational complexity
and administrative costs and provide greater overall operational
efficiency, while at the same time providing the holders of
Publicly Owned WMZ Common Units with the opportunity to become
owners of a much larger, diversified pipeline and midstream
partnership that has an investment grade credit profile and is
better able to finance growth opportunities.
Recommendation
to Holders of Non-affiliated WMZ Common Units
(page 65)
The WMZ Conflicts Committee and the WMZ Board recommend that you
vote FOR the merger proposal.
The WMZ partnership agreement requires that the WMZ General
Partner approve the Merger Agreement before submitting it to a
vote of WMZ limited partners. In light of potential conflicts of
interest between Williams Partners, the WMZ General Partner and
its affiliates, including Williams, on the one hand, and the
interests of WMZ and the holders of Non-affiliated WMZ Common
Units, on the other hand, the WMZ Board requested that the WMZ
Conflicts Committee, consisting exclusively of directors who
meet the independence requirements established in the WMZ
partnership agreement, review, negotiate and evaluate the Merger
Agreement and the Merger and related matters. The WMZ Conflicts
Committee, with the assistance of its advisors, reviewed,
negotiated and evaluated the Merger Agreement and the Merger,
and following that process unanimously determined that the
Merger Agreement and the Merger are in the best interests of WMZ
and the holders of Non-affiliated WMZ Common Units and
recommended that the Merger Agreement and the Merger be approved
by the WMZ Board and the holders of Non-affiliated WMZ Common
Units.
Based on the WMZ Conflicts Committees recommendation, the
WMZ Board, acting on behalf of the WMZ General Partner,
unanimously approved the Merger Agreement and the Merger and
recommended that the holders of Non-affiliated WMZ Common Units
vote to approve and adopt the Merger Agreement and the Merger.
4
Holders of Non-affiliated WMZ Common Units are urged to review
carefully the background and reasons for the Merger described
under The Merger and the risks associated with the
Merger described under Risk Factors.
The WMZ
Conflicts Committees Reasons for its Recommendation
(page 67)
The WMZ Conflicts Committee considered a number of factors in
determining that the Merger and the Merger Agreement are in the
best interests of WMZ and the holders of Non-affiliated WMZ
Common Units and recommending the approval of the Merger and the
Merger Agreement to the WMZ Board and to holders of
Non-affiliated WMZ Common Units. The material factors are
summarized below.
The WMZ Conflicts Committee viewed the following factors as
being generally positive or favorable in coming to its
determination and recommendation:
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Simmons & Company, independent financial advisor to
the WMZ Conflicts Committee, rendered to the WMZ Conflicts
Committee on April 21, 2010 and on May 21, 2010 its
opinion that the Exchange Ratio set forth in the Merger
Agreement is fair, from a financial point of view, to the
holders of Non-affiliated WMZ Common Units.
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The financial analyses of Simmons & Company were
favorable, and they were reviewed and discussed by
Simmons & Company with the WMZ Conflicts Committee on
April 21, 2010 and May 21, 2010.
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The current quarterly cash distribution on the Williams Partners
Common Units is significantly higher than the current quarterly
cash distribution on the WMZ Common Units. The first quarter
2010 cash distribution on each Williams Partners Common Unit
represented a 49% premium over the distribution paid by WMZ for
the first quarter of 2010 on the number of WMZ Common Units that
would be exchanged into one Williams Partners Common Unit in the
Merger.
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Because the proposed exchange ratio was announced at the same
time as the Dropdown, holders of Publicly Owned WMZ Common Units
would be able to benefit from any increase in the market price
of the Williams Partners Common Units as a result of the
Dropdown. The closing market price of the Williams Partners
Common Units increased 18% from January 15, 2010, the last
trading day prior to the announcement of the Dropdown and the
proposed exchange ratio, through May 21, 2010.
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The WMZ Conflicts Committee believed, based, among other things,
on statements of Williams Partners management, that the
Exchange Ratio represented the highest per unit consideration
that Williams Partners would pay for Publicly Owned WMZ Common
Units.
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From January 19, 2010, the date that the Dropdown and
Williams Partners intention to offer to acquire the
Publicly Owned WMZ Common Units were announced, to the time of
the WMZ Conflicts Committees determination and
recommendations, no third parties indicated any interest in
pursuing a combination transaction with WMZ or the WMZ General
Partner.
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Given that WMZs only significant asset is a 35% interest
in a single pipeline system controlled by Williams Partners and
that Williams Partners already controls approximately 48% of
WMZs partnership interests, including all of WMZs
general partner interests, it appeared unrealistic for the WMZ
Conflicts Committee to believe that a more attractive
alternative proposal would be forthcoming from an unrelated
third party.
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Williams Partners is a much larger and more diversified energy
master limited partnership with an investment grade credit
rating that, among other things, is expected to have increased
access to capital and increased scale, scope and diversification
of revenue sources and, based on historic trading volumes for
its units, is expected to offer greater trading liquidity.
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Williams recently transferred a substantial majority of its
natural gas transportation assets in the Dropdown to Williams
Partners and incurred substantial expenses in connection with
the Dropdown. As a result, the possibility that any of such
assets would be further dropped down to WMZ by Williams as an
avenue for WMZs future growth has been substantially
diminished. While WMZ still may be able
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to grow organically or through third party acquisitions, the
pace of such growth will likely be slower than if WMZ could
obtain contributions of assets to WMZ by Williams.
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The Merger will provide holders of WMZ Common Units with the
benefits of the combination while eliminating the potential of
conflicts of interests between Williams Partners and WMZ, both
operationally and with respect to asset sales and joint
ventures, that can arise because they share common management
teams and operate in the same industry.
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The Merger is expected to result in cost savings, principally
from general and administrative costs.
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Generally, except with respect to cash received in lieu of
fractional WMZ Common Units, no gain or loss is expected to be
recognized for U.S. federal income tax purposes by the
holders of Publicly Owned WMZ Common Units as a result of the
Merger.
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The terms of the Merger Agreement included, among other things:
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the requirement that the Merger Agreement and the Merger be
approved by the holders of a majority of the Non-affiliated WMZ
Common Units;
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provisions allowing the WMZ Board or the WMZ Conflicts Committee
to withdraw or change its recommendation of the Merger Agreement
and the Merger in certain circumstances if it makes a good faith
determination that the failure to change its recommendation
would be reasonably likely to constitute a breach of its
fiduciary duties under applicable law;
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provisions allowing for WMZ to participate, in certain
circumstances, in negotiations with a third party in response to
an unsolicited alternative proposal that is reasonably likely to
result in a superior proposal;
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the lack of a
break-up fee
for termination of the Merger Agreement in accordance with its
terms;
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limited conditions and exceptions to the material adverse effect
closing condition and other closing conditions; and
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the lack of a need by Williams Partners to finance any component
of the purchase price because the consideration is composed of
Williams Partners Common Units.
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The WMZ Conflicts Committee considered the following factors to
be generally negative or unfavorable in making its determination
and recommendation:
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It is possible that the price for Williams Partners Common Units
could diminish prior to closing, reducing the value of the
Williams Partners Common Units to be received by virtue of the
Exchange Ratio from their value at the time of the signing of
the Merger Agreement.
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The Merger might not be completed in a timely manner, or at all,
which could result in significant costs and a decline in the
trading price of WMZ Common Units.
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One of WMZs primary business objectives is to generate
stable cash flows through the ownership and operation of natural
gas transportation and storage assets. Williams Partners was
formed to own, operate and acquire a diversified portfolio of
complementary energy assets, which may not generate cash flows
as stable as natural gas transportation and storage assets.
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The Merger Agreement limits WMZs ability to solicit third
party offers, although it does allow the WMZ Board and WMZ
Conflicts Committee in certain circumstances to withdraw, modify
or qualify their recommendations of the Merger or recommend,
adopt or approve a takeover proposal.
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Finally, the WMZ Conflicts Committee considered as favorable to
approval of the Merger Agreement and the Merger a number of
procedural factors associated with the Merger, including the
following:
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The WMZ Board of Directors unanimously delegated to the WMZ
Conflicts Committee the authority to review, evaluate and
negotiate the Merger and the Merger Agreement.
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The WMZ Conflicts Committee consists solely of directors each of
whom (a) is not a security holder, officer or employee of
the WMZ General Partner, (b) is not an officer, director or
employee of any affiliate of the WMZ General Partner,
(c) is not a holder of any ownership interest in WMZ and
its subsidiaries other than WMZ Common Units and awards under
the WMZ Long Term Incentive Plan (as defined in the WMZ
partnership agreement) and (d) meets the independence
standards required of a director who serves on an audit
committee established under the Exchange Act and the NYSE.
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The members of the WMZ Conflicts Committee were adequately
compensated for their services and their compensation was in no
way contingent on their approving the Merger Agreement or the
Merger.
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The members of the WMZ Conflicts Committee will not personally
benefit from the completion of the Merger in a manner different
from the holders of Non-affiliated WMZ Common Units.
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The WMZ Conflicts Committee was given authority to select and
compensate legal, financial and other independent advisors as it
deemed appropriate.
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The WMZ Conflicts Committee retained and was advised by
independent legal counsel, Fulbright, and an independent
financial advisor, Simmons & Company, who was also
engaged to render an opinion as to the fairness, from a
financial point of view, to the holders of Non-affiliated WMZ
Common Units of the consideration proposed to be paid in the
Merger.
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The WMZ Conflicts Committee and its legal counsel and financial
advisor conducted due diligence regarding Williams Partners and
WMZ.
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The WMZ Conflicts Committee had the ultimate authority to decide
whether or not to proceed with the proposed merger.
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The WMZ Conflicts Committee, with the assistance of its legal
and financial advisors, negotiated the terms of the Merger
Agreement on an arms-length basis with Williams Partners
and its legal and financial advisors.
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The structure of the acquisition was changed from an exchange
offer by Williams Partners to the negotiated Merger, thereby
(i) requiring approval by holders of a majority of
Non-affiliated WMZ Common Units, an additional form of approval
of a conflict of interest transaction under the WMZ partnership
agreement, and, (ii) if so approved, assuring that all
holders of Publicly Owned WMZ Common Units would receive the
same consideration in a Williams Partners acquisition of
100% of Publicly Owned WMZ Common Units.
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The structure of the acquisition was changed at the request of
the WMZ Conflicts Committee to a merger in which WMZ would
survive, thereby decreasing the risk of adverse tax consequences
to WMZ and the holders of Non-affiliated WMZ Common Units as a
result of the Merger.
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The WMZ Conflicts Committee was aware that it had no obligation
to recommend any transaction, including the merger proposal put
forth by Williams Partners.
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Opinion
of Financial Advisor (page 72)
The opinion of the WMZ Conflicts Committees independent
financial advisor, Simmons & Company, is attached to
this joint proxy statement/prospectus as Annex B. You are
encouraged to read the opinion carefully, as well as the
description of the analyses and assumptions on which the opinion
is based set forth under The Merger Opinion of
Financial Advisor. The opinion is directed to the WMZ
Conflicts Committee and does not constitute a recommendation to
any unitholder as to any matter relating to the Merger.
Simmons & Company delivered its written opinion to the
WMZ Conflicts Committee on May 21, 2010, to the effect
that, as of the date of its opinion and based on and subject to
various assumptions made, the Exchange Ratio is fair from a
financial point of view to holders of Non-affiliated WMZ Common
Units.
7
Other
Information
You should consider, among other matters, the following
information in evaluating the Merger Agreement and the Merger:
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WMZs only significant asset is a 35% interest in Northwest
Pipeline. Williams Partners owns a diversified group of
midstream and pipeline assets (including the controlling 65%
interest in Northwest Pipeline) with a book value of
approximately 27 times the book value of WMZs assets as of
March 31, 2010, and has an investment grade rating from the
three major credit rating agencies. As a result, Williams
Partners believes that it will have greater access to capital
and growth opportunities and offer greater potential for
acquisitions and increased unitholder value than WMZ would have
as a stand-alone owner of a minority interest in a single
pipeline system.
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The timing of the Merger provides holders of WMZ Common Units
the opportunity to participate in any value created from
Williams Partners February 2010 acquisition from Williams
of approximately $12 billion of assets in the Dropdown.
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The initial public offering price of WMZ Common Units in January
2008 was $20.00. The highest closing price of the WMZ Common
Units on any trading day from the date of the WMZ IPO to
January 15, 2010, the last NYSE trading day prior to the
announcement of Williams Partners intention to offer to
acquire the Publicly Owned WMZ Common Units, was $24.50. The
closing price of the WMZ Common Units on January 15, 2010
was $23.35. Based on the closing price of the Williams Partners
Common Units on June 23, 2010, the Exchange Ratio
represents an approximate 29% premium to the highest closing
price for WMZ Common Units on any trading day from the date of
the WMZ IPO and prior to the announcement of Williams
Partners intention to offer to acquire the Publicly Owned
WMZ Common Units, and an approximate 35% premium to the closing
price of the WMZ Common Units on the last trading day prior to
the announcement of Williams Partners intention to offer
to acquire the Publicly Owned WMZ Common Units.
|
Market
Prices of Williams Partners and WMZ Common Units
Williams Partners Common Units are quoted on the NYSE under the
symbol WPZ. WMZ Common Units are quoted on the NYSE
under the symbol WMZ.
The following table shows the closing sale prices of Williams
Partners Common Units and WMZ Common Units as reported on the
NYSE on January 15, 2010, the last full trading day prior
to the public announcement of the Dropdown and Williams
Partners intention to offer to acquire the Publicly Owned
WMZ Common Units, and on June 23, 2010, the last
practicable trading day prior to filing this joint proxy
statement/prospectus. This table also shows the value of each
WMZ Common Unit implied by the Merger consideration being
offered, calculated by multiplying the relevant price of a
Williams Partners Common Unit by the Exchange Ratio of 0.7584.
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Implied Value of a
|
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Williams Partners
|
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WMZ
|
|
WMZ Common Unit
|
|
January 15, 2010
|
|
$
|
30.79
|
|
|
$
|
23.35
|
|
|
$
|
23.35
|
|
June 23, 2010
|
|
$
|
41.69
|
|
|
$
|
31.35
|
|
|
$
|
31.62
|
|
Directors
and Management of Williams Partners Following the Merger
(page 57)
If the Merger is successfully consummated, it is expected that
the Williams Partners General Partners management team
will continue in their current roles and manage the combined
company.
The
Merger Agreement (page 85)
The Merger Agreement is attached to this joint proxy
statement/prospectus as Annex A and is incorporated by
reference into this joint proxy statement/prospectus. You are
encouraged to read the Merger Agreement because it is the legal
document that governs the Merger. For a summary of the material
terms of the Merger Agreement, please read the section entitled
The Merger Agreement below.
8
Structure
of the Merger
Merger Sub will merge with and into WMZ, and each Publicly Owned
WMZ Common Unit will be converted into the right to receive
0.7584 of one Williams Partners Common Unit. As a result of the
Merger, the separate existence of Merger Sub will cease and WMZ
and its subsidiaries will become indirect wholly owned
subsidiaries of Williams Partners.
When
the Merger Becomes Effective
The parties to the Merger Agreement have agreed to close the
Merger on the next business day after the day on which the last
condition to completing the Merger is satisfied or waived or at
such other time as the parties may agree. The Merger will then
become effective at the time and on the date on which a
certificate of merger is filed with the Delaware Secretary of
State or at such later time and date on which the parties agree
and specify in the certificate of merger. This time is referred
to as the effective time of the Merger.
Effect
of the Merger
At the effective time of the Merger:
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Each outstanding Publicly Owned WMZ Common Unit will be
converted into the right to receive 0.7584 of one Williams
Partners Common Unit and each such Publicly Owned WMZ Common
Unit will be canceled and retired and will cease to exist.
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The outstanding WMZ Common Units and WMZ Subordinated Units
owned by the WMZ General Partner will be canceled and retired
and will cease to exist without consideration.
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Each outstanding limited liability company interest in Merger
Sub issued and outstanding immediately prior to the effective
time of the Merger will cease to be outstanding and will be
canceled. Operating Company will be admitted to WMZ as a limited
partner of WMZ with a limited partner interest that constitutes
98% of the aggregate partnership interest of all partners in WMZ
immediately upon the effective time of the Merger. Immediately
after the effective time of the Merger, Operating Company will
be the sole limited partner of WMZ and the WMZ General Partner
will be the sole general partner of WMZ.
|
If, before the effective time of the Merger, the issued and
outstanding Williams Partners Common Units or WMZ Common Units
are changed into a different number of units as a result of any
unit split, distribution, combination, reorganization or other
similar transaction, an appropriate adjustment will be made to
the Exchange Ratio.
For a description of the Williams Partners Common Units and the
WMZ Common Units and a description of the comparative rights of
holders of the Williams Partners Common Units and the WMZ Common
Units, please read Comparison of the Rights of Holders of
Williams Partners Common Units and Holders of WMZ Common
Units and Description of Williams Partners Common
Units.
Conditions
to The Merger
The obligation of the parties to the Merger Agreement to
complete the Merger is subject to the satisfaction or waiver of
certain conditions, including, among others:
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The approval of the Merger and the Merger Agreement by holders
of at least a majority of the outstanding Non-affiliated WMZ
Common Units.
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The receipt of all other governmental consents and approvals,
the absence of which would, individually or in the aggregate,
have a material adverse effect on Williams Partners or WMZ.
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The continued effectiveness of the registration statement of
which this joint proxy statement/prospectus forms a part.
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9
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The approval for listing on the NYSE of the Williams Partners
Common Units to be issued in the Merger, subject to official
notice of issuance.
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The absence of any decree, order, injunction or law that
prohibits the Merger or makes the Merger unlawful.
|
The parties obligations are also separately subject to the
satisfaction or waiver of the following conditions:
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The representations and warranties of each other party set forth
in the Merger Agreement being true and correct as of the
closing, other than certain failures to be true and correct that
would not in the aggregate result in a material adverse effect
on the party making the representation or warranty, and each
party having performed or complied with all agreements and
covenants required to be performed by it under the Merger
Agreement in all material respects.
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In the case of Williams Partners condition, the receipt of
certain opinions of Andrews Kurth LLP or another
nationally-recognized tax counsel with regard to the
U.S. federal income tax consequences of the Merger, and in
the case of WMZs condition, the receipt of certain
opinions of Fulbright or another nationally-recognized tax
counsel with regard to the U.S. federal income tax
consequences of the Merger.
|
Non-Solicitation
WMZ and the WMZ General Partner have agreed that they and
WMZs subsidiaries will not, and will direct and use their
reasonable best efforts to cause such parties
representatives (including the WMZ Conflicts Committee) not to,
directly or indirectly, initiate or continue any discussions
with any other person with respect to a takeover proposal (as
defined in the Merger Agreement). Notwithstanding this
agreement, at any time prior to the approval by holders of a
majority of the outstanding Non-affiliated WMZ Common Units, WMZ
and the WMZ General Partner may, in response to a bona fide
unsolicited written takeover proposal that is made after the
date of the Merger Agreement and that did not result from a
breach of the non-solicitation provisions, furnish information
and participate in discussions or negotiations with respect to a
takeover proposal if:
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The WMZ Conflicts Committee determines in good faith after
consultation with its financial advisor and legal counsel that
the takeover proposal constitutes or is reasonably likely to
result in a superior proposal (as defined in the Merger
Agreement), and after consultation with outside legal counsel,
that the failure to do so would be reasonably likely to
constitute a violation of its fiduciary duties owed to the
holders of WMZ units under applicable law; and
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WMZ and the WMZ General Partner comply with the non-solicitation
provisions in the Merger Agreement.
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Neither the WMZ Board nor the WMZ Conflicts Committee may
withdraw, modify or qualify, or propose publicly to withdraw,
modify or qualify, its recommendation of the Merger or Merger
Agreement, recommend, adopt or approve, as applicable (or
propose publicly to do so), any takeover proposal, or fail to
reaffirm its recommendation upon request made by Williams
Partners except in certain circumstances involving a
determination in good faith, after consulting with outside legal
counsel, that failure to change its recommendation would be
reasonably likely to constitute a violation of its fiduciary
duties owed to the holders of the WMZ units under applicable
law. Unless the Merger Agreement is terminated as permitted
under the circumstances described below, the Merger Agreement
prohibits the WMZ Board and the WMZ Conflicts Committee from
approving or recommending, proposing to approve or recommend, or
allowing the WMZ General Partner or WMZ to execute or enter
into, any letter of intent, memorandum of understanding, merger
agreement or other similar agreement constituting or related to,
or that is intended to or would reasonably be expected to lead
to, any takeover proposal.
10
Termination
The parties to the Merger Agreement can agree to terminate the
Merger Agreement at any time without completing the Merger, even
after approval of the Merger Agreement by holders of a majority
of outstanding Non-affiliated WMZ Common Units. In addition,
either party may terminate the Merger Agreement on its own
without completing the Merger in a number of situations,
including if:
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the Merger has not been consummated on or before
November 1, 2010 (so long as the party seeking to terminate
did not prevent the Merger from occurring by failing to perform
or observe its obligations under the Merger Agreement), but if
the Merger has not been consummated solely because the parties
have not received regulatory approvals, then the outside date
will be automatically extended to December 31, 2010;
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a governmental entity shall have issued a final and
non-appealable order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the
Merger, so long as the party seeking termination has complied
with its obligations under the Merger Agreement to attempt to
remove the prohibition;
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the approval by holders of at least a majority of outstanding
Non-affiliated WMZ Common Units has not been obtained; or
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the other party breaches of any of its representations,
warranties or agreements in the Merger Agreement or if any of
the other partys representations or warranties becomes
untrue (subject to materiality, in certain cases), resulting in
a condition to the Merger not being satisfied, provided that the
terminating party is not likewise in breach of the Merger
Agreement.
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Material
U.S. Federal Income Tax Consequences (page 131)
Tax matters are very complicated. The tax consequences of the
Merger to each holder of Publicly Owned WMZ Common Units will
depend on its own situation. The tax discussions in this joint
proxy statement/prospectus focus on the U.S. federal income
tax consequences generally applicable to individuals who are
residents or citizens of the United States that acquired their
Publicly Owned WMZ Common Units for cash and hold their Publicly
Owned WMZ Common Units as capital assets, and these discussions
have only limited application to other holders of Publicly Owned
WMZ Common Units. Holders of Publicly Owned WMZ Common Units are
urged to consult their tax advisor for a full understanding of
the U.S. federal, state, local and foreign tax consequences
of the Merger to them.
For U.S. federal income tax purposes, except with respect
to cash received in lieu of fractional Williams Partners Common
Units and as described below with respect to a net decrease in a
holders share of nonrecourse liabilities, no income or
gain is expected to be recognized by a holder of Publicly Owned
WMZ Common Units as a result of the Merger.
Under Section 752 of the Code, each holders tax basis
in its Publicly Owned WMZ Common Units includes such
holders share of the nonrecourse liabilities of WMZ. For
U.S. federal income tax purposes, nonrecourse liabilities
are generally liabilities for which no partner has liability. As
a result of the Merger, each holders share of nonrecourse
liabilities will be recalculated, and each holder will be
treated as receiving a deemed cash distribution equal to the
excess, if any, of such holders share of nonrecourse
liabilities of WMZ immediately before the Merger over such
holders share of nonrecourse liabilities of Williams
Partners immediately following the Merger. If the amount of the
deemed cash distribution received by such holder exceeds the
holders basis in its Williams Partners Common Units
immediately after the Merger, such holder will recognize income
or gain in an amount equal to such excess. Williams Partners and
WMZ do not expect any holders of Publicly Owned WMZ Common Units
to recognize income or gain in this manner.
For U.S. federal income tax purposes, except under certain
circumstances with respect to a net decrease in a
unitholders share of nonrecourse liabilities, no income or
gain is expected to be recognized by a Williams Partners
unitholder as a result of the Merger.
For additional information, please read Material
U.S. Federal Income Tax Consequences.
11
Other
Information Related to the Merger
No
Appraisal Rights (page 83)
Holders of WMZ Common Units do not have appraisal rights under
applicable law or contractual appraisal rights under the WMZ
partnership agreement or the Merger Agreement.
Regulatory
Matters (page 83)
In connection with the Merger, Williams Partners intends to make
all required filings under the Securities Act of 1933, as
amended (the Securities Act) and the Exchange Act,
as well as any required filings or applications with the NYSE.
Williams Partners and WMZ are unaware of any other requirement
for the filing of information with, or the obtaining of the
approval of, governmental authorities in any jurisdiction that
is applicable to the Merger.
The Merger is not reportable under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the HSR
Act), and therefore no filings with respect to the Merger
were required with the Federal Trade Commission
(FTC) or the Antitrust Division of the Department of
Justice (DOJ).
Listing
of Williams Partners Common Units to be Issued in the Merger
(page 84)
Williams Partners expects to obtain approval to list the
Williams Partners Common Units to be issued pursuant to the
Merger Agreement on the NYSE, which approval is a condition to
the Merger.
Accounting
Treatment (page 84)
The Merger of Merger Sub with and into WMZ will be treated as an
equity transaction in accordance with generally accepted
accounting principles in the United States. As such, any
noncontrolling interests in consolidated subsidiaries of
Williams Partners will, following the Merger, be recognized as
equity of holders of Williams Partners Common Units.
Comparison
of the Rights of Holders of Williams Partners Common Units and
Holders of WMZ Common Units (page 99)
Both Williams Partners and WMZ are Delaware limited
partnerships, so there are no differences under applicable
Delaware state law in the rights of holders of Williams Partners
Common Units and holders of WMZ Common Units with respect to
matters on which the partnership agreements of both Williams
Partners and WMZ are silent. However, Williams Partners
organizational documents and the organizational documents of WMZ
are different and, as a result, there are differences in the
rights of holders of Williams Partners Common Units and WMZ
Common Units. Therefore, holders of WMZ Common Units will have
different rights once they become holders of Williams Partners
Common Units. For more information concerning these differences,
please read Comparison of the Rights of Holders of
Williams Partners Common Units and Holders of WMZ Common
Units.
Pending
Litigation (page 84)
On May 25, 2010, a lawsuit was filed in Tulsa, Oklahoma
against WMZ, certain of the officers and directors of the WMZ
General Partner, Williams Partners and Williams. The lawsuit
seeks class action status, and asserts claims of self-dealing
and breach of fiduciary duty in connection with the Merger. All
of the parties against whom the lawsuit was filed believe that
the lawsuit is without merit and intend to defend against it
vigorously. There can be no assurance that additional claims
will not be made or additional lawsuits filed, the substance of
which may be similar to the allegations described above or that
otherwise might arise from, or in connection with, the Merger
Agreement and the transactions it contemplates. For additional
information, please read The Merger Pending
Litigation.
12
Risk
Factors
The Merger poses a number of risks to the holders of Publicly
Owned WMZ Common Units who would become holders of Williams
Partners Common Units if the Merger is consummated. Some of
these risks include, but are not limited to, those described
below and in more detail under the headings Risk
Factors Risks Related to the Merger and
Risk Factors Tax Risks Related to the
Merger:
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|
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The number of Williams Partners Common Units that you will
receive in the Merger is based upon a fixed Exchange Ratio. As a
result, the market value of the Williams Partners Common Units
that you receive for your Publicly Owned WMZ Common Units in the
Merger could be less than it was at the time you vote on the
Merger.
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The market price of Williams Partners Common Units is affected
by factors different from those affecting the market price of
the WMZ Common Units. The price of Williams Partners Common
Units could decline following the Merger.
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The Merger is subject to closing conditions that, if not
satisfied or waived, will result in the Merger not being
consummated even if unitholder approval for the Merger is
obtained, which may cause the market price of the WMZ Common
Units to decline.
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|
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The combined company may not fully realize the anticipated
benefits of the Merger, or may not do so within the anticipated
time frame.
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Financial projections regarding Williams Partners and WMZ may
not be achieved.
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While the Merger Agreement is in effect, WMZ and Williams
Partners may lose opportunities to enter into other transactions
with other parties on more favorable terms.
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Failure to complete the Merger may have negative consequences to
WMZ and to the price of WMZ Common Units.
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|
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WMZs partnership agreement limits the fiduciary duties of
the WMZ General Partner to unitholders and restricts the
remedies available to unitholders for actions taken by the WMZ
General Partner that might otherwise constitute breaches of
fiduciary duty.
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Certain directors and executive officers of the WMZ General
Partner may have interests that differ in certain respects from
the holders of Non-affiliated WMZ Common Units.
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|
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No ruling has been requested from the Internal Revenue Service
with respect to the U.S. federal income tax consequences of
the Merger.
|
|
|
|
Holders of Publicly Owned WMZ Common Units may recognize income
or gain for U.S. federal income tax purposes as a result of
the Merger.
|
|
|
|
The Merger may further limit the ability of a Holder of Publicly
Owned WMZ Common Units to utilize suspended passive activity
losses.
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The intended U.S. federal income tax consequences of the
Merger are dependent upon Williams Partners being treated as a
partnership for U.S. federal income tax purposes.
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In addition, both Williams Partners and WMZ are subject to
various risks associated with their respective businesses. In
deciding whether to vote to approve the Merger Agreement and the
Merger, holders of Non-affiliated WMZ Common Units should read
carefully this joint proxy statement/prospectus, the documents
incorporated herein by reference and the documents to which you
are referred. See Risk Factors beginning on
page 21.
13
SELECTED
FINANCIAL INFORMATION OF WILLIAMS PARTNERS AND WMZ
The following selected financial information is provided to
assist you in analyzing the financial aspects of the Merger. The
selected historical financial information presented for Williams
Partners as of December 31, 2009 and 2008, and for the
years ended December 31, 2009, 2008 and 2007 was derived
from the audited consolidated financial statements of Williams
Partners filed with Williams Partners Current Report on
Form 8-K
on May 12, 2010 (the May 12, 2010
8-K),
which is incorporated by reference in this joint proxy
statement/prospectus. The selected historical financial
information presented for Williams Partners as of March 31,
2010 and for the three months ended March 31, 2010 and 2009
was derived from the unaudited consolidated financial statements
of Williams Partners included in Williams Partners
Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2010 (the Williams
Partners First Quarter 2010
10-Q),
which is incorporated by reference in this joint proxy
statement/prospectus. All other selected historical financial
information presented for Williams Partners has been prepared
from unaudited financial statements not incorporated by
reference in this joint proxy statement/prospectus.
The selected historical financial information presented for WMZ
as of December 31, 2009 and 2008, and for the years ended
December 31, 2009, 2008 and 2007 was derived from the
audited financial statements included in WMZs Annual
Report on
Form 10-K
for the year ended December 31, 2009 (the WMZ 2009
10-K),
which is incorporated by reference in this joint proxy
statement/prospectus. The selected historical financial
information presented for WMZ as of March 31, 2010 and for
the three months ended March 31, 2010 and 2009 was derived
from the unaudited consolidated financial statements of WMZ
included in WMZs Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2010 (the WMZ First
Quarter 2010
10-Q),
which is incorporated by reference in this joint proxy
statement/prospectus. All other selected historical financial
information presented for WMZ has been prepared from unaudited
financial statements not incorporated by reference in this joint
proxy statement/prospectus.
The unaudited consolidated financial statements of Williams
Partners and WMZ have been prepared on the same basis as their
audited consolidated financial statements except as stated in
the related notes thereto and, in the opinion of management,
include all normal recurring adjustments considered necessary
for a fair presentation of their financial condition and results
of operations for such periods. Operating results for the three
months ended March 31, 2010 are not necessarily indicative
of the results that may be expected for the year ended
December 31, 2010.
You should read the financial information with respect to
Williams Partners presented below in conjunction with the
historical consolidated financial statements and the related
notes contained in the May 12, 2010
8-K, and the
Managements Discussion and Analysis of Financial
Condition and Results of Operations filed with Williams
Partners Current Report on
Form 8-K
on April 20, 2010 (the April 20, 2010
8-K)
and the Williams Partners First Quarter 2010
10-Q. You
should read the financial information with respect to WMZ
presented below in conjunction with the historical consolidated
financial statements and the related notes and the
Managements Discussion and Analysis of Financial
Condition and Results of Operations contained in the WMZ
2009 10-K
and the WMZ First Quarter 2010
10-Q. See
Documents Incorporated by Reference.
14
Williams
Partners
The following table shows Williams Partners selected
financial and operating data for the periods and as of the dates
indicated and has been revised to reflect the consummation of
the Dropdown.
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Years Ended December 31,
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Three Months Ended March 31,
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2005
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|
2006
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2007
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|
2008
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2009
|
|
2009
|
|
2010
|
|
|
(Millions of dollars, except per-unit amounts)
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|
Statement of Income Data:
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|
|
|
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|
|
|
|
|
|
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|
|
|
|
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Revenues
|
|
$
|
3,994
|
|
|
$
|
4,711
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|
|
$
|
5,616
|
|
|
$
|
5,762
|
|
|
$
|
4,512
|
|
|
$
|
957
|
|
|
$
|
1,458
|
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Income before cumulative effect of change in accounting principle
|
|
|
553
|
|
|
|
822
|
|
|
|
1,449
|
|
|
|
2,102
|
|
|
|
1,031
|
|
|
|
183
|
|
|
|
313
|
|
Net income
|
|
|
552
|
|
|
|
822
|
|
|
|
1,449
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(1)
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|
|
2,102
|
(1)
|
|
|
1,031
|
|
|
|
183
|
|
|
|
313
|
|
Net income attributable to controlling interests
|
|
|
552
|
|
|
|
822
|
|
|
|
1,449
|
|
|
|
2,077
|
|
|
|
1,004
|
|
|
|
176
|
|
|
|
307
|
|
Income before cumulative effect of change in accounting
principle per limited partner unit:
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|
|
|
|
|
|
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|
|
|
|
|
|
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|
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|
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Common unit
|
|
$
|
0.49
|
(2)
|
|
$
|
1.73
|
|
|
$
|
1.99
|
|
|
$
|
3.08
|
|
|
$
|
2.88
|
|
|
$
|
0.36
|
|
|
$
|
0.61
|
|
Subordinated unit
|
|
$
|
0.49
|
(2)
|
|
$
|
1.73
|
|
|
$
|
1.99
|
|
|
|
N/A
|
|
|
|
N/A
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|
|
|
N/A
|
|
|
|
N/A
|
|
Net income per limited partner unit:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common unit
|
|
$
|
0.44
|
(2)
|
|
$
|
1.73
|
|
|
$
|
1.99
|
|
|
$
|
3.08
|
|
|
$
|
2.88
|
|
|
$
|
0.36
|
|
|
$
|
0.61
|
|
Subordinated unit
|
|
$
|
0.44
|
(2)
|
|
$
|
1.73
|
|
|
$
|
1.99
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Cash distributions declared per unit
|
|
$
|
0.1484
|
|
|
$
|
1.605
|
|
|
$
|
2.045
|
|
|
$
|
2.435
|
|
|
$
|
2.540
|
|
|
$
|
0.6350
|
|
|
$
|
0.6575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
As of March 31,
|
|
|
2005
|
|
2006
|
|
2007
|
|
2008
|
|
2009
|
|
2009
|
|
2010
|
|
|
(Millions of dollars)
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
9,473
|
|
|
$
|
10,297
|
|
|
$
|
11,064
|
|
|
$
|
11,676
|
|
|
$
|
11,984
|
|
|
$
|
11,730
|
|
|
$
|
12,136
|
|
Short-term notes payable and long-term debt due within one year
|
|
|
8
|
|
|
|
253
|
|
|
|
75
|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
9
|
|
Long-term debt
|
|
|
1,513
|
(3)
|
|
|
2,386
|
(3)
|
|
|
2,821
|
(3)
|
|
|
2,971
|
(3)
|
|
|
2,981
|
(3)
|
|
|
2,971
|
(3)
|
|
|
6,330
|
|
Total equity
|
|
|
5,991
|
|
|
|
5,472
|
|
|
|
5,867
|
|
|
|
7,389
|
|
|
|
7,627
|
|
|
|
7,514
|
|
|
|
4,349
|
|
|
|
|
(1) |
|
Transco and Northwest Pipeline converted to single member
limited liability companies on December 31, 2008 and
October 1, 2007, respectively. Each made an election to be
treated as a disregarded entity; therefore, they were no longer
subject to federal or state income tax as of their respective
conversion date. The provision (benefit) for income taxes
included in net income for 2007 includes Northwest
Pipelines benefit through September 30, 2007 and the
2008 provision (benefit) for income taxes included in net income
includes Transcos benefit through December 31, 2008.
Subsequent to the conversion, all deferred taxes were eliminated
through income and Transco and Northwest Pipeline no longer
provide for federal or state income taxes. |
|
(2) |
|
Commencing on August 23, 2005, the date of Williams
Partners initial public offering. |
|
(3) |
|
Does not reflect borrowings of $3.5 billion entered into in
February 2010 related to the Dropdown. |
15
WMZ
The following tables show (i) selected financial data of
WMZ, and (ii) selected financial and operating data of
Northwest Pipeline. The financial information that precedes
January 24, 2008, the date of the WMZ IPO, is referred to
as Predecessor. The historical financial information
for the Predecessor reflects the ownership of a 35% investment
in Northwest Pipeline using the equity method of accounting.
Williams
Pipeline Partners L.P. and/or Predecessor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
Three Months Ended March 31,
|
|
|
2005
|
|
2006
|
|
2007
|
|
2008
|
|
2009
|
|
2009
|
|
2010
|
|
|
(Predecessor)
|
|
(Predecessor)
|
|
(Predecessor)
|
|
(Restated)(1)
|
|
|
|
|
|
|
|
|
|
|
(Restated)(1)
|
|
(Restated)(1)
|
|
|
|
|
|
|
|
|
|
|
(Restated)(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Thousands of dollars, except per-unit amounts)
|
|
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity earnings from investment in Northwest Pipeline
|
|
$
|
24,141
|
|
|
$
|
19,062
|
|
|
$
|
153,904
|
(2)
|
|
$
|
54,380
|
|
|
$
|
53,778
|
|
|
$
|
14,318
|
|
|
$
|
13,259
|
|
Net income
|
|
|
24,141
|
|
|
|
19,062
|
|
|
|
153,904
|
(2)
|
|
|
51,880
|
|
|
|
50,821
|
|
|
|
13,655
|
|
|
|
11,927
|
|
Basic and diluted net income per limited partner unit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1.45
|
|
|
$
|
1.53
|
|
|
$
|
0.41
|
|
|
$
|
0.35
|
|
Subordinated units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1.45
|
|
|
$
|
1.53
|
|
|
$
|
0.41
|
|
|
$
|
0.35
|
|
Cash distributions declared per unit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.8492
|
|
|
$
|
1.31
|
|
|
$
|
0.3250
|
|
|
$
|
0.3350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
As of March 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
(Predecessor)
|
|
|
(Predecessor)
|
|
|
(Predecessor)
|
|
|
(Restated)(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Restated)(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Restated)(1)
|
|
|
(Restated)(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Thousands of dollars)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in Northwest Pipeline
|
|
$
|
264,721
|
|
|
$
|
306,660
|
|
|
$
|
422,199
|
|
|
$
|
435,103
|
|
|
$
|
441,608
|
|
|
$
|
417,525
|
|
|
$
|
428,515
|
|
Total partners capital
|
|
|
264,721
|
|
|
|
306,660
|
|
|
|
422,199
|
|
|
|
441,952
|
|
|
|
449,372
|
|
|
|
424,333
|
|
|
|
450,045
|
|
Note: Net income and distributions per
partnership unit are not presented for 2005 through 2007 because
Northwest Pipeline was a corporation wholly owned by Williams
during those years. Distributions for 2009 and 2008 were made to
Northwest Pipelines partners based upon each
partners ownership interest.
Northwest
Pipeline (100%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
Three Months Ended March 31,
|
|
|
2005
|
|
2006
|
|
2007
|
|
2008
|
|
2009
|
|
2009
|
|
2010
|
|
|
|
|
|
|
(Restated)(1)
|
|
(Restated)(1)
|
|
|
|
|
|
|
|
|
(Restated)(1)
|
|
(Restated)(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
(Thousands of dollars)
|
|
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues
|
|
$
|
321,457
|
|
|
$
|
324,250
|
|
|
$
|
421,851
|
|
|
$
|
434,854
|
|
|
$
|
434,379
|
|
|
$
|
111,548
|
|
|
$
|
106,110
|
|
Net income
|
|
|
68,974
|
|
|
|
54,462
|
|
|
|
439,726
|
(2)
|
|
|
155,371
|
|
|
|
153,651
|
|
|
|
40,908
|
|
|
|
37,883
|
|
Cash distributions
|
|
|
50,000
|
|
|
|
|
|
|
|
109,770
|
|
|
|
419,342
|
|
|
|
135,000
|
|
|
|
32,000
|
|
|
|
75,280
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
As of March 31,
|
|
|
2005
|
|
2006
|
|
2007
|
|
2008
|
|
2009
|
|
2009
|
|
2010
|
|
|
|
|
|
|
(Restated)(1)
|
|
(Restated)(1)
|
|
|
|
|
|
|
|
|
(Restated)(1)
|
|
(Restated)(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
(Thousands of dollars)
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,661,324
|
|
|
$
|
2,034,748
|
|
|
$
|
2,033,596
|
|
|
$
|
2,078,812
|
|
|
$
|
2,081,277
|
|
|
$
|
2,089,564
|
|
|
$
|
2,114,520
|
|
Long-term debt, including current maturities
|
|
|
520,080
|
|
|
|
687,075
|
|
|
|
693,736
|
|
|
|
693,240
|
|
|
|
693,437
|
|
|
|
693,290
|
|
|
|
701,486
|
|
Total owners equity
|
|
|
728,505
|
|
|
|
846,809
|
|
|
|
1,177,098
|
|
|
|
1,210,547
|
|
|
|
1,207,150
|
|
|
|
1,194,588
|
|
|
|
1,240,498
|
|
|
|
|
(1) |
|
WMZs and Northwest Pipelines financial statements
have been restated as described in the WMZ 2009
10-K in
Item 8. Financial Statements and Supplementary
Data Williams Pipeline Partners L.P. Notes to
Consolidated Financial Statements: Note 2. Restatement and
Northwest Pipeline GP Notes to Consolidated Financial
Statements: Note 2. Restatement. Accordingly,
Northwests 2005, 2006, 2007, and 2008 selected financial
data has been restated to reflect the change in accounting
treatment. See Documents Incorporated by Reference. |
|
(2) |
|
Through September 30, 2007, Northwest Pipeline used the
liability method of accounting for income taxes which required,
among other things, provisions for all temporary differences
between the financial basis and the tax basis in Northwest
Pipelines assets and liabilities and adjustments to the
existing deferred tax balances for changes in tax rates.
Following Northwest Pipelines conversion to a general
partnership on October 1, 2007, Northwest Pipeline is no
longer subject to income tax. On October 1, 2007, Northwest
Pipeline reversed deferred income tax liabilities of
approximately $311.8 million to income and
$0.2 million of deferred income tax assets to other
comprehensive income. |
17
COMPARATIVE
AND PRO FORMA PER UNIT DATA
The following table presents Williams Partners and
WMZs historical per unit data, Williams Partners and
WMZs combined pro forma per unit data for the year ended
December 31, 2009 and for the quarter ended March 31,
2010, and equivalent pro forma per unit data for WMZ for the
year ended December 31, 2009 and for the quarter ended
March 31, 2010, using certain assumptions as set forth in
the footnotes to the table. The data do not purport to be
indicative of:
|
|
|
|
|
the results of operations or financial position which would have
been achieved if the Dropdown and the Merger had been effected
at the beginning of the period or as of the date
indicated; or
|
|
|
|
the results of operations or financial position that may be
achieved in the future.
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
Three Months
|
|
|
December 31,
|
|
Ended March 31,
|
|
|
2009
|
|
2010
|
|
Williams Partners Historical Data:
|
|
|
|
|
|
|
|
|
Net income per common unit
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
2.88
|
|
|
$
|
0.61
|
|
Cash distributions declared per unit
|
|
$
|
2.54
|
|
|
$
|
0.635
|
|
Book value per common unit as of period end
|
|
$
|
30.90
|
|
|
$
|
31.23
|
|
WMZ Historical Data
|
|
|
|
|
|
|
|
|
Net income per common and subordinated unit
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
1.53
|
|
|
$
|
0.35
|
|
Cash distributions declared per unit
|
|
$
|
1.31
|
|
|
$
|
0.335
|
|
Book value per common and subordinated unit as of period end
|
|
$
|
13.12
|
|
|
$
|
13.14
|
|
Unaudited pro forma combined(1)
|
|
|
|
|
|
|
|
|
Net income per limited partner unit
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
2.93
|
|
|
$
|
0.90
|
|
Cash distributions declared per unit
|
|
|
N/A
|
|
|
|
N/A
|
|
Book value per limited partner unit as of period end
|
|
$
|
21.09
|
|
|
$
|
21.08
|
|
Equivalent basis unaudited pro forma combined(2)
|
|
|
|
|
|
|
|
|
Net income per limited partner unit
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
2.22
|
|
|
$
|
0.68
|
|
Cash distributions declared per unit
|
|
|
N/A
|
|
|
|
N/A
|
|
Book value per limited partner unit as of period end
|
|
$
|
16.00
|
|
|
$
|
15.99
|
|
|
|
|
(1) |
|
The unaudited pro forma combined calculations reflect both the
Merger and the Dropdown, both as previously described in this
joint proxy statement/prospectus. The primary pro forma effect
of the Merger is the elimination of noncontrolling interests in
consolidated subsidiaries of Williams Partners and the
recognition of the additional equity holders in Williams
Partners Common Units. The primary pro forma effects of the
Dropdown are as follows: |
|
|
|
|
|
The addition of the entities that were contributed to Williams
Partners in the Dropdown (the Contributed Entities)
at Williams historical cost as the Dropdown is considered
a transaction between entities under common control;
|
|
|
|
The receipt of $3.5 billion of proceeds from the issuance
of Williams Partners senior unsecured notes, net of
estimated purchasers discounts and issuance costs and the
related increase in interest expense;
|
|
|
|
Payment of estimated fees to establish a new unsecured revolving
credit facility for Williams Partners;
|
|
|
|
Payment of $3.5 billion of cash consideration to Williams,
less estimated costs and expenses of the Dropdown; and
|
|
|
|
Issuance, and conversion to Williams Partners Common Units, of
Williams Partners Class C Units to affiliates of
Williams and an increase in the capital account of Williams
Partners general partner sufficient to maintain its 2%
ownership interest in Williams Partners.
|
|
|
|
(2) |
|
Equivalent basis unaudited pro forma combined amounts have been
calculated by multiplying the unaudited pro forma combined per
unit amounts by the 0.7584 Exchange Ratio. |
18
MARKET
PRICE AND CASH DISTRIBUTION INFORMATION
Williams Partners Common Units and the WMZ Common Units are
listed on the NYSE. The following table sets forth for the
periods indicated the high and low per unit sale price of
Williams Partners Common Units and the WMZ Common Units and the
cash distributions per unit for each of the last two fiscal
years and the current fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Williams Partners
|
|
WMZ
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
Cash
|
|
|
|
|
|
|
Distribution
|
|
|
|
|
|
Distribution
|
|
|
High
|
|
Low
|
|
per Unit(1)
|
|
High
|
|
Low
|
|
per Unit(2)
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter(3)
|
|
$
|
39.31
|
|
|
$
|
31.24
|
|
|
$
|
0.6000
|
|
|
$
|
20.42
|
|
|
$
|
15.89
|
|
|
$
|
0.2242
|
|
Second Quarter
|
|
$
|
37.66
|
|
|
$
|
31.33
|
|
|
$
|
0.6250
|
|
|
$
|
18.86
|
|
|
$
|
17.26
|
|
|
$
|
0.3100
|
|
Third Quarter
|
|
$
|
32.84
|
|
|
$
|
22.77
|
|
|
$
|
0.6350
|
|
|
$
|
17.54
|
|
|
$
|
13.59
|
|
|
$
|
0.3150
|
|
Fourth Quarter
|
|
$
|
26.25
|
|
|
$
|
9.96
|
|
|
$
|
0.6350
|
|
|
$
|
16.00
|
|
|
$
|
11.57
|
|
|
$
|
0.3200
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
17.88
|
|
|
$
|
8.54
|
|
|
$
|
0.6350
|
|
|
$
|
17.11
|
|
|
$
|
14.20
|
|
|
$
|
0.3250
|
|
Second Quarter
|
|
$
|
19.70
|
|
|
$
|
10.89
|
|
|
$
|
0.6350
|
|
|
$
|
20.40
|
|
|
$
|
15.93
|
|
|
$
|
0.3300
|
|
Third Quarter
|
|
$
|
23.80
|
|
|
$
|
17.10
|
|
|
$
|
0.6350
|
|
|
$
|
19.30
|
|
|
$
|
17.27
|
|
|
$
|
0.3350
|
|
Fourth Quarter
|
|
$
|
32.23
|
|
|
$
|
22.20
|
|
|
$
|
0.6350
|
|
|
$
|
23.80
|
|
|
$
|
18.64
|
|
|
$
|
0.3350
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
42.35
|
|
|
$
|
30.01
|
|
|
$
|
0.6575
|
|
|
$
|
31.84
|
|
|
$
|
23.35
|
|
|
$
|
0.3350
|
|
Second Quarter (through June 23, 2010)
|
|
$
|
44.15
|
|
|
$
|
34.62
|
|
|
$
|
(4
|
)
|
|
$
|
33.28
|
|
|
$
|
25.66
|
|
|
$
|
(4
|
)
|
|
|
|
(1) |
|
Represents cash distributions attributable to the quarter and
declared and paid within 45 days after quarter end.
Williams Partners paid cash distributions to the Williams
Partners General Partner with respect to its 2% general partner
interest and incentive distribution rights that totaled
$2.7 million and $30.0 million for the 2009 and 2008
periods, respectively. |
|
(2) |
|
Represents cash distributions attributable to the quarter and
declared and paid or to be paid within 45 days after
quarter end. WMZ paid cash distributions to the WMZ General
Partner with respect to its 2% general partner interest and
incentive distribution rights that totaled $0.8 million in
2008 and $1.0 million in 2009. Subordinated units
participated in all of the cash distributions for the periods
indicated above. |
|
(3) |
|
For WMZ, represents the period from January 24, 2008, the
date the WMZ IPO was completed. The first quarter distribution
was prorated to cover the period of time from January 24,
when the partnerships initial public offering closed,
through March 31. The prorated distribution of $0.2242
equates to a full quarter distribution of $0.30 per unit. |
|
(4) |
|
Cash distributions in respect of the second quarter have not yet
been declared or paid. |
On January 15, 2010, the last full trading day prior to the
public announcement of the proposed transaction, the closing
price for each WMZ Common Unit quoted on the NYSE was $23.35 and
the closing price for each Williams Partners Common Unit quoted
on the NYSE was $30.79. On June 23, 2010, the last
practicable trading day prior to the filing date of this joint
proxy statement/prospectus, the closing price for a WMZ Common
Unit as reported on the NYSE was $31.35 and the closing price
for a Williams Partners Common Unit as reported on the NYSE was
$41.69.
The initial public offering price of WMZ Common Units in January
2008 was $20.00. The highest closing price of the WMZ Common
Units on any trading day from the date of the WMZ IPO to
January 15, 2010, the last NYSE trading day prior to the
announcement of Williams Partners intention to offer to
acquire the Publicly Owned WMZ Common Units, was $24.50. The
closing price of the WMZ Common Units on January 15, 2010
was $23.35. Based on the closing price of the Williams Partners
Common Units on June 23, 2010, the Exchange Ratio
represents an approximate 29% premium to the highest closing
price for WMZ Common Units on any trading day from the date of
the WMZ IPO and prior to the announcement of Williams
19
Partners intention to offer to acquire the Publicly Owned
WMZ Common Units, and an approximate 35% premium to the closing
price of the WMZ Common Units on the last trading day prior to
the announcement of Williams Partners intention to offer
to acquire the Publicly Owned WMZ Common Units.
For the week ended June 18, 2010, the average daily trading
volume of Williams Partners Common Units was 371,829 and the
average daily trading volume of WMZ Common Units was 51,899.
Holders of Non-affiliated WMZ Common Units are encouraged to
obtain current market quotations for Williams Partners Common
Units prior to making any decision with respect to the Merger.
No assurance can be given concerning the market price for
Williams Partners Common Units before or after the Merger. The
market price for Williams Partners Common Units will fluctuate
between the date of this joint proxy statement/prospectus and
the date on which the Merger is consummated and thereafter.
Williams Partners partnership agreement provides that
within 45 days after the end of each quarter, it will
distribute its cash available for distributions, if any, to
unitholders of record on the applicable record date. Williams
Partners has paid quarterly distributions to unitholders and the
Williams Partners General Partner after every quarter since its
initial public offering on August 23, 2005. On
April 22, 2010, Williams Partners announced that it was
increasing its quarterly distribution from $0.6350 to $0.6575
per common unit effective with its distribution with respect to
the first quarter of 2010, and Williams Partners paid a
quarterly distribution of $0.6575 per unit on May 14, 2010
to unitholders of record at the close of business on May 7,
2010.
As part of the consideration for the Dropdown, Williams Partners
issued 203 million Class C limited partnership units
to Williams, which were identical to Williams Partners Common
Units except with respect to distributions for the first quarter
of 2010, for which they received a prorated quarterly
distribution as they were not outstanding during the full
quarterly period. These Class C units automatically
converted into Williams Partners Common Units on May 10,
2010, the first business day following the record date for the
first quarter 2010 cash distribution.
WMZs partnership agreement provides that, within
45 days after the end of each quarter, beginning with the
quarter ended March 31, 2008, WMZ will distribute its cash
available for distributions, if any, to unitholders of record on
the applicable record date. WMZ has paid quarterly distributions
to unitholders and the WMZ General Partner after every quarter
since the WMZ IPO on January 24, 2008. WMZs last
quarterly distribution of $0.3350 per unit was paid on
May 14, 2010 to unitholders of record at the close of
business on May 7, 2010.
Williams Partners and WMZ will coordinate the record dates of
any quarterly distributions during the period from the execution
of the Merger Agreement to the date that the Merger is
consummated so that no holder of Publicly Owned WMZ Common Units
will fail to be entitled to receive any quarterly regular
distribution by WMZ unless it becomes entitled to receive a
quarterly distribution from Williams Partners with respect to
the same quarter.
20
RISK
FACTORS
You should carefully consider the following risk factors,
together with all of the other information in this joint proxy
statement/prospectus, the documents incorporated herein by
reference and the documents to which you are referred before
deciding how to vote. Each of these factors could adversely
affect the consummation of the Merger, Williams Partners
business, operating results and financial condition, the value
of an investment in Williams Partners Common Units and
WMZs business. This joint proxy statement/prospectus also
contains forward-looking statements that involve risks and
uncertainties. Please read Information Regarding
Forward-Looking Statements.
Risks
Related to the Merger
The
number of Williams Partners Common Units that you will receive
in the Merger is based upon a fixed Exchange Ratio. As a result,
the market value of the Williams Partners Common Units that you
receive for your Publicly Owned WMZ Common Units in the Merger
could be less than it was at the time you vote on the
Merger.
The Exchange Ratio is 0.7584 and it is fixed, meaning that it
does not change and is not dependent upon the relative values of
Williams Partners Common Units and WMZ Common Units. This means
that there is no price protection mechanism
contained in the Merger Agreement that would adjust the number
of Williams Partners Common Units that holders of WMZ Common
Units will receive based on any decreases in the trading price
of Williams Partners Common Units. If the price of Williams
Partners Common Units decreases because of changes in Williams
Partners business, operations or prospects, market
reactions to the Merger, general market and economic conditions
or other factors, such as the existing or any subsequent
litigation challenging the Merger or an announcement by Williams
Partners that it will pursue another merger or acquisition or a
debt offering, the market value of the consideration received by
holders of WMZ Common Units will also decrease. For example, if
the market price of Williams Partners Common Units declines in
value following the announcement of the Merger, you will receive
less value for your WMZ Common Units than the value calculated
pursuant to the Exchange Ratio on the date the Merger was
announced. In addition, there are no covenants in the Merger
Agreement restricting Williams Partners from engaging in other
mergers and acquisitions, sales of assets, or debt financings
between signing and closing. If Williams Partners engages in any
such transactions and the market price of Williams Partners
Common Units declines in value as a result, you will receive
less value for your WMZ Common Units than the value calculated
pursuant to the Exchange Ratio on the date the Merger was
announced. For historical and current market prices of Williams
Partners Common Units and WMZ Common Units, please read the
Market Prices and Distribution Information section
of this joint proxy statement/prospectus.
The
market price of Williams Partners Common Units is affected by
factors different from those affecting the market price of the
WMZ Common Units. The price of Williams Partners Common Units
could decline following the Merger.
If the Merger is successfully consummated, holders of Publicly
Owned WMZ Common Units will become holders of Williams Partners
Common Units. Although, as of the date of this joint proxy
statement/prospectus, Williams Partners owns an approximate
45.7% limited partner interest and a 2% general partner interest
in WMZ (by virtue of owning 100% of the WMZ General Partner),
Williams Partners also operates very substantial other
businesses, which have different risks associated with them than
those associated with WMZ. Accordingly, the performance of
Williams Partners Common Units is likely to be different from
the performance of the WMZ Common Units in the absence of the
Merger. Williams Partners Common Units are subject to investment
risks and they may decline in value due to Williams
Partners business performance or extrinsic factors
affecting the industry or financial markets generally. See
Risks Inherent in Williams Partners
Business.
21
The
Merger is subject to closing conditions that, if not satisfied
or waived, will result in the Merger not being consummated even
if unitholder approval for the Merger is obtained, which may
cause the market price of the WMZ Common Units to
decline.
The obligation of the parties to the Merger Agreement to
complete the Merger is subject to the satisfaction or waiver of
certain conditions, including, among others:
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|
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|
|
The approval of the Merger and the Merger Agreement by holders
of at least a majority of the outstanding Non-affiliated WMZ
Common Units;
|
|
|
|
The receipt of all other governmental consents and approvals,
the absence of which would, individually or in the aggregate,
have a material adverse effect on Williams Partners or WMZ;
|
|
|
|
The continued effectiveness of the registration statement of
which this joint proxy statement/prospectus forms a part;
|
|
|
|
The approval for listing on the NYSE of the Williams Partners
Common Units to be issued in the Merger, subject to official
notice of issuance; and
|
|
|
|
The absence of any decree, order, injunction or law that
prohibits the Merger or makes the Merger unlawful;
|
The parties obligations are also separately subject to the
satisfaction or waiver of the following conditions:
|
|
|
|
|
The representations and warranties of each other party set forth
in the Merger Agreement being true and correct as of the
closing, other than certain failures to be true and correct that
would not in the aggregate result in a material adverse effect
on the party making the representation or warranty, and each
party having performed or complied with all agreements and
covenants required to be performed by it under the Merger
Agreement in all material respects; and
|
|
|
|
In the case of Williams Partners condition, the receipt of
certain opinions of Andrews Kurth LLP or another
nationally-recognized tax counsel with regard to the
U.S. federal income tax consequences of the Merger, and in
the case of WMZs condition, the receipt of certain
opinions of Fulbright or another nationally-recognized tax
counsel with regard to the U.S. federal income tax
consequences of the Merger.
|
If these conditions are not satisfied or waived, the Merger
would not occur, even though the holders of Non-affiliated WMZ
Common Units may have voted in favor of the Merger, which may
cause the market price of the WMZ Common Units to decline.
The
combined company may not fully realize the anticipated benefits
of the Merger, or may not do so within the anticipated time
frame.
The Merger may result in unforeseen expenses, and the
integration of WMZs business and operations with those of
Williams Partners may not proceed smoothly, successfully or on a
timely basis. In addition, expected growth opportunities for the
combined company may not materialize.
Financial
projections regarding Williams Partners and WMZ may not prove
accurate.
In performing its financial analyses and rendering its opinion
regarding the fairness, from a financial point of view, of the
Exchange Ratio, the financial advisor to the WMZ Conflicts
Committee reviewed and relied on, among other things, internal
financial analyses and forecasts for WMZ and Williams Partners
prepared by employees of Williams who normally render services
to WMZ and Williams Partners. These financial projections
include assumptions regarding future operating cash flows,
expenditures and income of Williams Partners and WMZ. These
financial projections were not prepared with a view to public
disclosure, are subject to a significant economic, competitive,
industry and other uncertainties and may not be achieved in
full, at all or within projected timeframes. The failure of
Williams Partners or WMZs businesses to achieve
projected results, including projected cash flows, could have a
material adverse effect on the price of Williams
22
Partners Common Units, its financial position and its ability to
maintain or increase its distributions following the Merger.
While
the Merger Agreement is in effect, WMZ and Williams Partners may
lose opportunities to enter into other transactions with other
parties on more favorable terms.
While the Merger Agreement is in effect, WMZ is prohibited from
entering into or soliciting, initiating or encouraging any
inquiries or proposals that may lead to a proposal to acquire
WMZ, or offer to enter into certain transactions such as a
merger, sale of assets or other business combination, with any
other person, subject to exceptions in certain circumstances
involving fiduciary duties under applicable law. As a result of
these provisions in the Merger Agreement, WMZ may lose
opportunities to enter into more favorable transactions. These
non-solicitation provisions (described in more detail in
The Merger Agreement) could be in effect for an
extended period of time if completion of the Merger is delayed.
In addition to the economic costs associated with pursuing a
Merger, substantial management time and other human resources
are being devoted to the proposed transaction and related
matters, which could limit Williams Partners and
WMZs ability to pursue other attractive business
opportunities, including potential joint ventures, stand-alone
projects and other transactions. If either Williams Partners or
WMZ is unable to pursue such other attractive business
opportunities, then its growth prospects and the long-term
strategic position of its business and the combined business
could be adversely affected.
Failure
to complete the Merger may have negative consequences to WMZ and
to the price of WMZ Common Units.
Since the announcement of the Dropdown and, in connection
therewith, of the Exchange Ratio to be offered by Williams
Partners for Publicly Owned WMZ Common Units, WMZ Common Units
have traded on the NYSE at a range of prices that reflect the
market price of Williams Partners Common Units and the announced
Exchange Ratio. If the Merger is not completed, the market price
of WMZ Common Units could decline to the price level at which
WMZ Common Units traded prior to the announcement of the
proposed acquisition by Williams Partners of WMZ Common Units.
In addition, if the Merger is not completed, the market price of
WMZ Common Units could decline below pre-announcement levels as
the completion of the Dropdown has significantly diminished the
likelihood that WMZ will be able to grow through the dropdown of
additional assets from Williams into WMZ.
WMZs
partnership agreement limits the fiduciary duties of the WMZ
General Partner to unitholders and restricts the remedies
available to unitholders for actions taken by the WMZ General
Partner that might otherwise constitute breaches of fiduciary
duty.
In light of potential conflicts of interest between Williams,
Williams Partners and the WMZ General Partner, on the one hand,
and WMZ and the holders of Non-affiliated WMZ Common Units, on
the other hand, the WMZ Board submitted the Merger and related
matters to the WMZ Conflicts Committee for review and possible
approval of a majority of its members acting in good faith,
which is referred to as Special Approval in
WMZs partnership agreement. Under the WMZ partnership
agreement:
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any resolution or course of action by the WMZ General Partner in
respect of a conflict of interest is permitted and deemed
approved by all partners of WMZ, and will not constitute a
breach of the WMZ partnership agreement or of any duty stated or
implied by law, in equity or otherwise, if the resolution or
course of actions is approved by Special Approval; and
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it is presumed that the actions of the WMZ Conflicts Committee
in connection with granting Special Approval are made in good
faith, and in any proceeding brought by or on behalf of any
unitholder or WMZ, the person bringing such proceeding has the
burden of overcoming that presumption.
|
The WMZ Conflicts Committee reviewed, negotiated and evaluated
the Merger Agreement and the Merger and related matters on
behalf of the holders of Non-affiliated WMZ Common Units and
WMZ. Among other things, the WMZ Conflicts Committee determined
that the Merger Agreement and the Merger
23
are in the best interests of WMZ and the holders of
Non-affiliated WMZ Common Units, approved the Merger Agreement
and the Merger (thereby giving Special Approval
under WMZs partnership agreement), and recommended that
the Merger Agreement and the Merger be approved by the WMZ Board
and the holders of Non-affiliated WMZ Common Units. The
fiduciary duties of the WMZ General Partner, the WMZ Board and
the WMZ Conflicts Committee to you in connection with the Merger
are substantially limited by the WMZ partnership agreement, and
any proceeding by a unitholder to challenge the transaction is
made meaningfully more difficult by the presumption that the WMZ
Conflicts Committee acted in good faith in granting Special
Approval.
Certain
directors and executive officers of the WMZ General Partner may
have interests that differ in certain respects from the holders
of Non-affiliated WMZ Common Units.
In considering the recommendations of the WMZ Conflicts
Committee and the WMZ Board to approve the Merger Agreement and
the Merger, you should consider that some of the directors and
executive officers of the WMZ General Partner who are not
members of the WMZ Conflicts Committee may have interests that
differ from, or are in addition to, their interests as holders
of WMZ Common Units. You should consider these interests in
voting on the Merger, which are described more fully under the
caption The Merger Interests of Certain
Persons in the Merger.
Tax Risks
Related to the Merger
You are urged to read Material U.S. Federal Income
Tax Consequences beginning on page 131 for a more
complete discussion of the expected material U.S. federal
income tax consequences of the Merger.
No
ruling has been requested from the Internal Revenue Service with
respect to the U.S. federal income tax consequences of the
Merger.
Although no income or gain is expected to be recognized by a
holder of Publicly Owned WMZ Common Units as a result of the
Merger (except with respect to (i) cash received in lieu of
fractional Williams Partners Common Units and (ii) a net
decrease in a such holders share of nonrecourse
liabilities as discussed below), no ruling has been or will be
requested from the Internal Revenue Service, or IRS, with
respect to the U.S. federal income tax consequences of the
Merger. Instead, Williams Partners and WMZ are relying on the
opinions of their respective counsel as to the U.S. federal
income tax consequences of the Merger, and counsels
conclusions may not be sustained if challenged by the IRS.
Holders
of Publicly Owned WMZ Common Units may recognize income or gain
for U.S. federal income tax purposes as a result of the
Merger.
Under Section 752 the Code, each holders tax basis in
its Publicly Owned WMZ Common Units includes such holders
share of the nonrecourse liabilities of WMZ. For
U.S. federal income tax purposes, nonrecourse liabilities
are generally liabilities for which no partner has liability. As
a result of the Merger, each holders share of nonrecourse
liabilities will be recalculated, and each holder will be
treated as receiving a deemed cash distribution equal to the
excess, if any, of such holders share of nonrecourse
liabilities of WMZ immediately before the Merger over such
holders share of nonrecourse liabilities of Williams
Partners immediately following the Merger. If the amount of the
deemed cash distribution received by such holder exceeds the
holders basis in its Williams Partners Common Units
immediately after the Merger, such holder will recognize income
or gain in an amount equal to such excess. Williams Partners and
WMZ do not expect any holders of Publicly Owned WMZ Common Units
to recognize income or gain in this manner. For additional
information, please read Material U.S. Federal Income
Tax Consequences.
The
Merger may further limit the ability of a Holder of Publicly
Owned WMZ Common Units to utilize suspended passive activity
losses.
Passive loss limitations generally provide that specific
taxpayers may only deduct losses from passive activities to the
extent of the taxpayers income from passive activities.
The passive loss limitations are applied
24
separately with respect to each publicly traded partnership.
There is no guidance as to whether suspended passive losses of
holders of Publicly Owned WMZ Common Units that are attributable
to WMZ will be available to offset future passive income from
Williams Partners following the Merger. Accordingly, the ability
of such a holder to utilize such suspended passive losses to
offset its share of Williams Partners passive income
following the Merger may be limited.
The
intended U.S. federal income tax consequences of the Merger are
dependent upon Williams Partners being treated as a partnership
for U.S. federal income tax purposes.
The U.S. federal income tax treatment of the exchange of
Publicly Owned WMZ Common Units for Williams Partners Common
Units in the Merger is dependent upon Williams Partners being
treated as a partnership for U.S. federal income tax
purposes. If Williams Partners were treated as a corporation for
U.S. federal income tax purposes, it is likely that the
Merger would be a fully taxable transaction for a holder of
Publicly Owned WMZ Common Units.
Risks
Inherent in an Investment in Williams Partners
Williams
Partners may not realize the anticipated benefits from the
Dropdown.
Williams Partners may not realize the benefits that it
anticipates from the Dropdown for a number of reasons,
including, but not limited to, if any of the matters identified
as risks in the Risk Factors section in this joint proxy
statement/prospectus or the Williams Partners Annual
Report on
Form 10-K
for the year ended December 31, 2009 (the Williams
Partners 2009
10-K)
were to occur. If Williams Partners does not realize the
anticipated benefits from the Dropdown for any reason, its
business may be materially adversely affected.
Williams
controls the Williams Partners General Partner, which has sole
responsibility for conducting Williams Partners business
and managing its operations. The Williams Partners General
Partner has limited fiduciary duties to, and it and its
affiliates may have conflicts of interest with, Williams
Partners and Williams Partners unitholders, and the
Williams Partners General Partner and its affiliates may favor
their interests to the detriment of Williams Partners
unitholders.
Williams owns and controls the Williams Partners General Partner
and appoints all of the directors of the Williams Partners
General Partner. All of the executive officers and certain
directors of the Williams Partners General Partner are officers
and/or
directors of Williams and certain of its affiliates. Although
the Williams Partners General Partner has a fiduciary duty to
manage Williams Partners in a manner beneficial to Williams
Partners, the directors and officers of the Williams Partners
General Partner also have a fiduciary duty to manage the
Williams Partners General Partner in a manner beneficial to
Williams. Therefore, conflicts of interest may arise between
Williams and its affiliates, including the Williams Partners
General Partner, on the one hand, and Williams Partners and its
unitholders, on the other hand. In resolving these conflicts,
the Williams Partners General Partner may favor its own
interests and the interests of its affiliates over the interests
of Williams Partners unitholders. These conflicts include,
among others, the following factors:
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neither Williams Partners partnership agreement nor any
other agreement requires Williams or its affiliates to pursue a
business strategy that favors Williams Partners. Williams
directors and officers have a fiduciary duty to make decisions
in the best interests of the owners of Williams, which may be
contrary to the best interests of Williams Partners and its
unitholders;
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all of the executive officers and certain of the directors of
the Williams Partners General Partner are also officers
and/or
directors of Williams and certain of its affiliates, and these
persons will also owe fiduciary duties to those entities;
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the Williams Partners General Partner is allowed to take into
account the interests of parties other than Williams Partners,
such as Williams and its affiliates, in resolving conflicts of
interest;
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Williams owns common units representing an 82% limited partner
interest in Williams Partners, and if a vote of limited partners
is required in which Williams is entitled to vote, Williams will
be able to
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25
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vote its units in accordance with its own interests, which may
be contrary to Williams Partners interests or your
interests if you become a unitholder of Williams Partners;
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all of the executive officers and certain of the directors of
the Williams Partners General Partner will devote significant
time to Williams Partners business
and/or the
business of Williams, and will be compensated by Williams for
the services rendered to them;
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the Williams Partners General Partner determines the amount and
timing of Williams Partners cash reserves, asset purchases
and sales, capital expenditures, borrowings and issuances of
additional partnership securities, each of which can affect the
amount of cash that is distributed to Williams Partners
unitholders;
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the Williams Partners General Partner determines the amount and
timing of any capital expenditures and, based on the applicable
facts and circumstances, and, in some instances, with the
concurrence of the conflicts committee of its board of
directors, whether a capital expenditure is classified as a
maintenance capital expenditure, which reduces operating
surplus, or an expansion capital expenditure or investment
capital expenditure, neither of which reduces operating surplus.
This determination can affect the amount of cash that is
distributed to Williams Partners unitholders and to the
Williams Partners General Partner with respect to its incentive
distribution rights;
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in some instances, the Williams Partners General Partner may
cause Williams Partners to borrow funds in order to permit the
payment of cash distributions even if the purpose or effect of
the borrowing is to make incentive distributions to itself as
general partner;
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the Williams Partners General Partner determines which costs
incurred by it and its affiliates are reimbursable by Williams
Partners;
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Williams Partners partnership agreement does not restrict
the Williams Partners General Partner from causing Williams
Partners to pay it or its affiliates for any services rendered
to Williams Partners or entering into additional contractual
arrangements with any of these entities on Williams
Partners behalf;
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the Williams Partners General Partner has limited liability
regarding Williams Partners contractual and other
obligations and in some circumstances is required to be
indemnified by Williams Partners;
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pursuant to the Williams Partners partnership agreement,
the Williams Partners General Partner may exercise its limited
right to call and purchase common units if it and its affiliates
own more than 80% of the outstanding Williams Partners Common
Units, but pursuant to a limited call right forbearance
agreement entered into by the Williams Partners General Partner
in connection with the Dropdown, the Williams Partners General
Partner agreed not to exercise this right unless it and its
affiliates hold more than 85% of the outstanding Williams
Partners Common Units; this limited call right forbearance
agreement will terminate if and when the Williams Partners
General Partner and its affiliates hold less than 75% of the
outstanding Williams Partners Common Units;
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the Williams Partners General Partner controls the enforcement
of obligations owed to Williams Partners by it and its
affiliates; and
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the Williams Partners General Partner decides whether to retain
separate counsel, accountants or others to perform services for
Williams Partners.
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Williams
Partners partnership agreement limits the Williams
Partners General Partners fiduciary duties to the
unitholders of Williams Partners and restricts the remedies
available to such unitholders for actions taken by the Williams
Partners General Partner that might otherwise constitute
breaches of fiduciary duty.
Williams Partners partnership agreement contains
provisions that reduce the standards to which the Williams
Partners General Partner would otherwise be held by state
fiduciary duty law. The limitation and definition of these
duties is permitted by the Delaware law governing limited
partnerships. In addition,
26
Williams Partners partnership agreement restricts the
remedies available to holders of Williams Partners limited
partner units for actions taken by the Williams Partners General
Partner that might otherwise constitute breaches of fiduciary
duty. For example, Williams Partners partnership agreement:
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permits the Williams Partners General Partner to make a number
of decisions in its individual capacity as opposed to in its
capacity as the general partner of Williams Partners. This
entitles the Williams Partners General Partner to consider only
the interests and factors that it desires, and it has no duty or
obligation to give any consideration to any interest of, or
factors affecting, Williams Partners, its affiliates or any
limited partner of Williams Partners. Examples include the
exercise of its limited call right, its voting rights with
respect to the units it owns, its registration rights and its
determination whether or not to consent to any merger or
consolidation of Williams Partners or amendment to the Williams
Partners partnership agreement;
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provides that the Williams Partners General Partner will not
have any liability to Williams Partners or Williams
Partners unitholders for decisions made in its capacity as
a general partner so long as it acted in good faith, meaning it
believed the decision was in the best interests of Williams
Partners;
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generally provides that affiliate transactions and resolutions
of conflicts of interest not approved by the conflicts committee
of the board of directors of the Williams Partners General
Partner and not involving a vote of the unitholders of Williams
Partners must be on terms no less favorable to Williams Partners
than those generally being provided to or available from
unrelated third parties or be fair and reasonable to
Williams Partners, as determined by the Williams Partners
General Partner in good faith. In determining whether a
transaction or resolution is fair and reasonable,
the Williams Partners General Partner may consider the totality
of the relationships between the parties involved, including
other transactions that may be particularly advantageous or
beneficial to Williams Partners;
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provides that the Williams Partners General Partner, its
affiliates and their respective officers and directors will not
be liable for monetary damages to Williams Partners or its
limited partners or assignees for any acts or omissions unless
there has been a final and non-appealable judgment entered by a
court of competent jurisdiction determining that the Williams
Partners General Partner or those other persons acted in bad
faith or engaged in fraud or willful misconduct or, in the case
of a criminal matter, acted with knowledge that such
persons conduct was criminal; and
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provides that in resolving conflicts of interest, it will be
presumed that in making its decision the Williams Partners
General Partner or the conflicts committee of its board of
directors acted in good faith, and in any proceeding brought by
or on behalf of any limited partner or Williams Partners, the
person bringing or prosecuting such proceeding will have the
burden of overcoming such presumption.
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Holders of Williams Partners Common Units are bound by the
provisions in the Williams Partners partnership agreement,
including the provisions discussed above.
Affiliates
of the Williams Partners General Partner, including Williams,
may not be limited in their ability to compete with Williams
Partners. Williams is also not obligated to offer Williams
Partners the opportunity to acquire additional assets or
businesses from it, which could limit Williams Partners
commercial activities or its ability to grow. In addition, all
of the executive officers and certain of the directors of the
Williams Partners General Partner are also officers and/or
directors of Williams, and these persons will also owe fiduciary
duties to Williams.
While Williams Partners relationship with Williams and its
affiliates is a significant attribute, it is also a source of
potential conflicts. For example, Williams is in the natural gas
business and is not restricted from competing with Williams
Partners. Williams and its affiliates may compete with Williams
Partners. Williams and its affiliates may acquire, construct or
dispose of natural gas industry assets in the future, some or
all of which may compete with Williams Partners assets,
without any obligation to offer Williams Partners the
opportunity to purchase or construct such assets. In addition,
all of the executive officers and certain of the directors of
the Williams Partners General Partner are also officers
and/or
directors of Williams and certain of
27
its affiliates and will owe fiduciary duties to those entities
as well as to Williams Partners unitholders and Williams
Partners.
Holders
of Williams Partners Common Units have limited voting rights and
are not entitled to elect the Williams Partners General Partner
or its directors, which could reduce the price at which Williams
Partners Common Units will trade.
Unlike the holders of common stock in a corporation, Williams
Partners unitholders have only limited voting rights on
matters affecting Williams Partners business and,
therefore, limited ability to influence managements
decisions regarding Williams Partners business. Williams
Partners unitholders will have no right to elect the
Williams Partners General Partner or its board of directors on
an annual or other continuing basis. The board of directors of
the Williams Partners General Partner, including the independent
directors, will be chosen entirely by Williams and not by
Williams Partners unitholders. Unlike publicly traded
corporations, Williams Partners will not conduct annual meetings
of its unitholders to elect directors or conduct other matters
routinely conducted at annual meetings of stockholders.
Furthermore, if the Williams Partners unitholders become
dissatisfied with the performance of the Williams Partners
General Partner, they will have little ability to remove it. As
a result of these limitations, the price at which Williams
Partners Common Units will trade could be diminished because of
the absence or reduction of a takeover premium in the trading
price.
Cost
reimbursements due to the Williams Partners General Partner and
its affiliates will reduce cash available to pay distributions
to unitholders.
Williams Partners will reimburse the Williams Partners General
Partner and its affiliates, including Williams, for various
general and administrative services they provide for Williams
Partners benefit, including costs for rendering
administrative staff and support services to Williams Partners,
and overhead allocated to Williams Partners. The Williams
Partners General Partner determines the amount of these
reimbursements in its sole discretion. Payments for these
services will be substantial and will reduce the amount of cash
available for distributions to Williams Partners
unitholders. In addition, under Delaware partnership law, the
Williams Partners General Partner has unlimited liability for
Williams Partners obligations, such as Williams
Partners debts and environmental liabilities, except for
Williams Partners contractual obligations that are
expressly made without recourse to the Williams Partners General
Partner. To the extent the Williams Partners General Partner
incurs obligations on Williams Partners behalf, Williams
Partners is obligated to reimburse or indemnify the Williams
Partners General Partner. If Williams Partners is unable or
unwilling to reimburse or indemnify the Williams Partners
General Partner, the Williams Partners General Partner may take
actions to cause Williams Partners to make payments of these
obligations and liabilities. Any such payments could reduce the
amount of cash otherwise available for distribution to Williams
Partners unitholders.
Even
if Williams Partners unitholders are dissatisfied, they
have little ability to remove the Williams Partners General
Partner without its consent.
Unlike the holders of common stock in a corporation, Williams
Partners unitholders have only limited voting rights on
matters affecting Williams Partners business and,
therefore, limited ability to influence managements
decisions regarding Williams Partners business. Williams
Partners unitholders will have no right to elect the
Williams Partners General Partner or its board of directors on
an annual or other continuing basis. The board of directors of
the Williams Partners General Partner is chosen by Williams. As
a result of these limitations, the price at which Williams
Partners Common Units will trade could be diminished because of
the absence or reduction of a takeover premium in the trading
price.
Furthermore, if Williams Partners unitholders are
dissatisfied with the performance of the Williams Partners
General Partner, they will have little ability to remove it. The
vote of the holders of at least
662/3%
of all outstanding Williams Partners Common Units is required to
remove the Williams Partners General Partner. The Williams
Partners General Partner and its affiliates currently own
approximately 82% of the outstanding Williams Partners Common
Units and, as a result, Williams Partners public
unitholders cannot remove the Williams Partners General Partner
without its consent. If the Merger is consummated, the Williams
Partners
28
General Partner and its affiliates will own approximately 80% of
the outstanding Williams Partners Common Units and Williams
Partners public unitholders will continue to be unable to
remove the Williams Partners General Partner without its consent.
Williams
Partners has a holding company structure in which Williams
Partners subsidiaries conduct its operations and own its
operating assets, which may affect Williams Partners
ability to make payments on its debt obligations and
distributions on Williams Partners Common Units.
Williams Partners has a holding company structure, and its
subsidiaries conduct all of its operations and own all of its
operating assets. Williams Partners has no significant assets
other than the ownership interests in these subsidiaries. As a
result, Williams Partners ability to make required
payments on its debt obligations and distributions on Williams
Partners Common Units depends on the performance of its
subsidiaries and their ability to distribute funds to Williams
Partners. The ability of Williams Partners subsidiaries to
make distributions to Williams Partners may be restricted by,
among other things, applicable state partnership and limited
liability company laws and other laws and regulations. If
Williams Partners is unable to obtain the funds necessary to pay
the principal amount at maturity of its debt obligations, to
repurchase its debt obligations upon the occurrence of a change
of control or make distributions on Williams Partners Common
Units, it may be required to adopt one or more alternatives,
such as a refinancing of its debt obligations or borrowing funds
to make distributions on Williams Partners Common Units.
Williams Partners cannot assure you that it would be able to
borrow funds to make distributions on Williams Partners Common
Units.
Williams
Partners allocation from Williams for costs for its
defined benefit pension plans and other postretirement benefit
plans are affected by factors beyond Williams Partners and
Williams control.
As Williams Partners has no employees, employees of Williams and
its affiliates provide services to Williams Partners. As a
result, Williams Partners is allocated a portion of
Williams costs in defined benefit pension plans covering
substantially all of Williams or its affiliates
employees providing services to Williams Partners, as well as a
portion of the costs of other postretirement benefit plans
covering certain eligible participants providing services to
Williams Partners. The timing and amount of Williams
Partners allocations under the defined benefit pension
plans depend upon a number of factors Williams controls,
including changes to pension plan benefits, as well as factors
outside of Williams control, such as asset returns,
interest rates and changes in pension laws. Changes to these and
other factors that can significantly increase Williams
Partners allocations could have a significant adverse
effect on its financial condition and results of operations.
The
control of the Williams Partners General Partner may be
transferred to a third party without the consent of Williams
Partners unitholders.
The Williams Partners General Partner may transfer its general
partner interest to a third party in a merger or in a sale of
all or substantially all of its assets without the consent of
Williams Partners unitholders. Furthermore, Williams
Partners partnership agreement effectively permits a
change of control without the consent of Williams Partners
unitholders.
Williams
Partners may issue additional Williams Partners Common Units
without the approval of Williams Partners unitholders,
which would dilute Williams Partners unitholders
ownership interests.
Williams Partners partnership agreement does not limit the
number of additional limited partner interests that Williams
Partners may issue at any time without the approval of Williams
Partners unitholders. The issuance by Williams Partners of
additional Williams Partners Common Units or other equity
securities of equal or senior rank will have the following
effects:
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Williams Partners unitholders proportionate
ownership interest in Williams Partners will decrease;
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the amount of cash available to pay distributions on each
Williams Partners Common Unit may decrease;
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the ratio of taxable income to distributions may decrease;
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29
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the relative voting strength of each previously outstanding
Williams Partners Common Unit may be diminished; and
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the market price of Williams Partners Common Units may decline.
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Williams
Partners Common Units held by Williams eligible for future sale
may adversely affect the price of Williams Partners Common
Units.
As of March 31, 2010, Williams held 214,613,527 Williams
Partners Common Units, representing an 82% limited partnership
interest in Williams Partners. Williams may, from time to time,
sell all or a portion of its Williams Partners Common Units.
Sales of substantial amounts of its Williams Partners Common
Units, or the anticipation of such sales, could lower the market
price of Williams Partners Common Units and may make it more
difficult for Williams Partners to sell its equity securities in
the future at a time and at a price that Williams Partners deems
appropriate.
The
Williams Partners General Partner has a limited call right that
may require unitholders to sell their Williams Partners Common
Units at an undesirable time or price.
If at any time the Williams Partners General Partner and its
affiliates own more than 80% of the Williams Partners Common
Units, the Williams Partners General Partner will have the
right, but not the obligation, to acquire all, but not less than
all, of the Williams Partners Common Units held by unaffiliated
persons at a price not less than their then-current market
price. In connection with the closing of the Dropdown, Williams
Partners entered into a limited call right forbearance agreement
with the Williams Partners General Partner, pursuant to which
the Williams Partners General Partner agreed not to exercise
this right unless it and its affiliates hold more than 85% of
the Williams Partners Common Units. The forbearance agreement
will terminate when the ownership by the Williams Partners
General Partner and its affiliates of the Williams Partners
Common Units decreases below 75%. The Williams Partners General
Partner may assign this right to any of its affiliates or to
Williams Partners. As a result, non-affiliated unitholders of
Williams Partners may be required to sell their Williams
Partners Common Units at an undesirable time or price and may
not receive any return on their investment. Such unitholders may
also incur a tax liability upon a sale of their Williams
Partners Common Units. The Williams Partners General Partner is
not obligated to obtain a fairness opinion regarding the value
of the Williams Partners Common Units to be repurchased by it
upon exercise of the limited call right. There is no restriction
in Williams Partners partnership agreement that prevents
the Williams Partners General Partner from exercising its call
right. If the Williams Partners General Partner exercised its
limited call right, the effect would be to take Williams
Partners private and, if the Williams Partners Common Units were
subsequently deregistered under the Exchange Act, Williams
Partners would no longer be subject to the reporting
requirements of that Act.
Williams
Partners partnership agreement restricts the voting rights
of unitholders owning 20% or more of the Williams Partners
Common Units.
Williams Partners partnership agreement restricts Williams
Partners unitholders voting rights by providing that
any units of Williams Partners held by a person that owns 20% or
more of any class of units of Williams Partners then
outstanding, other than the Williams Partners General Partner
and its affiliates, their transferees, transferees of their
transferees (provided that the Williams Partners General Partner
has notified such secondary transferees that the voting
limitation shall not apply to them) and persons who acquired
such units with the prior approval of the board of directors of
the Williams Partners General Partner, cannot be voted on any
matter. Williams Partners partnership agreement also
contains provisions limiting the ability of Williams
Partners unitholders to call meetings, to acquire
information about Williams Partners operations and to
influence the manner or direction of Williams Partners
management.
30
The
liability of holders of Williams Partners Common Units may not
be limited if a court finds that action of Williams
Partners unitholders constitutes control of Williams
Partners business.
A general partner of a partnership generally has unlimited
liability for the obligations of the partnership, except for
those contractual obligations of the partnership that are
expressly made without recourse to the general partner. Williams
Partners limited partnership is organized under Delaware
law and Williams Partners conducts business in a number of other
states. The limitations on the liability of holders of limited
partner interests for the obligations of a limited partnership
have not been clearly established in some of the other states in
which Williams Partners does business. A holder of Williams
Partners Common Units could be liable for any and all of
Williams Partners obligations as if such holder were a
general partner if a court or government agency were to
determine that:
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Williams Partners was conducting business in a state but had not
complied with that particular states partnership
statute; or
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the right of holders of Williams Partners Common Units to act
with other Williams Partners unitholders to remove or
replace the Williams Partners General Partner, to approve some
amendments to Williams Partners partnership agreement or
to take other actions under Williams Partners partnership
agreement constitute control of Williams
Partners business.
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Williams
Partners unitholders may have liability to repay
distributions that were wrongfully distributed to
them.
Under certain circumstances, Williams Partners unitholders
may have to repay amounts wrongfully returned or distributed to
them. Under
Section 17-607
of the Delaware Revised Uniform Limited Partnership Act,
Williams Partners may not make a distribution to a holder of
Williams Partners Common Units if the distribution would cause
its liabilities to exceed the fair value of its assets. Delaware
law provides that for a period of three years from the date of
the impermissible distribution, limited partners who received
the distribution and who knew at the time of the distribution
that it violated Delaware law will be liable to the limited
partnership for the distribution amount. Substituted limited
partners are liable for the obligations of the assignor to make
contributions to the partnership that are known to the
substituted limited partner at the time it became a limited
partner and for unknown obligations if the liabilities could be
determined from the partnership agreement. Liabilities to
partners on account of their partnership interest and
liabilities that are non recourse to the partnership are not
counted for purposes of determining whether a distribution is
permitted.
Williams
did not seek a vote of its shareholders in connection with the
Dropdown. If there is a determination that such a vote were
required, the resulting consequences could impact Williams
Partners.
Section 271 of the Delaware General Corporation Law
generally requires a corporation to obtain authorization from
the holders of a majority of its outstanding shares if the
corporation intends to sell all or substantially all of its
assets. Williams does not believe the Dropdown constituted a
sale of all or substantially all of its assets
because of, among other things, the portion of Williams
assets involved, the significance of its assets and businesses
that were not transferred and the fact that Williams retains
control of all of the assets involved and over an 80% interest
in the cash flows therefrom. As such, Williams did not seek a
vote of its shareholders in connection with the Dropdown. There
is a limited body of Delaware case law interpreting the phrase
all or substantially all, and there is no precise
established definition. Williams Partners cannot assure you that
the Dropdown did not constitute a sale of all or
substantially all of Williams assets and, therefore,
that a shareholder vote was not required. If such a shareholder
vote were determined to be required, the resulting consequences
could impact Williams Partners and could include (among other
consequences) shareholders of Williams asserting claims against
Williams Partners, some or all of which could ultimately be
successful.
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Risks
Inherent in Williams Partners Business
Williams
Partners may not have sufficient cash from operations to enable
it to maintain current levels of cash distributions or to pay
the minimum quarterly distribution following establishment of
cash reserves and payment of fees and expenses, including
payments to the Williams Partners General Partner.
Williams Partners may not have sufficient available cash from
operating surplus each quarter to maintain current levels of
cash distributions or to pay the minimum quarterly distribution.
The amount of cash Williams Partners can distribute on Williams
Partners Common Units principally depends upon the amount of
cash it generates from its operations, which will fluctuate from
quarter to quarter based on, among other things:
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the prices Williams Partners obtains for its services;
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the prices of, level of production of, and demand for natural
gas and NGLs and Williams Partners NGL margins;
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the volumes of natural gas Williams Partners gathers,
transports, processes and treats and the volumes of NGLs it
fractionates and stores;
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the level of Williams Partners operating costs, including
payments to the Williams Partners General Partner; and
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prevailing economic conditions.
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In addition, the actual amount of cash Williams Partners will
have available for distribution will depend on other factors,
some of which are beyond its control, such as:
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the level of capital expenditures Williams Partners makes;
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the restrictions contained in Williams indentures,
Williams Partners indentures and credit facility and
Williams Partners debt service requirements;
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the cost of acquisitions, if any;
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fluctuations in Williams Partners working capital needs;
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Williams Partners ability to borrow for working capital or
other purposes;
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the amount, if any, of cash reserves established by the Williams
Partners General Partner; and
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the amount of cash that the Partially Owned Entities and
Williams Partners subsidiaries distribute to it.
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Unitholders of Williams Partners should be aware that the amount
of cash Williams Partners has available for distribution depends
primarily on its cash flow, including cash reserves and working
capital or other borrowings, and not solely on its
profitability, which will be affected by non-cash items. As a
result, Williams Partners may make cash distributions during
periods when it records losses, and it may not make cash
distributions during periods when it records net income.
Williams
Partners may not be able to grow or effectively manage its
growth.
A principal focus of Williams Partners strategy is to
continue to grow by expanding its business. Williams
Partners future growth will depend upon its ability to
successfully identify, finance, acquire, integrate and operate
projects and businesses. Failure to achieve any of these factors
would adversely affect Williams Partners ability to
achieve anticipated growth in the level of cash flows or realize
anticipated benefits.
Williams Partners may acquire new facilities or expand its
existing facilities to capture anticipated future growth in
natural gas production that does not ultimately materialize. As
a result, Williams Partners new or expanded facilities may
not achieve profitability. In addition, the process of
integrating newly acquired or constructed assets into Williams
Partners operations may result in unforeseen operating
difficulties, may absorb significant management attention and
may require financial resources that would otherwise be
available for the ongoing development and expansion of Williams
Partners existing operations. Future acquisitions or
32
construction projects may require substantial new capital and
could result in the incurrence of indebtedness, additional
liabilities and excessive costs that could have a material
adverse effect on Williams Partners business, results of
operations, financial condition and its ability to make cash
distributions to its unitholders. If Williams Partners issues
additional Williams Partners Common Units in connection with
future acquisitions, unitholders interest in Williams
Partners will be diluted and distributions to unitholders may be
reduced. Further, any limitations on Williams Partners
access to capital, including limitations caused by illiquidity
in the capital markets, may impair its ability to complete
future acquisitions and construction projects on favorable
terms, if at all.
Prices
for NGLs, natural gas and other commodities are volatile, and
this volatility could adversely affect Williams Partners
financial results, cash flows, access to capital and ability to
maintain existing businesses.
Williams Partners revenues, operating results, future rate
of growth and the value of certain segments of its businesses
depend primarily upon the prices of NGLs, natural gas, or other
commodities, and the differences between prices of these
commodities. Price volatility can impact both the amount
Williams Partners receives for its products and services and the
volume of products and services it sells. Prices affect the
amount of cash flow available for capital expenditures and
Williams Partners ability to borrow money or raise
additional capital. Any of the foregoing can also have an
adverse effect on Williams Partners business, results of
operations and financial condition and its ability to make cash
distributions to its unitholders.
The markets for NGLs, natural gas and other commodities are
likely to continue to be volatile. Wide fluctuations in prices
might result from relatively minor changes in the supply of and
demand for these commodities, market uncertainty and other
factors that are beyond Williams Partners control,
including:
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worldwide and domestic supplies of and demand for natural gas,
NGLs, petroleum, and related commodities;
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turmoil in the Middle East and other producing regions;
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the activities of the Organization of Petroleum Exporting
Countries;
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terrorist attacks on production or transportation assets;
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weather conditions;
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the level of consumer demand;
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the price and availability of other types of fuels;
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the availability of pipeline capacity;
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supply disruptions, including plant outages and transportation
disruptions;
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the price and level of foreign imports;
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domestic and foreign governmental regulations and taxes;
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volatility in the natural gas markets;
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the overall economic environment;
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the credit of participants in the markets where products are
bought and sold; and
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the adoption of regulations or legislation relating to climate
change.
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Williams
Partners might not be able to successfully manage the risks
associated with selling and marketing products in the wholesale
energy markets.
Williams Partners portfolio of derivative and other energy
contracts may consist of wholesale contracts to buy and sell
commodities, including contracts for natural gas, NGLs and other
commodities that are settled by the delivery of the commodity or
cash throughout the United States. If the values of these
contracts change
33
in a direction or manner that Williams Partners does not
anticipate or cannot manage, it could negatively affect Williams
Partners results of operations. In the past, certain
marketing and trading companies have experienced severe
financial problems due to price volatility in the energy
commodity markets. In certain instances this volatility has
caused companies to be unable to deliver energy commodities that
they had guaranteed under contract. If such a delivery failure
were to occur in one of Williams Partners contracts,
Williams Partners might incur additional losses to the extent of
amounts, if any, already paid to, or received from,
counterparties. In addition, in Williams Partners
businesses, Williams Partners often extends credit to its
counterparties. Despite performing credit analysis prior to
extending credit, Williams Partners is exposed to the risk that
it might not be able to collect amounts owed to it. If the
counterparty to such a transaction fails to perform and any
collateral that secures the counterpartys obligation is
inadequate, Williams Partners will suffer a loss. Downturns in
the economy or disruptions in the global credit markets could
cause more of Williams Partners counterparties to fail to
perform than it expects.
Any
decrease in NGL prices or a change in NGL prices relative to the
price of natural gas could affect Williams Partners
processing, fractionation and storage businesses.
The relationship between natural gas prices and NGL prices
affects Williams Partners profitability. When natural gas
prices are low relative to NGL prices, it is more profitable for
Williams Partners and its customers to process natural gas. When
natural gas prices are high relative to NGL prices, it is less
profitable to process natural gas both because of the higher
value of natural gas and because of the increased cost of
separating the mixed NGLs from the natural gas. Higher natural
gas prices relative to NGL prices may also make it uneconomical
to recover ethane, which may further negatively impact sales
volumes and margins. Finally, higher natural gas prices relative
to NGL prices could also reduce volumes of gas processed
generally, reducing the volumes of mixed NGLs available for
fractionation.
The
long-term financial condition of Williams Partners natural
gas transportation and midstream businesses is dependent on the
continued availability of natural gas supplies in the supply
basins that Williams Partners accesses, demand for those
supplies in Williams Partners traditional markets, and the
prices of and market demand for natural gas.
The development of the additional natural gas reserves that are
essential for Williams Partners gas transportation and
midstream businesses to thrive requires significant capital
expenditures by others for exploration and development drilling
and the installation of production, gathering, storage,
transportation and other facilities that permit natural gas to
be produced and delivered to its pipeline systems. Low prices
for natural gas, regulatory limitations, including environmental
regulations, or the lack of available capital for these projects
could adversely affect the development and production of
additional reserves, as well as gathering, storage, pipeline
transportation and import and export of natural gas supplies,
adversely impacting Williams Partners ability to fill the
capacities of its gathering, transportation and processing
facilities.
Production from existing wells and natural gas supply basins
with access to Williams Partners pipeline systems will
also naturally decline over time. The amount of natural gas
reserves underlying these wells may also be less than
anticipated, and the rate at which production from these
reserves declines may be greater than anticipated. Additionally,
the competition for natural gas supplies to serve other markets
could reduce the amount of natural gas supply for Williams
Partners customers. Accordingly, to maintain or increase
the contracted capacity or the volume of natural gas transported
on Williams Partners pipeline systems and cash flows
associated with the transportation of natural gas, Williams
Partners customers must compete with others to obtain
adequate supplies of natural gas. In addition, if natural gas
prices in the supply basins connected to Williams Partners
pipeline systems are higher than prices in other natural gas
producing regions, Williams Partners ability to compete
with other transporters may be negatively impacted on a
short-term basis, as well as with respect to its long-term
recontracting activities. If new supplies of natural gas are not
obtained to replace the natural decline in volumes from existing
supply areas, if natural gas supplies are diverted to serve
other markets, or if environmental regulators restrict new
natural gas drilling, the overall volume of natural gas
transported and stored on Williams Partners system would
decline, which could have a material adverse effect on Williams
Partners business, financial condition and results of
operations, and its ability to make cash
34
distributions to its unitholders. In addition, new LNG import
facilities built near Williams Partners markets could
result in less demand for its gathering and transportation
facilities.
Williams
Partners risk measurement and hedging activities might not
be effective and could increase the volatility of its
results.
Although Williams Partners has systems in place that use various
methodologies to quantify commodity price risk associated with
its businesses, these systems might not always be followed or
might not always be effective. Further, such systems do not in
themselves manage risk, particularly risks outside of Williams
Partners control, and adverse changes in energy commodity
market prices, volatility, adverse correlation of commodity
prices, the liquidity of markets, changes in interest rates and
other risks discussed in this joint proxy statement/prospectus
might still adversely affect Williams Partners earnings,
cash flows and balance sheet under applicable accounting rules,
even if risks have been identified.
In an effort to manage Williams Partners financial
exposure related to commodity price and market fluctuations,
Williams Partners has entered and may in the future enter into
contracts to hedge certain risks associated with its assets and
operations. In these hedging activities, Williams Partners has
used and may in the future use fixed-price, forward, physical
purchase and sales contracts, futures, financial swaps and
option contracts traded in the
over-the-counter
markets or on exchanges. Nevertheless, no single hedging
arrangement can adequately address all risks present in a given
contract. For example, a forward contract that would be
effective in hedging commodity price volatility risks would not
hedge the contracts counterparty credit or performance
risk. Therefore, unhedged risks will always continue to exist.
While Williams Partners attempts to manage counterparty credit
risk within guidelines established by its credit policy, it may
not be able to successfully manage all credit risk and as such,
future cash flows and results of operations could be impacted by
counterparty default.
Williams Partners use of hedging arrangements through
which it attempts to reduce the economic risk of its
participation in commodity markets could result in increased
volatility of its reported results. Changes in the fair values
(gains and losses) of derivatives that qualify as hedges under
generally accepted accounting principles (GAAP), to
the extent that such hedges are not fully effective in
offsetting changes to the value of the hedged commodity, as well
as changes in the fair value of derivatives that do not qualify
or have not been designated as hedges under GAAP, must be
recorded in Williams Partners income. This creates the
risk of volatility in earnings even if no economic impact to
Williams Partners has occurred during the applicable period.
The impact of changes in market prices for NGLs and natural gas
on the average prices paid or received by Williams Partners may
be reduced based on the level of its hedging activities. These
hedging arrangements may limit or enhance Williams
Partners margins if the market prices for NGLs or natural
gas were to change substantially from the price established by
the hedges. In addition, Williams Partners hedging
arrangements expose it to the risk of financial loss in certain
circumstances, including instances in which:
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volumes are less than expected;
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the hedging instrument is not perfectly effective in mitigating
the risk being hedged; and
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the counterparties to Williams Partners hedging
arrangements fail to honor their financial commitments.
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Williams
Partners industry is highly competitive, and increased
competitive pressure could adversely affect Williams
Partners business and operating results.
Williams Partners has numerous competitors in all aspects of its
businesses, and additional competitors may enter its markets.
Some of Williams Partners competitors are large oil,
natural gas and petrochemical companies that have greater access
to supplies of natural gas and NGLs than Williams Partners does.
In addition, current or potential competitors may make strategic
acquisitions or have greater financial resources than Williams
Partners does, which could affect Williams Partners
ability to make investments or acquisitions. Other companies
with which Williams Partners competes may be able to respond
more quickly to new laws or
35
regulations or emerging technologies or to devote greater
resources to the construction, expansion or refurbishment of
their facilities than Williams Partners can. In addition,
current or potential competitors may make strategic acquisitions
or have greater financial resources than Williams Partners does,
which could affect Williams Partners ability to make
investments or acquisitions. There can be no assurance that
Williams Partners will be able to compete successfully against
current and future competitors and any failure to do so could
have a material adverse effect on Williams Partners
business, results of operations, and financial condition and its
ability to make cash distributions to its unitholders.
Williams
Partners is exposed to the credit risk of its customers, and its
credit risk management may not be adequate to protect against
such risk.
Williams Partners is subject to the risk of loss resulting from
nonpayment
and/or
nonperformance by its customers in the ordinary course of its
business. Generally, Williams Partners customers are rated
investment grade, are otherwise considered creditworthy or are
required to make prepayments or provide security to satisfy
credit concerns. However, Williams Partners credit
procedures and policies may not be adequate to fully eliminate
customer credit risk. Williams Partners cannot predict to what
extent its business would be impacted by deteriorating
conditions in the economy, including declines in its
customers creditworthiness. If Williams Partners fails to
adequately assess the creditworthiness of existing or future
customers, unanticipated deterioration in their creditworthiness
and any resulting increase in nonpayment
and/or
nonperformance by them could cause Williams Partners to write
down or write off doubtful accounts. Such write-downs or
write-offs could negatively affect Williams Partners
operating results in the periods in which they occur, and, if
significant, could have a material adverse effect on Williams
Partners business, results of operations, cash flows, and
financial condition and its ability to make cash distributions
to its unitholders.
The
failure of counterparties to perform their contractual
obligations could adversely affect Williams Partners
operating results, financial condition and cash available to
make distributions.
Despite performing credit analysis prior to extending credit,
Williams Partners is exposed to the credit risk of its
contractual counterparties in the ordinary course of business
even though it monitors these situations and attempts to take
appropriate measures to protect itself. In addition to credit
risk, counterparties to Williams Partners commercial
agreements, such as product sales, gathering, treating, storage,
transportation, processing and fractionation agreements, may
fail to perform their other contractual obligations. A failure
of counterparties to perform their contractual obligations,
including Williams, could cause Williams Partners to write down
or write off doubtful accounts, which could materially adversely
affect its operating results, and financial condition and its
ability to make cash distributions to its unitholders.
If
third-party pipelines and other facilities interconnected to
Williams Partners pipelines and facilities become
unavailable to transport natural gas and NGLs or to treat
natural gas, Williams Partners revenues and cash available
to pay distributions could be adversely affected.
Williams Partners depends upon third-party pipelines and other
facilities that provide delivery options to and from its
pipelines and facilities for the benefit of its customers.
Because Williams Partners does not own these third-party
pipelines or facilities, their continuing operation is not
within its control. If these pipelines or facilities were to
become temporarily or permanently unavailable for any reason, or
if throughput were reduced because of testing, line repair,
damage to pipelines or facilities, reduced operating pressures,
lack of capacity, increased credit requirements or rates charged
by such pipelines or facilities or other causes, Williams
Partners and its customers would have reduced capacity to
transport, store or deliver natural gas or NGL products to end
use markets or to receive deliveries of mixed NGLs, thereby
reducing its revenues. Further, although there are laws and
regulations designed to encourage competition in wholesale
market transactions, some companies may fail to provide fair and
equal access to their transportation systems or may not provide
sufficient transportation capacity for other market participants.
Any temporary or permanent interruption at any key pipeline
interconnect or in operations on third-party pipelines or
facilities that would cause a material reduction in volumes
transported on Williams Partners pipelines or its
gathering systems or processed, fractionated, treated or stored
at its facilities could have a
36
material adverse effect on its business, results of operations,
and financial condition and its ability to make cash
distributions to its unitholders.
Future
disruptions in the global credit markets may make equity and
debt markets less accessible, create a shortage in the
availability of credit and lead to credit market volatility,
which could disrupt Williams Partners financing plans
and limit its ability to grow.
In 2008, public equity markets experienced significant declines,
and global credit markets experienced a shortage in overall
liquidity and a resulting disruption in the availability of
credit. Future disruptions in the global financial marketplace,
including the bankruptcy or restructuring of financial
institutions, could make equity and debt markets inaccessible
and adversely affect the availability of credit already arranged
and the availability and cost of credit in the future. Williams
Partners has availability under its Credit Facility, but its
ability to borrow under that facility could be impaired if one
or more of Williams Partners lenders fails to honor its
contractual obligation to lend to Williams Partners.
As a publicly traded partnership, these developments could
significantly impair Williams Partners ability to make
acquisitions or finance growth projects. Williams Partners
distributes all of its available cash to its unitholders on a
quarterly basis. Williams Partners typically relies upon
external financing sources, including the issuance of debt and
equity securities and bank borrowings, to fund acquisitions or
expansion capital expenditures. Any limitations on Williams
Partners access to external capital, including limitations
caused by illiquidity or volatility in the capital markets, may
impair its ability to complete future acquisitions and
construction projects on favorable terms, if at all. As a
result, Williams Partners may be at a competitive disadvantage
as compared to businesses that reinvest all of their available
cash to expand ongoing operations, particularly under adverse
economic conditions.
Adverse
economic conditions could negatively affect Williams
Partners results of operations.
A slowdown in the economy has the potential to negatively impact
Williams Partners businesses in many ways. Included among
these potential negative impacts are reduced demand and lower
prices for Williams Partners products and services,
increased difficulty in collecting amounts owed to it by its
customers and a reduction in its credit ratings (either due to
tighter rating standards or the negative impacts described
above), which could result in reducing its access to credit
markets, raising the cost of such access or requiring it to
provide additional collateral to it counterparties.
Restrictions
in Williams Partners debt agreements and its leverage may
affect its future financial and operating
flexibility.
Williams Partners total outstanding long-term debt as of
March 31, 2010, was $6.3 billion, which includes
Williams Partners outstanding senior unsecured notes and
Williams Partners initial borrowings under the Credit
Facility.
Williams Partners debt service obligations and restrictive
covenants in its Credit Facility and the indentures governing
its senior unsecured notes could have important consequences.
For example, they could:
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make it more difficult for Williams Partners to satisfy its
obligations with respect to its senior unsecured notes and its
other indebtedness, which could in turn result in an event of
default on such other indebtedness or its outstanding notes;
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impair Williams Partners ability to obtain additional
financing in the future for working capital, capital
expenditures, acquisitions, general partnership purposes or
other purposes;
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adversely affect Williams Partners ability to pay cash
distributions to unitholders;
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diminish Williams Partners ability to withstand a
continued or future downturn in its business or the economy
generally;
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37
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require Williams Partners to dedicate a substantial portion of
its cash flow from operations to debt service payments, thereby
reducing the availability of cash for working capital, capital
expenditures, acquisitions, general corporate purposes or other
purposes;
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limit Williams Partners flexibility in planning for, or
reacting to, changes in its business and the industry in which
it operates; and
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place Williams Partners at a competitive disadvantage compared
to its competitors that have proportionately less debt.
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Williams Partners ability to repay, extend or refinance
its existing debt obligations and to obtain future credit will
depend primarily on its operating performance, which will be
affected by general economic, financial, competitive,
legislative, regulatory, business and other factors, many of
which are beyond its control. Williams Partners ability to
refinance existing debt obligations or obtain future credit will
also depend upon the current conditions in the credit markets
and the availability of credit generally. If Williams Partners
is unable to meet its debt service obligations, it could be
forced to restructure or refinance its indebtedness, seek
additional equity capital or sell assets. Williams Partners may
be unable to obtain financing or sell assets on satisfactory
terms, or at all.
Williams Partners is not prohibited under its indentures from
incurring additional indebtedness. Williams Partners
incurrence of significant additional indebtedness would
exacerbate the negative consequences mentioned above, and could
adversely affect its ability to repay its senior notes.
Williams
Partners debt agreements and Williams public
indentures contain financial and operating restrictions that may
limit Williams Partners access to credit and affect its
ability to operate its business. In addition, Williams
Partners ability to obtain credit in the future will be
affected by Williams credit ratings.
Williams Partners public indentures contain various
covenants that, among other things, limit its ability to grant
certain liens to support indebtedness, merge, or sell
substantially all of its assets. In addition,
Williams Partners Credit Facility contains certain
financial covenants and restrictions on its ability and its
subsidiaries ability to incur indebtedness, to consolidate
or allow any material change in the nature of its business,
enter into certain affiliate transactions and make certain
distributions during an event of default. These covenants could
adversely affect Williams Partners ability to finance its
future operations or capital needs or engage in, expand or
pursue its business activities and prevent it from engaging in
certain transactions that might otherwise be considered
beneficial to it. Williams Partners ability to comply with
these covenants may be affected by events beyond its control,
including prevailing economic, financial and industry
conditions. If market or other economic conditions deteriorate,
Williams Partners current assumptions about future
economic conditions turn out to be incorrect or unexpected
events occur, its ability to comply with these covenants may be
significantly impaired.
Williams public indentures contain covenants that restrict
Williams and Williams Partners ability to incur
liens to support indebtedness. These covenants could adversely
affect Williams Partners ability to finance its future
operations or capital needs or engage in, expand or pursue its
business activities and prevent it from engaging in certain
transactions that might otherwise be considered beneficial to
it. Williams ability to comply with the covenants
contained in its debt instruments may be affected by events
beyond Williams Partners and Williams control,
including prevailing economic, financial and industry
conditions. If market or other economic conditions deteriorate,
Williams ability to comply with these covenants may be
negatively impacted.
Williams Partners failure to comply with the covenants in
its debt agreements could result in events of default. Upon the
occurrence of such an event of default, the lenders could elect
to declare all amounts outstanding under a particular facility
to be immediately due and payable and terminate all commitments,
if any, to extend further credit. Certain payment defaults or an
acceleration under Williams Partners public indentures or
other material indebtedness could cause a cross-default or
cross-acceleration of its Credit Facility. Such a cross-default
or cross-acceleration could have a wider impact on Williams
Partners liquidity
38
than might otherwise arise from a default or acceleration of a
single debt instrument. If an event of default occurs, or if
Williams Partners Credit Facility cross-defaults, and the
lenders under the affected debt agreements accelerate the
maturity of any loans or other debt outstanding to it, Williams
Partners may not have sufficient liquidity to repay amounts
outstanding under such debt agreements. For more information
regarding Williams Partners debt agreements, please read
Managements Discussion and Analysis of Financial
Condition and Results of Operations
Managements Discussion and Analysis of Financial Condition
and Liquidity in Exhibit 99.1 to Williams
Partners April 20, 2010
8-K.
Substantially all of Williams operations are conducted
through its subsidiaries. Williams cash flows are
substantially derived from loans, dividends and distributions
paid to it by its subsidiaries. Williams cash flows are
typically utilized to service debt and pay dividends on the
common stock of Williams, with the balance, if any, reinvested
in its subsidiaries as loans or contributions to capital. Due to
Williams Partners relationship with Williams, Williams
Partners ability to obtain credit will be affected by
Williams credit ratings. If Williams were to experience a
deterioration in its credit standing or financial condition,
Williams Partners access to credit and its ratings could
be adversely affected. Any future downgrading of a
Williams credit rating would likely also result in a
downgrading of Williams Partners credit rating. A
downgrading of a Williams credit rating could limit
Williams Partners ability to obtain financing in the
future upon favorable terms, if at all.
Williams
Partners subsidiaries are not prohibited from incurring
indebtedness by their organizational documents, which may affect
Williams Partners ability to make distributions to
unitholders.
Williams Partners subsidiaries are not prohibited by the
terms of their respective organizational documents from
incurring indebtedness. If they were to incur significant
amounts of indebtedness, such occurrence may inhibit their
ability to make distributions to Williams Partners. An inability
by Williams Partners subsidiaries to make distributions to
Williams Partners would materially and adversely affect its
ability to make distributions to unitholders because Williams
Partners expects distributions it receives from its subsidiaries
to represent a significant portion of the cash available to make
cash distributions to unitholders.
A
downgrade of Williams Partners credit rating could impact
its liquidity, access to capital and its costs of doing
business, and maintaining credit ratings is under the control of
independent third parties.
A downgrade of Williams Partners credit rating might
increase its cost of borrowing and could require it to post
collateral with third parties, negatively impacting its
available liquidity. Williams Partners ability to access
capital markets could also be limited by a downgrade of its
credit rating and other disruptions. Such disruptions could
include:
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economic downturns;
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deteriorating capital market conditions;
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declining market prices for natural gas, NGLs and other
commodities;
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terrorist attacks or threatened attacks on Williams
Partners facilities or those of other energy
companies; and
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the overall health of the energy industry, including the
bankruptcy or insolvency of other companies.
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Credit rating agencies perform independent analysis when
assigning credit ratings. The analysis includes a number of
criteria including, but not limited to, business composition,
market and operational risks, as well as various financial
tests. Credit rating agencies continue to review the criteria
for industry sectors and various debt ratings and may make
changes to those criteria from time to time. Williams
Partners current credit ratings after the Dropdown from
Moodys is Baa3, from S&P is BBB-, and from Fitch is
BBB-. Credit ratings are not recommendations to buy, sell or
hold investments in the rated entity. Ratings are subject to
revision or withdrawal at any time by the ratings agencies and
no assurance can be given that Williams Partners will maintain
its current credit ratings.
39
Williams
Partners is subject to risks associated with climate
change.
There is a growing belief that emissions of greenhouse gases may
be linked to climate change. Climate change and the costs that
may be associated with its impacts and the regulation of
greenhouse gases have the potential to affect Williams
Partners business in many ways, including negatively
impacting the costs it incurs in providing its products and
services, the demand for and consumption of its products and
services (due to change in both costs and weather patterns), and
the economic health of the regions in which it operates, all of
which can create financial risks. For further information
regarding risks to Williams Partners business arising from
climate change related legislation, please read the discussion
below under Williams Partners operations are subject
to governmental laws and regulations relating to the protection
of the environment, which may expose it to significant costs and
liabilities and could exceed current expectations.
Williams
Partners assets and operations can be affected by weather
and other natural phenomena.
Williams Partners assets and operations can be adversely
affected by hurricanes, floods, earthquakes, tornadoes and other
natural phenomena and weather conditions, including extreme
temperatures, making it more difficult for Williams Partners to
realize the historic rates of return associated with these
assets and operations. Insurance may be inadequate, and in some
instances, Williams Partners has been unable to obtain insurance
on commercially reasonable terms or insurance has not been
available at all. A significant disruption in operations or a
significant liability for which Williams Partners was not fully
insured could have a material adverse effect on its business,
results of operations and financial condition and its ability to
make cash distributions to its unitholders.
Williams Partners customers energy needs vary with
weather conditions. To the extent weather conditions are
affected by climate change or demand is impacted by regulations
associated with climate change, customers energy use could
increase or decrease depending on the duration and magnitude of
the changes, leading either to increased investment or decreased
revenues.
Williams
Partners depends on certain key customers and producers for a
significant portion of its revenues and supply of natural gas
and NGLs. If Williams Partners lost any of these key customers
or producers or contracted volumes, its revenues and cash
available to pay distributions could decline.
Williams Partners relies on a limited number of customers for a
significant portion of its revenues. Although some of these
customers are subject to long-term contracts, Williams Partners
may be unable to negotiate extensions or replacements of these
contracts on favorable terms, if at all. The loss of all, or
even a portion of, the revenues from natural gas, NGLs or
contracted volumes, as applicable, supplied by these customers,
as a result of competition, creditworthiness, inability to
negotiate extensions or replacements of contracts or otherwise,
could have a material adverse effect on Williams Partners
business, results of operations, financial condition and its
ability to make cash distributions to its unitholders, unless it
is able to acquire comparable volumes from other sources.
Williams
Partners does not own all of the interests in Partially Owned
Entities, which could adversely affect its ability to operate
and control these assets in a manner beneficial to
it.
Because Williams Partners does not control the Partially Owned
Entities except Northwest Pipeline, it may have limited
flexibility to control the operation of or cash distributions
received from these assets. Any future disagreements with the
other co-owners of these assets could adversely affect Williams
Partners ability to respond to changing economic or
industry conditions, which could have a material adverse effect
on its business, results of operations, financial condition and
ability to make cash distributions to its unitholders.
The
Partially Owned Entities may reduce their cash distributions to
Williams Partners in some situations.
The Partially Owned Entities organizational documents
require distribution of their available cash to their members on
a quarterly basis. In each case, available cash is reduced, in
part, by reserves appropriate for operating their respective
businesses.
40
Significant
prolonged changes in natural gas prices could affect supply and
demand, cause a reduction in or termination of the long-term
transportation and storage contracts or throughput on the
Pipeline Entities systems, and adversely affect Williams
Partners cash available to make
distributions.
Higher natural gas prices over the long term could result in a
decline in the demand for natural gas and, therefore, in the
Pipeline Entities long-term transportation and storage
contracts or throughput on their respective systems. Also, lower
natural gas prices over the long term could result in a decline
in the production of natural gas resulting in reduced contracts
or throughput on their systems. As a result, significant
prolonged changes in natural gas prices could have a material
adverse effect on the Pipeline Entities business,
financial condition, results of operations and cash flows, and
on Williams Partners ability to make cash distributions to
its unitholders.
The
Pipeline Entities natural gas sales, transportation and
storage operations are subject to regulation by FERC, which
could have an adverse impact on their ability to establish
transportation and storage rates that would allow them to
recover the full cost of operating their respective pipelines,
including a reasonable rate of return.
The Pipeline Entities natural gas sales, transmission and
storage operations are subject to federal, state and local
regulatory authorities. Specifically, their interstate pipeline
transportation and storage service is subject to regulation by
FERC. The federal regulation extends to such matters as:
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transportation and sale for resale of natural gas in interstate
commerce;
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rates, operating terms and conditions of service, including
initiation and discontinuation of service;
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the types of services the Pipeline Entities may offer to their
customers;
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certification and construction of new facilities;
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acquisition, extension, disposition or abandonment of facilities;
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accounts and records;
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depreciation and amortization policies;
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relationships with affiliated companies who are involved in
marketing functions of the natural gas business; and
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market manipulation in connection with interstate sales,
purchases or transportation of natural gas.
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Under the Natural Gas Act (NGA), FERC has authority
to regulate providers of natural gas pipeline transportation and
storage services in interstate commerce, and such providers may
only charge rates that have been determined to be just and
reasonable by FERC. In addition, FERC prohibits providers from
unduly preferring or unreasonably discriminating against any
person with respect to pipeline rates or terms and conditions of
service.
Regulatory actions in these areas can affect Williams
Partners business in many ways, including decreasing
tariff rates and revenues, decreasing volumes in its pipelines,
increasing its costs and otherwise altering the profitability of
its pipeline business.
The FERC Standards of Conduct govern the relationship between
natural gas transmission providers and their marketing function
employees as defined by the rule. The standards of conduct are
intended to prevent natural gas transmission providers from
preferentially benefiting gas marketing functions by requiring
the employees of a transmission provider that perform
transmission functions to function independently from marketing
function employees and by restricting the information that
transmission providers may provide to gas marketing employees.
The inefficiencies created by the restrictions on the sharing of
employees and information may increase Williams Partners
costs, and the restriction on the sharing of information may
have an adverse impact on its senior managements ability
to effectively obtain important information about its business.
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Unlike other pipelines that own facilities in the offshore Gulf
of Mexico, Transco charges its transportation customers a
separate fee to access its offshore facilities. The separate
charge that it assesses, referred to as an IT feeder
charge, is charged only when the facilities are used and
typically is paid by producers or marketers. This means that
Transco recovers the costs included in the IT feeder charge only
if its facilities are used, and because it is typically paid by
producers and marketers, it generally results in netback prices
to producers that are slightly lower than the netbacks realized
by producers transporting on other interstate pipelines. Longer
term, this rate design disparity could result in producers
bypassing Transcos offshore facilities in favor of
alternative transportation facilities. Transco has asked FERC to
allow it to eliminate the IT feeder charge and charge for
transportation on its offshore facilities in the same manner as
other pipelines. Transcos requests have been denied.
The rates, terms and conditions for the Pipeline Entities
interstate pipeline services are set forth in their respective
FERC-approved tariffs. Any successful complaint or protest
against the Pipeline Entities rates could have an adverse
impact on their revenues associated with providing
transportation services. In addition, there is a risk that rates
set by FERC in future rate cases filed by the Pipeline Entities
will be inadequate to recover increases in operating costs or to
sustain an adequate return on capital investments. There is also
the risk that higher rates would cause their customers to look
for alternative ways to transport natural gas.
The
Pipeline Entities could be subject to penalties and fines if
they fail to comply with FERC regulations.
The Pipeline Entities transportation and storage
operations are regulated by FERC. Should the Pipeline Entities
fail to comply with all applicable FERC administered statutes,
rules, regulations and orders, they could be subject to
substantial penalties and fines. Under the Energy Policy Act of
2005, FERC has civil penalty authority under the NGA to impose
penalties for current violations of up to $1,000,000 per day for
each violation. Any material penalties or fines imposed by FERC
could have a material adverse impact on the Pipeline
Entities business, financial condition, results of
operations and cash flows, and on Williams Partners
ability to make cash distributions to its unitholders.
The
outcome of certain FERC proceedings involving FERC policy
statements is uncertain and could affect the level of return on
equity that the Pipeline Entities may be able to achieve in any
future rate proceeding.
In an effort to provide some guidance and to obtain further
public comment on FERCs policies concerning return on
equity determinations, on July 19, 2007, FERC issued its
Proposed Proxy Policy Statement, Composition of Proxy
Groups for Determining Gas and Oil Pipeline Return on
Equity. In the Proposed Proxy Policy Statement, FERC
proposes to permit inclusion of publicly traded partnerships in
the proxy group analysis relating to return on equity
determinations in rate proceedings, provided that the analysis
be limited to actual publicly traded partnership distributions
capped at the level of the pipelines earnings.
After receiving public comment on the proposed policy statement,
on April 17, 2008, FERC issued a final policy statement
rejecting the concept of capping distributions in favor of an
adjustment to the long-term growth rate used to calculate the
equity cost of capital for publicly traded partnerships which
are included in the proxy group.
On January 19, 2009, FERC applied the policy statement to a
pipeline rate case and determined that the pipelines
return on equity should be 11.55%. It is difficult to know how
instructive this case is for purposes of anticipating rates of
return in future rate cases, because FERC determined the
composition of the proxy group using data from 2004 when the
case was filed.
The effect of the application of FERCs policy to the
Pipeline Entities future rate proceedings is not certain,
and Williams Partners cannot ensure that such application would
not adversely affect its ability to achieve a reasonable level
of return on equity.
42
The
outcome of future rate cases to set the rates the Pipeline
Entities can charge customers on their respective pipelines
might result in rates that lower their return on the capital
invested in those pipelines.
There is a risk that rates set by FERC in the Pipeline
Entities future rate cases will be inadequate to recover
increases in operating costs or to sustain an adequate return on
capital investments. There is also the risk that higher rates
will cause their customers to look for alternative ways to
transport their natural gas.
The
outcome of future rate cases will determine the amount of income
taxes the Pipeline Entities will be allowed to
recover.
In May 2005, FERC issued a statement of general policy
permitting a pipeline to include in its
cost-of-service
computations an income tax allowance provided that an entity or
individual has an actual or potential income tax liability on
income from the pipelines public utility assets. The
extent to which owners of pipelines have such actual or
potential income tax liability will be reviewed by FERC on a
case-by-case
basis in rate cases where the amounts of the allowances will be
established.
Legal
and regulatory proceedings and investigations relating to the
energy industry and capital markets have adversely affected the
Pipeline Entities businesses and may continue to do
so.
Public and regulatory scrutiny of the energy industry and of the
capital markets has resulted in increased regulation being
either proposed or implemented. Such scrutiny has also resulted
in various inquiries, investigations and court proceedings in
which the Pipeline Entities or their affiliates are named
as defendants. Both the shippers on the Pipeline Entities
pipelines and regulators have rights to challenge the rates they
charge under certain circumstances. Any successful challenge
could materially affect the Pipeline Entities results of
operations.
Certain inquiries, investigations and court proceedings are
ongoing. Adverse effects may continue as a result of the
uncertainty of these ongoing inquiries and proceedings, or
additional inquiries and proceedings by federal or state
regulatory agencies or private plaintiffs. In addition, Williams
Partners cannot predict the outcome of any of these inquiries or
whether these inquiries will lead to additional legal
proceedings against the Pipeline Entities, civil or criminal
fines or penalties, or other regulatory action, including
legislation, which might be materially adverse to the operation
of the Pipeline Entities businesses and Williams
Partners revenues and net income or increase their
operating costs in other ways. Current legal proceedings or
other matters against Williams Partners including environmental
matters, suits, regulatory appeals and similar matters might
result in adverse decisions against the Pipeline Entities. The
result of such adverse decisions, either individually or in the
aggregate, could be material and may not be covered fully or at
all by insurance.
Increased
competition from alternative natural gas transportation and
storage options and alternative fuel sources could have a
significant financial impact on Williams Partners.
Williams Partners competes primarily with other interstate
pipelines and storage facilities in the transportation and
storage of natural gas. Some of Williams Partners
competitors may have greater financial resources and access to
greater supplies of natural gas than Williams Partners does.
Some of these competitors may expand or construct transportation
and storage systems that would create additional competition for
natural gas supplies or the services Williams Partners provides
to its customers. Moreover, Williams and its other affiliates
may not be limited in their ability to compete with Williams
Partners. Further, natural gas also competes with other forms of
energy available to Williams Partners customers, including
electricity, coal, fuel oils and other alternative energy
sources.
The principal elements of competition among natural gas
transportation and storage assets are rates, terms of service,
access to natural gas supplies, flexibility and reliability.
FERCs policies promoting competition in natural gas
markets are having the effect of increasing the natural gas
transportation and storage options for Williams Partners
traditional customer base. As a result, Williams Partners could
experience some turnback of firm capacity as the
primary terms of existing agreements expire. If Williams
Partners is unable to remarket this capacity or can remarket it
only at substantially discounted rates compared to previous
contracts, Williams Partners or its remaining customers may have
to bear the costs associated with the turned back capacity.
43
Increased competition could reduce the amount of transportation
or storage capacity contracted on Williams Partners system
or, in cases where Williams Partners does not have long-term
fixed rate contracts, could force it to lower its transportation
or storage rates. Competition could intensify the negative
impact of factors that significantly decrease demand for natural
gas or increase the price of natural gas in the markets served
by Williams Partners pipeline system, such as competing or
alternative forms of energy, a regional or national recession or
other adverse economic conditions, weather, higher fuel costs
and taxes or other governmental or regulatory actions that
directly or indirectly increase the price of natural gas or
limit the use of natural gas. Williams Partners ability to
renew or replace existing contracts at rates sufficient to
maintain current revenues and cash flows could be adversely
affected by the activities of its competitors. All of these
competitive pressures could have a material adverse effect on
Williams Partners business, financial condition, results
of operations and cash flows and its ability to make cash
distributions to its unitholders.
Williams
Partners may not be able to maintain or replace expiring natural
gas transportation and storage contracts at favorable rates or
on a long-term basis.
The Pipeline Entities primary exposure to market risk
occurs at the time the terms of existing transportation and
storage contracts expire and are subject to termination.
Although none of Williams Partners material contracts are
terminable in 2010, upon expiration of the terms Williams
Partners may not be able to extend contracts with existing
customers to obtain replacement contracts at favorable rates or
on a long-term basis.
The extension or replacement of existing contracts depends on a
number of factors beyond Williams Partners control,
including:
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the level of existing and new competition to deliver natural gas
to Williams Partners markets;
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the growth in demand for natural gas in Williams Partners
markets;
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whether the market will continue to support long-term firm
contracts;
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whether Williams Partners business strategy continues to
be successful;
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the level of competition for natural gas supplies in the
production basins serving Williams Partners; and
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the effects of state regulation on customer contracting
practices.
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Any failure to extend or replace a significant portion of
Williams Partners existing contracts may have a material
adverse effect on its business, financial condition, results of
operations and cash flows and its ability to make cash
distributions to its unitholders.
Competitive
pressures could lead to decreases in the volume of natural gas
contracted or transported through the Pipeline Entities
pipeline systems.
Although most of the Pipeline Entities pipeline
systems current capacity is fully contracted, FERC has
taken certain actions to strengthen market forces in the natural
gas pipeline industry that have led to increased competition
throughout the industry. In a number of key markets, interstate
pipelines are now facing competitive pressure from other major
pipeline systems, enabling local distribution companies and end
users to choose a transmission provider based on considerations
other than location. Other entities could construct new
pipelines or expand existing pipelines that could potentially
serve the same markets as Williams Partners pipeline
system. Any such new pipelines could offer transportation
services that are more desirable to shippers because of
locations, facilities, or other factors. These new pipelines
could charge rates or provide service to locations that would
result in greater net profit for shippers and producers and
thereby force Williams Partners to lower the rates charged for
service on its pipeline in order to extend its existing
transportation service agreements or to attract new customers.
Williams Partners is aware of proposals by competitors to expand
pipeline capacity in certain markets it also serves which, if
the proposed projects proceed, could increase the competitive
pressure upon it. There can be no assurance that Williams
Partners will be able to compete successfully against current
and future competitors and any failure to do so could have a
material adverse effect on its business, results of operations,
and its ability to make cash distributions to its unitholders.
44
Decreases
in demand for natural gas could adversely affect Williams
Partners business.
Demand for Williams Partners transportation services
depends on the ability and willingness of shippers with access
to Williams Partners facilities to satisfy their demand by
deliveries through its system. Any decrease in this demand could
adversely affect Williams Partners business. Demand for
natural gas is also affected by weather, future industrial and
economic conditions, fuel conservation measures, alternative
fuel requirements, governmental regulation, or technological
advances in fuel economy and energy generation devices, all of
which are matters beyond Williams Partners control.
Additionally, in some cases, new LNG import facilities built
near Williams Partners markets could result in less demand
for its gathering and transmission facilities.
The
failure of new sources of natural gas production or LNG import
terminals to be successfully developed in North America could
increase natural gas prices and reduce the demand for Williams
Partners services.
New sources of natural gas production in the United States and
Canada, particularly in areas of shale development, are expected
to become an increasingly significant component of future
U.S. natural gas supply in North America. Additionally,
increases in LNG supplies are expected to be imported through
new LNG import terminals, particularly in the Gulf Coast region.
If these additional sources of supply are not developed, natural
gas prices could increase and cause consumers of natural gas to
turn to alternative energy sources, which could have a material
adverse effect on Williams Partners business, financial
condition, results of operations and cash flows and its ability
to make cash distributions to its unitholders.
Certain
of the Pipeline Entities services are subject to
long-term, fixed-price contracts that are not subject to
adjustment, even if Williams Partners cost to perform such
services exceeds the revenues received from such
contracts.
The Pipeline Entities provide some services pursuant to
long-term, fixed price contracts. It is possible that costs to
perform services under such contracts will exceed the revenues
they collect for their services. Although most of the services
are priced at cost-based rates that are subject to adjustment in
rate cases, under FERC policy, a regulated service provider and
a customer may mutually agree to sign a contract for service at
a negotiated rate that may be above or below the
FERC-regulated, cost-based rate for that service. These
negotiated rate contracts are not generally subject
to adjustment for increased costs that could be produced by
inflation or other factors relating to the specific facilities
being used to perform the services.
Williams
Partners operations are subject to operational hazards and
unforeseen interruptions for which they may not be adequately
insured.
There are operational risks associated with the gathering,
transporting, storage, processing and treating of natural gas
and the fractionation and storage of NGLs, including:
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hurricanes, tornadoes, floods, fires, extreme weather conditions
and other natural disasters;
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aging infrastructure and mechanical problems;
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damages to pipelines and pipeline blockages;
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uncontrolled releases of natural gas (including sour gas), NGLs,
brine or industrial chemicals;
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collapse of NGL storage caverns;
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operator error;
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damage inadvertently caused by third party activity, such as
operation of construction equipment;
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pollution and other environmental risks;
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fires, explosions, craterings and blowouts;
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risks related to truck and rail loading and unloading;
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45
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risks related to operating in a marine environment; and
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terrorist attacks or threatened attacks on Williams
Partners facilities or those of other energy companies.
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Any of these risks could result in loss of human life, personal
injuries, significant damage to property, environmental
pollution, impairment of Williams Partners operations and
substantial losses to it. In accordance with customary industry
practice, Williams Partners maintains insurance against some,
but not all, of these risks and losses, and only at levels it
believes to be appropriate. The location of certain segments of
Williams Partners facilities in or near populated areas,
including residential areas, commercial business centers and
industrial sites, could increase the level of damages resulting
from these risks. In spite of Williams Partners
precautions, an event such as those described above could cause
considerable harm to people or property, and could have a
material adverse effect on Williams Partners financial
condition and results of operations, particularly if the event
is not fully covered by insurance. Accidents or other operating
risks could further result in loss of service available to
Williams Partners customers.
Some
portions of Williams Partners current pipeline
infrastructure and other assets have been in use for many
decades, which may adversely affect its business.
Some portions of Williams Partners assets, including its
pipeline infrastructure, have been in use for many decades. The
current age and condition of Williams Partners assets
could result in a material adverse impact on its business,
financial condition and results of operations if the costs of
maintaining its facilities exceed current expectations.
Williams
Partners operations are subject to governmental laws and
regulations relating to the protection of the environment, which
may expose it to significant costs and liabilities and could
exceed current expectations.
The risk of substantial environmental costs and liabilities is
inherent in natural gas gathering, transportation, storage,
processing and treating, and in the fractionation and storage of
NGLs, and Williams Partners may incur substantial environmental
costs and liabilities in the performance of these types of
operations. Williams Partners operations are subject to
extensive federal, state and local environmental laws and
regulations governing environmental protection, the discharge of
materials into the environment and the security of chemical and
industrial facilities. These laws include:
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Clean Air Act (CAA) and analogous state laws, which
impose obligations related to air emissions;
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Clean Water Act (CWA) and analogous state laws,
which regulate discharge of wastewaters from Williams
Partners facilities to state and federal waters;
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Comprehensive Environmental Response, Compensation, and
Liability Act (CERCLA) and analogous state laws,
which regulate the cleanup of hazardous substances that may have
been released at properties currently or previously owned or
operated by Williams Partners or locations to which it has sent
wastes for disposal; and
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Resource Conservation and Recovery Act (RCRA) and
analogous state laws, which impose requirements for the handling
and discharge of solid and hazardous waste from Williams
Partners facilities.
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Various governmental authorities, including the
U.S. Environmental Protection Agency (EPA) and
analogous state agencies and the U.S. Department of
Homeland Security, have the power to enforce compliance with
these laws and regulations and the permits issued under them,
oftentimes requiring difficult and costly actions. Failure to
comply with these laws, regulations, and permits may result in
the assessment of administrative, civil, and criminal penalties,
the imposition of remedial obligations, the imposition of
stricter conditions on or revocation of permits, and the
issuance of injunctions limiting or preventing some or all of
Williams Partners operations.
There is inherent risk of the incurrence of environmental costs
and liabilities in Williams Partners business, some of
which may be material, due to its handling of the products it
gathers, transports, processes,
46
fractionates and stores, air emissions related to its
operations, historical industry operations, waste disposal
practices, and the prior use of flow meters containing mercury.
Joint and several, strict liability may be incurred without
regard to fault under certain environmental laws and
regulations, including CERCLA, RCRA, and analogous state laws,
for the remediation of contaminated areas and in connection with
spills or releases of natural gas and wastes on, under, or from
Williams Partners properties and facilities. Private
parties, including the owners of properties through which
Williams Partners pipeline and gathering systems pass and
facilities where its wastes are taken for reclamation or
disposal, may have the right to pursue legal actions to enforce
compliance as well as to seek damages for non-compliance with
environmental laws and regulations or for personal injury or
property damage arising from its operations. Some sites Williams
Partners operates are located near current or former third-party
hydrocarbon storage and processing operations, and there is a
risk that contamination has migrated from those sites to
Williams Partners sites. In addition, increasingly strict
laws, regulations and enforcement policies could materially
increase Williams Partners compliance costs and the cost
of any remediation that may become necessary. Williams
Partners insurance may not cover all environmental risks
and costs or may not provide sufficient coverage if an
environmental claim is made against it.
Williams Partners business may be adversely affected by
increased costs due to stricter pollution control requirements
or liabilities resulting from non-compliance with required
operating or other regulatory permits. Also, Williams Partners
might not be able to obtain or maintain from time to time all
required environmental regulatory approvals for its operations.
If there is a delay in obtaining any required environmental
regulatory approvals, or if Williams Partners fails to obtain
and comply with them, the operation of its facilities could be
prevented or become subject to additional costs, resulting in
potentially material adverse consequences to its business,
financial condition, results of operations and cash flows.
Williams Partners makes assumptions and develops expectations
about possible expenditures related to environmental conditions
based on current laws and regulations and current
interpretations of those laws and regulations. If the
interpretation of laws or regulations, or the laws and
regulations themselves, change, Williams Partners
assumptions may change, and any new capital costs incurred to
comply with such changes may not be recoverable under its
regulatory rate structure or its customer contracts. In
addition, new environmental laws and regulations might adversely
affect Williams Partners products and activities,
including processing, fractionation, storage and transportation,
as well as waste management and air emissions. For instance,
federal and state agencies could impose additional safety
requirements, any of which could affect Williams Partners
profitability. In addition, recent scientific studies have
suggested that emissions of certain gases, commonly referred to
as greenhouse gases (GHGs), may be contributing to
warming of the earths atmosphere, and various governmental
bodies have considered legislative and regulatory responses in
this area.
Legislative and regulatory responses related to GHGs and climate
change creates the potential for financial risk. The
U.S. Congress and certain states have for some time been
considering various forms of legislation related to GHG
emissions. There have also been international efforts seeking
legally binding reductions in emissions of GHGs. In addition,
increased public awareness and concern may result in more state,
regional
and/or
federal requirements to reduce or mitigate GHG emissions.
Several bills have been introduced in U.S. Congress that
would compel GHG emission reductions. On June 26, 2009, the
U.S. House of Representatives passed the American
Clean Energy and Security Act which is intended to
decrease annual GHG emissions through a variety of measures,
including a cap and trade system which limits the
amount of GHGs that may be emitted and incentives to reduce the
nations dependence on traditional energy sources. The
U.S. Senate is currently considering similar legislation,
and numerous states have also announced or adopted programs to
stabilize and reduce GHGs. In addition, on December 7,
2009, the EPA issued a final determination that six GHGs are a
threat to public safety and welfare. This determination could
ultimately lead to the direct regulation of GHG emissions in
Williams Partners industry under the CAA. While it is not
clear whether or when any federal or state climate change laws
or regulations will be passed, any of these actions could result
in increased costs to (i) operate and maintain Williams
Partners facilities, (ii) install new emission
controls on its facilities, and (iii) administer and manage
any GHG emissions program. If Williams Partners is unable to
recover or pass through a significant level of its costs related
to complying with climate change regulatory requirements imposed
on it,
47
there could be a material adverse effect on its results of
operations and its ability to make cash distributions to its
unitholders. To the extent financial markets view climate change
and GHG emissions as a financial risk, this could negatively
impact Williams Partners cost of and access to capital.
Williams
Partners does not insure against all potential losses and could
be seriously harmed by unexpected liabilities or by the ability
of the insurers it does use to satisfy its claims.
Williams Partners is not fully insured against all risks
inherent to its business, including environmental accidents that
might occur. In addition, Williams Partners does not maintain
business interruption insurance in the type and amount to cover
all possible risks of loss. Williams Partners currently
maintains excess liability insurance with limits of
$610 million per occurrence and in the aggregate annually
and a deductible of $2 million per occurrence. This
insurance covers Williams Partners, its subsidiaries, and
certain of its affiliates for legal and contractual liabilities
arising out of bodily injury, personal injury or property
damage, including resulting loss of use to third parties. This
excess liability insurance includes coverage for sudden and
accidental pollution liability for full limits, with the first
$135 million of insurance also providing gradual pollution
liability coverage for natural gas and NGL operations. Pollution
liability coverage excludes: release of pollutants subsequent to
their disposal; release of substances arising from the
combustion of fuels that result in acidic deposition; and
testing, monitoring,
clean-up,
containment, treatment or removal of pollutants from property
owned, occupied by, rented to, used by or in the care, custody
or control of Williams Partners, its subsidiaries, or certain of
its affiliates.
Williams Partners does not insure onshore underground pipelines
for physical damage, except at river crossings and at certain
locations such as compressor stations. Williams Partners
maintains coverage of $300 million per occurrence for
physical damage to onshore assets and resulting business
interruption caused by terrorist acts. Williams Partners also
maintains coverage of $100 million per occurrence for
physical damage to offshore assets caused by terrorist acts,
except for its Devils Tower spar where it maintains limits of
$450 million per occurrence for physical damage caused by
terrorist acts. Williams Partners purchases insurance for
business interruption arising from physical loss or damage
resulting from terrorist acts only for certain offshore assets.
Also, all of Williams Partners insurance is subject to
deductibles. If a significant accident or event occurs for which
Williams Partners is not fully insured, it could adversely
affect Williams Partners operations and financial
condition. Williams Partners may not be able to maintain or
obtain insurance of the type and amount it desires at reasonable
rates. Changes in the insurance markets subsequent to hurricanes
losses in recent years have impacted named windstorm insurance
coverage, rates and availability for Gulf of Mexico area
exposures, and Williams Partners may elect to self insure a
portion of its asset portfolio. Williams Partners cannot assure
you that it will in the future be able to obtain the levels or
types of insurance it would otherwise have obtained prior to
these market changes or that the insurance coverage it does
obtain will not contain large deductibles or fail to cover
certain hazards or cover all potential losses. The occurrence of
any operating risks not fully covered by insurance could have a
material adverse effect on Williams Partners business,
financial condition, results of operations and cash flows, and
its ability to make cash distributions to its unitholders.
In addition, certain insurance companies that provide coverage
to Williams Partners, including American International Group,
Inc., have experienced negative developments that could impair
their ability to pay any of Williams Partners potential
claims. As a result, Williams Partners could be exposed to
greater losses than anticipated and may have to obtain
replacement insurance, if available, at a greater cost.
Execution
of Williams Partners capital projects subjects it to
construction risks, increases in labor costs and materials, and
other risks that may adversely affect financial
results.
Williams Partners growth may be dependent upon the
construction of new natural gas gathering, transportation,
processing or treating pipelines and facilities or NGL
fractionation or storage facilities, as well
48
as the expansion of existing facilities. Construction or
expansion of these facilities is subject to various regulatory,
development and operational risks, including:
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the ability to obtain necessary approvals and permits by
regulatory agencies on a timely basis and on acceptable terms;
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the availability of skilled labor, equipment, and materials to
complete expansion projects;
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potential changes in federal, state and local statutes and
regulations, including environmental requirements, that prevent
a project from proceeding or increase the anticipated cost of
the project;
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impediments on Williams Partners ability to acquire
rights-of-way
or land rights on a timely basis and on acceptable terms;
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the ability to construct projects within estimated costs,
including the risk of cost overruns resulting from inflation or
increased costs of equipment, materials, labor or other factors
beyond Williams Partners control, that may be
material; and
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the ability to access capital markets to fund construction
projects.
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Any of these risks could prevent a project from proceeding,
delay its completion or increase its anticipated costs. As a
result, new facilities may not achieve expected investment
return, which could adversely affect Williams Partners
results of operations, financial position, or cash flows and its
ability to make cash distributions to its unitholders.
Williams
Partners operating results for certain segments of its
business might fluctuate on a seasonal and quarterly
basis.
Revenues from certain segments of Williams Partners
business can have seasonal characteristics. In many parts of the
country, demand for natural gas and other fuels peaks during the
winter. As a result, Williams Partners overall operating
results in the future might fluctuate substantially on a
seasonal basis. Demand for natural gas and other fuels could
vary significantly from Williams Partners expectations
depending on the nature and location of its facilities and
pipeline systems and the terms of its natural gas transportation
arrangements relative to demand created by unusual weather
patterns.
Williams
Partners does not operate all of its assets. This reliance on
others to operate Williams Partners assets and to provide
other services could adversely affect its business and operating
results.
Williams and other third parties operate certain of Williams
Partners assets. Williams Partners has a limited ability
to control these operations and the associated costs. The
success of these operations is therefore dependent upon a number
of factors that are outside Williams Partners control,
including the competence and financial resources of the
operators.
Williams Partners relies on Williams for certain services
necessary for Williams Partners to be able to conduct its
business. Williams may outsource some or all of these services
to third parties, and a failure of all or part of Williams
relationships with its outsourcing providers could lead to
delays in or interruptions of these services. Williams
Partners reliance on Williams and others as operators and
on Williams outsourcing relationships, and Williams
Partners limited ability to control certain costs could
have a material adverse effect on its business, results of
operations, and financial condition and its ability to make cash
distributions to its unitholders.
Williams
Partners does not own all of the land on which its pipelines and
facilities are located, which could disrupt its
operations.
Williams Partners does not own all of the land on which its
pipelines and facilities have been constructed. As such,
Williams Partners is subject to the possibility of increased
costs to retain necessary land use. Williams Partners obtains
the rights to construct and operate its pipelines and gathering
systems on land owned by third parties and governmental agencies
for a specific period of time. Williams Partners loss of
these
49
rights, through its inability to renew
right-of-way
contracts or otherwise, could have a material adverse effect on
its business, results of operations, and financial condition and
its ability to make cash distributions to its unitholders.
Potential
changes in accounting standards might cause Williams Partners to
revise its financial results and disclosures in the future,
which might change the way analysts measure its business or
financial performance.
Regulators and legislators continue to take a renewed look at
accounting practices, financial disclosures, retirement plan
practices and companies relationships with their
independent public accounting firms. It remains unclear what new
laws or regulations will be adopted, and Williams Partners
cannot predict the ultimate impact that any such new laws or
regulations could have. In addition, the Financial Accounting
Standards Board, the SEC or FERC could enact new accounting
standards or FERC orders that might impact how Williams Partners
is required to record revenues, expenses, assets and
liabilities. Any significant change in accounting standards or
disclosure requirements could have a material adverse effect on
Williams Partners business, results of operations, and
financial condition and its ability to make cash distributions
to its unitholders.
Institutional
knowledge residing with current employees nearing retirement
eligibility might not be adequately preserved.
In Williams Partners business, institutional knowledge
resides with employees who have many years of service. As these
employees reach retirement age, Williams Partners may not be
able to replace them with employees of comparable knowledge and
experience. In addition, Williams Partners may not be able to
retain or recruit other qualified individuals, and its efforts
at knowledge transfer could be inadequate. If knowledge
transfer, recruiting and retention efforts are inadequate,
access to significant amounts of internal historical knowledge
and expertise could become unavailable to it.
Failure
of or disruptions to Williams Partners outsourcing
relationships might negatively impact its ability to conduct its
business.
Some studies indicate a high failure rate of outsourcing
relationships. Although Williams has taken steps to build a
cooperative and mutually beneficial relationship with its
outsourcing providers and to closely monitor their performance,
a deterioration in the timeliness or quality of the services
performed by the outsourcing providers or a failure of all or
part of these relationships could lead to loss of institutional
knowledge and interruption of services necessary for Williams
Partners to be able to conduct its business. The expiration of
such agreements or the transition of services between providers
could lead to similar losses of institutional knowledge or
disruptions.
Certain of Williams Partners accounting, information
technology, application development, and help desk services are
currently provided by Williams outsourcing provider from
service centers outside of the United States. The economic
and political conditions in certain countries from which
Williams outsourcing providers may provide services to
Williams Partners present similar risks of business operations
located outside of the United States, including risks of
interruption of business, war, expropriation, nationalization,
renegotiation, trade sanctions or nullification of existing
contracts and changes in law or tax policy, that are greater
than in the United States.
Acts
of terrorism could have a material adverse effect on Williams
Partners financial condition, results of operations and
cash flows.
Williams Partners assets and the assets of its customers
and others may be targets of terrorist activities that could
disrupt its business or cause significant harm to its
operations, such as full or partial disruption to its ability to
produce, process, transport or distribute natural gas, NGLs or
other commodities. Acts of terrorism as well as events occurring
in response to or in connection with acts of terrorism could
cause environmental repercussions that could result in a
significant decrease in revenues or significant reconstruction
50
or remediation costs, which could have a material adverse effect
on Williams Partners financial condition, results of
operations, and cash flows and on its ability to make cash
distributions to its unitholders.
Tax Risks
Related to Owning Williams Partners Common Units
You are urged to read Material U.S. Federal Income
Tax Consequences beginning on page 131 for a more
complete discussion of the expected material U.S. federal
income tax consequences of owning and disposing of Williams
Partners Common Units received in the Merger.
The
tax treatment of Williams Partners depends on its status as a
partnership for U.S. federal income tax purposes, as well as
Williams Partners not being subject to a material amount of
entity-level taxation by states and localities. If the IRS were
to treat Williams Partners as a corporation for U.S. federal
income tax purposes or if Williams Partners were to become
subject to a material amount of entity-level taxation for state
or local tax purposes, then its cash available for distribution
to unitholders would be substantially reduced.
The anticipated after-tax economic benefit of an investment in
Williams Partners Common Units depends largely on Williams
Partners being treated as a partnership for U.S. federal
income tax purposes. Williams Partners has not requested, and
does not plan to request, a ruling from the IRS on this or any
other tax matter affecting Williams Partners.
If Williams Partners were treated as a corporation for
U.S. federal income tax purposes, it would pay
U.S. federal income tax on its taxable income at the
corporate tax rate, which currently has a top marginal rate of
35%, and would likely pay state and local income tax at the
corporate tax rate of the various states and localities imposing
a corporate income tax. Distributions to holders of Williams
Partners Common Units would generally be taxed again as
corporate distributions, and no income, gains, losses,
deductions or credits would flow through to holders of Williams
Partners Common Units. Because a tax would be imposed upon
Williams Partners as a corporation, its cash available to pay
distributions to holders of Williams Partners Common Units would
be substantially reduced. Thus, treatment of Williams Partners
as a corporation would result in a material reduction in the
anticipated cash flow and after-tax return to holders of
Williams Partners Common Units, likely causing a substantial
reduction in the value of the Williams Partners Common Units.
Current law may change, causing Williams Partners to be treated
as a corporation for U.S. federal income tax purposes or
otherwise subjecting Williams Partners to entity-level taxation.
In addition, because of widespread state budget deficits and
other reasons, several states are evaluating ways to subject
partnerships to entity-level taxation through the imposition of
state income, franchise or other forms of taxation. If any state
were to impose a tax upon Williams Partners as an entity, the
cash available for distributions to holders of Williams Partners
Common Units would be reduced. Williams Partners
partnership agreement provides that if a law is enacted or
existing law is modified or interpreted in a manner that
subjects Williams Partners to taxation as a corporation or
otherwise subjects it to entity-level taxation for
U.S. federal, state or local income tax purposes, then the
minimum quarterly distribution amount and the target
distribution amounts will be adjusted to reflect the impact of
that law on Williams Partners.
The
U.S. federal income tax treatment of publicly traded
partnerships or an investment in Williams Partners Common Units
could be subject to potential legislative, judicial or
administrative changes and differing interpretations, possibly
on a retroactive basis.
The present U.S. federal income tax treatment of publicly
traded partnerships, including Williams Partners, or an
investment in Williams Partners Common Units may be modified by
administrative, legislative or judicial interpretation at any
time. Any modification to the U.S. federal income tax laws
and interpretations thereof may or may not be applied
retroactively and could make it more difficult or impossible to
meet the exception for Williams Partners to be treated as a
partnership for U.S. federal income tax purposes, affect or
cause Williams Partners to change its business activities,
affect the tax considerations of an investment in Williams
Partners, change the character or treatment of portions of
Williams Partners income and adversely affect an
investment in Williams Partners Common Units. For example, in
response to certain recent
51
developments, the U.S. House of Representatives passed
legislation that would provide for substantive changes to the
definition of qualifying income under Internal
Revenue Code Section 7704(d) and the treatment of certain
types of income earned from profits interests in partnerships.
It is possible that these legislative efforts could result in
changes to the existing U.S. tax laws that affect publicly
traded partnerships, including Williams Partners. Modifications
to the U.S. federal income tax laws and interpretations
thereof may or may not be applied retroactively. Williams
Partners is unable to predict whether this legislation, or other
proposals, will ultimately be enacted. Any such changes could
negatively impact the value of an investment in Williams
Partners Common Units.
Williams
Partners prorates its items of income, gain, loss and deduction
between transferors and transferees of Williams Partners Common
Units each month based upon the ownership of Williams Partners
Common Units on the first day of each month, instead of on the
basis of the date a particular Williams Partners Common Unit is
transferred.
Williams Partners prorates its items of income, gain, loss and
deduction between transferors and transferees of the Williams
Partners Common Units each month based upon the ownership of
Williams Partners Common Units on the first day of each month,
instead of on the basis of the date a particular Williams
Partners Common Unit is transferred. The use of this proration
method may not be permitted under existing Treasury regulations,
and, accordingly, Williams Partners counsel is unable to
opine as to the validity of this method. If the IRS were to
challenge this method or new Treasury regulations were issued,
Williams Partners may be required to change the allocation of
items of income, gain, loss and deduction among holders of
Williams Partners Common Units.
An IRS
contest of the U.S. federal income tax positions Williams
Partners takes may adversely impact the market for the Williams
Partners Common Units, and the costs of any contest will reduce
cash available for distribution to holders of Williams Partners
Common Units and the Williams Partners General
Partner.
Williams Partners has not requested any ruling from the IRS with
respect to its treatment as a partnership for U.S. federal
income tax purposes or any other matter affecting Williams
Partners. The IRS may adopt positions that differ from Williams
Partners counsels conclusions or from the positions
Williams Partners takes. It may be necessary to resort to
administrative or court proceedings to sustain some or all of
its counsels conclusions or the positions it takes. A
court may not agree with some or all of its counsels
conclusions or the U.S. federal income tax positions it
takes. Any contest with the IRS may materially and adversely
impact the market for Williams Partners Common Units and the
price at which they trade. In addition, the costs of any contest
with the IRS will result in a reduction in cash available to pay
distributions to holders of Williams Partners Common Units and
the Williams Partners General Partner and thus will be borne
indirectly by holders of Williams Partners Common Units and the
Williams Partners General Partner.
Holders
of Williams Partners Common Units will be required to pay taxes
on their share of Williams Partners income even if such
holders do not receive any cash distributions from Williams
Partners.
Because holders of Williams Partners Common Units will be
treated as partners to whom Williams Partners will allocate
taxable income which could be different in amount than the cash
Williams Partners distributes, such holders will be required to
pay U.S. federal income taxes and, in some cases, state and
local income taxes on their share of Williams Partners
taxable income, whether or not they receive cash distributions
from Williams Partners. Such holders may not receive cash
distributions from Williams Partners equal to their share of its
taxable income or even equal to the actual tax liability that
results from their share of its taxable income.
The
tax gain or loss on the disposition of Williams Partners Common
Units could be different than expected.
A holder of Williams Partners Common Units that sells its
Williams Partners Common Units will recognize gain or loss for
U.S. federal income tax purposes equal to the difference
between the amount
52
realized and its tax basis in those Williams Partners Common
Units. Prior distributions to such holder in excess of the total
net taxable income that was allocated to such holder, which
decreased its tax basis in its Williams Partners Common Units,
will, in effect, become taxable income to such holder if the
Williams Partners Common Units are sold at a price greater than
its tax basis in those Williams Partners Common Units. A
substantial portion of the amount realized, regardless of
whether such amount represents gain, may be taxed as ordinary
income to such holder due to potential recapture items,
including depreciation recapture. In addition, if such a holder
sells its Williams Partners Common Units, such holder may incur
a U.S. federal income tax liability in excess of the amount
of cash it received from the sale.
Tax-exempt
entities and
non-U.S.
persons face unique tax issues from owning Williams Partners
Common Units that may result in adverse tax consequences to
them.
Investment in Williams Partners Common Units by tax-exempt
entities, such as individual retirement accounts (known as
IRAs), and
non-U.S. persons
raises issues unique to them. For example, virtually all of
Williams Partners income allocated to holders who are
organizations that are exempt from U.S. federal income tax,
including IRAs and other retirement plans, may be taxable to
them as unrelated business taxable income.
Distributions to
non-U.S. persons
will be reduced by withholding taxes at the highest applicable
effective tax rate, and
non-U.S. persons
will be required to file U.S. federal income tax returns
and pay U.S. federal income tax on their share of Williams
Partners taxable income.
Williams
Partners treats each holder of Williams Partners Common Units as
having the same tax benefits without regard to the actual
Williams Partners Common Units held. The IRS may challenge this
treatment, which could adversely affect the value of Williams
Partners Common Units.
Because Williams Partners cannot match transferors and
transferees of Williams Partners Common Units, Williams Partners
has adopted depreciation and amortization positions that may not
conform with all aspects of applicable Treasury regulations.
Williams Partners counsel is unable to opine as to the
validity of such filing positions. A successful IRS challenge to
those positions could adversely affect the amount of
U.S. federal income tax benefits available to holders of
Williams Partners Common Units. It also could affect the timing
of these tax benefits or the amount of gain from the sale of
Williams Partners Common Units and could have a negative impact
on the value of Williams Partners Common Units or result in
audit adjustments to a holders tax returns.
Holders
of Williams Partners Common Units will likely be subject to
state and local taxes and return filing requirements as a result
of investing in Williams Partners Common Units.
In addition to U.S. federal income taxes, holders of
Williams Partners Common Units will likely be subject to other
taxes, such as state and local income taxes, unincorporated
business taxes and estate, inheritance, or intangible taxes that
are imposed by the various jurisdictions in which Williams
Partners does business or owns property, even if the holder does
not live in any of those jurisdictions. Holders of Williams
Partners Common Units will likely be required to file state and
local income tax returns and pay state and local income taxes in
some or all of these various jurisdictions. Further, such
holders may be subject to penalties for failure to comply with
those requirements. As Williams Partners makes acquisitions or
expands its business, Williams Partners may own assets or
conduct business in additional states or foreign countries that
impose a personal income tax or an entity level tax. It is the
such holders responsibility to file all U.S. federal,
state and local tax returns. Williams Partners counsel has
not rendered an opinion on the state and local tax consequences
of an investment in Williams Partners Common Units.
The
sale or exchange of 50% or more of the total interest in
Williams Partners capital and profits within a
12-month
period will result in Williams Partners termination as a
partnership for U.S. federal income tax purposes.
Williams Partners will be considered to have terminated as a
partnership for U.S. federal income tax purposes if there
is a sale or exchange of 50% or more of the total interests in
Williams Partners capital and profits within a
12-month
period. Williams Partners termination would, among other
things, result in the
53
closing of its taxable year for all partners, which would result
in Williams Partners filing two tax returns for one fiscal year.
Williams Partners termination could also result in a
deferral of depreciation deductions allowable in computing its
taxable income. In the case of a holder of Williams Partners
Common Units reporting on a taxable year other than a fiscal
year ending December 31, the closing of Williams
Partners taxable year may also result in more than
12 months of its taxable income or loss being includable in
such holders taxable income for the year of termination.
Williams Partners termination currently would not affect
its classification as a partnership for U.S. federal income
tax purposes, but instead, it would be treated as a new
partnership, it would be required to make new tax elections and
could be subject to penalties if it is unable to determine that
a termination occurred. The IRS has recently announced a relief
procedure whereby if a publicly traded partnership that has
technically terminated requests and the IRS grants special
relief, among other things, the partnership will be required to
provide only a single
Schedule K-1
to its partners for the tax years in the fiscal year during
which the termination occurs.
Williams
Partners has adopted certain valuation methodologies that may
result in a shift of income, gain, loss and deduction between
the general partner and holders of Williams Partners Common
Units. The IRS may challenge this treatment, which could
adversely affect the value of the Williams Partners Common
Units.
When Williams Partners issues additional Williams Partners
Common Units or engages in certain other transactions, it
determines the fair market value of its assets and allocates any
unrealized gain or loss attributable to its assets to the
capital accounts of partners. Williams Partners
methodology may be viewed as understating the value of its
assets. In that case, there may be a shift of income, gain, loss
and deduction between certain partners and the general partner,
which may be unfavorable to such partners. Moreover, under
Williams Partners current valuation methods, subsequent
purchasers of Williams Partners Common Units may have a greater
portion of their Code Section 743(b) adjustment allocated
to Williams Partners tangible assets and a lesser portion
allocated to Williams Partners intangible assets. The IRS
may challenge Williams Partners valuation methods, or its
allocation of the Code Section 743(b) adjustment
attributable to its tangible and intangible assets, and
allocations of income, gain, loss and deduction between the
Williams Partners General Partner and certain of its partners.
A successful IRS challenge to these methods or allocations could
adversely affect the amount of taxable income or loss being
allocated to holders of Williams Partners Common Units. It also
could affect the amount of gain from a holders sale of
Williams Partners Common Units and could have a negative impact
on the value of the Williams Partners Common Units or result in
audit adjustments to the holders tax returns.
Risks
Related to WMZs Business
WMZs business operations and activities are subject to
hazards, risks and uncertainties. If the Merger is successfully
consummated, as a holder of Williams Partners Common Units, you
will continue to hold an indirect interest in the business
currently operated by WMZ, and the value of your units will
continue to be, in part, based on the value of such business.
For a description of the risks related to the WMZ business, see
the section titled Risk Factors in the WMZ 2009
10-K
incorporated by reference into this joint proxy
statement/prospectus. If any of the events described in the WMZ
2009 10-K
occur, the business, financial condition and/or results of
operations of WMZ could be materially harmed, and the market
price of Williams Partners Common Units could decline.
54
THE
SPECIAL MEETING
Time,
Place and Date
The Special Meeting will take place in the Williams Resource
Center Theater, at One Williams Center, Tulsa, Oklahoma,
74172-0172
on ,
2010 at a.m., local time. The Special Meeting
may be adjourned or postponed to another date or place for
proper purposes, including for the purpose of soliciting
additional proxies.
Purposes
The purposes of the Special Meeting are to consider and vote on
the approval and adoption of the Merger Agreement and the Merger
and to transact other business as may be properly presented at
the Special Meeting or any adjournments of the Special Meeting.
At the present time, WMZ knows of no other matters that will be
presented for consideration at the Special Meeting.
Quorum
The holders of a majority of each class of units voting at the
Special Meeting (WMZ Common Units and WMZ Subordinated Units)
outstanding on the record date present in person or by proxy at
the Special Meeting will constitute a quorum and will permit WMZ
to conduct the proposed business at the Special Meeting.
Representatives of the WMZ General Partner will be present in
person on behalf of the WMZ General Partner at the Special
Meeting.
Record
Date
The close of business
on ,
2010 is the record date.
Units
Entitled to Vote
Holders of WMZ Common Units or WMZ Subordinated Units as of the
close of business on the record date may vote at the Special
Meeting. On that date, there
were
WMZ Common Units outstanding
and
WMZ Subordinated Units outstanding. Each holder of WMZ Common
Units or WMZ Subordinated Units entitled to vote at the Special
Meeting may cast one vote for each WMZ Common Unit or each WMZ
Subordinated Unit that such holder owned on the close of
business on the record date.
Votes
Required
The affirmative vote of holders of at least a majority of the
outstanding Non-affiliated WMZ Common Units is required to
approve and adopt the Merger Agreement and Merger. As of the
record date, there
were
Non-affiliated WMZ Common Units outstanding. For purposes of
determining whether the Merger Agreement and the Merger have
been approved and adopted by the Non-affiliated WMZ Common
Units, WMZ Common Units held by directors and officers of the
WMZ General Partner will not be counted toward the required
majority vote of outstanding Non-affiliated WMZ Common Units.
The affirmative vote of holders of at least a majority of the
outstanding WMZ Subordinated Units is also required to approve
and adopt the Merger Agreement and the Merger. The WMZ General
Partner owns all of the outstanding WMZ Subordinated Units and
has agreed in the Merger Agreement to vote these units at the
Special Meeting in favor of the Merger Agreement and the Merger.
The failure of a holder of Non-affiliated WMZ Common Units to
vote in person or by proxy will have the effect of a vote
against approval and adoption of the Merger Agreement and the
Merger. If you sign and return your proxy card but do not
indicate how you want to vote, your proxy will be counted as a
vote in favor of the approval and adoption of the Merger
Agreement and the Merger.
55
Voting
Procedures
If you hold your WMZ Common Units in certificated or book-entry
form, you may vote using any of the following methods:
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phone the toll-free number listed on your proxy card and follow
the recorded instructions;
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go to the Internet website listed on your proxy card and follow
the instructions provided;
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complete, sign and mail your proxy card in the postage-paid
envelope; or
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attend the Special Meeting and vote in person.
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If you have timely and properly submitted your proxy, clearly
indicated your vote and have not revoked your proxy, your units
will be voted as indicated. If you have timely and properly
submitted your proxy but have not clearly indicated your vote,
your units will be voted FOR approval and adoption of the Merger
Agreement and the Merger.
If any other matters are properly presented at the Special
Meeting for consideration, the persons named in your proxy will
have the discretion to vote on these matters in accordance with
their best judgment. Proxies voted against adoption of the
Merger Agreement and the Merger will not be voted in favor of
any adjournment of the Special Meeting for the purpose of
soliciting additional proxies.
You may revoke your proxy at any time prior to its exercise by:
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giving written notice of revocation to the Secretary of the WMZ
General Partner;
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appearing and voting in person at the Special Meeting; or
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properly completing and executing a later dated proxy and
delivering it to the Secretary of the WMZ General Partner at or
before the Special Meeting.
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Your presence without voting at the Special Meeting will not
automatically revoke your proxy, and any revocation during the
Special Meeting will not affect votes previously taken.
The inspector of election will determine all questions as to
validity, form, eligibility (including time of receipt) and
acceptance of proxies. Its determination will be final and
binding. The WMZ Board has the right to waive any irregularities
or conditions as to the manner of voting. WMZ may accept your
proxy by any form of communication permitted by Delaware law so
long as WMZ is reasonably assured that the communication is
authorized by you.
The accompanying proxy is being solicited on behalf of the WMZ
General Partner. The expenses of preparing, printing and mailing
the proxy and materials used in the solicitation will be borne
half by WMZ and half by Williams Partners.
Mackenzie Partners Inc. has been retained by WMZ to aid in the
solicitation of proxies for a fee of
$ plus expenses and the
reimbursement of
out-of-pocket
expenses. Proxies may also be solicited from WMZ unitholders by
mail, telephone, fax or other electronic means, or in person by
directors, officers and employees of the WMZ General Partner or
its affiliates, who will not receive additional compensation for
performing that service. Arrangements also will be made with
brokerage houses and other custodians, nominees and fiduciaries
for the forwarding of proxy materials to the beneficial owners
of WMZ Common Units, and WMZ will reimburse them for any
reasonable expenses that they incur.
Units
Held in Street Name
Your broker cannot vote your WMZ Common Units for or against
approval and adoption of the Merger Agreement and the Merger
unless you tell the broker or other nominee how you wish to
vote. To tell your broker or other nominee how to vote, you
should follow the directions that your broker or other nominee
provides to you. Units not voted because brokers lack power to
vote them without instructions are also known as broker
non-votes. A broker non-vote will have the same effect as
a vote against the proposal. Please note that you may not vote
your WMZ Common Units held in street name by
returning a proxy card directly to WMZ or by voting in person at
the Special Meeting unless you provide a legal
proxy, which you must obtain from your broker or other
nominee.
56
THE
MERGER
General
On May 24, 2010, the Williams Partners General Partner and
the WMZ General Partner agreed to combine the businesses of
Williams Partners and WMZ by merging Merger Sub, an indirect
wholly owned subsidiary of Williams Partners, into WMZ.
If the Merger is successfully consummated, all outstanding WMZ
Common Units and WMZ Subordinated Units will be canceled, Merger
Sub will be merged with and into WMZ, and WMZ will become an
indirect wholly owned subsidiary of Williams Partners. The
Williams Partners General Partners management team will
continue in their current roles and manage the combined company.
As a result of the Merger, each outstanding Publicly Owned WMZ
Common Unit will be converted into the right to receive 0.7584
of one Williams Partners Common Unit and each such Publicly
Owned WMZ Common Unit will be canceled and retired and will
cease to exist.
The approval and adoption of the Merger Agreement and the Merger
require the affirmative vote of holders of at least a majority
of the outstanding Non-affiliated WMZ Common Units and the WMZ
Subordinated Units, with each group of WMZ Common Units and WMZ
Subordinated Units voting as a separate class. All of the
currently outstanding WMZ Subordinated Units are held by the WMZ
General Partner, and the WMZ General Partner has agreed in the
Merger Agreement to vote these units in favor of the Merger
Agreement and the Merger. WMZ has scheduled the Special Meeting
for holders of WMZ Common Units and WMZ Subordinated Units to
vote on this matter
on ,
2010.
Williams
Partners Ownership Interest in and Control of WMZ
Holders of Publicly Owned WMZ Common Units should be aware that
WMZ is indirectly controlled by Williams Partners through
Williams Partners 100% ownership of the WMZ General
Partner, which owns all of the outstanding general partner
interests in WMZ. As a result, Williams Partners appoints the
members of the WMZ Board, a majority of whom are affiliated with
Williams and its affiliates, and thereby could be seen as
controlling all of WMZs decisions other than those
involving certain conflicts of interest with Williams Partners
or that require an affirmative vote of holders of the limited
partner interests in WMZ pursuant to and in the percentages
specified by the WMZ partnership agreement. In addition,
Williams Partners, through its ownership of the WMZ General
Partner, owns an approximate 45.7% limited partner interest
(comprised of 20.8% of the currently outstanding WMZ Common
Units and 100% of the currently outstanding WMZ Subordinated
Units) in WMZ.
Certain persons associated with Williams Partners and its
affiliates have a relationship with WMZ.
Steven J. Malcolm, Chairman of the Board and Chief
Executive Officer of the WMZ General Partner, also serves as
Chairman of the Board and Chief Executive Officer of the
Williams Partners General Partner and as a director, executive
officer,
and/or
member of the management committee of certain of its affiliates,
including Williams. Donald R. Chappel, a director and the Chief
Financial Officer of the WMZ General Partner, also serves as a
director and the Chief Financial Officer of the Williams
Partners General Partner and as a director, executive officer,
and/or
member of the management committee of certain of its affiliates,
including Williams. Phillip D. Wright, a director and the Chief
Operating Officer of the WMZ General Partner, also serves as a
director and the Senior Vice President Gas Pipeline of the
Williams Partners General Partner and as a director, executive
officer,
and/or
member of the management committee of certain of its affiliates,
including Williams. Rodney J. Sailor, a director and the
Treasurer of the WMZ General Partner, also serves as the
Treasurer of the Williams Partners General Partner and as a
director, officer,
and/or
member of the management committee of certain of its affiliates,
including Williams. Ted T. Timmermans, Chief Accounting Officer
of the WMZ General Partner, also serves as Vice President,
Controller and Chief Accounting Officer of the Williams Partners
General Partner and as an officer of certain of its affiliates,
including Williams. James J. Bender, General Counsel of the WMZ
General Partner, also serves as General Counsel of the Williams
Partners General Partner, and as general counsel, director
and/or executive officer of certain of its affiliates, including
Williams. None of these individuals are members of the WMZ
Conflicts Committee.
57
Background
of the Merger
In February 2005, Williams formed Williams Partners to own,
operate and acquire a diversified portfolio of complementary
energy assets with a focus on the business of gathering,
transporting and processing natural gas and fractionating and
storing natural gas liquids. Williams Partners was formed as a
limited partnership in order to take advantage of the lower cost
of capital associated with this structure and the resulting
facilitation of growth opportunities.
In August 2007, Williams formed WMZ to operate natural gas
transportation and storage assets. A second, separate
partnership was created because Williams believed the financial
markets would prefer the pure play nature of
separate entities and that a cost of capital differential
existed between partnerships focused on midstream operations,
such as Williams Partners, and those focused on the natural gas
transportation and storage businesses, such as WMZ. Williams
initially contributed a 35% interest in Northwest Pipeline to
WMZ, and Williams has not since contributed any additional
assets to WMZ. Common units representing a 52.3% limited
partnership interest in WMZ were sold to the public through an
initial public offering in January 2008, and no subsequent
offerings have taken place.
In July 2009, Williams began considering the potential of
restructuring ownership of its assets to capitalize on the
advantages of large scale, investment grade, diversified energy
partnerships. Williams reviewed how competitors structured along
these lines maintained access to cost-efficient debt and equity
capital throughout the financial crisis of 2008 and 2009, and in
late fall 2009, Williams and its advisors became increasingly
convinced that the possibility existed that Williams, Williams
Partners and WMZ could operate their existing assets more
efficiently, as well as enhance their growth and acquisition
opportunities, by restructuring the ownership of a substantial
portion of Williams existing natural gas midstream and
pipeline operations. This restructuring would involve the
initial contribution of a majority of Williams midstream
and pipeline operations to Williams Partners in return for cash
and a greater ownership interest in Williams Partners, followed
by Williams Partners offering holders of WMZ Common Units the
opportunity to exchange their WMZ Common Units for units in what
would then be a much larger and more diversified Williams
Partners (collectively, the Restructuring
Transactions). The result would be to consolidate the
majority of Williams natural gas midstream and pipeline
operations and the operations of WMZ and Williams Partners into
a single operation.
The Restructuring Transactions were designed to create a large,
investment grade, diversified energy partnership, capitalized
similarly to many of its peer competitors in the midstream and
pipeline space. As part of this transformation, holders of WMZ
Common Units would be given the opportunity to exchange their
WMZ Common Units for Williams Partners Common Units in
expectation of the eventual combination of WMZ into Williams
Partners and the resulting elimination of the expenses and
management time required to operate WMZ as a separate
partnership.
One of Williams original goals in forming two different
partnerships to separately operate in the pipeline and midstream
areas was to take advantage of differences in the cost of
capital to finance these businesses. After the financial crisis
of 2008 and 2009, Williams believed all unitholders would
benefit from the enhanced scale, scope, cost and financing
advantages of operating through a single, top tier, diversified
partnership. In addition, as senior executives of Williams held
similar positions in the Williams Partners General Partner and
the WMZ General Partner, it seemed prudent to reduce the time
commitments on these individuals and the stock exchange and SEC
reporting costs associated with operating two publicly owned
partnerships, especially when one of them, WMZ, had as its only
significant asset a minority interest in a single pipeline
system that would be controlled by Williams Partners following
the Dropdown.
In November 2009, after preliminary discussions with the
Williams Board of Directors, representatives of Williams raised
the possibility of the Restructuring Transactions to the three
independent directors of the Williams Partners General Partner
who constituted Williams Partners Conflicts Committee (the
Williams Partners Conflicts Committee) in order to
explore whether an acceptable transaction could be formulated.
As proposed, Williams would contribute to Williams Partners
approximately $11.5 billion of its midstream and pipeline
assets (including its 45.7% limited partner interest and 2%
general partner interest in WMZ), and Williams Partners would
pay Williams cash, issue to Williams additional Williams
Partners Common Units,
58
and maintain Williams general partner interest in Williams
Partners at its then-current level, and Williams Partners would
later commence an offer to exchange each WMZ Common Unit not
owned by Williams for Williams Partners Common Units. The
Williams Partners Conflicts Committee promptly engaged
independent legal and financial advisors to assist with its
consideration of this concept and the fairness to the
non-Williams owners of Williams Partners of any final terms to
be negotiated.
During November and December 2009 and early January 2010, the
Williams Partners Conflicts Committee and its advisors conducted
an extensive diligence review of the assets that Williams
Partners would acquire in the Dropdown, including the assets of
WMZ. In addition, they evaluated and negotiated price and deal
terms with Williams and its advisors while Williams continued to
evaluate the merits and value of the Restructuring Transactions
based on the terms being negotiated.
Following (i) satisfactory completion of due diligence on
the assets to be acquired by Williams Partners,
(ii) negotiation of the financial terms and legal
documentation related to their acquisition, (iii) agreement
on the number of Williams Partners Common Units that would be
offered by Williams Partners to holders of WMZ Common Units in
the unit exchange, and (iv) approval by the Williams Board
of Directors of the merits of the Restructuring Transactions,
the making of the exchange offer to holders of WMZ Common Units,
and the applicable financial terms negotiated with the Williams
Partners Conflicts Committee, the Restructuring Transactions
were announced on January 19, 2010. The Williams Partners
Board similarly approved the Dropdown and exchange offer based
on the recommendation of, and approval by, the Williams Partners
Conflicts Committee. As part of the January 19, 2010
announcement, it was stated that Williams Partners intended to
commence an offer to the holders of WMZ Common Units to exchange
each of their units for 0.7584 of one Williams Partners Common
Unit once the Dropdown was closed and certain regulatory filings
were completed. Williams and Williams Partners elected to offer
the holders of WMZ Common Units a fixed exchange ratio of
Williams Partners Common Units based on the relative closing
prices of the Williams Partners and WMZ units on the trading day
prior to the announcement of the Restructuring Transactions
because this approach provided the holders of WMZ Common Units
with the ability to equitably participate in the benefits of the
Restructuring Transaction while also providing Williams Partners
and Williams certainty regarding the financial impact of the
transaction.
Williams Partners intention was to offer to holders of WMZ
Common Units the opportunity to exchange their WMZ Common Units
for Williams Partners Common Units at the exchange ratio
approved by the Williams Partners Conflicts Committee on the
condition that enough WMZ Common Units were exchanged to allow
Williams Partners to exercise the cash call
provision contained in the WMZ partnership agreement. Under this
provision, if Williams Partners, as the owner of the WMZ General
Partner, held 75% of the WMZ Common Units, Williams Partners
would have the right to require all remaining holders of WMZ
Common Units to sell their units to Williams Partners at a cash
price determined pursuant to the WMZ partnership agreement.
Because after the Dropdown Williams Partners would already own
approximately 4.7 million WMZ Common Units, it would need
to acquire approximately 68% of the WMZ Common Units it did not
then own in order to exercise the cash call right. Thus,
Williams Partners intention was to have as a condition to
the WMZ exchange offer the requirement that at least 68% of the
WMZ Common Units be tendered.
On January 15, 2010, representatives of Williams asked to
convene a conference call with the independent members of the
WMZ Board, who constitute the WMZ Conflicts Committee, at
4:00 p.m. Central Standard Time on Monday, January 18,
2010, a day on which the NYSE was closed in observance of the
Martin Luther King holiday. The WMZ Conflicts Committee is made
up of the members of the WMZ Board that satisfy the independence
standards set out in the WMZ partnership agreement and, under
the WMZ partnership agreement, are authorized upon the request
of the WMZ General Partner to evaluate and approve transactions
that involve potential conflicts of interest with affiliates of
the WMZ General Partner. The members of the WMZ Conflicts
Committee are Emmitt C. House, Chairman, Brent Austin and Steven
Zelkowitz. No information about the purpose of the call was
disclosed to the WMZ Conflicts Committee prior to the call.
On January 18, 2010, the day prior to the announcement of
the proposed Dropdown transaction, the Chairman of the Board and
Chief Financial Officer of Williams and the Williams Partners
General Partner met by telephone with the WMZ Conflicts
Committee to give them advance notice of the pending
announcement
59
and to advise them that, as the WMZ Conflicts Committee, it was
the desire of other members of the WMZ Board that they would
evaluate the terms of the proposed exchange and would be acting
on behalf of the holders of WMZ Common Units in any transaction
with Williams Partners. The Williams representatives also made
clear that, although they believed that the proposed ultimate
combination of the businesses of Williams Partners and WMZ would
benefit holders of WMZ Common Units because of the
diversification, growth and cost benefits such a combination
would bring to such holders, the closing of the Dropdown would
not be dependent in any way on the making of or the success of
the contemplated exchange offer for WMZ Common Units. The
Williams representatives also stated that the exchange ratio was
based on the closing market prices of a Williams Partners Common
Unit and a WMZ Common Unit on the NYSE on the business day prior
to the announcement of the Dropdown and the proposed exchange
offer. Williams and Williams Partners believed that because the
exchange ratio was a reflection of the value placed on those
securities by a trading market unaffected by any knowledge of
the Dropdown or proposed exchange offer, it was a fair price. As
a result, Williams representatives stated to the WMZ Conflicts
Committee that Williams Partners would not be open to the WMZ
Conflicts Committee seeking to negotiate a more favorable
exchange ratio.
Later in the day on January 18, 2010, the WMZ Conflicts
Committee held a telephonic meeting. Prior to the meeting, the
WMZ Conflicts Committee had contacted Fulbright, which had
previously served as independent counsel to the WMZ Conflicts
Committee, and representatives of Fulbright joined the meeting.
The WMZ Conflicts Committee discussed the call with Williams
with Fulbright. The WMZ Conflicts Committee also discussed with
Fulbright the advisability of retaining an independent financial
advisor for the WMZ Conflicts Committee. The WMZ Conflicts
Committee determined that Mr. House would contact
Simmons & Company, which had previously served as an
independent financial advisor to the WMZ Conflicts Committee.
On January 19, 2010, Williams and Williams Partners
announced by press release the proposed Dropdown and Williams
Partners intention to commence an exchange offer for the
outstanding publicly held common units of WMZ at a future date
following the closing of the Dropdown. Williams Partners
announced its intent to offer a fixed exchange ratio of 0.7584
of its common units for each Publicly Owned WMZ Common Unit and
that the exact timing of the launch would be based upon the
filing of necessary offering documents with the SEC and upon
market conditions.
On January 19, 21 and 22, 2010, the WMZ Conflicts Committee
held telephonic meetings, which representatives of Fulbright
attended and Simmons & Company in part attended. The
purpose of the meetings was to consider the engagement of
Simmons & Company to evaluate whether the proposed
exchange offer would be fair, from a financial point of view, to
the holders of Non-affiliated WMZ Common Units and to render its
opinion with respect to that issue. At these same meetings, the
WMZ Conflicts Committee discussed several issues with Fulbright
with respect to the proposed exchange offer. The WMZ Conflicts
Committee discussed the process that the WMZ Conflicts Committee
had previously undertaken to select a financial advisor in
connection with a possible asset acquisition from Williams that
did not occur. At that time, the WMZ Conflicts Committee had
selected Simmons & Company as its independent
financial advisor after conducting interviews of three possible
financial advisors. After a discussion of the other financial
advisors previously interviewed and their qualifications, the
WMZ Conflicts Committee decided to commence discussions with
Simmons & Company about a potential engagement to
advise the WMZ Conflicts Committee in connection with the
proposed exchange offer.
At a telephonic meeting on January 25, 2010, the WMZ
Conflicts Committee determined, after further discussion, to
engage Simmons & Company as its financial advisor with
respect to the proposed exchange offer. On February 1,
2010, Mr. House, on behalf of the WMZ Conflicts Committee,
executed an engagement letter with Simmons & Company
after confirming that Simmons & Company had not
provided services to Williams, Williams Partners or their
respective affiliates during the past three years. In addition
to providing advice and analysis to the WMZ Conflicts Committee,
Simmons & Company agreed to render its views and
opinion as to the fairness, from a financial point of view, to
the Non-affiliated WMZ Common Units of the consideration being
paid in the proposed exchange offer.
60
On February 11, 2010, Fulbright and Simmons &
Company provided a joint request for information to Williams
Partners and its advisors in connection with the review by the
WMZ Conflicts Committee of the proposed exchange offer.
During the next several weeks, the WMZ Conflicts Committee held
telephonic meetings with Fulbright and Simmons &
Company regarding the proposed exchange offer process, the roles
and obligations of the WMZ Conflicts Committee in determining
whether to recommend the proposed exchange offer, the fairness
opinion process of Simmons & Company and related
issues. The WMZ Conflicts Committee held these telephonic
meetings on February 11, 17, 19 and 23, as well as on
March 3, 2010. At the February 23, 2010 telephonic
meeting, Fulbright reported that it had contacted the Delaware
law firm of Morris, Nichols, Arsht & Tunnell LLP
(Morris Nichols) regarding representation of the WMZ
Conflicts Committee, and it had confirmed that it did not have a
conflict of interest in the potential representation. The WMZ
Conflicts Committee reviewed with Fulbright the qualifications
and experience of Morris Nichols. After discussion, the WMZ
Conflicts Committee determined to retain Morris Nichols.
The Dropdown closed on February 17, 2010. Following the
closing of the Dropdown, Williams and Williams Partners focused
their attention on the preparation of the financial statements
that would be necessary to commence the exchange offer for WMZ
Common Units and continued preliminary discussions with the WMZ
Conflicts Committee advisors regarding the exchange offer.
During the weeks following the February 11, 2010 submission
of the joint request for information to Williams Partners and
its advisors, Fulbright had a number of conference calls
primarily with Williams Partners outside counsel, Gibson,
Dunn & Crutcher LLP (Gibson Dunn), in
which Fulbright was advised that Williams Partners did not
believe that it was necessary or appropriate to provide most of
the requested non-public information in the context of the
proposed transaction which involved the issuance of less than 5%
of Williams Partners equity securities, and that while
certain of the requested non-public information would be
provided, the WMZ Conflicts Committee should, along with its
advisors, be able to form an opinion based principally on
publicly available information, supplemented by presentations
by, and question and answer sessions with, executives from each
of Williams Partners business segments.
On February 23, 2010, WMZ filed the WMZ 2009
10-K. Under
the heading, Recent Developments, the Dropdown and
the proposed exchange offer at a fixed exchange ratio of 0.7584
were noted. In addition, under the heading, Risk
Factors, risks relating to recent developments in
connection with the announced exchange offer were discussed,
including, among others, that if the exchange offer were
consummated, the trading market would become less liquid
potentially resulting in a negative impact on the market for and
the price of WMZ Common Units. The section on Risk Factors
further stated that if Williams Partners acquired sufficient WMZ
Common Units in the exchange offer so that it and its affiliates
owned more than 75% of WMZ Common Units, it would have the right
to exercise the cash call provision in the WMZ
partnership agreement, in which case Williams Partners, as
provided in the WMZ partnership agreement, could acquire all
remaining outstanding Non-affiliated WMZ Common Units at prices
stipulated in the WMZ partnership agreement.
On March 8, 2010, the WMZ Conflicts Committee held a
telephonic meeting, which representatives of Fulbright and
Simmons & Company attended. Fulbright reported that
Williams Partners had declined to deliver a significant portion
of the requested non-public information. Simmons &
Company discussed the implications of the development on its
review and analysis based upon the financial information
presently available. Fulbright discussed with the WMZ Conflicts
Committee the implications of this development on the
Committees evaluation of the proposed exchange offer. In
light of the magnitude of the Dropdown and the lack of publicly
available information on the newly reconstituted Williams
Partners as a result of the Dropdown and the fact that financial
projections of Williams Partners and WMZ were provided to the
Williams Partners Conflicts Committee in connection with the
Dropdown and the proposed exchange offer, the WMZ Conflicts
Committee determined to continue to seek such non-public
information deemed reasonably necessary to allow
Simmons & Company to render, without including a
qualification as to access to information, its opinion as to the
fairness, from a financial point of view, of the proposed
exchange offer to holders of Non-affiliated WMZ Common Units.
61
During late February and March 2010, Williams Partners became
concerned as to the pace at which progress was being made toward
the commencement of the exchange offer. As a result, Williams
Partners began to examine alternatives to achieve the same
structural consolidation that the successful completion of the
exchange offer and the cash call would have achieved. One such
alternative would have been a merger with WMZ approved by a
majority vote of the Non-affiliated WMZ Common Units. Under the
terms of the WMZ partnership agreement, an approval by the WMZ
Conflicts Committee was one of four options available to approve
a related party transaction; a majority vote of the
Non-affiliated WMZ Common Units was also an alternative.
Before proceeding to explore further the issues that might exist
if the alternative approval options that existed under the WMZ
partnership agreement were pursued, executives of Williams
Partners decided to contact Mr. House to see if the impasse
that had appeared to have developed could be broken. On
March 13, 2010, the General Counsel and the Chief Financial
Officer of the Williams Partners General Partner called
Mr. House to see if a compromise could be reached on the
diligence request list and to advise him that a merger proposal
was one alternative to the proposed exchange offer available
under the WMZ partnership agreement. On March 14, 2010, the
WMZ Conflicts Committee held a telephonic meeting, at which a
representative of Fulbright was present and at which
Mr. House reported on his March 13 call. Having failed to
make any progress in the March 13, 2010 conference call,
the General Counsel of the Williams Partners General Partner
called Mr. House on March 18, 2010 with an offer to
provide the majority of the non-public information previously
requested by the advisors of the WMZ Conflicts Committee.
On March 22, 2010, the WMZ Conflicts Committee held a
telephonic meeting, which representatives of Fulbright attended.
Fulbright reported that Barclays PLC, financial advisor to
Williams Partners (Barclays), had agreed to provide
Simmons & Company with the financial information that
Simmons & Company had requested. Fulbright also
reported that it had discussed its information request with
representatives of Williams Partners, who had agreed to send
documents responsive to the request. The WMZ Conflicts Committee
asked that Fulbright and Simmons & Company continue to
work with Williams Partners and its advisors so that the WMZ
Conflicts Committee could evaluate whether it could be in a
position to render a recommendation regarding the proposed
exchange offer.
On March 29, 2010, representatives of Fulbright and
Simmons & Company attended a presentation in Tulsa,
Oklahoma by Williams Partners management regarding
Williams Partners midstream business. The presentation
materials were provided to the WMZ Conflicts Committee, and
Mr. Zelkowitz, a member of the WMZ Conflicts Committee,
attended the presentation by telephone. At the presentation,
Williams Partners management discussed the business,
financial position and projected growth and future strategies of
Williams Partners midstream business. Williams
Partners management responded to questions from
Mr. Zelkowitz and the representatives of Fulbright and
Simmons & Company during the presentation.
On April 1, 2010, Fulbright, Gibson Dunn and the General
Counsel of the Williams Partners General Partner had a
conference call to discuss the structure of the transaction or
transactions whereby Williams Partners proposed to acquire 100%
of the WMZ Common Units. As the announced exchange offer could
result, if consummated, in a partial acquisition, the issues in
a subsequent cash call transaction designed to achieve a 100%
acquisition were discussed. Williams Partners stated its
willingness to entertain a one-step merger at the same exchange
ratio as the proposed exchange offer rather than a two-step
structure involving an exchange offer followed by a cash call
(assuming 68% of the Non-affiliated Common Units were tendered
in the exchange offer). It also stated that in the event the WMZ
Conflicts Committee considered a proposed merger and then
determined not to recommend such a proposed merger, that
Williams Partners would consider proceeding with the proposed
exchange offer. Upon inquiry from Fulbright, the Williams
Partners representatives confirmed that the merger agreement
would contain representations and warranties, that there would
be a written delegation of authority to the WMZ Conflicts
Committee to negotiate the merger agreement, and that approval
of the merger would require a favorable vote of a majority of
the Non-affiliated WMZ Common Units as required under the WMZ
partnership agreement. Fulbright advised that it would discuss
the option of a merger versus an exchange offer with the WMZ
Conflicts Committee.
62
Also, on April 1, 2010, representatives of Fulbright and
Simmons & Company attended a presentation in Houston,
Texas by Williams Partners management regarding Williams
Partners gas pipeline business. The presentation materials
were provided to the WMZ Conflicts Committee, and
Mr. Zelkowitz attended the presentation by telephone. At
the presentation, Williams Partners management discussed
the business, financial position and projected growth and future
strategies of Williams Partners gas pipeline business.
Williams Partners management responded to questions from
Mr. Zelkowitz and the representatives of Fulbright and
Simmons & Company during the presentation.
Later on April 1, 2010, the WMZ Conflicts Committee held a
telephonic meeting, which representatives of Fulbright and
Simmons & Company attended. Simmons &
Company summarized the March 29 presentation and the April 1
presentation for the WMZ Conflicts Committee.
Simmons & Company updated the WMZ Conflicts Committee
regarding its review of the materials provided by Williams
Partners, the status of its discussions with Barclays and its
anticipated timing for the completion of its analysis. Fulbright
reported that it had held a conference call that morning with
Williams Partners counsel to discuss whether Williams
Partners and the WMZ Conflicts Committee would be open to the
possibility of changing the structure of the proposed exchange
offer to a merger. The WMZ Conflicts Committee discussed with
Fulbright the merits of the merger option versus the proposed
exchange offer and the different processes that the WMZ
Conflicts Committee would likely follow in each scenario. The
WMZ Conflicts Committee discussed the merger option with
Fulbright and Simmons & Company, and agreed that it
would further consider the merger option.
On April 6, 2010, the WMZ Conflicts Committee held a
telephonic meeting, which representatives of Fulbright and
Simmons & Company attended. After further consultation
with its advisors, the WMZ Conflicts Committee determined that
it would be open to consideration of the merger structure for a
proposed transaction with Williams Partners. A merger structure
would require approval by holders of a majority of the
Non-affiliated WMZ Common Units, an additional form of approval
of a related party transaction under the WMZ partnership
agreement. A merger structure would also assure that all holders
of such units would receive the same consideration in an
acquisition of all such units as opposed to a partial exchange
offer followed by a subsequent transaction that might not
involve the same type or amount of consideration to remaining
holders of Publicly Owned WMZ Common Units. Moreover, the WMZ
Conflicts Committee would have the opportunity to negotiate the
related merger agreement on behalf of WMZ and the holders of the
Non-affiliated WMZ Common Units.
On April 7, 2010, Fulbright indicated to Gibson Dunn the
willingness of the WMZ Conflicts Committee to consider a merger
structure; on April 18, 2010, Gibson Dunn provided an
initial draft of a merger agreement to Fulbright. Several drafts
were exchanged in the next several weeks.
On April 21, 2010, the WMZ Conflicts Committee met at the
offices of Simmons & Company in Houston with
representatives of Simmons & Company and Fulbright.
Presentation materials were provided to the WMZ Conflicts
Committee in connection with the meeting, although Brent Austin,
a member of the WMZ Conflicts Committee, was unable to attend
the meeting due to a family emergency. At this meeting,
Simmons & Company provided the WMZ Conflicts Committee
with its preliminary analyses of the fairness of a proposed
merger transaction, from a financial point of view, to holders
of Non-affiliated WMZ Common Units. Simmons & Company
responded to several questions from the WMZ Conflicts Committee
about its analyses. Simmons & Company confirmed to the
WMZ Conflicts Committee that management of Williams, Williams
Partners, and WMZ and their advisors had provided all of the
information that Simmons & Company had requested to
conduct its analyses. Simmons & Company advised the
WMZ Conflicts Committee that it would be prepared to issue a
formal opinion subject to its review of the terms and conditions
of a merger agreement and updated due diligence. Fulbright then
discussed with the WMZ Conflicts Committee its initial review of
the merger agreement.
On April 26, 2010, Fulbright provided to Gibson Dunn its
initial comments on the draft merger agreement. On
April 27, 2010, Gibson Dunn provided to Fulbright an
initial draft of a joint proxy statement/prospectus for use in
connection with a special meeting of WMZ limited partners to
consider and vote on the approval and adoption of an agreement
and plan of merger and the merger itself. Additional drafts of
the joint proxy statement/prospectus were exchanged between
Gibson Dunn and Fulbright in the next several weeks.
63
On April 29, 2010, in a conference call between Fulbright
and Gibson Dunn, along with Williams Partners tax
advisors, Andrews Kurth LLP, Fulbright expressed a preference,
in light of tax considerations, to change the structure of any
proposed merger from a forward triangular merger in which WMZ
would merge with and into Merger Sub, which is owned indirectly
by Williams Partners, to a reverse triangular merger in which
Merger Sub would merge with and into WMZ, with WMZ as the
surviving entity and becoming a wholly owned indirect subsidiary
of Williams Partners. The next draft of the merger agreement
reflected that change.
On May 12, 2010, Williams Partners filed a Current Report
on
Form 8-K
that recast Williams Partners historical consolidated
financial statements and notes to reflect the combined
historical results for all periods presented as a result of the
Dropdown. This filing was a necessary predicate to the filing of
any registration statement in connection with an exchange offer
or a merger transaction.
On May 12 and 17, 2010, the WMZ Conflicts Committee held
telephonic meetings, which Fulbright and Simmons &
Company attended. Fulbright and Simmons & Company
updated the WMZ Conflicts Committee on the status of the
negotiations with Williams Partners regarding the proposed
merger.
On May 18, 2010, representatives of the WMZ Conflicts
Committee had a conference call with representatives of Williams
Partners to discuss open items in the proposed merger agreement.
Following that call, on that same date, the WMZ Conflicts
Committee held a telephonic meeting with Fulbright to discuss
the merger agreement and the status of the merger negotiations
further. On May 19, the WMZ Conflicts Committee held a
telephonic meeting at which Simmons & Company and
Fulbright were present to discuss further the merger agreement
and the status of the merger negotiations.
Following that meeting, all of the members of the WMZ Conflicts
Committee had a conference call with representatives of Williams
Partners. Upon inquiry from Mr. House, Williams Partners
stated that the exchange ratio announced in connection with the
proposed exchange offer on January 19, 2010 would be the
exchange ratio Williams Partners would offer in a merger
transaction. After further discussion of open items, the WMZ
Conflicts Committee advised that subject to finalization of
other matters it was prepared to meet to consider the proposed
merger transaction.
On May 21, 2010, Fulbright and Simmons & Company
conducted a final due diligence session with representatives of
Williams and Williams Partners.
Further, on May 21, 2010, the WMZ Board formally confirmed
its delegation to the WMZ Conflicts Committee of matters
relating to the proposed merger by approving by unanimous
written consent resolutions that, among other things,
(i) authorized and empowered the WMZ Conflicts Committee to
review, evaluate and negotiate the Merger and the Merger
Agreement on behalf of WMZ and the holders of Non-affiliated WMZ
Common Units, to make a recommendation to the WMZ Board whether
or not to approve, on behalf of the WMZ General Partner, the
Merger and the Merger Agreement, to determine whether the Merger
and the Merger Agreement are in the best interests of WMZ and
the holders of Non-affiliated WMZ Common Units, and to determine
whether to approve the Merger and the Merger Agreement by
Special Approval (pursuant to Section 7.9(a) of the WMZ
Partnership Agreement) and if appropriate to make a
recommendation to the holders of Non-affiliated WMZ Common Units
to approve the Merger and the Merger Agreement and
(ii) ratified all acts and deeds previously performed by
the members of the WMZ Conflicts Committee and the WMZ Conflicts
Committees independent professional advisors.
Later on May 21, 2010, at 5:00 p.m. Central Daylight
Time, the WMZ Conflicts Committee met telephonically to consider
the proposed form of merger agreement and merger with
representatives of Simmons & Company and Fulbright in
attendance. Based on presentation materials provided to the WMZ
Conflicts Committee that day, representatives of
Simmons & Company reviewed with the WMZ Conflicts
Committee their financial analyses with respect to the proposed
merger and responded to questions from the WMZ Conflicts
Committee. At the request of the WMZ Conflicts Committee,
Simmons & Company then rendered its oral opinion
(which was subsequently confirmed in writing by delivery of
Simmons & Companys written opinion dated the
same date) that the proposed merger at the consideration set
forth in the Merger Agreement was fair, from a financial point
of view, to the holders of Non-affiliated WMZ Common Units.
64
Representatives of Fulbright then reviewed the Merger Agreement
and advised the WMZ Conflicts Committee of changes to the terms
of the Merger Agreement since the committee was last updated,
and that, to its knowledge, all material open issues had been
resolved. Following further discussion, the WMZ Conflicts
Committee resolved unanimously (i) that the form, terms and
provisions of the Merger Agreement are in all respects approved;
(ii) that the WMZ Conflicts Committee believes that the
Merger Agreement and the Merger are in the best interests of WMZ
and the holders of the Non-affiliated WMZ Common Units;
(iii) that in accordance with Section 7.9(a) of the
WMZ Partnership Agreement, the WMZ Conflicts Committee approves
by Special Approval the Merger Agreement and the Merger as being
in the best interests of WMZ and the holders of the
Non-affiliated WMZ Common Units; (iv) that the WMZ
Conflicts Committee recommends approval of the Merger Agreement
and the Merger by the WMZ Board and by the holders of the
Non-affiliated WMZ Common Units; and (v) that all prior
acts and deeds performed by any member of the WMZ Conflicts
Committee, Simmons & Company, Fulbright or any other
professional advisor to the WMZ Conflicts Committee are
approved, ratified and confirmed in all respects as the
authorized acts and deeds of or on behalf of the WMZ Conflicts
Committee. Following the meeting, Fulbright provided a copy of
the executed Simmons & Company fairness opinion and
the resolutions of the WMZ Conflicts Committee to Gibson Dunn.
Following the WMZ Conflicts Committee meeting on May 21,
2010, the WMZ Board approved, by unanimous written consent,
resolutions, among other things, (i) approving and
ratifying the earlier delegation of authority to the WMZ
Conflicts Committee and (ii) based upon the Special
Approval of the WMZ Conflicts Committee, and consistent with the
WMZ Conflicts Committees recommendation to the WMZ Board
and in reliance thereon, authorizing and approving, on behalf of
the WMZ General Partner, the Merger and the Merger Agreement and
recommending that the holders of Non-affiliated WMZ Common Units
vote in favor of the approval and adoption of the Merger and the
Merger Agreement.
On May 21, 2010, the Williams Partners Board approved, on
behalf of the Williams Partners General Partner, Williams
Partners, the Operating Company and Merger Sub, by unanimous
written consent, the Merger and the Merger Agreement. The
Williams Partners Board confirmed such approval at a telephonic
meeting on May 24, 2010, following which the Merger
Agreement was executed and delivered.
On May 25, 2010, a lawsuit was filed in Tulsa, Oklahoma
against WMZ, certain of the officers and directors of the WMZ
General Partner, Williams Partners and Williams. The lawsuit
seeks class action status, and asserts claims of self-dealing
and breach of fiduciary duty in connection with the Merger.
Williams
Partners Reasons for the Merger
Williams Partners currently indirectly owns an approximate 45.7%
limited partner interest and a 2% general partner interest in
WMZ. Williams Partners wants to complete the Merger because
Williams Partners believes that merging Merger Sub into WMZ and
fully integrating WMZ into Williams Partners will reduce
organizational complexity and administrative costs and provide
greater overall operational efficiency, while at the same time
providing the holders of Publicly Owned WMZ Common Units with
the opportunity to become owners of a much larger, diversified
pipeline and midstream partnership that has an investment grade
credit profile and is better able to finance growth
opportunities.
Recommendation
of the WMZ Conflicts Committee and the WMZ Board
The WMZ Conflicts Committee and the WMZ Board recommend that you
vote FOR the merger proposal.
The WMZ partnership agreement requires that the WMZ General
Partner approve the Merger Agreement before submitting it to a
vote of WMZs limited partners. In light of potential
conflicts of interest between Williams Partners, the WMZ General
Partner and its affiliates, including Williams, on the one hand,
and the interests of WMZ and the holders of Non-affiliated WMZ
Common Units, on the other hand, the WMZ Board requested that
the WMZ Conflicts Committee, consisting exclusively of directors
who meet the independence requirements established in the WMZ
partnership agreement, review, negotiate and evaluate the Merger
Agreement and the Merger and related matters.
65
Under the WMZ partnership agreement, the WMZ Conflicts Committee
must be comprised of two or more directors, each of whom
(a) is not a security holder, officer or employee of the
WMZ General Partner, (b) is not an officer, director or
employee of any Affiliate of the WMZ General Partner,
(c) is not a holder of any ownership interest in WMZ and
its subsidiaries other than WMZ Common Units and awards under
the WMZ Long Term Incentive Plan (as defined in the WMZ
partnership agreement) and meets the independence standards
required of a director who serves on an audit committee
established under the Exchange Act and the NYSE. On
January 25, 2010, the WMZ Board reconfirmed that Emmitt C.
House, H. Brent Austin and Steven L. Zelkowitz met
these qualifications and would continue to constitute the WMZ
Conflicts Committee.
The WMZ Conflicts Committee retained Fulbright as its
independent legal counsel and Simmons & Company as its
independent financial advisor in connection with its review of
any possible transaction involving the WMZ General Partner or
any of its affiliates (including Williams Partners). The WMZ
Conflicts Committee believed that Simmons & Company
was independent based on the lack of recent material business
relationships between Simmons & Company and Williams,
Williams Partners, WMZ or their affiliates and was competent to
perform its engagement to render its views and opinion as to the
fairness, from a financial point of view, to the Non-affiliated
WMZ Common Units of the consideration being paid in the possible
transaction. The WMZ Conflicts Committee oversaw the performance
of financial and legal due diligence by its advisors, conducted
an extensive review and evaluation of Williams Partners
proposal and conducted negotiations with Williams Partners and
its representatives with respect to the Merger and the Merger
Agreement and the various other agreements and documents related
to the Merger.
On May 21, 2010, the WMZ Conflicts Committee, after
receiving the opinion of Simmons & Company that the
proposed merger at the consideration set forth in the Merger
Agreement was fair, from a financial point of view, to the
holders of Non-affiliated WMZ Common Units, unanimously
determined that the Merger Agreement and the Merger are in the
best interests of WMZ and the holders of Non-affiliated WMZ
Common Units and recommended that the Merger Agreement and the
Merger be approved by the WMZ Board and the holders of
Non-affiliated WMZ Common Units. Based on the WMZ Conflicts
Committees recommendation, the WMZ Board, acting on behalf
of the WMZ General Partner, unanimously approved the Merger
Agreement and the Merger and recommended that the holders of
Non-affiliated WMZ Common Units vote to approve and adopt the
Merger Agreement and the Merger.
In considering the recommendation of the WMZ Conflicts Committee
and the WMZ Board with respect to the Merger Agreement and the
Merger, you should be aware that some of the executive officers
and directors of the WMZ General Partner who are not members of
the WMZ Conflicts Committee may have interests in the Merger
that are different from, or in addition to, the interests of
holders of WMZ Common Units generally. The WMZ Conflicts
Committee and the WMZ Board were aware of these interests in
recommending approval of the Merger Agreement and the Merger.
Please read Interests of Certain Persons in
the Merger.
Resolution
of Conflicts of Interest; Standards of Conduct and Modification
of Duties
The actions with respect to the Merger and the Merger Agreement
by a majority of the members of the WMZ Conflicts Committee
acting in good faith constitute Special Approval
under the WMZ partnership agreement.
Under Section 7.9(a) of the WMZ partnership agreement,
whenever a potential conflict of interest exists, such as
consideration of the Merger and the Merger Agreement, a
resolution of such conflict shall be permitted and deemed
approved by all partners of WMZ, and shall not constitute a
breach of the WMZ partnership agreement or of any duty stated or
implied by law, in equity or otherwise, if the resolution is
approved by Special Approval, namely approval by a majority of
the members of the WMZ Conflicts Committee acting in good faith.
In order for an action by the WMZ Conflicts Committee to be in
good faith under the WMZ partnership agreement, the
persons taking the action must believe that the action is in the
best interests of WMZ.
Further, under Section 7.9(a) of the WMZ partnership
agreement, the WMZ Conflicts Committee is presumed to have acted
in good faith. In any proceeding brought by any person,
including a WMZ unitholder,
66
challenging the actions of the Special Committee with respect to
the Merger and the Merger Agreement, the WMZ partnership
agreement states that such person shall have the burden of
overcoming such presumption.
Under Section 7.10(b) of the WMZ partnership agreement, any
action taken or omitted to be taken by the WMZ General Partner
in reliance upon the opinion of an investment banker, among
others, as to matters reasonably believed to be in such
persons professional or expert competence shall be
conclusively presumed to have been done or omitted in good
faith and in accordance with such opinion.
A conflict of interest is also deemed approved under
Section 7.9(a) of the WMZ partnership agreement if approved
by holders of a majority of Non-affiliated WMZ Common Units.
Reasons
for the WMZ Conflicts Committees Recommendation
The WMZ Conflicts Committee considered a number of factors in
determining that the Merger and the Merger Agreement are in the
best interests of WMZ and the holders of Non-affiliated WMZ
Common Units and recommending the approval of the Merger and the
Merger Agreement to the WMZ Board and to holders of
Non-affiliated WMZ Common Units. The material factors are
summarized below.
The WMZ Conflicts Committee viewed the following factors as
being generally positive or favorable in coming to its
determination and recommendation:
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Simmons & Company, independent financial advisor to
the WMZ Conflicts Committee, rendered to the WMZ Conflicts
Committee on April 21, 2010 and on May 21, 2010 its
opinion that the Exchange Ratio set forth in the Merger
Agreement is fair, from a financial point of view, to the
holders of Non-affiliated WMZ Common Units.
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The financial analyses of Simmons & Company were
favorable, and they were reviewed and discussed by
Simmons & Company with the WMZ Conflicts Committee on
April 21, 2010 and May 21, 2010.
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The current quarterly cash distribution on the Williams Partners
Common Units is significantly higher than the current quarterly
cash distribution on the WMZ Common Units. The first quarter
2010 cash distribution on each Williams Partners Common Unit
represented a 49% premium over the distribution paid by WMZ for
the first quarter of 2010 on the number of WMZ Common Units that
would be exchanged into one Williams Partners Common Unit in the
Merger.
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Because the proposed exchange ratio was announced at the same
time as the Dropdown, holders of Publicly Owned WMZ Common Units
would be able to benefit from any increase in the market price
of the Williams Partners Common Units as a result of the
Dropdown. The closing market price of the Williams Partners
Common Units increased 18% from January 15, 2010, the last
trading day prior to the announcement of the Dropdown and the
proposed exchange ratio, through May 21, 2010.
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The WMZ Conflicts Committee believed, based, among other things,
on statements of Williams Partners management, that the
Exchange Ratio represented the highest per unit consideration
that Williams Partners would pay for Publicly Owned WMZ Common
Units.
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From January 19, 2010, the date that the Dropdown and
Williams Partners intention to offer to acquire the
Publicly Owned WMZ Common Units were announced, to the time of
the WMZ Conflicts Committees determination and
recommendations, no third parties indicated any interest in
pursuing a combination transaction with WMZ or the WMZ General
Partner.
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Given that WMZs only significant asset is a 35% interest
in a single pipeline system controlled by Williams Partners and
that Williams Partners already controls approximately 48% of
WMZs partnership interests, including all of WMZs
general partner interests, it appeared unrealistic for the WMZ
Conflicts Committee to believe that a more attractive
alternative proposal would be forthcoming from an unrelated
third party.
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Williams Partners is a much larger and more diversified energy
master limited partnership with an investment grade credit
rating that, among other things, is expected to have increased
access to capital
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67
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and increased scale, scope and diversification of revenue
sources and, based on historic trading volumes for its units, is
expected to offer greater trading liquidity.
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Williams recently transferred a substantial majority of its
natural gas transportation assets in the Dropdown to Williams
Partners and incurred substantial expenses in connection with
the Dropdown. As a result, the possibility that any of such
assets would be further dropped down to WMZ by Williams as an
avenue for WMZs future growth has been substantially
diminished. While WMZ still may be able to grow organically or
through third party acquisitions, the pace of such growth will
likely be slower than if WMZ could obtain contributions of
assets to WMZ by Williams.
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The Merger will provide holders of WMZ Common Units with the
benefits of the combination while eliminating the potential of
conflicts of interests between Williams Partners and WMZ, both
operationally and with respect to asset sales and joint
ventures, that can arise because they share common management
teams and operate in the same industry.
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The Merger is expected to result in cost savings, principally
from general and administrative costs.
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Generally, except with respect to cash received in lieu of
fractional WMZ Common Units, no gain or loss is expected to be
recognized for U.S. federal income tax purposes by the
holders of Publicly Owned WMZ Common Units as a result of the
Merger.
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The terms of the Merger Agreement included, among other things:
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the requirement that the Merger Agreement and the Merger be
approved by the holders of a majority of the Non-affiliated WMZ
Common Units;
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provisions allowing the WMZ Board or the WMZ Conflicts Committee
to withdraw or change its recommendation of the Merger Agreement
and the Merger in certain circumstances if it makes a good faith
determination that the failure to change its recommendation
would be reasonably likely to constitute a breach of its
fiduciary duties under applicable law;
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provisions allowing for WMZ to participate, in certain
circumstances, in negotiations with a third party in response to
an unsolicited alternative proposal that is reasonably likely to
result in a superior proposal;
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the lack of a
break-up fee
for termination of the Merger Agreement in accordance with its
terms;
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limited conditions and exceptions to the material adverse effect
closing condition and other closing conditions; and
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the lack of a need by Williams Partners to finance any component
of the purchase price because the consideration is composed of
Williams Partners Common Units.
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The WMZ Conflicts Committee considered the following factors to
be generally negative or unfavorable in making its determination
and recommendation:
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It is possible that the price for Williams Partners Common Units
could diminish prior to closing, reducing the value of the
Williams Partners Common Units to be received by virtue of the
Exchange Ratio from their value at the time of the signing of
the Merger Agreement.
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The Merger might not be completed in a timely manner, or at all,
which could result in significant costs and a decline in the
trading price of WMZ Common Units.
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One of WMZs primary business objectives is to generate
stable cash flows through the ownership and operation of natural
gas transportation and storage assets. Williams Partners was
formed to own, operate and acquire a diversified portfolio of
complementary energy assets, which may not generate cash flows
as stable as natural gas transportation and storage assets.
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The Merger Agreement limits WMZs ability to solicit third
party offers, although it does allow the WMZ Board and WMZ
Conflicts Committee in certain circumstances to withdraw, modify
or qualify their recommendations of the Merger or recommend,
adopt or approve a takeover proposal.
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68
Finally, the WMZ Conflicts Committee considered as favorable to
approval of the Merger Agreement and the Merger a number of
procedural factors associated with the Merger, including the
following:
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The WMZ Board of Directors unanimously delegated to the WMZ
Conflicts Committee the authority to review, evaluate and
negotiate the Merger and the Merger Agreement.
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The WMZ Conflicts Committee consists solely of directors each of
whom (a) is not a security holder, officer or employee of
the WMZ General Partner, (b) is not an officer, director or
employee of any affiliate of the WMZ General Partner,
(c) is not a holder of any ownership interest in WMZ and
its subsidiaries other than WMZ Common Units and awards under
the WMZ Long Term Incentive Plan (as defined in the WMZ
partnership agreement) and (d) meets the independence
standards required of a director who serves on an audit
committee established under the Exchange Act and the NYSE.
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The members of the WMZ Conflicts Committee were adequately
compensated for their services and their compensation was in no
way contingent on their approving the Merger Agreement or the
Merger.
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The members of the WMZ Conflicts Committee will not personally
benefit from the completion of the Merger in a manner different
from the holders of Non-affiliated WMZ Common Units.
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The WMZ Conflicts Committee was given authority to select and
compensate legal, financial and other independent advisors as it
deemed appropriate.
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The WMZ Conflicts Committee retained and was advised by
independent legal counsel, Fulbright, and an independent
financial advisor, Simmons & Company, who was also
engaged to render an opinion as to the fairness, from a
financial point of view, to the holders of Non-affiliated WMZ
Common Units of the consideration proposed to be paid in the
Merger.
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The WMZ Conflicts Committee and its legal counsel and financial
advisor conducted due diligence regarding Williams Partners and
WMZ.
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The WMZ Conflicts Committee had the ultimate authority to decide
whether or not to proceed with the proposed merger.
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The WMZ Conflicts Committee, with the assistance of its legal
and financial advisors, negotiated the terms of the Merger
Agreement on an arms-length basis with Williams Partners
and its legal and financial advisors.
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The structure of the acquisition was changed from an exchange
offer by Williams Partners to the negotiated Merger, thereby
(i) requiring approval by holders of a majority of
Non-affiliated WMZ Common Units, an additional form of approval
of a conflict of interest transaction under the WMZ partnership
agreement, and, (ii) if so approved, assuring that all
holders of Publicly Owned WMZ Common Units would receive the
same consideration in a Williams Partners acquisition of
100% of Publicly Owned WMZ Common Units.
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The structure of the acquisition was changed at the request of
the WMZ Conflicts Committee to a merger in which WMZ would
survive, thereby decreasing the risk of adverse tax consequences
to WMZ and the holders of Non-affiliated WMZ Common Units as a
result of the Merger.
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The WMZ Conflicts Committee was aware that it had no obligation
to recommend any transaction, including the merger proposal put
forth by Williams Partners.
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The foregoing discussion of the information and factors
considered by the WMZ Conflicts Committee is not intended to be
exhaustive, but includes the relevant factors considered by the
WMZ Conflicts Committee. In view of the variety of factors
considered in connection with its evaluation of the Merger, the
WMZ Conflicts Committee did not find it practicable to, and did
not, quantify or otherwise assign specific weights to the
factors considered in reaching its determination and
recommendation. In addition, each of the members of the WMZ
Conflicts Committee may have given differing weights to
different factors. On balance, the WMZ Conflicts Committee
believed that the positive factors discussed above outweighed
the negative factors discussed above.
69
Unaudited
Financial Projections of WMZ
WMZ has not historically published projections as to long-term
future performance or earnings. However, in connection with the
proposed Merger, management of the WMZ General Partner provided
projections relating to WMZ that included future financial and
operating performance. The projections were prepared for WMZ on
a stand-alone basis by employees of Williams who normally render
services to WMZ. These non-public projections were provided to
Simmons & Company for use and consideration in its
financial analysis and in preparation of its opinion to the WMZ
Conflicts Committee. The projections were also presented to the
WMZ Conflicts Committee and members of the WMZ Board. A summary
of these projections is included below to give holders of WMZ
Common Units access to certain non-public unaudited prospective
financial information that was made available to
Simmons & Company, the WMZ Conflicts Committee and the
WMZ Board in connection the proposed Merger.
You
should be aware that uncertainties are inherent in prospective
financial information of any kind. None of Williams, Williams
Partners, WMZ or any of their affiliates, advisors, officers,
directors or representatives has made or makes any
representation or can give any assurance to any WMZ unitholder
or any other person regarding the ultimate performance of WMZ
compared to the summarized information set forth below or that
any such results will be achieved.
The summary projections set forth below summarize the most
recent projections provided to Simmons & Company, the
WMZ Conflicts Committee and members of the WMZ Board prior to
the execution of the Merger Agreement. The inclusion of the
following summary projections in this joint proxy
statement/prospectus should not be regarded as an indication
that WMZ or its representatives considered or consider the
projections to be a reliable or accurate prediction of future
performance or events, and the summary projections set forth
below should not be relied upon as such.
The projections summarized below were prepared by employees of
Williams who normally render services to WMZ in connection with
the evaluation of the proposed Merger or for internal planning
purposes only and not with a view toward public disclosure or
toward compliance with GAAP, the published guidelines of the
SEC, or the guidelines established by the American Institute of
Certified Public Accountants. Neither Ernst & Young
nor any other independent registered public accounting firm have
compiled, examined or performed any procedures with respect to
the prospective financial information contained in the
projections and accordingly, Ernst & Young does not
express an opinion or any other form of assurance with respect
thereto. The Ernst & Young reports incorporated by
reference into this joint proxy statement/prospectus with
respect to WMZ and Northwest Pipeline relate to historical
financial information of WMZ. Such reports do not extend to the
projections included below and should not be read to do so. The
WMZ Board did not prepare, and neither the WMZ Board, the WMZ
General Partner nor Williams Partners gives any assurance
regarding, the summarized information.
The internal financial projections of WMZ are, in general,
prepared solely for internal use. Such internal financial
forecasts are inherently subjective in nature, susceptible to
interpretation and, accordingly, such forecasts may not be
achieved. The internal financial forecasts also reflect numerous
assumptions made by management, including material assumptions
that may not be realized and are subject to significant
uncertainties and contingencies, all of which are difficult to
predict and many of which are beyond the control of the
preparing party. Accordingly, there can be no assurance that the
assumptions made in preparing the internal financial forecasts
upon which the foregoing projected financial information was
based will prove accurate. There will be differences between
actual and forecasted results, and the differences may be
material. The risk that these uncertainties and contingencies
could cause the assumptions to fail to be reflective of actual
results is further increased due to the length of time in the
future over which these assumptions apply. Any inaccuracy of
assumptions and projections in early periods could have a
compounding effect on the projections shown for the later
periods. Thus, any failure of an assumption or projection to be
reflective of actual results in an early period could have a
greater effect on the projected results failing to be reflective
of actual events in later periods. The projections are
forward-looking statements and are subject to risks and
uncertainties. You should consider the risks identified in the
WMZ 2009
10-K.
70
In developing the projections, management of the WMZ General
Partner made numerous material assumptions with respect to WMZ
for the period from 2010 to 2014, including:
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organic growth opportunities, and the amounts and timing of
related costs and potential economic returns;
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outstanding debt during applicable periods, and the availability
and cost of capital;
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the cash flow from existing assets and business activities;
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the prices and production of, and demand for crude oil, natural
gas, NGLs and other hydrocarbon products; and
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other general business, market and financial assumptions.
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In addition, additional assumptions were made with respect to
the size, availability, timing and anticipated results of, and
cash flows from, acquired assets. All of these assumptions
involve variables making them difficult to predict, and most are
beyond the control of WMZ. Although management of the WMZ
General Partner believes that there was a reasonable basis for
its projections and underlying assumptions, any assumptions for
near-term projected cases remain uncertain, and the risk of
inaccuracy increases with the length of the forecasted period.
The projection of future acquisitions is particularly difficult
as WMZ has no control over the availability or price of future
acquisition opportunities.
The summarized projected financial information set forth below
was based on WMZs actual results through December 31,
2009 and projected results for 2010, 2011 and 2012.
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Years Ended December 31,
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2010
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2011
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2012
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(Millions of dollars)
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Net income
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$
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50
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$
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52
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$
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52
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Distributable cash flow(1)
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49
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51
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51
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(1) |
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Distributable cash flow is a non-GAAP financial measure under
the rules of the SEC. For WMZ, distributable cash flow is
defined as net income less its equity earnings in Northwest
Pipeline, plus reimbursements under an omnibus agreement, plus
cash distributed by Northwest Pipeline attributable to Northwest
Pipelines operations through the current reporting period.
The following table is a reconciliation of distributable cash
flow to net income, its most directly comparable GAAP financial
measure. Distributable cash flow is not intended to represent
cash flows for the period, nor is it presented as an alternative
to net income or cash flow from operations. |
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Years Ended December 31,
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2010
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2011
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2012
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(Millions of dollars)
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Net income
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$
|
50
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$
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52
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$
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52
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Less:
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Equity earnings from investment in Northwest Pipeline
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(53
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)
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(54
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)
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(54
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)
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Add:
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Reimbursements under an omnibus agreement
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1
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Cash distributions from Northwest Pipeline
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51
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53
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53
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Distributable cash flow
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$
|
49
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$
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51
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$
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51
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WMZ DOES NOT INTEND TO UPDATE OR OTHERWISE REVISE THE ABOVE
PROSPECTIVE FINANCIAL INFORMATION TO REFLECT CIRCUMSTANCES
EXISTING AFTER THE DATE WHEN MADE OR TO REFLECT THE OCCURRENCE
OF FUTURE EVENTS, EVEN IN THE EVENT THAT ANY OR ALL OF THE
ASSUMPTIONS UNDERLYING SUCH PROSPECTIVE FINANCIAL INFORMATION
ARE NO LONGER APPROPRIATE.
71
Opinion
of Simmons & Company Financial Advisor to
WMZ Conflicts Committee
Simmons & Company acted as independent financial
advisor to the WMZ Conflicts Committee in connection with the
proposed Merger and Merger Agreement. On May 21, 2010,
Simmons & Company rendered its written opinion to the
WMZ Conflicts Committee to the effect that as of the date of
such opinion, the consideration to be received by the holders of
Publicly Owned WMZ Common Units as set forth in the Merger
Agreement (the Merger Consideration) is fair,
from a financial point of view, to the holders of Non-affiliated
WMZ Common Units.
Simmons & Companys opinion was directed to
the WMZ Conflicts Committee and only addressed the fairness,
from a financial point of view, to the holders of Non-affiliated
WMZ Common Units of the Merger Consideration, and did not
address any other aspect or implication of the Merger. The
summary of Simmons & Companys opinion in this
joint proxy statement/prospectus is qualified in its entirety by
reference to the full text of its written opinion, which is
included as Annex B to this joint proxy
statement/prospectus and sets forth the procedures followed,
assumptions made, qualifications and limitations on the review
undertaken and other matters considered by Simmons &
Company in preparing its opinion. However, neither
Simmons & Companys written opinion nor the
summary of its opinion and the related analyses set forth in
this joint proxy statement/prospectus are intended to be, and
they do not constitute, advice or a recommendation to any holder
of WMZ partnership interests as to how such holder should vote
or act with respect to any matter relating to the Merger.
In arriving at its opinion, Simmons & Company reviewed
and analyzed, among other things, the following:
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the Merger Agreement;
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the financial statements and other information concerning WMZ,
including that contained in WMZs Annual Reports on
Form 10-K
for each of the years in the two year period ended
December 31, 2009; and WMZs Quarterly Reports on
Form 10-Q
for the quarters ended September 30, 2009 and
March 31, 2010;
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certain other internal information, primarily financial in
nature, relating to WMZ, which was provided to
Simmons & Company by WMZ, including the projected
financial results, prepared by employees of Williams who
normally render services to WMZ, for the five year period ending
December 31, 2014;
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certain publicly available information concerning the trading
of, and trading market for, the WMZ Common Units;
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the financial statements and other information concerning
Williams Partners, including that contained in Williams
Partners Annual Reports on
Form 10-K
for each of the years in the three year period ended
December 31, 2009; Williams Partners Quarterly
Reports on
Form 10-Q
for the quarters ended September 30, 2009 and
March 31, 2010; Williams Partners draft
Form S-4
dated May 20, 2010; Williams Partners Current Reports
on
Form 8-K
and Forms 425 filed during the period from January 1,
2010 to May 21, 2010; and various other reports and
documents provided by the management of Williams Partners;
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certain other internal information, primarily financial in
nature, relating to Williams Partners, which was provided to
Simmons & Company by Williams Partners, including
projected financial results prepared by employees of Williams
who normally render services to Williams Partners, for the five
year period ending December 31, 2014;
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certain publicly available information concerning the trading
of, and the trading market for, the Williams Partners Common
Units;
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certain publicly available information with respect to certain
other publicly traded companies and limited partnerships
Simmons & Company believes to be comparable to WMZ and
Williams Partners and the trading markets for certain of such
companies securities;
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72
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certain publicly available information concerning the estimates
of the future operating and financial performance of Williams
Partners, WMZ and the comparable companies prepared by industry
experts unaffiliated with either Williams Partners or WMZ;
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certain publicly available information concerning the markets in
which Williams Partners and WMZ operate prepared by industry
experts unaffiliated with either Williams Partners or WMZ;
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certain publicly available information concerning the nature and
terms of certain other transactions considered relevant to
Simmons & Companys analysis; and
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such other analyses and examinations as Simmons &
Company deemed necessary and appropriate.
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Simmons & Company also met with certain officers and
employees of WMZ and Williams Partners to discuss the foregoing,
as well as other matters believed relevant to the inquiry.
In connection with its review, Simmons & Company did
not independently verify any of the foregoing information
(including the information contained in this joint proxy
statement/prospectus), and Simmons & Company relied on
such information being complete and accurate in all material
respects. With respect to the financial forecasts for WMZ and
Williams Partners that Simmons & Company used in its
analyses, the management of WMZ and Williams Partners advised
Simmons & Company, and Simmons & Company
assumed, that such forecasts were reasonably prepared in good
faith on bases reflecting the best currently available estimates
and judgment of management of each of WMZ and Williams Partners
as to the future financial performance of WMZ and Williams
Partners, respectively. The WMZ Conflicts Committee advised
Simmons & Company that each of WMZ and Williams
Partners obtains financial, administrative and other services
from Williams and that, among other things, employees of
Williams who normally render services to WMZ and Williams
Partners prepared the financial forecasts relating to WMZ and
Williams Partners provided to or discussed with
Simmons & Company by WMZ and Williams Partners.
Simmons & Company also assumed that, in connection
with the receipt of all necessary governmental, regulatory or
other approvals and consents required for the Merger, no delays,
limitations, conditions or restrictions would be imposed that
would have a material adverse effect on the contemplated
benefits expected to be derived by the Merger and that the
Merger would be consummated in accordance with the terms of the
Merger Agreement without any waiver, amendment or delay of any
material terms or conditions thereof. Simmons &
Company did not investigate or otherwise evaluate the potential
effects of the Merger on the federal, state or other taxes or
tax rates payable by WMZ, Williams Partners or their respective
security holders, and assumed that such taxes and tax rates
would not be affected by or after giving effect to the Merger.
In addition, Simmons & Company was not requested to
make, and did not make, an independent evaluation or appraisal
of the assets of WMZ or Williams Partners, nor was
Simmons & Company furnished with any such evaluations
or appraisals.
Simmons & Companys opinion addresses only the
fairness, from a financial point of view, to the holders of
Non-affiliated WMZ Common Units of the Merger Consideration and
does not address any other aspect or implication of the Merger
or any other agreement, arrangement or understanding entered
into in connection with the Merger or otherwise. Furthermore, no
opinion, counsel or interpretation was intended regarding
matters that require legal, regulatory, accounting, insurance,
tax, executive compensation or other similar professional
advice. Simmons & Company assumed that such opinions,
counsel, interpretations or advice had been or would be obtained
from the appropriate professional sources. The issuance of
Simmons & Companys opinion was approved by an
authorized internal committee of Simmons & Company.
Simmons & Companys opinion was necessarily based
upon information made available to it as of the date of its
opinion and financial, economic, market and other conditions as
they existed and could be evaluated on such date and upon
certain assumptions regarding such financial, economic, market
and other conditions which are currently subject to unusual
volatility and which, if different than assumed, could have a
material impact on Simmons & Companys analyses
or opinion. In addition, as the WMZ Conflicts Committee was
aware, the financial projections and estimates that
Simmons & Company reviewed relating to the future
financial performance of WMZ and Williams Partners reflect
certain assumptions regarding the oil and gas industry and
commodity prices which are subject to significant volatility and
which, if different than assumed, could have a material impact
on Simmons & Companys analyses or opinion.
Simmons & Company did not
73
express any opinion as to what the value of the Williams
Partners Common Units actually would be when issued to the
holders of Publicly Owned WMZ Common Units pursuant to the
Merger or the prices at which the Williams Partners Common Units
or WMZ Common Units would trade at any time. Simmons &
Companys opinion did not address the relative merits of
the Merger as compared to alternative transactions or strategies
that might be available to WMZ, nor did it address the
underlying business decision of WMZ to proceed with the Merger.
Simmons & Company was not requested to, and did not,
solicit third party indications of interest in acquiring all or
any part of WMZ. The WMZ Conflicts Committee imposed no
restrictions or limitations on Simmons & Company with
respect to the investigation made or the procedures followed by
Simmons & Company in rendering its opinion. In
addition, the Merger Consideration was determined between WMZ
and Williams Partners and not as a result of a recommendation by
Simmons & Company, and the decision of WMZ to enter
into the Merger Agreement was solely that of the board of
directors of WMZ General Partner, based on the approval and
recommendation of the WMZ Conflicts Committee.
It is understood that Simmons & Companys opinion
was for the information of the WMZ Conflicts Committee in
connection with its consideration of the Merger and does not
constitute advice or a recommendation to any security holder of
WMZ as to how such security holder should vote or act on the
proposed Merger or any other matter.
In preparing its opinion to the WMZ Conflicts Committee,
Simmons & Company performed a variety of analyses,
including those described below. The summary of
Simmons & Companys valuation analyses is not a
complete description of the analyses underlying
Simmons & Companys opinion. The preparation of a
fairness opinion is a complex process involving various
quantitative and qualitative judgments and determinations with
respect to the financial, comparative and other analytic methods
employed and the adaptation and application of those methods to
the unique facts and circumstances presented. As a consequence,
neither Simmons & Companys opinion nor the
analyses underlying its opinion are readily susceptible to
partial analysis or summary description. Simmons &
Company arrived at its opinion based on the results of all
analyses undertaken by it and assessed as a whole and did not
draw, in isolation, conclusions from or with regard to any
individual analysis, analytic method or factor. Accordingly,
Simmons & Company believes that its analyses must be
considered as a whole and that selecting portions of its
analyses, analytic methods and factors, without considering all
analyses and factors or the narrative description of the
analyses, could create a misleading or incomplete view of the
processes underlying its analyses and opinion.
In performing its analyses, Simmons & Company
considered business, economic, industry and market conditions,
financial and otherwise, and other matters as they existed on,
and could be evaluated as of, the date of the opinion. No
company or business used in Simmons & Companys
analyses for comparative purposes is identical to WMZ, Williams
Partners or the proposed transaction. While the results of each
analysis were taken into account in reaching its overall
conclusion with respect to fairness, Simmons & Company
did not make separate or quantifiable judgments regarding
individual analyses. The implied exchange ratio reference ranges
indicated by Simmons & Companys analyses are
illustrative and not necessarily indicative of actual values nor
predictive of future results or values, which may be
significantly more or less favorable than those suggested by the
analyses. In addition, any analyses relating to the value of
assets, businesses or securities do not purport to be appraisals
or to reflect the prices at which businesses or securities
actually may be sold, which may depend on a variety of factors,
many of which are beyond WMZs control and the control of
Simmons & Company. Much of the information used in,
and accordingly the results of, Simmons &
Companys analyses are inherently subject to substantial
uncertainty.
The following is a summary of the material valuation analyses
performed in connection with the preparation of
Simmons & Companys opinion rendered to the WMZ
Conflicts Committee on May 21, 2010. The analyses
summarized below include information presented in tabular
format. The tables alone do not constitute a complete
description of the analyses. Considering the data in the tables
below without considering the full narrative description of the
analyses, as well as the methodologies and underlying
assumptions, qualifications and limitations affecting each
analysis, could create a misleading or incomplete view of
Simmons & Companys analyses.
74
Discounted
Cash Flow Analysis
Simmons & Company performed a discounted cash flow
analysis of the projected levered free cash flows of WMZ and
Williams Partners for the calendar years 2010 through 2014.
Simmons & Company assumed discount rates of 6.0% to
12.0% for WMZ and 8.0% to 14.0% for Williams Partners and
calculated terminal values using a range of multiples of
projected EBITDA from 10.0x to 14.0x for WMZ and 8.0x to 12.0x
for Williams Partners. The discount rates reflect an estimate of
the respective costs of capital and an approximation of the
different risk attributable to the WMZ and Williams Partners
cash flows.
The projections underlying the discounted cash flow analysis
were prepared by employees of Williams who normally render
services to WMZ and Williams Partners and provided to
Simmons & Company by management of each of WMZ and
Williams Partners for the period 2010 through 2014. In
performing the discounted cash flow analysis,
Simmons & Company considered a range of cases with
respect to the operating and financial projections in which,
among other things, the assumed commodity price environment and
number of growth projects for WMZ and Williams Partners were
varied. The discounted cash flow analyses indicated the implied
exchange ratio reference range of Williams Partners Common Units
per WMZ Common Unit below, with the exchange ratio under the
Merger Agreement above the range.
|
|
|
Implied Exchange Ratio of
|
|
Exchange Ratio
|
Discounted Cash Flow Analysis
|
|
Payable Under the Merger Agreement
|
|
0.4152x 0.5561x
|
|
0.7584x
|
Comparable
MLP Analysis
Simmons & Company reviewed and compared certain
financial information relating to WMZ and Williams Partners to
corresponding financial information, ratios and public market
multiples for the following eight publicly traded energy
pipeline master limited partnerships (MLPs):
|
|
|
Boardwalk Pipeline Partners, LP
|
|
Enterprise Products Partners L.P.
|
El Paso Pipeline Partners,
L.P.
|
|
Kinder Morgan Energy Partners, L.P.
|
Enbridge Energy Partners, L.P.
|
|
Spectra Energy Partners, LP
|
Energy Transfer Partners, L.P.
|
|
Williams Partners L.P.
|
The partnerships listed above (the Selected
Partnerships) were chosen because they are publicly traded
MLPs with operations that for purposes of analysis may be
considered similar to WMZ in one or more respects including the
nature of their business, stability of cash flows,
diversification, financial performance and geographic
concentration. No specific numeric or other similar criteria
were used to select the Selected Partnerships, and all criteria
were evaluated in their entirety without application of
definitive qualifications or limitations to individual criteria.
As a result, a significantly larger or smaller partnership with
substantially similar lines of businesses and business focus may
have been included while a similarly sized partnership with less
similar lines of business and greater diversification may have
been excluded. Simmons & Company identified a
sufficient number of partnerships for purposes of its analysis
but may not have included all partnerships that might be deemed
comparable to WMZ. Simmons & Company calculated
various multiples and ratios for the Selected Partnerships and
used the multiples and ratios as reference points to develop an
indicative valuation for WMZ. All multiples were based on
closing market prices on May 19, 2010 and balance sheets as
of March 31, 2010. Estimated financial data for the
Selected Partnerships were based on publicly available research
analysts estimates. Simmons & Company reviewed
multiples and ratios for the Selected Partnerships based on
estimates of projected 2010 and projected 2011 EBITDA and
distributable cash flow.
75
Simmons & Company applied multiple ranges based on the
Selected Partnerships analysis to corresponding financial data
for WMZ based on WMZs management projections to calculate
an implied WMZ value to the projected EBITDA and distributable
cash flow multiples, respectively, for comparable MLPs.
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|
|
Implied Transaction Value to Projected
|
|
Implied Transaction Value to
|
|
|
EBITDA for
|
|
Projected EBITDA
|
|
|
Comparable MLP Analysis(1)
|
|
Under the Merger Agreement
|
|
2010
|
|
|
10.7x 12.5x
|
|
|
|
11.7x
|
|
2011
|
|
|
9.1x 11.6x
|
|
|
|
11.2x
|
|
|
|
|
|
|
|
|
|
|
|
|
Implied Transaction Value to
|
|
Implied Transaction Value to
|
|
|
Projected Distributable Cash Flow for
|
|
Projected Distributable Cash Flow
|
|
|
Comparable MLP Analysis(1)
|
|
Under the Merger Agreement
|
|
2010
|
|
|
10.8x 14.4x
|
|
|
|
20.0x
|
|
2011
|
|
|
9.6x 13.3x
|
|
|
|
19.1x
|
|
|
|
|
(1) |
|
Excludes highest and lowest multiple |
None of the comparable MLPs is identical to WMZ. Accordingly, a
complete analysis of the results of the foregoing calculations
cannot be limited to a quantitative review of such results and
involves complex considerations and judgments concerning
differences in financial and operating characteristics of the
comparable MLPs and other factors that could affect the public
valuation of the comparable MLPs, as well as that of WMZ or
Williams Partners.
Comparable
Transactions Analysis
Simmons & Company analyzed certain publicly-available
information relating to selected transactions in the midstream
industry since 2006 (collectively, Selected
Transactions). Specifically, Simmons & Company
calculated, when available, the last twelve months EBITDA
multiples implied by the aggregate purchase price of the
Selected Transactions and used these multiples as reference
points to develop an indicative valuation range for the Merger
Consideration. Simmons & Company compared
(i) multiples ranges of implied transaction values to last
twelve months EBITDA of Selected Transactions to (ii) the
implied multiple value of the Merger (which implied multiple
value was based on the ratio of the implied transaction value of
the Merger to last twelve months EBITDA provided by WMZ
management). This analysis indicated the implied last twelve
months EBITDA range for the Comparable Transactions analysis
below, with the implied WMZ transaction value to last twelve
months EBITDA ratio above the range.
|
|
|
Implied Transaction Value to
|
|
Implied Transaction Value to
|
LTM EBITDA for
|
|
LTM EBITDA
|
Comparable Transactions Analysis(1)
|
|
Under the Merger Agreement
|
|
8.1x 10.9x
|
|
12.4x
|
|
|
|
(1) |
|
Excludes highest and lowest multiple. |
None of the comparable precedent transactions considered by
Simmons & Company was identical to the proposed
Merger. An analysis of the results, therefore, requires complex
considerations and judgments regarding the financial and
operating characteristics of WMZ and Williams Partners and the
companies involved in the comparable precedent transactions
analysis, as well as other facts that could affect their
transaction values.
Contribution
Analysis
Simmons & Company reviewed certain historical and
estimated future financial information, including, among other
things, EBITDA, unlevered distributable cash flow, net income
and levered distributable cash flow for WMZ and Williams
Partners based on financial data provided by management of each
of WMZ and Williams Partners for the calendar years 2008 through
2014. Based on these projections, Simmons & Company
compared the relative contribution of each partnership to the
whole and the implied equity value based on the percentage
contribution of WMZ and Williams Partners. The relative
contributions of WMZ and Williams
76
Partners resulted in the implied aggregate exchange ratio range
of Williams Partners Common Units per WMZ Common Units below,
with the exchange ratio under the Merger Agreement above the
range.
|
|
|
Implied Exchange Ratio of
|
|
Exchange Ratio Payable
|
Contribution Analysis
|
|
Under the Merger Agreement
|
|
0.1076x 0.5677x
|
|
0.7584x
|
Pro
Forma Accretion / Dilution Analysis
Simmons & Company analyzed the pro forma impact of the
Merger on, among other things, WMZs projected
distributable cash flow per common unit for the calendar years
2010 through 2014. Using financial projections provided by
management of each of WMZ and Williams Partners,
Simmons & Company compared the distributable cash flow
per WMZ Common Unit, on a stand-alone basis, to the
distributable cash flow per WMZ Common Unit pro forma for the
Merger. In performing the Pro Forma Accretion/Dilution Analysis,
Simmons & Company considered a range of cases with
respect to the operating and financial projections in which,
among other things, the assumed commodity price environment and
number of growth projects for WMZ and Williams Partners were
varied. Based on such analysis, and such projections provided by
management of each of WMZ and Williams Partners, the Merger
would be accretive to distributable cash flow per common unit
for WMZ common unitholders for the calendar years 2010 through
2014 under all cases considered.
Historical
Exchange Ratio Analysis
Simmons & Company reviewed the daily ratio of the
closing price of Williams Partners Common Units to the closing
price of WMZ Common Units for the two-year period ended
January 15, 2010, the last full trading day prior to the
public announcement of Williams Partners intention to
offer to acquire the Publicly Owned WMZ Common Units.
Simmons & Company calculated the average of this ratio
for ten-day,
thirty-day,
three-month, six-month, one-year, eighteen-month, and two-year
periods. This analysis indicated the implied range for the
exchange ratio analysis below, with the implied exchange ratio
contemplated under the Merger Agreement within the range.
|
|
|
Implied Exchange Ratio Range of
|
|
Exchange Ratio Payable
|
Historical Exchange Ratio Analysis
|
|
Under the Merger Agreement
|
|
0.7553x 0.9909x
|
|
0.7584x
|
The Historical Exchange Ratio Analysis undertaken does not
factor in the change in the underlying business of Williams
Partners after the dropdown of assets from WMB. Accordingly, a
complete analysis of the results of the foregoing calculations
cannot be limited to a quantitative review of such results and
involves complex considerations and judgments concerning
differences in the underlying partnerships and other factors
that could affect the composition of the business and cash flows
generated by Williams Partners and WMZ.
Other
Matters
Simmons & Company is a specialized, energy-related
investment banking firm and, as part of its investment banking
activities, is regularly engaged in the valuation of businesses
and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bids,
secondary distributions of listed and unlisted securities,
private placements and valuations for corporate and other
purposes. The WMZ Conflicts Committee selected
Simmons & Company because of its expertise, reputation
and familiarity with WMZ and the oil and gas industry in general
and because its investment banking professionals have
substantial experience in transactions comparable to the Merger
and the related transactions.
Pursuant to the terms of the engagement letter dated
February 1, 2010, WMZ has paid Simmons & Company
$100,000 as an initial advisory fee for acting as the WMZ
Conflicts Committees financial advisor in connection with
the Merger, including rendering its fairness opinion on
May 21, 2010. WMZ also agreed to pay Simmons &
Company an additional advisory fee of $500,000 upon completion
or delivery of its fairness opinion. Whether or not the Merger
occurs, WMZ will also reimburse Simmons &
Companys reasonable expenses, including legal fees,
incurred in connection with its engagement and indemnify
Simmons &
77
Company against liabilities arising out of Simmons &
Companys services to WMZ or, if indemnification is
unavailable, contribute to the amount paid or payable as a
result of such liabilities.
Simmons & Company has performed various investment
banking services for WMZ in the past and has received customary
fees for such services.
Interests
of Certain Persons in the Merger
The following tables set forth information with respect to the
beneficial ownership as of May 31, 2010 of certain
specified persons of the WMZ Common Units, the Williams Partners
Common Units, and shares of Williams common stock. The
amounts and percentage of units or shares beneficially owned are
reported on the basis of regulations of the SEC governing the
determination of beneficial ownership of securities. Under the
rules of the SEC, a person is deemed to be a beneficial
owner of a security if that person has or shares
voting power, which includes the power to vote or to
direct the voting of such security, or investment
power, which includes the power to dispose of or to direct
the disposition of such security. A person is also deemed to be
a beneficial owner of any securities of which that person has a
right to acquire beneficial ownership within 60 days. Under
these rules, more than one person may be deemed a beneficial
owner of the same securities and a person may be deemed a
beneficial owner of securities as to which he or she has no
economic interest. Except as indicated by footnote, the persons
named in the tables below have sole voting and investment power
with respect to all units or shares shown as beneficially owned
by them, subject to community property laws where applicable.
Except as noted, the address for the beneficial owners listed
below is One Williams Center, Tulsa, Oklahoma
74172-0172.
The following table sets forth as of May 31, 2010 the
beneficial ownership of the WMZ Common Units and subordinated
units held by: (1) the WMZ General Partner; (2) each
of the executive officers and directors of the WMZ General
Partner and all directors and executive officers of the WMZ
General Partner as a group; (3) each of the executive
officers and directors of the Williams Partners General Partner
and all of the directors and executive officers of the Williams
Partners General Partner as a group; and (4) each of
Williams directors and executive officers and all of
Williams directors and executive officers as a group.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WMZ Common
|
|
Percentage of WMZ
|
|
WMZ Subordinated
|
|
Percentage of WMZ
|
|
Percentage of Total
|
|
|
Units Beneficially
|
|
Common Units
|
|
Units Beneficially
|
|
Subordinated Units
|
|
WMZ Units
|
Name of Beneficial Owner
|
|
Owned
|
|
Beneficially Owned(1)
|
|
Owned
|
|
Beneficially Owned(1)
|
|
Beneficially Owned(1)
|
|
Williams Pipeline GP LLC(2)
|
|
|
4,700,668
|
|
|
|
20.79
|
%
|
|
|
10,957,900
|
|
|
|
100
|
%
|
|
|
45.72
|
%
|
Steven J. Malcolm
|
|
|
10,000
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Donald R. Chappel
|
|
|
10,000
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
James J. Bender(3)
|
|
|
10,000
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Phillip D. Wright
|
|
|
10,100
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Rodney J. Sailor
|
|
|
500
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
H. Brent Austin
|
|
|
1,762
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Emmitt C. House
|
|
|
4,000
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Steven L. Zelkowitz
|
|
|
5,000
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Alan S. Armstrong
|
|
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
H. Michael Krimbill
|
|
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Bill Z. Parker
|
|
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Alice M. Peterson
|
|
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Joseph R. Cleveland
|
|
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Kathleen B. Cooper
|
|
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Irl F. Engelhardt
|
|
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
William R. Granberry
|
|
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
William E. Green
|
|
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Juanita H. Hinshaw
|
|
|
1,000
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WMZ Common
|
|
Percentage of WMZ
|
|
WMZ Subordinated
|
|
Percentage of WMZ
|
|
Percentage of Total
|
|
|
Units Beneficially
|
|
Common Units
|
|
Units Beneficially
|
|
Subordinated Units
|
|
WMZ Units
|
Name of Beneficial Owner
|
|
Owned
|
|
Beneficially Owned(1)
|
|
Owned
|
|
Beneficially Owned(1)
|
|
Beneficially Owned(1)
|
|
W. R. Howell
|
|
|
10,000
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
George A. Lorch
|
|
|
5,000
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
William G. Lowrie
|
|
|
6,990
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Frank T. MacInnis
|
|
|
5,000
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Janice D. Stoney
|
|
|
5,000
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Robyn L. Ewing
|
|
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Ralph A. Hill
|
|
|
5,000
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Ted Timmermans
|
|
|
500
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
All executive officers and directors of the WMZ General Partner
as a group (nine persons)(4)
|
|
|
51,862
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
All executive officers and directors of the Williams Partners
General Partner as a group (nine persons)(4)
|
|
|
40,600
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
All Williams executive officers and directors as a group
(19 persons)(4)
|
|
|
78,590
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
|
|
|
* |
|
Less than 1% |
|
(1) |
|
The percentage of beneficial ownership is based on 22,607,430
WMZ Common Units and 10,957,900 WMZ Subordinated Units
outstanding as of May 31, 2010. |
|
(2) |
|
Williams Pipeline GP LLC is a wholly owned subsidiary of
Williams. |
|
(3) |
|
Represents units beneficially owned by Mr. Bender that are
held by the James J. Bender Trust. |
|
(4) |
|
Includes units beneficially owned by Mr. Bender that are
held by the James. J. Bender Trust. |
79
The following table sets forth as of May 31, 2010 the
beneficial ownership of the Williams Partners Common Units held
by: (1) Williams and entities controlled by Williams,
(2) each of the executive officers and directors of the WMZ
General Partner and all directors and executive officers of the
WMZ General Partner as a group; (3) each of the executive
officers and directors of the Williams Partners General Partner
and all directors and executive officers of the Williams
Partners General Partner as a group; and (4) each of
Williams directors and executive officers and all of
Williams directors and executive officers as a group.
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
Williams Partners
|
|
Williams Partners
|
|
|
Common Units
|
|
Common Units
|
Name of Beneficial Owner
|
|
Beneficially Owned
|
|
Beneficially Owned(1)
|
|
The Williams Companies, Inc.(2)
|
|
|
214,613,527
|
|
|
|
83.91
|
%
|
James J. Bender(3)
|
|
|
10,000
|
|
|
|
*
|
|
Donald R. Chappel
|
|
|
15,000
|
|
|
|
*
|
|
Steven J. Malcolm(4)
|
|
|
25,100
|
|
|
|
*
|
|
Rodney J. Sailor
|
|
|
|
|
|
|
*
|
|
Phillip D. Wright
|
|
|
4,425
|
|
|
|
*
|
|
H. Brent Austin
|
|
|
9,000
|
|
|
|
*
|
|
Emmitt C. House
|
|
|
|
|
|
|
*
|
|
Steven L. Zelkowitz
|
|
|
|
|
|
|
*
|
|
Alan S. Armstrong
|
|
|
20,000
|
|
|
|
*
|
|
H. Michael Krimbill
|
|
|
57,151
|
|
|
|
*
|
|
Bill Z. Parker
|
|
|
9,524
|
|
|
|
*
|
|
Alice M. Peterson
|
|
|
4,524
|
|
|
|
*
|
|
Joseph R. Cleveland
|
|
|
|
|
|
|
*
|
|
Kathleen B. Cooper
|
|
|
|
|
|
|
*
|
|
Irl F. Engelhardt
|
|
|
|
|
|
|
*
|
|
William R. Granberry
|
|
|
|
|
|
|
*
|
|
William E. Green
|
|
|
1,180
|
|
|
|
*
|
|
Juanita H. Hinshaw
|
|
|
1,000
|
|
|
|
*
|
|
W. R. Howell
|
|
|
5,000
|
|
|
|
*
|
|
George A. Lorch
|
|
|
5,000
|
|
|
|
*
|
|
William G. Lowrie
|
|
|
2,320
|
|
|
|
*
|
|
Frank T. MacInnis
|
|
|
5,000
|
|
|
|
*
|
|
Janice D. Stoney
|
|
|
5,000
|
|
|
|
*
|
|
Robyn L. Ewing
|
|
|
|
|
|
|
*
|
|
Ralph A. Hill
|
|
|
500
|
|
|
|
*
|
|
Ted Timmermans
|
|
|
300
|
|
|
|
*
|
|
All executive officers and directors of the WMZ General Partner
as a group (nine persons)(5)
|
|
|
63,825
|
|
|
|
*
|
|
All executive officers and directors of the Williams Partners
General Partner as a group (nine persons)(5)
|
|
|
146,024
|
|
|
|
*
|
|
All Williams executive officers and directors as a group
(19 persons)(5))
|
|
|
99,825
|
|
|
|
*
|
|
|
|
|
* |
|
Less than 1% |
|
(1) |
|
Based on 255,777,452 Williams Partners Common Units outstanding
as of May 31, 2010. |
|
(2) |
|
As of May 31, 2010, Williams Gas Pipeline Company, LLC
directly held 115,689,700 Williams Partners Common Units,
Williams Energy Services, LLC directly held 84,113,523 Williams
Partners Common |
80
|
|
|
|
|
Units, WGP Gulfstream Pipeline Company, L.L.C. directly held
4,242,700 Williams Partners Common Units, the Williams Partners
General Partner directly held 3,363,527 Williams Partners Common
Units, Williams Partners Holdings LLC directly held 2,826,378
Williams Partners Common Units, Williams Energy, L.L.C. directly
held 2,952,233 Williams Partners Common Units, and Williams
Discovery Pipeline LLC directly held 1,425,466 Williams Partners
Common Units. The Williams Companies, Inc. directly or
indirectly owns 100% of each of the Williams Partners General
Partner, Williams Partners Holdings LLC, Williams Energy
Services, LLC, Williams Energy, L.L.C., Williams Discovery
Pipeline LLC, Williams Gas Pipeline Company, LLC, and WGP
Gulfstream Pipeline Company, L.L.C. The Williams Partners
General Partner is the sole general partner of Williams
Partners, holding a 2% general partner interest in Williams
Partners, the incentive distribution rights in Williams Partners
and Williams Partners Common Units. The Williams Companies, Inc.
indirectly beneficially owns (a) the common units that each
of Williams Energy, L.L.C., Williams Partners Holdings LLC,
Williams Discovery Pipeline LLC, Williams Gas Pipeline Company,
LLC, Williams Energy Services, LLC and WGP Gulfstream Pipeline
Company, L.L.C. directly beneficially own and (b) the
incentive distribution rights in Williams Partners, the 2%
general partner interest in Williams Partners and the common
units held by the Williams Partners General Partner. |
|
(3) |
|
Represents units beneficially owned by Mr. Bender that are
held by the James J. Bender Trust. |
|
(4) |
|
Represents units beneficially owned by Mr. Malcolm that are
held by the Steven J. Malcolm Revocable Trust. |
|
(5) |
|
Includes units beneficially owned by Mr. Bender that are
held by the James J. Bender Trust and units beneficially owned
by Mr. Malcolm that are held by the Steven J. Malcolm
Revocable Trust. |
81
The following table sets forth as of May 31, 2010 the
beneficial ownership of the Williams common stock held by:
(1) each of the executive officers and directors of the WMZ
General Partner and all directors and executive officers of the
WMZ General Partner as a group; (2) each of the executive
officers and directors of the Williams Partners General Partner
and all directors and executive officers of the Williams
Partners General Partner as a group; and (3) each of
Williams directors and executive officers and all of
Williams directors and executive officers as a group.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of Common Stock
|
|
Shares Underlying
|
|
|
|
|
|
|
Owned Directly or
|
|
Options Exercisable
|
|
|
|
Percent of
|
Name of Beneficial Owner
|
|
Indirectly(1)(2)
|
|
Within 60 days(3)
|
|
Total
|
|
Class(4)
|
|
James J. Bender
|
|
|
226,129
|
|
|
|
152,455
|
|
|
|
378,584
|
|
|
|
*
|
|
Donald R. Chappel
|
|
|
431,729
|
|
|
|
466,051
|
|
|
|
897,780
|
|
|
|
*
|
|
Steven J. Malcolm
|
|
|
1,223,012
|
|
|
|
2,139,294
|
|
|
|
3,362,306
|
|
|
|
*
|
|
Rodney J. Sailor
|
|
|
45,679
|
|
|
|
65,397
|
|
|
|
111,076
|
|
|
|
*
|
|
Phillip D. Wright
|
|
|
420,010
|
|
|
|
375,128
|
|
|
|
795,138
|
|
|
|
*
|
|
H. Brent Austin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Emmitt C. House
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Steven L. Zelkowitz
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Alan S. Armstrong
|
|
|
293,705
|
|
|
|
247,539
|
|
|
|
541,244
|
|
|
|
*
|
|
H. Michael Krimbill
|
|
|
10,000
|
|
|
|
|
|
|
|
10,000
|
|
|
|
*
|
|
Bill Z. Parker
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Alice M. Peterson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Joseph R. Cleveland
|
|
|
14,957
|
|
|
|
|
|
|
|
14,957
|
|
|
|
*
|
|
Kathleen B. Cooper
|
|
|
17,715
|
|
|
|
4,500
|
|
|
|
22,215
|
|
|
|
*
|
|
Irl F. Engelhardt
|
|
|
47,706
|
|
|
|
12,000
|
|
|
|
59,706
|
|
|
|
*
|
|
William R. Granberry
|
|
|
19,975
|
|
|
|
9,000
|
|
|
|
28,975
|
|
|
|
*
|
|
William E. Green
|
|
|
48,651
|
|
|
|
26,357
|
|
|
|
75,008
|
|
|
|
*
|
|
Juanita H. Hinshaw
|
|
|
23,666
|
|
|
|
15,000
|
|
|
|
38,666
|
|
|
|
*
|
|
W. R. Howell
|
|
|
73,139
|
|
|
|
44,357
|
|
|
|
117,496
|
|
|
|
*
|
|
George A. Lorch
|
|
|
62,785
|
|
|
|
43,631
|
|
|
|
106,416
|
|
|
|
*
|
|
William G. Lowrie
|
|
|
69,050
|
|
|
|
|
|
|
|
69,050
|
|
|
|
*
|
|
Frank T. MacInnis
|
|
|
66,787
|
|
|
|
44,357
|
|
|
|
111,144
|
|
|
|
*
|
|
Janice D. Stoney
|
|
|
54,311
|
|
|
|
44,357
|
|
|
|
98,668
|
|
|
|
*
|
|
Robyn L. Ewing
|
|
|
162,283
|
|
|
|
73,167
|
|
|
|
235,450
|
|
|
|
|
|
Ralph A. Hill
|
|
|
273,657
|
|
|
|
193,999
|
|
|
|
467,656
|
|
|
|
*
|
|
Ted T. Timmermans
|
|
|
62,981
|
|
|
|
50,617
|
|
|
|
113,598
|
|
|
|
*
|
|
All executive officers and directors of the WMZ General Partner
as a group (nine persons)
|
|
|
2,409,540
|
|
|
|
3,248,942
|
|
|
|
5,658,482
|
|
|
|
0.90
|
|
All executive officers and directors of the Williams Partners
General Partner as a group (nine persons)
|
|
|
2,667,566
|
|
|
|
3,431,084
|
|
|
|
6,098,650
|
|
|
|
1.04
|
|
All Williams executive officers and directors as a group
(19 persons)
|
|
|
3,592,248
|
|
|
|
3,941,809
|
|
|
|
7,534,057
|
|
|
|
1.28
|
|
|
|
|
* |
|
Less than 1% |
|
(1) |
|
Includes shares held under the terms of incentive and investment
plans as follows: Mr. Armstrong, 212,579 restricted stock
units and 15 shares in The Williams Investment Plus Plan;
Mr. Bender, 176,587 restricted stock units;
Mr. Chappel, 276,269 restricted stock units;
Ms. Ewing, 141, 885 restricted stock units and
7,560 shares in The Williams Investment Plus Plan;
Mr. Hill, 231,208 restricted stock units and |
82
|
|
|
|
|
27,954 shares in The Williams Investment Plus Plan;
Mr. Malcolm, 511,085 restricted stock units and
47,998 shares in The Williams Investment Plus Plan;
Mr. Sailor, 36,899 restricted stock units and
6,448 shares in The Williams Investment Plus Plan;
Mr. Timmermans 38,715 restricted stock units and
13,015 shares in The Williams Plus Plan; and
Mr. Wright, 212,579 restricted stock units and
15,857 shares in The Williams Investment Plus Plan.
Restricted stock units include both time-based and
performance-based units and do not have voting or investment
power. Shares held in The Williams Investment Plus Plan have
voting and investment power. |
|
(2) |
|
Includes restricted stock units over which directors have no
voting or investment power held under the terms of compensation
plans as follows: Mr. Cleveland, 11,026; Dr. Cooper,
14,026; Mr. Engelhardt, 14,026; Mr. Granberry, 14,026;
Mr. Green, 14,026; Ms. Hinshaw, 14,026;
Mr. Howell, 22,619; Mr. Lorch, 53,322;
Mr. Lowrie, 14,026; Mr. MacInnis, 14,026; and
Ms. Stoney, 37,053. |
|
(3) |
|
The SEC deems a person to have beneficial ownership of all
shares that the person has the right to acquire within
60 days. The shares indicated represent stock options
granted under our current or previous stock option plans that
are currently exercisable or will become exercisable within
60 days of May 31, 2010. |
|
(4) |
|
Ownership percentage is reported based on
584,342,659 shares of common stock outstanding on
May 31, 2010, plus, as to the holder thereof only and no
other person, the number of shares (if any) that the person has
the right to acquire as of May 31, 2010, or within
60 days from that date, through the exercise of all options
and other rights. |
The executive officers of the WMZ General Partner and the
Williams Partners General Partner are compensated directly by
Williams. All decisions as to the compensation of the executive
officers of the WMZ General Partner and the Williams Partners
General Partner who are involved in management of WMZ and
Williams Partners are made by the compensation committee of
Williams. Each of Williams Partners and WMZ reimburse their
respective general partner for direct and indirect general and
administrative expenses attributable to their management (which
expenses include the share of the compensation paid to the
executive officers of their respective general partner
attributable to the time they spend managing their business).
For additional information, please read Item 13. Certain
Relationships and Related Party Transactions in each of the
Williams Partners 2009
10-K and the
WMZ 2009
10-K.
No
Appraisal Rights
Delaware law does not require appraisal rights in connection
with a merger involving a Delaware limited partnership. Pursuant
to § 17-212 of the Delaware Revised Uniform Limited
Partnership Act, however, a partnership agreement or an
agreement of merger or consolidation may provide contractual
appraisal rights with respect to a partnership interest or
another interest in a limited partnership for any class or group
or series of partners or partnership interests in connection
with any amendment of a partnership agreement, any merger or
consolidation in which the limited partnership is a constituent
party to the merger or consolidation, any conversion of the
limited partnership to another business form, any transfer to or
domestication or continuance in any jurisdiction by the limited
partnership, or the sale of all or substantially all of the
limited partnerships assets. Holders of WMZ Common Units
do not have contractual appraisal rights under the WMZ
partnership agreement or the Merger Agreement.
Regulatory
Matters
In connection with the Merger, Williams Partners intends to make
all required filings under the Securities Act and the Exchange
Act, as well as any required filings or applications with the
NYSE. Williams Partners and WMZ are unaware of any other
requirement for the filing of information with, or the obtaining
of the approval of, governmental authorities in any jurisdiction
that is applicable to the Merger.
The Merger is not reportable under the HSR Act, and therefore no
filings with respect to the Merger were required with the FTC or
the DOJ.
83
Listing
of Williams Partners Common Units to be Issued in the
Merger
Williams Partners expects to obtain approval to list the
Williams Partners Common Units to be issued pursuant to the
Merger Agreement on the NYSE, which approval is a condition to
closing the Merger.
Accounting
Treatment
The Merger of Merger Sub with and into WMZ will be treated as an
equity transaction in accordance with generally accepted
accounting principles in the United States. As such, any
noncontrolling interests in consolidated subsidiaries of
Williams Partners will, following the Merger, be recognized as
equity of holders of Williams Partners Common Units.
Pending
Litigation
On May 25, 2010, a lawsuit was filed in the District Court
of Oklahoma, County of Tulsa, entitled Booth Family
Trust v. Williams Pipeline Partners, L.P., et al., case
no. CJ-2010-03408.
The plaintiff alleges that it is a unitholder of WMZ, and seeks
to represent a class comprising all of WMZs unitholders.
The complaint names as defendants WMZ, certain of the officers
and directors of the WMZ General Partner, Williams Partners and
Williams, and asserts claims of self-dealing and breach of
fiduciary duty in connection with the Merger. Among other
allegations, the plaintiff alleges that (1) the proposed
transaction was the product of a flawed process that would
result in the sale of WMZ at an unfairly low price, (2) the
defendants are in possession of non-public information
concerning the financial condition and prospects of WMZ and its
assets, which they have not disclosed to WMZs public
unitholders, and (3) because of various conflicts of
interest, the defendants have acted to better their own
interests at the expense of WMZs public unitholders. The
plaintiff seeks injunctive relief against completing the Merger,
rescission of the Merger Agreement, other equitable relief, and
recovery of the plaintiffs costs and attorneys fees.
All of the parties against whom the lawsuit was filed believe
that the lawsuit is without merit and intend to defend against
it vigorously. There can be no assurance that additional claims
will not be made or additional lawsuits filed, the substance of
which may be similar to the allegations described above or that
otherwise might arise from, or in connection with, the Merger
Agreement and the transactions it contemplates.
84
THE
MERGER AGREEMENT
The following is a summary of the material terms of the Merger
Agreement. This summary is qualified in its entirety by
reference to the Merger Agreement, a copy of which is attached
to this joint proxy statement/prospectus as Annex A and is
incorporated into this joint proxy statement/prospectus by
reference. You should read the Merger Agreement because it, and
not this joint proxy statement/prospectus, is the legal document
that governs the terms of the Merger.
Explanatory
Note Regarding the Merger Agreement and the Summary of the
Merger Agreement: Representations, Warranties and Covenants in
the Merger Agreement Are Not Intended to Function or Be Relied
on as Public Disclosures
The Merger Agreement and the summary of its terms in this joint
proxy statement/prospectus have been included to provide
information about the terms and conditions of the Merger
Agreement. The terms and information in the Merger Agreement
were not intended to provide any other public disclosure of
factual information about Williams Partners, WMZ, their
respective general partners or any of their respective
subsidiaries or affiliates. The representations, warranties and
covenants contained in the Merger Agreement were made by the
parties thereto only for the purposes of the Merger Agreement
and were qualified and subject to certain limitations and
exceptions agreed to by the parties thereto in connection with
negotiating the terms of the Merger Agreement. In particular, in
your review of the representations and warranties contained in
the Merger Agreement and described in this summary, it is
important to bear in mind that the representations and
warranties were made solely for the benefit of the parties to
the Merger Agreement and were negotiated for the purpose of
allocating contractual risk among the parties to the Merger
Agreement rather than to establish matters as facts. The
representations and warranties may also be subject to a
contractual standard of materiality or material adverse effect
different from those generally applicable to unitholders and
reports and documents filed with the SEC and in some cases may
be qualified by disclosures made by one party to the other,
which are not necessarily reflected in the Merger Agreement.
Moreover, information concerning the subject matter of the
representations and warranties, which do not purport to be
accurate as of the date of this joint proxy
statement/prospectus, may have changed since the date of the
Merger Agreement, and subsequent developments or new information
qualifying a representation or warranty may have been included
in or incorporated by reference into this joint proxy
statement/prospectus.
For the foregoing reasons, the representations, warranties and
covenants or any descriptions of those provisions should not be
read alone or relied upon as characterizations of the actual
state of facts or condition of Williams Partners, WMZ, their
respective general partners, or any of their respective
subsidiaries or affiliates. Instead, such provisions or
descriptions should be read only in conjunction with the other
information provided elsewhere in this joint proxy
statement/prospectus or incorporated by reference into this
joint proxy statement/prospectus.
Structure
of the Merger
Merger Sub will merge with and into WMZ, and each Publicly Owned
WMZ Common Unit will be converted into the right to receive
0.7584 of one Williams Partners Common Unit. As a result of the
Merger, the separate existence of Merger Sub will cease and WMZ
and its subsidiaries will become indirect wholly owned
subsidiaries of Williams Partners.
When the
Merger Becomes Effective
The parties to the Merger Agreement will cause a certificate of
merger to be executed and filed with the Delaware Secretary of
State on the next business day after the day on which the last
condition to completing the Merger is satisfied or waived or at
such other time as the parties may agree. The Merger will become
effective at the time and on the date on which the certificate
of merger is filed or at such later time and date on which the
parties agree and specify in the certificate of merger. This
time is referred to as the effective time of the
Merger.
85
Effect of
the Merger
At the effective time of the Merger:
|
|
|
|
|
Each outstanding Publicly Owned WMZ Common Unit will be
converted into the right to receive 0.7584 of one Williams
Partners Common Unit and each such Publicly Owned WMZ Common
Unit will be canceled and retired and will cease to exist.
|
|
|
|
The outstanding WMZ Common Units and WMZ Subordinated Units
owned by the WMZ General Partner will be canceled and retired
and will cease to exist without consideration.
|
|
|
|
Each outstanding limited liability company interest in Merger
Sub issued and outstanding immediately prior to the effective
time of the Merger will cease to be outstanding and will be
canceled. Operating Company will be admitted to WMZ as a limited
partner of WMZ with a limited partner interest that constitutes
98% of the aggregate partnership interest of all partners in WMZ
immediately upon the effective time of the Merger. Immediately
after the effective time of the Merger, Operating Company will
be the sole limited partner of WMZ and the WMZ General Partner
will be the sole general partner of WMZ.
|
If, before the effective time of the Merger, the issued and
outstanding Williams Partners Common Units or WMZ Common Units
are changed into a different number of units as a result of any
unit split, distribution, combination, reorganization or other
similar transaction, an appropriate adjustment will be made to
the Exchange Ratio.
For a description of the Williams Partners Common Units and the
WMZ Common Units and a description of the comparative rights of
holders of the Williams Partners Common Units and the WMZ Common
Units, please read Comparison of the Rights of Holders of
Williams Partners Common Units and Holders of WMZ Common
Units and Description of Williams Partners Common
Units.
Exchange
of Units; Fractional Units
Exchange
Agent
Williams Partners has appointed Computershare Inc., together
with its subsidiary Computershare Trust Company, N.A., to
act as exchange agent for the payment of the Williams Partners
Common Units and cash payments for fractional Williams Partners
Common Units. At or prior to the effective time of the Merger,
Williams Partners will (i) deposit with the exchange agent,
for the benefit of the holders of Publicly Owned WMZ Common
Units an amount of cash equal to the estimated aggregate cash
payment to be made in lieu of fractional Williams Partners
Common Units, (ii) reserve with the exchange agent the
Williams Partners Common Units to be issued in the Merger and
(iii) authorize the exchange agent to exchange Williams
Partners Common Units as described above under
Effect of the Merger on Outstanding WMZ Common
and Subordinated Units. Williams Partners will deposit
with the exchange agent additional funds as and when necessary
to pay any cash in lieu of fractional Williams Partners Common
Units. Williams Partners will pay all costs and fees of the
exchange agent and all expenses associated with the exchange
process.
After the effective time of the Merger, there will be no further
transfers on the records of WMZ or its transfer agent of WMZ
Common Units. If WMZ Common Units are presented to WMZ or its
transfer agent for transfer after the effective time of the
Merger, they will be canceled against delivery of the Williams
Partners Common Units and any cash payments for fractional
Williams Partners Common Units and unpaid distributions.
Exchange
of Units; Fractional Units
If you own Publicly Owned WMZ Common Units of record as of the
effective time of the Merger, the exchange agent will mail to
you a transmittal letter and instructions explaining how to
surrender your WMZ Common Units to the exchange agent after the
effective time of the Merger. WMZ Common Unit certificates
should not be returned with the enclosed proxy card.
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Holders of Publicly Owned WMZ Common Units who deliver a
properly completed and signed transmittal letter and any other
documents required by the instructions to the transmittal letter
to the exchange agent, together with their WMZ Common Unit
certificates (if any), will be entitled to receive:
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the number of whole Williams Partners Common Units to which such
holder is entitled in accordance with the Merger Agreement and
as described above under Effect of the Merger
on Outstanding WMZ Common and Subordinated Units; and
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after giving effect to any required tax withholding, a check in
the aggregate amount of:
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cash equal to the aggregate value of the holders
fractional Williams Partners Common Units calculated by
multiplying the fractional interest by the average closing price
of Williams Partners Common Units on the NYSE during the five
trading days ending on the third trading day prior to the
effective time of the Merger; and
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any cash distributions declared by Williams Partners on the
Williams Partners Common Units with a record date after the
effective time of the Merger and a payment due on or before the
date the holder of WMZ Common Units surrendered its WMZ Common
Units.
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Williams Partners and WMZ will coordinate the record dates of
any quarterly distributions during the period from the execution
of the Merger Agreement to the date that the Merger is
consummated so that no holder of Publicly Owned WMZ Common Units
will fail to be entitled to receive any quarterly regular
distribution by WMZ unless it becomes entitled to receive a
quarterly distribution from Williams Partners with respect to
the same quarter. Any cash distribution declared by Williams
Partners with a record date after the effective time of the
Merger but prior to the date a holder of WMZ Common Units
surrenders its WMZ Common Units, and which has a payment date
subsequent to such surrender, will be paid to such holder of WMZ
Common Units on the applicable payment date.
Until you deliver a properly completed and signed transmittal
letter and any other documents required by the instructions to
the transmittal letter to the exchange agent, together with your
WMZ Common Unit certificates (if any), the distributions
declared by Williams Partners with a record date after the
effective time of the Merger will accrue, but will not be paid,
on Williams Partners Common Units that you are entitled to
receive as a result of the Merger. No interest will be paid or
accrue on:
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the amount of cash to be received in lieu of fractional Williams
Partners Common Units; or
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any cash distributions declared by Williams Partners on the
Williams Partners Common Units with a record date after the
effective time of the Merger.
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The exchange agent will deliver to Williams Partners any
Williams Partners Common Units to be issued in the Merger, cash
in lieu of fractional Williams Partners Common Units to be paid
in connection with the Merger and any distributions paid on
Williams Partners Common Units to be issued in the Merger that
are not claimed by former holders of WMZ Common Units within
twelve months after the effective time of the Merger.
Thereafter, Williams Partners will act as the exchange agent and
former holders of WMZ Common Units may look only to Williams
Partners for their Williams Partners Common Units, cash in lieu
of fractional Williams Partners Common Units and unpaid
distributions. None of Williams Partners, the Williams Partners
General Partner, WMZ, the WMZ General Partner or the exchange
agent will be liable to any former holder of WMZ Common Units
for any amount properly delivered to a public official pursuant
to applicable abandoned property, escheat or similar laws. To
the extent permitted by applicable law, any amount that would
escheat or become the property of any governmental entity shall,
immediately prior thereto, become the property of Williams
Partners free and clear of all claims or interests of any person
previously entitled thereto.
The instructions for effecting the surrender of WMZ Common Unit
certificates will set forth procedures that must be taken by the
holder of any WMZ Common Unit certificate that has been lost,
destroyed or stolen. If a WMZ Common Unit certificate has been
lost, destroyed or stolen, the exchange agent will issue
certificates representing the Williams Partners Common Units
properly issuable in accordance with the Merger Agreement and
any cash payment in lieu of fractional Williams Partners Common
Units only upon receipt of, along with the letter of
transmittal, a duly executed lost certificate affidavit,
including an agreement to
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indemnify Williams Partners, signed exactly as the name or names
of the registered holder or holders appeared on the books of WMZ
immediately prior to the effective time of the Merger, together
with a customary bond and such other documents as Williams
Partners may reasonably require.
Conditions
to the Merger
The obligation of the parties to the Merger Agreement to
complete the Merger is subject to the satisfaction or waiver of
certain conditions, including, among others:
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The approval of the Merger and the Merger Agreement by holders
of at least a majority of the outstanding Non-affiliated WMZ
Common Units.
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The receipt of all other governmental consents and approvals,
the absence of which would, individually or in the aggregate,
have a material adverse effect on Williams Partners or WMZ.
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The continued effectiveness of the registration statement of
which this joint proxy statement/prospectus forms a part.
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The approval for listing on the NYSE of the Williams Partners
Common Units to be issued in the Merger, subject to official
notice of issuance.
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The absence of any decree, order, injunction or law that
prohibits the Merger or makes the Merger unlawful.
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The parties obligations are also separately subject to the
satisfaction or waiver of the following conditions:
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The representations and warranties of each other party set forth
in the Merger Agreement being true and correct as of the
closing, other than certain failures to be true and correct that
would not in the aggregate result in a material adverse effect
on the party making the representation or warranty, and each
party having performed or complied with all agreements and
covenants required to be performed by it under the Merger
Agreement in all material respects.
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In the case of Williams Partners condition, the receipt of
certain opinions of Andrews Kurth LLP or another
nationally-recognized tax counsel with regard to the
U.S. federal income tax consequences of the Merger, and in
the case of WMZs condition, the receipt of certain
opinions of Fulbright or another nationally-recognized tax
counsel with regard to the U.S. federal income tax
consequences of the Merger.
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Representations
and Warranties
The Merger Agreement contains reciprocal representations and
warranties by each of the parties to the Merger Agreement, many
of which provide that the representation and warranty does not
extend to matters where the failure of the representation and
warranty to be accurate would not result in a material adverse
effect on the party making the representation and warranty.
These representations and warranties concern, among other things:
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organization and existence;
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authorization to enter into the Merger Agreement and to complete
the Merger and transactions contemplated thereby;
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absence of defaults, breaches and other conflicts caused by
entering into the Merger Agreement and completing the Merger;
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capitalization, title to membership and limited partner
interests;
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reports filed with the SEC;
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absence of material litigation;
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absence of changes that would have a material adverse effects;
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absence of material damage, destruction or loss to any material
portion of assets;
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tax matters; and
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brokerage arrangements.
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The Merger Agreement also contains additional representations
and warranties made by Williams Partners to WMZ, many of which
also provide that the representation and warranty does not
extend to matters where the failure of the representation and
warranty to be accurate would not result in a material adverse
effect on Williams Partners. These representations and
warranties concern, among other things:
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internal controls;
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accuracy of financial statements;
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absence of certain undisclosed liabilities;
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title to properties and
rights-of-way;
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absence of violations or liabilities under environmental laws;
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condition of assets;
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compliance with applicable licenses and permits;
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material contracts and agreements;
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employee benefits;
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labor matters;
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transactions with affiliates;
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insurance matters;
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intellectual property matters;
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investment company act;
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liabilities associated with natural gas contracts;
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distributions made by Williams Partners; and
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approvals under state takeover laws.
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For purposes of the Merger Agreement, material adverse
effect means a material adverse effect on or a material
adverse change in (i) the business, assets, liabilities,
properties, financial condition or results of operations of
Williams Partners or WMZ, as applicable, other than any effect
or change (u) in the natural gas gathering, processing,
treating, transportation and storage industries generally and
NGL marketing industry generally (including any change in the
prices of natural gas, NGLs or other hydrocarbon products,
industry margins or any regulatory changes or changes in
applicable law), (v) in United States or global economic
conditions or financial markets in general, (w) resulting
from any outbreak of hostilities, terrorism, war or other
similar national emergency, (x) resulting from the
announcement of the Merger Agreement or any of the transactions
contemplated thereby, (y) in the law or in accounting
principles that materially affects the Merger Agreement or the
transactions contemplated thereby or (z) resulting from
such entity taking any action required or contemplated by the
Merger Agreement; provided, that in the case of clauses (u),
(v), (w) and (y) the impact on such entity is not
materially disproportionate to the impact on similarly situated
parties, or (ii) the ability of any of the parties to the
Merger Agreement to perform their obligations under the Merger
Agreement or to consummate the transactions contemplated by the
Merger Agreement.
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Covenants
and Other Agreements
Prior to the closing of the Merger, the parties have agreed that
no party to the Merger Agreement will take any action not
permitted by the Merger Agreement or fail to take any action
contemplated by the Merger Agreement that would be reasonably
likely to materially delay the consummation of the Merger or
result in the failure of a condition to closing. The parties
have also agreed to promptly notify the other parties in writing
of (i) any event, condition or circumstance that could
reasonably be expected to result in any of the conditions to
closing not being satisfied and (ii) any material breach of
any covenant, obligation or agreement contained in the Merger
Agreement.
Prior to the closing of the Merger and unless the other party
consents in writing (which consent may not be unreasonably
withheld, delayed or conditioned), and subject to specified
exceptions, each of Williams Partners and WMZ has agreed not to
(and has agreed to cause their respective general partners and
subsidiaries not to):
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make any material change in the nature of its business and
operations;
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make any change in its governing documents in any manner that
would reasonably be expected to adversely affect in a material
way the rights of holders of its securities;
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(A) issue, deliver or sell any of its equity securities for
cash and at a material discount to the lower of prevailing
market prices at the time of their issuance or at the time of
commitment to do so, or (B) authorize or propose the
issuance, delivery or sale of any subscriptions, rights,
warrants or options to acquire or other agreements or
commitments of any character obligating it to issue any equity
securities (other than issuances pursuant to options and
warrants in existence on the date of the Merger Agreement) for
cash and at a material discount to the lower of prevailing
market prices of such equity securities at the time of their
issuance or at the time such subscriptions, rights, warrants,
options, agreements or commitments are entered into;
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except for distributions to the holders of limited partnership
units consistent with past or previously announced practices,
the proportionate distribution on the general partner interests
and payments under incentive distribution rights, or any
distributions from subsidiaries of WMZ to WMZ, or from
subsidiaries of Williams Partners to Williams Partners, declare,
set aside or pay any distributions in respect of its equity
securities, or split, combine or reclassify any of its equity
securities or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for any
of its equity securities; provided that, in the case of
distributions in respect of equity securities, consent to such
distributions shall not be unreasonably withheld, delayed or
conditioned;
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settle any claims, demands, lawsuits or state or federal
regulatory proceedings seeking damages or an injunction or other
equitable relief where such settlements would be reasonably
likely in the aggregate to have a material adverse effect on WMZ
or Williams Partners, as applicable;
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adopt or vote to adopt a plan of complete or partial dissolution
or liquidation;
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make any material change in its tax methods, principles or
elections that would reasonably be expected to materially
adversely affect the ability of Andrews Kurth LLP or Fulbright
to deliver its tax opinion at the closing of the Merger; or
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agree or commit to do any of the foregoing.
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The Merger Agreement contains additional agreements between the
parties thereto including, among other things:
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providing access to information with respect to the other party;
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cooperation regarding required filings or other interactions
with governmental and other agencies and organizations;
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the preparation, filing and distribution of this joint proxy
statement/prospectus;
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convening and holding the Special Meeting;
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using commercially reasonable efforts to take, or cause to be
taken, all appropriate action, and to do or cause to be done,
all things necessary, proper or advisable under applicable laws
to consummate and make effective the transactions contemplated
by the Merger Agreement;
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making certain public announcements;
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expenses;
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satisfying conditions to a consent or approval of any
governmental entity necessary for the consummation of the Merger;
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tax matters;
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coordinating the declaration of and the setting of record dates
and payment dates for, and the taking of any other actions
necessary with respect to distributions in respect of the
Williams Partners Common Units, WMZ Common Units and the 2%
general partner interest and incentive distribution rights in
WMZ;
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certain consents of auditors; and
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cooperating with Williams Partners financing activities,
if any.
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Indemnification
and Insurance
Subject to certain terms and conditions specified in the Merger
Agreement, Williams Partners has agreed to:
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continue in full force and effect in accordance with their terms
after the effective time of the Merger all rights to
indemnification, advancement of expenses and exculpation from
liabilities for acts or omissions occurring at or prior to the
effective time of the Merger (including the transactions
contemplated by the Merger Agreement) existing in favor of
certain past and present directors and officers of WMZ and
certain of its subsidiaries; and
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maintain officers and directors liability insurance
covering certain past and present directors and officers of WMZ
and its subsidiaries who are or were covered by the existing
general partners liability insurance applicable to WMZ for a
period of six years following the effective time of the Merger.
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Non-Solicitation
In the Merger Agreement, WMZ and the WMZ General Partner have
agreed that they and WMZs subsidiaries will not, and will
direct and use their reasonable best efforts to cause such
parties representatives (including the WMZ Conflicts
Committee) not to, directly or indirectly:
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take any action to solicit, initiate, or knowingly encourage or
knowingly facilitate the making of any takeover proposal (as
defined in the Merger Agreement) or any inquiry with respect to
a takeover proposal or engage in discussions or negotiations
with any person with respect to a takeover proposal;
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disclose any non-public information or afford access to
properties, books or records to any person that has made or, to
their knowledge, is considering making a takeover
proposal; or
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approve or recommend, or propose to approve or recommend, or
execute or enter into any letter of intent or agreement relating
to a takeover proposal.
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Notwithstanding those agreements, at any time prior to the
approval by the required vote of the holders of WMZ units, WMZ
and the WMZ General Partner may, in response to a bona fide
unsolicited written takeover proposal that is made after the
date of the Merger Agreement and that did not result from a
breach of the non-
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solicitation provisions, furnish information and participate in
discussions or negotiations with respect to a takeover proposal
if:
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The WMZ Conflicts Committee determines in good faith after
consultation with its financial advisor and legal counsel that
the takeover proposal constitutes or is reasonably likely to
result in a superior proposal (as defined in the Merger
Agreement), and after consultation with outside legal counsel,
that the failure to do so would be reasonably likely to
constitute a violation of its fiduciary duties owed to the
holders of WMZ units under applicable law; and
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WMZ and the WMZ General Partner comply with the non-solicitation
provisions in the Merger Agreement.
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Neither the WMZ Board nor the WMZ Conflicts Committee may
withdraw, modify or qualify, or propose publicly to withdraw,
modify or qualify its recommendation of the Merger or Merger
Agreement, recommend, adopt or approve, as applicable (or
propose publicly to do so), any takeover proposal, or fail to
reaffirm its recommendation upon request made by Williams
Partners (any such action being referred to as a WMZ
Recommendation Change), unless:
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the approval of the Merger Agreement and the Merger by the
required vote of the holders of WMZ units has not been obtained;
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it determines in good faith, after consulting with outside legal
counsel, that failure to change its recommendation would be
reasonably likely to constitute a violation of its fiduciary
duties owed to the holders of the WMZ units under applicable law;
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at least three business days prior to taking any such action,
WMZ has provided Williams Partners with notice of such a change
in its recommendation and related information; and
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WMZ has given Williams Partners at least three business days
after delivery of each such notice to propose revisions to the
terms of the Merger Agreement (or to make another proposal) and
has negotiated in good faith with Williams Partners with respect
to such proposed revisions or other proposal, if any;
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and, in addition to the above, in the case of the WMZ Board:
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the WMZ Conflicts Committee has made a WMZ Recommendation Change
in accordance with the provisions described above.
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Notwithstanding any WMZ Recommendation Change, the Special
Meeting will take place as contemplated by this joint proxy
statement/prospectus. Unless the Merger Agreement is terminated
as permitted under the circumstances described below, the Merger
Agreement prohibits the WMZ Board and the WMZ Conflicts
Committee from approving or recommending, proposing to approve
or recommend, or allowing the WMZ General Partner or WMZ to
execute or enter into, any letter of intent, memorandum of
understanding, merger agreement or other similar agreement
constituting or related to, or that is intended to or would
reasonably be expected to lead to, any takeover proposal.
Nothing contained in the Merger Agreement prohibits WMZ from
taking and disclosing to its unitholders a position contemplated
by
Rule 14e-2(a)
promulgated under the Exchange Act with regard to a takeover
proposal or making any required disclosure to holders of WMZ
units if, in the good faith judgment of the WMZ Conflicts
Committee after consultation with outside legal counsel, failure
to so disclose would be reasonably likely to constitute a
violation of its fiduciary duties owed to the holders of WMZ
units under applicable law.
WMZ has agreed that it will notify Williams Partners promptly if
it receives a takeover proposal or any request for non-public
information relating to WMZ or for access to the properties,
books or records of WMZ by any person that has made a takeover
proposal, and will thereafter keep Williams Partners reasonably
and promptly informed of any material changes to the terms of
any such takeover proposal or request.
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Termination
Before the effective time of the Merger, the Merger Agreement
may be terminated:
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by mutual written agreement of the parties thereto;
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by Williams Partners or WMZ, if:
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the Merger has not been consummated on or before
November 1, 2010 (so long as the party seeking to terminate
did not prevent the Merger from occurring by failing to perform
or observe its obligations under the Merger Agreement), but if
the Merger has not been consummated solely because the parties
have not received regulatory approvals, then the outside date
will be automatically extended to December 31, 2010;
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a governmental entity shall have issued a final and
non-appealable order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the
Merger, so long as the party seeking termination has complied
with its obligations under the Merger Agreement to attempt to
remove the prohibition; or
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the approval by holders of a majority of the outstanding
Non-affiliated WMZ Common Units has not been obtained;
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by WMZ, if Williams Partners breaches any of its
representations, warranties or agreements in the Merger
Agreement or if any of Williams Partners representations
or warranties becomes untrue (subject to materiality, in certain
cases), resulting in a condition to the Merger not being
satisfied, provided that WMZ is not likewise in breach of the
Merger Agreement;
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by Williams Partners, if:
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WMZ breaches any of its representations, warranties or
agreements in the Merger Agreement or if any of WMZs
representations or warranties becomes untrue (subject to
materiality, in certain cases), resulting in a condition to the
Merger not being satisfied, provided that Williams Partners is
not likewise in breach of the Merger Agreement; or
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a WMZ Recommendation Change has occurred.
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Amendment
and Waiver
The Merger Agreement may be amended at any time by the action or
authorization of each partys (or its general
partners or its managing members general
partners) board of directors or conflicts committee;
however, if the Merger Agreement has been approved by holders of
a majority of the outstanding Non-affiliated WMZ Common Units,
then no amendment shall be made which by law requires further
approval by such unitholders without such further approval.
At any time prior to the effective time of the Merger, each of
the parties may, to the extent permitted by law:
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grant the other party additional time to perform its obligations
under the Merger Agreement;
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waive any inaccuracies in the representations and warranties of
the other party; and
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waive compliance with any agreements or conditions for the
benefit of that party.
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THE
MERGER PARTIES BUSINESSES
Williams
Partners
Williams Partners is a publicly traded Delaware limited
partnership formed by Williams in February 2005 to own, operate
and acquire a diversified portfolio of complementary energy
assets. Williams Partners operations are divided into two
business segments: Gas Pipeline and Midstream Gas &
Liquids.
The Gas Pipeline segment includes Williams Partners
interstate natural gas pipelines, including its 100% interest in
Transco and its 65% interest in Northwest Pipeline (the
remaining 35% of which is WMZs only significant asset).
Transco and Northwest Pipeline own and operate a combined total
of approximately 13,900 miles of pipelines with a total
annual throughput of approximately 2,700 TBtu of natural gas and
peak-day
delivery capacity of approximately 12 MMdt of natural gas.
Gas Pipeline also holds interests in joint venture interstate
and intrastate natural gas pipeline systems including a 24.5%
interest in Gulfstream, which owns an approximate
745-mile
pipeline with the capacity to transport approximately
1.26 million Dth per day of natural gas. Gas Pipeline also
includes Williams Partners indirect 45.7% limited partner
interest and 2% general partner interest in WMZ, which holds the
remaining 35% interest in Northwest Pipeline.
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Transco Transco is an interstate natural gas
transportation company that owns and operates a 10,000-mile
natural gas pipeline system extending from Texas, Louisiana,
Mississippi and the offshore Gulf of Mexico through Alabama,
Georgia, South Carolina, North Carolina, Virginia, Maryland,
Pennsylvania, and New Jersey to the New York City metropolitan
area. The system serves customers in Texas and 11 southeast and
Atlantic seaboard states, including major metropolitan areas in
Georgia, North Carolina, Washington, D.C., New York, New
Jersey, and Pennsylvania.
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Northwest Pipeline Northwest Pipeline is an
interstate natural gas transportation company that owns and
operates a 3,900-mile natural gas pipeline system extending from
the San Juan basin in northwestern New Mexico and
southwestern Colorado through Colorado, Utah, Wyoming, Idaho,
Oregon, and Washington to a point on the Canadian border near
Sumas, Washington. Northwest Pipeline provides services for
markets in California, Arizona, New Mexico, Colorado, Utah,
Nevada, Wyoming, Idaho, Oregon, and Washington directly or
indirectly through interconnections with other pipelines.
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Gulfstream Gulfstream is a natural gas
pipeline system extending approximately 745 miles from the
Mobile Bay area in Alabama to markets in Florida.
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The Midstream Gas & Liquids segment includes Williams
Partners natural gas gathering, treating and processing
businesses and has primary service areas concentrated in major
producing basins in Colorado, New Mexico, Wyoming, the Gulf
of Mexico and Pennsylvania. Midstream Gas &
Liquids primary businesses natural gas
gathering, treating, and processing; NGL fractionation, storage
and transportation; and oil transportation fall
within the middle of the process of taking raw natural gas and
crude oil from the producing fields to the consumer.
The
Dropdown
On February 17, 2010, Williams Partners closed the Dropdown
with Williams Partners General Partner, the Operating Company,
Williams and certain subsidiaries of Williams, pursuant to which
Williams (through such subsidiaries) contributed to Williams
Partners the ownership interests in the entities that made up
Williams Gas Pipeline and Midstream Gas &
Liquids businesses, to the extent not already owned by Williams
Partners, including Williams limited and general partner
interests in WMZ, but excluding Williams Canadian,
Venezuelan and olefin operations and 25.5% of Gulfstream. The
Dropdown was made in exchange for aggregate consideration of:
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$3.5 billion in cash, less certain expenses incurred by
Williams Partners relating to the Dropdown. This cash
consideration was financed through the private issuance of
$3.5 billion of Williams Partners senior unsecured
notes;
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203 million of Williams Partners Class C limited
partnership units, which were identical to Williams Partners
Common Units except with respect to distributions with respect
to the first quarter of 2010, for which they received a prorated
quarterly distribution as they were not outstanding during the
full
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quarterly period. The Class C units automatically converted
into Williams Partners Common Units on May 10, 2010, the
first business day following the record date for the
distribution with respect to the first quarter of 2010; and
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an increase in the capital account of the Williams Partners
General Partner to allow it to maintain its 2% general partner
interest.
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In connection with the Dropdown, Williams Partners entered into
the Credit Facility, which replaced Williams Partners then
existing $450 million senior unsecured credit facility.
Williams
Partners Ownership Interest in WMZ
Holders of Publicly Owned WMZ Common Units should be aware that
WMZ is indirectly controlled by Williams Partners through
Williams Partners 100% ownership of the WMZ General
Partner, which owns all of the outstanding general partner
interests in WMZ. As a result, Williams Partners appoints the
members of the WMZ Board, a majority of whom are affiliated with
Williams and its affiliates, and thereby could be seen as
controlling all of WMZs decisions other than those
involving certain conflicts of interest with Williams Partners
or that require an affirmative vote of holders of the limited
partner interests in WMZ pursuant to and in the percentages
specified by the WMZ partnership agreement. In addition,
Williams Partners, through its ownership of the WMZ General
Partner, owns an approximate 45.7% limited partner interest
(comprised of 20.8% of the currently outstanding WMZ Common
Units and 100% of the currently outstanding WMZ Subordinated
Units) in WMZ.
Four of the seven members on the board of the WMZ General
Partner are also executive officers of the Williams Partners
General Partner. For additional information on interests that
the board members and executive officers of the Williams
Partners General Partner may have in the Merger, see
Interests of Certain Persons in the Offer.
Executive
Offices
Williams Partners principal executive offices are located
at One Williams Center, Tulsa, Oklahoma
74172-0172,
and its telephone number is
(918) 573-2000.
Its website is located at
http://www.williamslp.com.
WMZ
WMZ is a Delaware limited partnership formed on August 31,
2007 by Williams to own and operate natural gas transportation
and storage assets. WMZs primary business objectives are
to generate stable cash flows and, over time, to increase its
quarterly cash distributions per unit. WMZs only
significant asset is a 35% general partnership interest in
Northwest Pipeline, which is an interstate natural gas
transportation company that owns and operates a natural gas
pipeline system extending from the San Juan basin in
northwestern New Mexico and southwestern Colorado through
Colorado, Utah, Wyoming, Idaho, Oregon, and Washington to a
point on the Canadian border near Sumas, Washington. Northwest
Pipeline provides services for markets in California, Arizona,
New Mexico, Colorado, Utah, Nevada, Wyoming, Idaho, Oregon, and
Washington directly or indirectly through interconnections with
other pipelines. WMZ accounts for its 35% interest in Northwest
Pipeline as an equity investment, and, therefore, does not
consolidate its financial results.
The 35% of Northwest Pipeline owned by WMZ was owned by Williams
prior to the WMZ IPO. Williams Partners currently owns an
approximate 45.7% limited partner interest in WMZ and all of
WMZs 2% general partner interest (by virtue of owning 100%
of the WMZ General Partner).
WMZs principal executive offices are located at One
Williams Center, Tulsa, Oklahoma
74172-0172,
and its telephone number is
918-573-2000.
Its website is located at
http://www.williamspipelinepartners.com.
95
DIRECTORS
AND EXECUTIVE OFFICERS OF WILLIAMS PARTNERS
The following table sets forth, for each executive officer and
director of the Williams Partners General Partner, his or her
name, age as of May 31, 2010, business address, principal
occupation or employment at the present time and during the last
five years, and the name of any corporation or other
organization in which such employment is conducted or was
conducted. Unless otherwise indicated, the principal business
address of each director and executive officer of the Williams
Partners General Partner is Williams Partners L.P., One Williams
Center, Tulsa, Oklahoma
74172-0172.
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Name and Title
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Current Occupation and Business
Background Since 2004
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Directors
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Steven J. Malcolm
Chairman of the Board
and Chief Executive
Officer
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Steven J. Malcolm, age 61, has served as the chairman of the
board of directors and chief executive officer of the Williams
Partners General Partner since February 2005. Mr. Malcolm has
served as president of Williams since September 2001, chief
executive officer of Williams since January 2002 and chairman of
the board of directors of Williams since May 2002. From
September 2001 to January 2002, he served as chief operating
officer of Williams and from May 2001 to September 2001, he
served as an executive vice president of Williams. From 1998 to
2001, he served as president and chief executive officer of
Williams Energy Services, LLC, a subsidiary of Williams. From
1994 to 1998, Mr. Malcolm served as the senior vice president
and general manager of Williams Field Services Company, a
subsidiary of Williams. Mr. Malcolm has served as chairman of
the board of directors and chief executive officer of the
general partner of Williams Pipeline Partners L.P. since 2007.
Mr. Malcolm has served as a member of the board of directors of
BOK Financial Corporation and Bank of Oklahoma, N.A. since 2002.
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Donald R. Chappel
Chief Financial Officer
and Director
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Donald R. Chappel, age 58, has served as the chief financial
officer and a director of the Williams Partners General Partner
since February 2005. Mr. Chappel has served as senior vice
president and chief financial officer of Williams since April
2003. Mr. Chappel has served as chief financial officer and a
director of the general partner of Williams Pipeline Partners
L.P. since 2007.
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Alan S. Armstrong
Senior Vice President
Midstream and Director
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Alan S. Armstrong, age 47, has served as a senior vice president
of the Williams Partners General Partner and president of
Williams Partners midstream business unit since February
17, 2010 and a director of the Williams Partners General Partner
since February 2005. Since February 2002, Mr. Armstrong has
served as a senior vice president of Williams and president of
Williams midstream business unit. From 2005 to February
2010, Mr. Armstrong served as the chief operating officer
of the Williams Partners General Partner. From 1999 to February
2002, Mr. Armstrong was vice president, gathering and processing
in Williams midstream business unit and from 1998 to 1999
was vice president, commercial development, in Williams
midstream business unit.
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96
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Name and Title
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Current Occupation and Business
Background Since 2004
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Phillip D. Wright
Senior Vice President
Gas Pipeline and Director
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Phillip D. Wright, age 54, has served as a senior vice president
and a director of the Williams Partners General Partner and
president of Williams Partners gas pipeline business unit
since February 17, 2010. Mr. Wright has served as a senior vice
president of Williams and president of Williams gas
pipeline unit since January 2005. Mr. Wright previously served
as a director of the Williams Partners General Partner from
April 2005 to October 2007. From October 2002 to January 2005,
Mr. Wright served as chief restructuring officer of Williams.
From September 2001 to October 2002, Mr. Wright served as
president and chief executive officer of Williams Energy
Services. From 1996 to September 2001, he was senior vice
president, enterprise development and planning for
Williams energy services group. From 1989 to 1996, Mr.
Wright served in various capacities for Williams. Mr. Wright
also serves as a director, senior vice president and chief
operating officer of Williams Pipeline GP LLC, the general
partner of Williams Pipeline Partners L.P.
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James J. Bender
General Counsel
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James J. Bender, age 53, has served as the general counsel of
the Williams Partners General Partner since February 2005. Mr.
Bender has served as senior vice president and general counsel
of Williams since December 2002. Mr. Bender has served as
the general counsel of the general partner of Williams Pipeline
Partners L.P. since August 2007. From June 2000 to June 2002,
Mr. Bender was senior vice president and general counsel with
NRG Energy, Inc. Mr. Bender was vice president, general counsel
and secretary of NRG Energy from June 1997 to June 2000. NRG
Energy, Inc. filed a voluntary bankruptcy petition during 2003
and its plan of reorganization was approved in December 2003.
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Ted T. Timmermans
Vice President, Controller
& Chief Accounting
Officer
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Ted T. Timmermans, age 53, has served as Vice President,
Controller & Chief Accounting Officer of the Williams
Partners General Partner since September 2005. Mr. Timmermans
has served as Vice President, Controller & Chief Accounting
Officer of Williams since July 2005. He served as Assistant
Controller of Williams from April 1998 to July 2005. Mr.
Timmermans has served as Chief Accounting Officer of the general
partner of Williams Pipeline Partners L.P. since January 2008.
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H. Michael Krimbill
Director and Member of
Audit and Conflicts
Committees
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H. Michael Krimbill, age 56, has served as a director of the
Williams Partners General Partner since August 2007. Mr.
Krimbill has served as a director of Seminole Energy Services,
LLC, a privately held natural gas marketing company, from
November 2007 to February 5, 2010. Mr. Krimbill was the
president and chief financial officer of Energy Transfer
Partners, L.P. from 2004 until his resignation in January 2007.
Mr. Krimbill joined Heritage Propane Partners, L.P. (the
predecessor of Energy Transfer Partners) as vice president and
chief financial officer in 1990. Mr. Krimbill served as
president of Heritage from 1999 to 2004 and as president and
chief executive officer of Heritage from 2000 to 2005. Mr.
Krimbill also served as a director of Energy Transfer Equity,
the general partner of Energy Transfer Partners from 2000 to
January 2007.
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Bill Z. Parker
Director and Member of
Audit and Conflicts
Committees
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Bill Z. Parker, age 63, has served as a director of the Williams
Partners General Partner since August 2005. Mr. Parker has
served as a director of Laredo Petroleum L.L.C., a privately
held independent oil and gas producing company, since 2007. Mr.
Parker served as a director for Latigo Petroleum, Inc., a
privately held independent oil and gas production company, from
2003 to May 2006, when it was acquired by POGO Producing
Company. From April 2000 to November 2002, Mr. Parker served as
executive vice president of Phillips Petroleum Companys
worldwide upstream operations. Mr. Parker was executive vice
president of Phillips Petroleum Companys worldwide
downstream operations from September 1999 to April 2000.
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97
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Name and Title
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Current Occupation and Business
Background Since 2004
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Alice M. Peterson
Director and Member of
Audit and Conflicts
Committees
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Alice M. Peterson, age 57, has served as a director of the
Williams Partners General Partner since September 2005. Ms.
Peterson has served as the chief ethics officer of SAI Global
since April 2009. Since 2000, Ms. Peterson has served as a
director of RIM Finance, LLC, a wholly owned subsidiary of
Research in Motion, Ltd., the maker of
Blackberrytm
handheld device. Ms. Peterson has served as a director of
Navistar Financial Corporation, a wholly owned subsidiary of
Navistar International, since 2006. She founded and served as
the president of Syrus Global, a provider of ethics, compliance
and reputation management solutions from 2002 to April 2009,
when it was acquired by SAI Global. Ms. Peterson served as a
director of Hanesbrands Inc., an apparel company, from 2006 to
2009. Ms. Peterson served as a director of TBC Corporation, a
marketer of private branded replacement tires, from July 2005 to
November 2005, when it was acquired by Sumitomo Corporation of
America. From 1998 to 2004, she served as a director of Fleming
Companies. From 2000 to 2001, Ms. Peterson served as president
and general manager of RIM Finance, LLC. From April 2000 to
September 2000, Ms. Peterson served as the chief executive
officer of Guidance Resources.com, a start-up business focused
on providing online behavioral health and concierge services to
employer groups and other associations. From 1998 to 2000, Ms.
Peterson served as vice president of Sears Online and from 1993
to 1998, as vice president and treasurer of Sears, Roebuck and
Co.
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98
COMPARISON
OF THE RIGHTS OF HOLDERS OF WILLIAMS PARTNERS
COMMON UNITS AND HOLDERS OF WMZ COMMON UNITS
The following describes the rights of holders of Williams
Partners Common Units and the rights of holders of WMZ Common
Units and the material differences between them. It is not a
complete summary of the provisions affecting, and the
differences between, the rights of holders of Williams Partners
Common Units and the rights of holders of WMZ Common Units. The
rights of holders of Williams Partners Common Units are governed
by the Amended and Restated Agreement of Limited Partnership of
Williams Partners L.P., as amended, and the rights of holders of
WMZ Common Units are governed by the First Amended and Restated
Agreement of Limited Partnership of Williams Pipeline Partners
L.P., as amended, and you should refer to each document for a
complete description of the rights of holders of Williams
Partners Common Units and the rights of holders of WMZ Common
Units, respectively. If the Merger is consummated, holders of
WMZ Common Units will become holders of Williams Partners Common
Units, and their rights as holders of Williams Partners Common
Units will be governed by Delaware law and Williams
Partners partnership agreement. You should refer to
Williams Partners partnership agreement and the amendments
thereto, which are incorporated by reference herein. For
WMZs partnership agreement, please refer to WMZs
current report on
Form 8-K
filed with the SEC on January 30, 2008. This summary is
qualified in its entirety by reference to the Delaware Revised
Uniform Limited Partnership Act, Williams Partners
partnership agreement and the WMZ partnership agreement.
Capitalized terms used herein and not otherwise defined herein
are used herein as defined in the applicable partnership
agreement.
Purpose
and Term of Existence
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Williams Partners
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WMZ
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Williams Partners stated purposes under its partnership
agreement are to engage directly or indirectly in any lawful
business activity that is approved by its general partner and to
exercise all rights and powers conferred upon Williams Partners
pursuant to any agreements relating to such business activity
and to do anything necessary or appropriate to the foregoing,
including the making of capital contributions or loans to its
subsidiaries. However, the general partner may not cause
Williams Partners to engage directly or indirectly in any
business activity that would cause Williams Partners to be
treated as an association taxable as a corporation or otherwise
taxable as an entity for federal income tax purposes.
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WMZs stated purposes under its partnership agreement are
to engage directly or indirectly in any lawful business activity
that is approved by its general partner and to exercise all
rights and powers conferred upon WMZ pursuant to any agreements
relating to such business activity and to do anything necessary
or appropriate to the foregoing, including the making of capital
contributions or loans to its subsidiaries. However, the general
partner may not cause WMZ to engage directly or indirectly in
any business activity that would cause WMZ to be treated as an
association taxable as a corporation or otherwise taxable as an
entity for federal income tax purposes.
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Williams Partners partnership term will continue until
Williams Partners is dissolved pursuant to the terms of its
partnership agreement. Williams Partners existence as a
separate legal entity will continue until cancellation of its
Certificate of Limited Partnership pursuant to the Delaware Act.
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WMZs partnership term will continue until WMZ is dissolved
pursuant to the terms of its partnership agreement. WMZs
existence as a separate legal entity will continue until
cancellation of its Certificate of Limited Partnership pursuant
to the Delaware Act.
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Distributions
of Available Cash
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Williams Partners
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WMZ
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Within 45 days after the end of each quarter, Williams
Partners will distribute all of its available cash to its
unitholders of record as of the applicable record date.
Available cash is defined in Williams Partners partnership
agreement and generally means, for any quarter ending prior to
liquidation, all cash on hand at
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Within 45 days after the end of each quarter, WMZ will
distribute all of its available cash to its unitholders of
record as of the applicable record date.
Available cash is defined in WMZs partnership agreement
and generally means, for any quarter ending prior to
liquidation, all cash on hand at the end of such quarter:
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99
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Williams Partners
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WMZ
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the end of such quarter:
less the amount of any cash
reserves established by the Williams Partners General Partner
to:
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less the amount of any cash
reserves established by the general partner to:
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provide for the
proper conduct of the business (including reserves for future
capital expenditures and for anticipated future credit needs);
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provide for the
proper conduct of the business (including reserves for future
capital expenditures, future anticipated credit needs and for
refunds of collected rates reasonably likely to be refunded as a
result of a settlement or hearing relating to FERC rate
proceedings);
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comply with
applicable law or any debt instrument or other agreement or
obligation; or
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comply with
applicable law or any debt instrument or other agreement or
obligation; or
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provide funds for
distributions to unitholders and the general partner in respect
of any one or more of the next four quarters;
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provide funds for
distributions to unitholders and the general partner for any one
or more of the next four quarters;
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plus all cash on
hand on the date of determination of available cash for such
quarter resulting from working capital borrowings made after the
end of the quarter for which the determination is being made.
Working capital borrowings are defined in Williams
Partners partnership agreement and are borrowings used
solely for working capital purposes or to pay distributions made
pursuant to a credit facility or other arrangement to the extent
such borrowings are required to be reduced to a relatively small
amount each year for an economically meaningful period of time.
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plus all cash on
hand on the date of determination of available cash for such
quarter resulting from cash received after the end of that
quarter in respect of WMZs ownership interest in Northwest
Pipeline and attributable to its operations during that
quarter;
plus,
if the general partner so determines, all or a portion of cash
on hand on the date of determination of available cash for the
quarter resulting from working capital borrowings made
subsequent to the end of such quarter. Working capital
borrowings are defined in WMZs partnership agreement and
are generally borrowings that are made under a credit facility
or another financing arrangement, are used solely for working
capital purposes or to pay distributions and are intended to be
repaid within twelve months.
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Operating
Surplus and Capital Surplus
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Williams Partners
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WMZ
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Cash distributions are characterized as distributions from
either operating surplus or capital surplus. Williams Partners
distributes available cash from operating surplus differently
than available cash from capital surplus.
Operating surplus is defined in Williams Partners
partnership agreement and generally means, with respect to any
period ending prior to liquidation, on a cumulative basis and
without duplication:
$10.0 million;
plus
$12.8 million
in cash and cash equivalents on hand as of the closing date of
Williams Partners initial public offering (which excludes
$24.4 million retained from the proceeds of the initial
public offering to make a capital contribution to Discovery
Producer Services
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Cash distributions are characterized as distributions from
either operating surplus or capital surplus. WMZ distributes
available cash from operating surplus differently than available
cash from capital surplus.
Operating surplus is defined in WMZs partnership agreement
and generally means, with respect to any period ending prior to
liquidation, on a cumulative basis and without duplication:
$25 million;
plus
all
cash receipts for the period from the closing of WMZs
initial public offering through the end of such period,
excluding cash receipts from interim capital transactions (as
defined below); plus
all
cash receipts after the end of such period but
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100
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Williams Partners
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WMZ
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LLC to fund an escrow account required in connection with the
Tahiti pipeline lateral expansion project); plus
all cash receipts
for the period beginning on the closing date of Williams
Partners initial public offering and ending on the last
day of such period, other than cash receipts
from(1) borrowings that are not working capital
borrowings,(2) sales of equity and debt securities
and(3) sales or other dispositions of assets outside the
ordinary course of business and not as part of normal
retirements or replacements; plus
working
capital borrowings made after the end of such period but on or
before the date of determination of operating surplus for the
period; less
operating
expenditures after the closing date of Williams Partners
initial public offering other than operating expenditures funded
with cash reserves established by the Williams Partners General
Partner to provide funds for future operating expenditures;
less
the
amount of cash reserves established by the general partner to
provide funds for future operating expenditures.
Operating expenditures are defined in Williams Partners
partnership agreement and generally mean all expenditures,
including, but not limited to, taxes, reimbursements of the
general partner, repayment of working capital borrowings, debt
service payments and capital expenditures (except as provided in
the second bullet below), provided that operating expenditures
will not include:
payments
(including prepayments) of principal and premium on indebtedness
other than working capital borrowings;
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on or before the date of determination of the operating surplus
with respect to such period constituting cash distributions paid
on WMZs ownership interest in Northwest Pipeline
(excluding any such receipts constituting either (i) cash
proceeds from the retirement of the notes receivable outstanding
as of the closing of WMZs initial public offering under
the cash management agreement between Williams and Northwest
Pipeline, or (ii) the proceeds from Northwest Pipelines
interim capital transactions); plus
working capital
borrowings made after the end of such period but on or before
the date of determination of operating surplus for such period;
plus
cash
distributions paid on equity issued and interest payments (and
related fees) made on debt incurred to finance all or a portion
of the construction, acquisition, development, replacement or
improvement of a capital asset (such as equipment or facilities)
in respect of the period beginning on the date that WMZ enters
into a binding obligation to commence such construction,
acquisition, development, replacement or improvement and ending
on the earlier to occur of the date the capital improvement or
capital asset commences commercial service or the date that it
is abandoned or disposed of; less
operating
expenditures (as defined below) from the closing of WMZs
initial public offering through the end of such period,
including maintenance capital expenditures (including capital
contributions to Northwest Pipeline to be used by it for
maintenance capital expenditures, but not including expenditures
funded by reserves established in the next bullet point);
less
the
amount of cash reserves established by the general partner to
provide funds for future operating expenditures; less
all
working capital borrowings not repaid within twelve months after
having been incurred.
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capital
expenditures made for acquisitions or capital improvements;
payment
of transaction expenses relating to interim capital transactions
(as defined below); and
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Operating expenditures are defined in WMZs partnership
agreement and generally mean all cash expenditures, including,
but not limited to, taxes, reimbursements of the general
partner, interest payments, payments made in the ordinary course
of business under interest rate swap agreements and commodity
hedge contracts, maintenance capital expenditures (as defined
below), director and officer compensation, repayment of working
capital borrowings and non-pro rata repurchases of units,
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distributions to
partners (including distributions in respect of incentive
distribution rights).
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Capital expenditures that are operating expenditures are made to
replace partially or fully depreciated assets, to maintain the
existing operating capacity of assets and to extend their useful
lives, or other capital expenditures that are incurred in
maintaining existing system volumes or Williams Partners
asset base. Capital expenditures made for acquisitions or
capital
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101
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Williams Partners
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WMZ
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improvements are made to increase operating capacity, revenues
or cash flow from operations, whether through construction,
acquisition, addition or improvement. Such capital expenditures
include contributions made by Williams Partners to an entity in
which Williams Partners has an equity interest to be used by the
entity for acquisitions or capital improvements. Pursuant to
Williams Partners partnership agreement, capital
expenditures that are made in part for acquisitions and capital
purposes and in part for other purposes will be allocated by the
general partner, with the concurrence of the conflicts committee
of the general partners board of directors.
Capital surplus is defined in Williams Partners
partnership agreement and will generally be generated only by
interim capital transactions, which are defined as:
borrowings other
than working capital borrowings;
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provided that operating expenditures will not include:
repayments of
working capital borrowings deducted from operating surplus
pursuant to the last bullet point of the definition of operating
surplus above when such repayment actually occurs;
payments
(including prepayments and prepayment penalties) of principal of
and premium on indebtedness, other than working capital
borrowings;
expansion
capital expenditures (as defined below);
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investment capital
expenditures (as defined below);
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payment of
transaction expenses (including taxes) relating to interim
capital transactions
(as defined below);
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sales of debt
and equity securities; and
sales
or other dispositions of assets for cash, other than inventory,
accounts receivable and other assets sold or disposed in the
ordinary course of business or assets sold or disposed as part
of normal retirements or replacements of assets.
All amounts of available cash distributed on any date from any
source will be treated as distributed from operating surplus
until the sum of all available cash distributed since the
closing date of Williams Partners initial public offering
equals the operating surplus as of the close of the quarter
immediately preceding such distribution. Any remaining amounts
of available cash distributed on such date will be deemed to be
capital surplus and distributed accordingly.
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distributions to
partners; or
non-pro
rata purchases of units of any class made with the proceeds of
an interim capital transaction.
Maintenance capital expenditures are defined in WMZs
partnership agreement and generally mean cash expenditures for
the addition or improvement to or the replacement of capital
assets, if incurred to maintain WMZs existing operating
capacity, asset base, revenues or cash flow from operations, or
other capital expenditures that are incurred in maintaining
existing system volumes or WMZs asset base. Costs for
repairs and minor renewals to maintain facilities in operating
condition and that do not extend the useful life of existing
assets will be treated as operations and maintenance expenses as
incurred. Maintenance capital expenditures will include
contributions made by WMZ to Northwest Pipeline to be used by it
for maintenance capital expenditures. Maintenance capital
expenditures for Northwest Pipeline will include allowance for
borrowed funds used during construction. Capital expenditures
made solely for investment purposes will not be considered
maintenance capital expenditures.
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Expansion capital expenditures are defined in WMZs
partnership agreement and are generally those capital
expenditures to increase WMZs long-term operating
capacity, asset base or cash flow from operations, whether
through construction, acquisition or improvement. Examples of
expansion capital expenditures include the acquisition of
equipment, or the construction, development or acquisition of
additional pipeline, compression or storage capacity, to the
extent they expand WMZs operating capacity or
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102
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Williams Partners
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WMZ
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asset base. Expansion capital expenditures will include
contributions made by WMZ to Northwest Pipeline to be used by it
for expansion capital expenditures. Capital expenditures made
solely for investment purposes will not be considered expansion
capital expenditures.
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Investment capital expenditures are those capital expenditures
that are neither maintenance capital expenditures nor expansion
capital expenditures. Investment capital expenditures largely
will consist of capital expenditures made for investment
purposes. Examples of investment capital expenditures include
traditional capital expenditures for investment purposes, such
as purchases of securities, as well as other capital
expenditures that might be made in lieu of such traditional
capital expenditures, such as the acquisition of a capital asset
for investment purposes or the development of facilities to a
greater extent than necessary to maintain existing operating
capacity or operating income, but which are not expected to
expand for the long term WMZs operating capacity or
operating income. Investment capital expenditures will include
contributions made by WMZ to Northwest Pipeline to be used for
investment capital expenditures.
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Pursuant to WMZs partnership agreement, capital
expenditures that are made in part for maintenance capital
purposes and in part for investment capital or expansion capital
purposes will be allocated as maintenance capital expenditures,
investment capital expenditures or expansion capital
expenditures by the general partner, with the concurrence of the
conflicts committee of the general partners board of
directors.
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Capital surplus is defined in WMZs partnership agreement
and will generally be generated only by interim capital
transactions, which are defined as:
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borrowings other
than working capital borrowings;
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sales of debt and
equity securities;
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sales or other
dispositions of assets for cash, other than inventory, accounts
receivable and other assets sold or disposed in the ordinary
course of business or as part of normal retirements or
replacements of assets;
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the termination of
interest rate swap agreements or commodity hedge contracts prior
to the termination date specified therein;
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capital
contributions received by WMZ; and
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corporate
reorganizations or restructurings.
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All
amounts of available cash distributed on any date from any
source will be treated as distributed from operating surplus
until the sum of all available cash distributed since the
closing date of WMZs initial
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103
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Williams Partners
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WMZ
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public offering equals the operating surplus as of the close of
the quarter immediately preceding such distribution. Any
remaining amounts of available cash distributed on such date
will be deemed to be capital surplus and distributed
accordingly.
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Subordination
Period
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Williams Partners
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WMZ
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Williams Partners has no subordinated units outstanding.
Williams Partners subordination period ended on
February 19, 2008 when Williams Partners met the
requirements for early termination pursuant to its partnership
agreement. As a result of the termination, the 7,000,000
outstanding subordinated units owned by four subsidiaries of
Williams converted
one-
for-one to
common units and now participate pro rata with the other common
units in distributions of available cash.
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WMZ currently has 10,975,900 subordinated units outstanding.
Accordingly, WMZ is currently in its subordination
period, which generally will not end prior to the first
business day of any quarter beginning after December 31, 2010.
During the subordination period, the common units have the right
to receive distributions of available cash from operating
surplus each quarter in an amount equal to $0.2875 per common
unit, which amount is defined in the partnership agreement as
the minimum quarterly distribution, plus any arrearages in the
payment of the minimum quarterly distribution on the common
units from prior quarters, before any distributions of available
cash from operating surplus may be made on the subordinated
units. Furthermore, no arrearages will be paid on the
subordinated units. The practical effect of the subordinated
units is to increase the likelihood that during the
subordination period there will be sufficient available cash to
pay the minimum quarterly distribution on the common units.
WMZs general partner currently holds all 10,975,900
subordinated units.
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Upon expiration of the subordination period, each outstanding
subordinated unit will convert into one common unit and will
then participate pro rata with the other common units in
distributions of available cash. The subordination period is
defined in WMZs partnership agreement, and will end on the
first day of any quarter beginning after December 31, 2010 that
each of the following tests are met:
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distributions of
available cash from operating surplus on the outstanding common
units, subordinated units and general partner units equaled or
exceeded the sum of the minimum quarterly distributions for each
of the three consecutive, non- overlapping four-quarter periods
immediately preceding that date;
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the adjusted
operating surplus for each of the three consecutive,
non-overlapping four-quarter periods immediately preceding that
date equaled or exceeded the sum of the minimum quarterly
distributions on all of the outstanding common units and
subordinated units and the related distributions on the general
partner units during those periods on a fully diluted basis;
and
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there are no
arrearages in payment of the minimum quarterly distribution on
the common units.
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104
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Williams Partners
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WMZ
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Adjusted operating surplus, a measure intended to reflect cash
generated from operations, is defined in WMZs partnership
agreement and generally means, for any period:
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operating surplus
generated with respect to that period; less
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any net increase
in working capital borrowings with respect to such period;
less
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any net decrease
in cash reserves for operating expenditures with respect to such
period not relating to an operating expenditure made with
respect to that period; plus
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any net decrease
in working capital borrowings with respect to that period;
plus
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any net decrease
made in subsequent periods in cash reserves for operating
expenditures initially established with respect to such period
to the extent such decrease results in a reduction in adjusted
operating surplus in subsequent periods pursuant to the third
bullet point above; plus
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any net increase
in cash reserves for operating expenditures with respect to such
period required by any debt instrument for the repayment of
principal, interest or premium.
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Notwithstanding the foregoing, the subordination period will
automatically terminate, and all of the subordinated units will
convert into common units on a one-for-one basis, on the first
business day following the distribution of available cash to
partners in respect of any quarter that each of the following
tests are met:
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distributions of
available cash from operating surplus on the outstanding common
units, subordinated units and general partner units equaled or
exceeded $1.725 (150% of the annualized minimum quarterly
distribution) for the four-quarter period immediately preceding
such date;
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the adjusted
operating surplus (as defined in the partnership agreement) for
the four-quarter period immediately preceding that date equaled
or exceeded $1.725 (150% of the annualized minimum quarterly
distribution) on all of the outstanding common units and
subordinated units and the related distributions on the general
partner units during that period on a fully diluted basis;
and
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there are no
arrearages in payment of the minimum quarterly distribution on
the common units.
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If
the unitholders remove the general partner without cause, the
subordination period may also end before December 31, 2010.
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105
Incentive
Distributions
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Williams Partners
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WMZ
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Incentive distribution rights represent the right to receive an
increasing percentage of quarterly distributions of available
cash from operating surplus after the minimum quarterly
distribution and certain target distribution levels have been
achieved. The Williams Partners General Partner currently holds
the incentive distribution rights, but may transfer these rights
separately from its general partner interest, subject to
restrictions in the partnership agreement.
If,
for any quarter, Williams Partners has distributed available
cash from operating surplus to the common unitholders in an
amount equal to the minimum quarterly distribution, then,
subject to the proration and reduction described below, Williams
Partners will distribute any additional available cash from
operating surplus for that quarter among the unitholders and the
general partner in the following manner:
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Incentive distribution rights represent the right to receive an
increasing percentage of quarterly distributions of available
cash from operating surplus after the minimum quarterly
distribution and certain target distribution levels have been
achieved. WMZs general partner currently holds the
incentive distribution rights, but may transfer these rights
separately from its general partner interest, subject to
restrictions in the partnership agreement.
If,
for any quarter, WMZ has
distributed
available cash from operating surplus to the common and
subordinated unitholders in an amount equal to the minimum
quarterly distribution; and
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First, 98%
to all unitholders, pro rata, and 2% to the general partner,
until each unitholder receives a total of $0.4025 per unit for
that quarter (the first target distribution);
Second,
85% to all unitholders, pro rata, and 15% to the general
partner, until each unitholder receives a total of $0.4375 per
unit for that quarter (the second target
distribution);
Third,
75% to all unitholders, pro rata, and 25% to the general
partner, until each unitholder receives a total of $0.5250 per
unit for that quarter (the third target
distribution); and
Thereafter,
50% to all unitholders, pro rata, and 50% to the general
partner.
The percentage interests set forth above for the general partner
assume that the general partner maintains its 2% general partner
interest, that the general partner has not transferred the
incentive distribution rights and that Williams Partners does
not issue additional classes of equity securities, subject to
the proration of distributions described below.
On February 17, 2010, the Williams Partners General Partner
amended Williams Partners partnership agreement (the
2010 Amendment) to establish a new class of units
designated as Class C units. As of February 18, 2010,
there were 203,000,000 Class C units outstanding. The
Class C units were identical to Williams Partners
common units except that for the distribution with respect to
the first quarter of 2010, they received a prorated quarterly
distribution since they were not outstanding during the full
quarterly period. The Class C units automatically converted
to Williams Partners common units on May 10, 2010, the
first business day after the record date for the
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distributed
available cash from operating surplus on outstanding common
units in an amount necessary to eliminate any cumulative
arrearages in payment of the minimum quarterly distribution;
then
WMZ will distribute any additional available cash from operating
surplus for that quarter among the unitholders and the general
partner in the following manner:
First,
98% to all common and subordinated unitholders, pro rata, and 2%
to the general partner, until each common and subordinated
unitholder receives a total of $0.330625 per unit for that
quarter (the first target distribution);
Second,
85% to all common and subordinated unitholders, pro rata, and
15% to the general partner, until each common and subordinated
unit holder receives a total of $0.359375 per unit for that
quarter (the second target distribution);
Third,
75% to all common and subordinated unitholders, pro rata, and
25% to the general partner, until each common and subordinated
unitholder receives a total of $0.431250 per unit for that
quarter (the third target distribution); and
Thereafter,
50% to all common and subordinated unitholders, pro rata, and
50% to the general partner.
The
percentage interests set forth above for the general partner
include its 2% general partner interest and assume the general
partner has contributed any additional capital to maintain its
2% general partner interests and has not transferred its
incentive distribution rights.
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106
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Williams Partners
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WMZ
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distribution with respect to the first quarter of 2010.
Williams Partners also increased the capital account of the
Williams Partners General Partner to allow it to maintain its 2%
general partner interest and issued additional general partner
units to the general partner equal to 2/98th of the number of
Class C units issued.
The minimum quarterly distribution, the first target
distribution, the second target distribution and the third
target distribution are subject to adjustment as described below
in Adjustments to the Minimum Quarterly
Distribution and Target Distribution Levels.
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WMZs general partner, as the holder of WMZs
incentive distribution rights, has the right under the
partnership agreement to elect to relinquish the right to
receive incentive distributions based on the then- current
target distribution levels and to reset, at higher levels, the
minimum quarterly distribution amount and target distribution
levels upon which future incentive distributions to the general
partner will be based. The general partners right to reset
the minimum quarterly distribution amount and the target
distribution levels upon which the incentive distributions
payable to the general partner are based may initially be
exercised, without approval of the unitholders or the conflicts
committee of the board of directors of the general partner, at
any time when there are no subordinated units outstanding, and
WMZ has made incentive distributions to its general partner at
the highest level for each of the four consecutive fiscal
quarters ended immediately prior to the date of the reset and
the amount of each such distribution did not exceed adjusted
operating surplus for such quarter.
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Following a reset election, the new minimum quarterly
distribution amount (the reset minimum quarterly
distribution amount) and target distribution levels will
be higher than the minimum quarterly distribution amount and
target distribution levels prior to the reset, such that
incentive distributions to the general partner will be reduced
or eliminated until cash distributions per common unit following
the reset increase as described below.
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In
connection with the resetting of the minimum quarterly
distribution amount and the target distribution levels, and the
corresponding relinquishment by the general partner of its
incentive distribution payments based on the target distribution
levels prior to the reset, the general partner will be entitled
to receive a number of newly issued Class B common units. The
number of Class B common units that the general partner would be
entitled to receive in connection with a resetting of the
minimum quarterly distribution amount and the target
distribution levels then in effect will be determined in the
manner described below. The general partner would also
automatically receive the number of additional general partner
units necessary to maintain its then-current general partner
interest in light of the issuance of the Class B common units.
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Each Class B common unit will be convertible into one common
unit at the election of the holder of the Class B common unit at
any time following the first anniversary of the issuance of the
Class B common units. The issuance of the Class B common units
will be conditioned upon approval of the listing or
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107
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Williams Partners
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WMZ
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admission for trading of the common units into which the Class
B common units are convertible by the national securities
exchange on which the common units are then listed or admitted
for trading. Each Class B common unit will receive the same
level of distribution as a common unit on a pari passu
basis with other common unitholders.
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WMZs general partner may effect a reset in one of two
ways:
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Option
1 Following the reset, the general partner would
not receive any incentive distributions until WMZs
quarterly cash distribution per common unit exceeded 115% of the
reset minimum quarterly distribution amount. The average cash
distribution amount per common unit for the two consecutive
fiscal quarters ended immediately prior to the date of the reset
election (the Average Per Unit Distribution) would
become the reset minimum quarterly distribution amount.
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Option
2 Following the reset, the general partner would
receive an incentive distribution at the first (13%) incentive
distribution level, but would not receive incentive
distributions at the second (23%) or third (48%) incentive
distribution levels until WMZs quarterly cash distribution
per common unit exceeded the Average Per Unit Distribution. The
reset minimum quarterly distribution amount would be equal to
the Average Per Unit Distribution divided by 1.25.
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In
either case, the first, second and third target distribution
levels following the reset would be equal to 115%, 125% and
150%, respectively, of the reset minimum quarterly distribution
amount.
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The number of Class B common units that the general partner
would be entitled to receive from WMZ in connection with an
Option 1 Reset will be equal to (x) the average of the cash
distributions received by the general partner with respect to
its incentive distribution rights for the two consecutive fiscal
quarters ended immediately prior to the date of the reset,
divided by (y) the Average Per Unit Distribution.
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The
number of Class B common units that the general partner would be
entitled to receive from WMZ in connection with an Option 2
Reset will be equal to (x)(i) the average of the cash
distributions received by the general partner with respect to
its incentive distribution rights for the two consecutive fiscal
quarters ended immediately prior to the date of the reset
election minus (ii) the amount of the incentive distribution
that would be payable to the
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108
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Williams Partners
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WMZ
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general partner at the first (13%) incentive distribution level
following the reset election assuming that the quarterly
distribution to each common unit equaled the Average Per Unit
Distribution, divided by (y) the Average Per Unit Distribution.
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The
formulas required for calculating the number of Class B common
units that the general partner would be entitled to receive from
WMZ in connection with resetting of the minimum quarterly
distribution amount and the target distribution levels then in
effect are set forth in the partnership agreement.
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Following the reset of the minimum quarterly distribution amount
and the target distribution levels, WMZ would distribute all of
its available cash from operating surplus for each quarter as
follows:
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First, 98%
to all common unitholders, pro rata, and 2% to the general
partner, until each common unitholder receives an amount equal
to 115% of the reset minimum quarterly distribution amount for
that quarter;
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Second, 85%
to all common unitholders, pro rata, and 15% to the general
partner, until each common unitholder receives a total amount
per common unit equal to 125% of the reset minimum quarterly
distribution amount for that quarter;
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Third, 75%
to all common unitholders, pro rata, and 25% to the general
partner, until each common unitholder receives a total amount
per common unit equal to 150% of the reset minimum quarterly
distribution amount for that quarter; and
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Thereafter,
50% to all common unitholders, pro rata, and 50% to the general
partner.
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WMZs general partner will be entitled to cause the minimum
quarterly distribution amount and the target distribution levels
to be reset on more than one occasion. However, it may not make
a subsequent reset election following an Option 1 reset unless
the general partner has received incentive distributions for the
prior four consecutive fiscal quarters based on the highest
level of incentive distributions to which it is entitled at that
time under WMZs partnership agreement, and such
distributions did not exceed adjusted operating surplus for such
quarters. The general partner may not make an additional reset
election following an Option 2 reset unless it has received
incentive distributions for the prior six consecutive fiscal
quarters based on the highest level of incentive distributions
to which it is entitled at the time under the partnership
agreement, and such
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109
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Williams Partners
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WMZ
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distributions did not exceed adjusted operating surplus for
such quarters.
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Distributions
of Available Cash From Operating Surplus
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Williams Partners
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WMZ
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Williams Partners distributes available cash from operating
surplus with respect to any fiscal quarter in the following
manner:
First, 98% to
all unitholders, pro rata, and 2% to the general partner, until
Williams Partners distributes for each outstanding unit an
amount equal to the minimum quarterly distribution for that
quarter; and
Thereafter, in
the manner described in Incentive
Distributions above.
The preceding discussion is based on the assumption that the
general partner maintains its 2% general partner interest and
that Williams Partners does not issue additional classes of
equity securities.
The minimum quarterly distribution, the first target
distribution, the second target distribution and the third
target distribution are subject to adjustment as described below
in Adjustments to the Minimum Quarterly
Distribution and Target Distribution Levels.
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During the subordination period. Currently, WMZ
distributes available cash from operating surplus with respect
to any fiscal quarter in the following manner:
First, 98% to
the common unitholders, pro rata, and 2% to the general partner,
until WMZ distributes for each outstanding unit an amount equal
to the minimum quarterly distribution for that quarter;
Second, 98% to
the common unitholders, pro rata, and 2% to the general partner,
until WMZ distributes for each outstanding common unit an amount
equal to any arrearages in payment of the minimum quarterly
distribution on the common units for any prior quarters during
the subordination period;
Third, 98% to
the subordinated unitholders, pro rata, and 2% to the general
partner, until WMZ distributes for each subordinated unit an
amount equal to the minimum quarterly distribution for that
quarter; and
Thereafter, in
the manner described in Incentive
Distributions above.
The preceding discussion assumes that the general partner
maintains its 2% general partner interest and that WMZ does not
issue additional classes of equity securities.
After the subordination period. After the end
of the subordination period, WMZ will distribute available cash
from operating surplus with respect to any fiscal quarter in the
following manner:
First, 98% to
all unitholders, pro rata, and 2% to the general partner, until
WMZ distributes for each outstanding unit an amount equal to the
minimum quarterly distribution for that quarter; and
Thereafter, in
the manner described in Incentive
Distributions above.
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Distributions
of Available Cash From Capital Surplus
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Williams Partners
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WMZ
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Williams Partners will make distributions of available cash from
capital surplus, if any, in the following manner:
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WMZ will make distributions of available cash from capital
surplus, if any, in the following manner:
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First, 98%
to all unitholders, pro rata, and 2%
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First, 98%
to all unitholders, pro rata, and 2% to the general partner,
until WMZ has
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110
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Williams Partners
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WMZ
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to the general partner, until Williams Partners has
distributed, for each common unit that was issued in Williams
Partners initial public offering, an amount of available
cash from capital surplus equal to the initial public offering
price;
Second, 98%
to the common unitholders, pro rata, and 2% to the general
partner, until Williams Partners has distributed, for each
common unit, an amount of available cash from capital surplus
equal to any unpaid arrearages in payment of the minimum
quarterly distribution on the common units; and
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distributed, for each common unit that was issued in the
WMZs initial public offering, an amount of available cash
from capital surplus equal to the initial public offering
price;
Second, 98%
to the common unitholders, pro rata, and 2% to the general
partner, until WMZ has distributed, for each common unit, an
amount of available cash from capital surplus equal to any
unpaid arrearages in payment of the minimum quarterly
distribution on the common units; and
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Thereafter,
Williams Partners will make all distributions of available cash
from capital surplus as if they were from operating surplus.
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Thereafter,
WMZ will make all distributions of available cash from capital
surplus as if they were from operating surplus.
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The preceding discussion is based on the assumption that the
general partner maintains its 2% general partner interest and
that Williams Partners does not issue additional classes of
equity securities.
Williams Partners partnership agreement treats a
distribution of available cash from capital surplus as the
repayment of the initial unit price from Williams Partners
initial public offering, which is a return of capital. The
initial public offering price less any distributions of capital
surplus per unit is referred to in the partnership agreement as
unrecovered capital. Each time a distribution of capital surplus
is made, the minimum quarterly distribution and the target
distribution levels will be reduced in the same proportion as
the corresponding reduction in unrecovered capital. Because
distributions of capital surplus will reduce the minimum
quarterly distribution, after any of these distributions are
made it may be easier for the Williams Partners General Partner
to receive incentive distributions. However, any distribution of
capital surplus before unrecovered capital is reduced to zero
cannot be applied to the payment of the minimum quarterly
distribution or any arrearages.
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The preceding discussion is based on the assumption that the
general partner maintains its 2% general partner interest and
that WMZ does not issue additional classes of equity
securities.
WMZs partnership agreement treats a distribution of
available cash from capital surplus as the repayment of the
initial unit price from its initial public offering, which is a
return of capital. The initial public offering price less any
distributions of capital surplus per unit is referred to as the
unrecovered initial unit price. Each time a distribution of
capital surplus is made, the minimum quarterly distribution and
the target distribution levels will be reduced in the same
proportion as the corresponding reduction in the unrecovered
initial unit price. Because distributions of capital surplus
will reduce the minimum quarterly distribution, after any of
these distributions are made it may be easier for the general
partner to receive incentive distributions and for the
subordinated units to convert into common units. However, any
distribution of capital surplus before the unrecovered initial
unit price is reduced to zero cannot be applied to the payment
of the minimum quarterly distribution or any arrearages.
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Once Williams Partners distributes capital surplus on a unit in
an amount equal to the initial unit price, Williams Partners
will reduce the minimum quarterly distribution and target
distribution levels to zero and Williams Partners will then make
all future distributions from operating surplus, with 50% being
paid to the holders of units and 50% to the general partner. The
preceding discussion assumes that the general partner maintains
its 2% general partner interest, that the general partner has
not transferred the incentive distribution rights and that
Williams Partners does not issue additional classes of equity
securities.
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Once WMZ distributes capital surplus on a unit in an amount
equal to the initial unit price, WMZ will reduce the minimum
quarterly distribution and target distribution levels to zero
and WMZ will then make all future distributions from operating
surplus, with 50% being paid to the holders of units and 50% to
the general partner. The preceding discussion assumes that the
general partner maintains its 2% general partner interest, that
the general partner has not transferred the incentive
distribution rights and that WMZ does not issue additional
classes of equity securities.
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111
Adjustment
to the Minimum Quarterly Distribution and Target Distribution
Levels
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Williams Partners
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WMZ
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In addition to adjusting the minimum quarterly distribution and
target distribution levels to reflect a distribution of capital
surplus, if Williams Partners combines its units into fewer
units or subdivides its units into a greater number of units,
Williams Partners will proportionately adjust:
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In addition to adjusting the minimum quarterly distribution and
target distribution levels to reflect a distribution of capital
surplus, if WMZ combines its units into fewer units or
subdivides its units into a greater number of units, WMZ will
proportionately adjust:
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the minimum
quarterly distribution;
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the minimum
quarterly distribution;
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the target
distribution levels;
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the target
distribution levels;
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the unrecovered
capital; and
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the unrecovered
initial unit price;
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other amounts
calculated on a per unit basis.
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the number of
common units into which a subordinated unit is convertible;
and
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For example, if a
two-for-one
split of the common units should occur, the minimum quarterly
distribution, the target distribution levels and the unrecovered
capital would each be reduced to 50% of its level immediately
prior to the
two-
for-one
split. Williams Partners will not make any adjustment by reason
of the issuance of additional units for cash or property.
In addition, if legislation is enacted or if existing law is
modified or interpreted by a governmental taxing authority so
that Williams Partners becomes taxable as a corporation or
otherwise subject to taxation as an entity for federal, state or
local income tax purposes, Williams Partners will reduce the
minimum quarterly distribution and each of the target
distribution levels, respectively, for each quarter by
multiplying the amount thereof by a fraction, the numerator of
which is available cash for that quarter and the denominator of
which is the sum of available cash for such quarter plus the
general partners estimate of Williams Partners
aggregate liability for the quarter for such income taxes
payable by reason of such legislation or interpretation. To the
extent that the actual tax liability differs from the estimated
tax liability for any quarter, the difference will be accounted
for in subsequent quarters.
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other amounts
calculated on a per unit basis.
For example, if a two-for-one split of the common units should
occur, the minimum quarterly distribution, the target
distribution levels and the unrecovered initial unit price would
each be reduced to 50% of its level immediately prior to the
two-for-one split and each subordinated unit would be
convertible into two common units. WMZ will not make any
adjustment by reason of the issuance of additional units for
cash or property.
In addition, if legislation is enacted or if existing law is
modified or interpreted by a governmental taxing authority so
that WMZ becomes taxable as a corporation or otherwise subject
to taxation as an entity for federal, state or local income tax
purposes, WMZs general partner may reduce the minimum
quarterly distribution and each of the target distribution
levels, respectively, for each quarter by multiplying the amount
thereof by a fraction, the numerator of which is available cash
for that quarter and the denominator of which is the sum of
available cash for such quarter plus the general partners
estimate of WMZs aggregate liability for the quarter for
such income taxes payable by reason of such legislation or
interpretation. To the extent that the actual tax liability
differs from the estimated tax liability for any quarter, the
difference will be accounted for in subsequent quarters.
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Distributions
of Cash Upon Liquidation
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Williams Partners
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WMZ
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If Williams Partners dissolves in accordance with its
partnership agreement, Williams Partners will sell or otherwise
dispose of its assets in a process called liquidation. Williams
Partners will first apply the proceeds of liquidation to the
satisfaction (whether by payment or the making of reasonable
provision for the payment) of liabilities to its creditors.
Williams Partners will distribute any remaining proceeds to the
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If WMZ dissolves in accordance with its partnership agreement,
it will sell or otherwise dispose of its assets in a process
called liquidation. WMZ will first apply the proceeds of
liquidation to the satisfaction (whether by payment or the
making of reasonable provision for the payment) of liabilities
to its creditors. WMZ will distribute any remaining proceeds to
the common and subordinated unitholders
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112
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Williams Partners
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WMZ
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unitholders and the general partner in accordance with their
capital account balances, as adjusted to reflect any gain or
loss upon the sale or other disposition of Williams
Partners assets in liquidation.
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and the general partner in accordance with their capital
account balances, as adjusted to reflect any gain or loss upon
the sale or other disposition of WMZs assets in
liquidation.
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The manner of the adjustment is set forth in Williams
Partners partnership agreement. Williams Partners will
allocate any gain in the following manner:
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The
manner of adjustment is set forth in WMZs partnership
agreement. If WMZs liquidation occurs before the end of
the subordination period, WMZ will allocate any gain in the
following manner:
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First, to
the general partner and the holders of units who have negative
balances in their capital accounts to the extent of and in
proportion to those negative balances;
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First, to
its general partner and the holders of units who have negative
balances in their capital accounts to the extent of and in
proportion to those negative balances;
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Second, 98%
to the common unitholders, pro rata, and 2% to the general
partner, until the capital account for each common unit is equal
to the sum of:
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Second, 98%
to the common unitholders, pro rata, and 2% to the general
partner, until the capital account for each common unit is equal
to the sum of:
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the unrecovered
capital for that common unit; plus
the
amount of the minimum quarterly distribution for the quarter
during which liquidation occurs, reduced by any distribution
from operating surplus with respect to such unit for such
quarter;
Third,
98% to all unitholders, pro rata, and 2% to the general partner,
until Williams Partners allocates under this paragraph an amount
per unit equal to:
the
sum of the excess of the first target distribution per unit over
the minimum quarterly distribution per unit for each quarter of
Williams Partners existence; less
the
cumulative amount per unit of any distributions of available
cash from operating surplus in excess of the minimum quarterly
distribution per unit that Williams Partners distributed 98% to
the unitholders, pro rata, and 2% to the general partner, for
each quarter of Williams Partners existence;
Fourth,
85% to all unitholders, pro rata, and 15% to the general partner
until Williams Partners allocates under this paragraph an amount
per unit equal to:
the
sum of the excess of the second target distribution per unit
over the first target distribution per unit for each quarter of
Williams Partners existence; less
the
cumulative amount per unit of any distributions of available
cash from operating surplus in excess of the first target
distribution per unit that Williams Partners distributed 85% to
the unitholders, pro rata,
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the unrecovered
initial unit price; plus
the
amount of the minimum quarterly distribution for the quarter
during which liquidation occurs; plus
any
unpaid arrearages in payment of the minimum quarterly
distribution;
Third,
if the adjusted capital account of a common unit and a Class B
unit (or converted Class B unit) are not identical, 98% to the
unitholders holding the class of units with the lower adjusted
capital account, pro rata, and 2% to the general partner, until
the adjusted capital account of each common unit and each Class
B unit (or converted Class B unit) are equal;
Fourth,
98% to the subordinated unitholders, pro rata, and 2% to the
general partner until the capital account for each subordinated
unit is equal to the sum of:
the
unrecovered initial unit price; plus
the
amount of the minimum quarterly distribution for the quarter
during which liquidation occurs, reduced by any distribution
from operating surplus with respect to such subordinated unit
for such quarter;
Fifth,
98% to all common and subordinated unitholders, pro rata, and 2%
to the general partner, until WMZ allocates under this paragraph
an amount per common unit equal to:
the
sum of the excess of the first target distribution per common
unit over the minimum quarterly distribution per common unit for
each quarter of WMZs existence; less
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113
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Williams Partners
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WMZ
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and 15% to the general partner for each quarter of Williams
Partners existence;
Fifth, 75%
to all unitholders, pro rata, and 25% to the general partner,
until Williams Partners allocates under this paragraph an amount
per unit equal to:
the
sum of the excess of the third target distribution per unit over
the second target distribution per unit for each quarter of
Williams Partners existence; less
the
cumulative amount per unit of any distributions of available
cash from operating surplus in excess of the second target
distribution per unit that Williams Partners distributed 75% to
the unitholders, pro rata, and 25% to the general partner for
each quarter of Williams Partners existence; and
Thereafter,
50% to all unitholders, pro rata, and 50% to the general
partner.
The percentage interests set forth above for the general partner
assume the general partner maintains its 2% general partner
interest, that the general partner has not transferred the
incentive distribution rights and that Williams Partners does
not issue additional classes of equity securities.
Upon Williams Partners liquidation, Williams Partners will
generally allocate any loss to the general partner and the
unitholders in the following manner:
First,
98% to the holders of common units in proportion to the positive
balances in their capital accounts and 2% to the general
partner, until the capital accounts of the common unitholders
have been reduced to zero; and
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the cumulative
amount per common unit of any distributions of available cash
from operating surplus in excess of the minimum quarterly
distribution per common unit that WMZ distributed 98% to the
common and subordinated unitholders, pro rata, and 2% to the
general partner, for each quarter of WMZs existence;
Sixth,
85% to all common and subordinated unitholders, pro rata, and
15% to the general partner, until WMZ allocates under this
paragraph an amount per common unit equal to:
the
sum of the excess of the second target distribution per common
unit over the first target distribution per common unit for each
quarter of WMZs existence; less
the
cumulative amount per common unit of any distributions of
available cash from operating surplus in excess of the first
target distribution per common unit that WMZ distributed 85% to
the common and subordinated unitholders, pro rata, and 15% to
the general partner for each quarter of WMZs existence;
Seventh,
75% to all common and subordinated unitholders, pro rata, and
25% to the general partner, until WMZ allocates under this
paragraph an amount per common unit equal to:
the
sum of the excess of the third target distribution over the
second target distribution per common unit for each quarter of
WMZs existence; less
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Thereafter,
100% to the general partner.
The percentage interests set forth above for the general partner
assume that the general partner maintains its 2% general partner
interest, that the general partner has not transferred the
incentive distribution rights and that Williams Partners does
not issue additional classes of equity securities.
In addition, Williams Partners will make adjustments to capital
accounts upon the issuance of additional units. In doing so,
Williams Partners will allocate any unrealized and, for tax
purposes, unrecognized gain or loss resulting from the
adjustments to the unitholders and the general partner in the
same manner that a gain or loss is allocated upon liquidation.
In the event that positive adjustments are made to the capital
accounts upon the issuance of additional units, Williams
Partners will allocate any later negative
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the cumulative
amount per common unit of any distributions of available cash
from operating surplus in excess of the second target
distribution per common unit that WMZ distributed 75% to the
common and subordinated unitholders, pro rata, and 25% to the
general partner for each quarter of WMZs existence; and
Thereafter,
50% to all common and subordinated unitholders, pro rata, and
50% to the general partner.
The percentage interests set forth above for the general partner
include its 2% general partner interest and assume the general
partner has not transferred the incentive distribution
rights.
If liquidation occurs after the end of the subordination period,
the distinction between common units and subordinated units will
disappear, so that the third clause of the second bullet point
above and all of the
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Williams Partners
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WMZ
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adjustments to the capital accounts resulting from the issuance
of additional units or upon liquidation in a manner which
results, to the extent possible, in the general partners
capital account balances equaling the amount which they would
have been if no earlier positive adjustments to the capital
accounts had been made.
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fourth bullet point above will no longer be applicable.
If
liquidation occurs before the end of the subordination period,
WMZ will generally allocate any loss in the following manner:
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First, 98%
to the holders of subordinated units in proportion to the
positive balances in their capital accounts and 2% to the
general partner, until the capital accounts of the subordinated
unitholders have been reduced to zero;
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Second, if
the adjusted capital account of a common unit and a Class B unit
(or converted Class B unit) are not identical, 98% to the
unitholders holding the class of units with the higher adjusted
capital account, pro rata, and 2% to the general partner, until
the adjusted capital account of each common unit and each Class
B unit (or converted Class B unit) are equal;
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Third, 98%
to all unitholders in proportion to the positive balances in
their capital accounts and 2% to the general partner, until the
capital accounts of all units then outstanding have been reduced
to zero; and
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Thereafter,
100% to the general partner.
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If
the liquidation occurs after the end of the subordination
period, the distinction between common units and subordinated
units will disappear, so that all of the first bullet point
above will no longer be applicable.
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In
addition, WMZ will make adjustments to capital accounts upon the
issuance of additional units. In doing so, WMZ will allocate any
unrealized and, for tax purposes, unrecognized gain or loss
resulting from the adjustments to the common and subordinated
unitholders and the general partner in the same manner that a
gain or loss is allocated upon liquidation. In the event that
positive adjustments are made to the capital accounts upon the
issuance of additional units, WMZ will allocate any later
negative adjustments to the capital accounts resulting from the
issuance of additional units or upon liquidation in a manner
which results, to the extent possible, in the general
partners capital account balances equaling the amount
which they would have been if no earlier positive adjustments to
the capital accounts had been made.
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115
Merger/Consolidation
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Williams Partners
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WMZ
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Merger or consolidation of Williams Partners requires the prior
consent of its general partner. The general partner must also
approve the merger agreement, which must include certain
information as set forth in Williams Partners partnership
agreement. Subject to certain exceptions set forth in Williams
Partners partnership agreement and described below, once
approved by the general partner, the merger agreement must be
submitted to a vote of the limited partners, and the merger
agreement will be approved upon receipt of the affirmative vote
or consent of a majority of the outstanding common units.
The
general partner may consummate any merger or consolidation
without the prior approval of unitholders if the general partner
has received an opinion of counsel that the merger or
consolidation, as the case may be, would not result in the loss
of limited liability of any limited partner or cause Williams
Partners to be treated as an association taxable as a
corporation or otherwise to be taxed as an entity for federal
income tax purposes, the transaction would not result in an
amendment to Williams Partners partnership agreement that
could not otherwise be adopted solely by the general partner,
Williams Partners is the surviving entity, each unit outstanding
immediately prior to the transaction will be identical following
the merger or consolidation and the units to be issued do not
exceed 20% of Williams Partners outstanding partnership
securities immediately prior to the transaction.
In
addition, if certain conditions in Williams Partners
partnership agreement are satisfied, the general partner may
convert Williams Partners or any of its subsidiaries into a new
limited liability entity or merge Williams Partners or any of
its subsidiaries into, or convey some or all of Williams
Partners assets to, a newly formed entity if the general
partner has received an opinion of counsel regarding limited
liability and tax matters, the sole purpose of such conversion,
merger or conveyance is to effect a mere change in the legal
form of the partnership into another limited liability entity
and the governing instruments of the new entity provide the
limited partners and the general partner with the same rights
and obligations as contained in Williams Partners
partnership agreement.
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Merger, consolidation or conversion of WMZ requires the prior
consent of its general partner. The general partner must also
approve the merger agreement or plan of conversion, which must
include certain information as set forth in WMZs
partnership agreement. Subject to certain exceptions set forth
in WMZs partnership agreement and described below, once
approved by the general partner, the merger agreement or plan of
conversion must be submitted to a vote of WMZs limited
partners, and the merger agreement or plan of conversion will be
approved upon receipt of the affirmative vote or consent of a
majority of WMZs outstanding common units (excluding
common units held by the general partner and its affiliates),
voting as a class, and a majority of the outstanding
subordinated units, voting as a class. After the subordination
period, at least a majority of the outstanding common units and
Class B units, if any, voting as a single class, will be
required to approve a merger agreement or plan of conversion.
The
general partner may consummate any merger or consolidation
without the prior approval of unitholders if the general partner
has received an opinion of counsel that the merger or
consolidation, as the case may be, would not result in the loss
of limited liability of any limited partner or cause the
partnership to be treated as an association taxable as a
corporation or otherwise to be taxed as an entity for federal
income tax purposes, the transaction would not result in an
amendment to the partnership agreement that could not otherwise
be adopted solely by the general partner, the partnership is the
surviving entity, each unit outstanding immediately prior to the
transaction will be substantially identical following the merger
or consolidation and the units to be issued do not exceed 20% of
WMZs outstanding partnership securities immediately prior
to the transaction.
In
addition, if certain conditions in the partnership agreement are
satisfied, the general partner may convert WMZ or any of its
subsidiaries into a new limited liability entity or merge WMZ or
any of its subsidiaries into, or convey some or all of
WMZs assets to, a newly formed entity if the general
partner has received an opinion of counsel regarding limited
liability and tax matters, the sole purpose of such conversion,
merger or conveyance is to effect a mere change in the legal
form of the partnership into another limited liability entity
and the governing instruments of the new entity provide the
limited partners and the general partners with substantially the
same rights and obligations as contained in WMZs
partnership agreement.
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116
Disposal
of Assets
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Williams Partners
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WMZ
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The Williams Partners General Partner generally may not, without
the prior approval of a majority of Williams Partners
outstanding units, sell, exchange or otherwise dispose of all or
substantially all the assets of Williams Partners in a single
transaction or a series of related transactions. However, the
Williams Partners General Partner may mortgage, pledge,
hypothecate or grant a security interest in all or substantially
all of Williams Partners assets without that approval. In
addition, the general partner may sell any or all of Williams
Partners assets in a forced sale pursuant to the
foreclosure of, or other realization upon, any such encumbrance
without the approval of Williams Partners unitholders.
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WMZs general partner generally may not, without the prior
approval of a majority of WMZs outstanding common units
(excluding common units owned by the general partner or its
affiliates) and a majority of WMZs outstanding
subordinated units, voting as separate classes, sell, exchange
or otherwise dispose of all or substantially all the assets of
WMZ in a single transaction or a series of related transactions.
However, WMZs general partner may mortgage, pledge,
hypothecate or grant a security interest in all or substantially
all of WMZs assets without that approval. In addition, the
general partner may sell any or all of WMZs assets in a
forced sale pursuant to the foreclosure of, or other realization
upon, any such encumbrance without the approval of WMZs
unitholders.
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Transfer
of General Partner Interest
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Williams Partners
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WMZ
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Prior to June 30, 2015, the Williams Partners General
Partner may not transfer all or any part of its general partner
interest in Williams Partners unless such transfer (a) has
been approved by the prior written consent or vote of at least a
majority of the outstanding common units (excluding any common
units held by the general partner and its affiliates) or
(b) is of all, but not less than all, of its general
partner interest to (i) an affiliate of the general partner
or (ii) another person in connection with the merger or
consolidation of the general partner with or into such other
person or the transfer by the general partner of all or
substantially all of its assets to such other person.
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Prior to December 31, 2017, WMZs general partner may not
transfer all or any part of its general partner interest in WMZ
unless such transfer (a) has been approved by the prior written
consent or vote of at least a majority of the outstanding common
units (excluding any common units held by the general partner
and its affiliates) or (b) is of all, but not less than all, of
its general partner interest to (i) an affiliate of the general
partner or (ii) another person in connection with the merger or
consolidation of the general partner with or into such person or
the transfer by the general partner of all or substantially all
of its assets to such other person.
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On or after June 30, 2015, the Williams Partners General
Partner may transfer all or any of its general partner interest
in Williams Partners without unitholder approval.
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On or after December 31, 2017, WMZs general partner may
transfer all or any of its general partner interest in WMZ
without unitholder approval.
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Withdrawal
of General Partner
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Williams Partners
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WMZ
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The Williams Partners General Partner has agreed not to withdraw
voluntarily as the general partner prior to June 30, 2015
without first providing 90 days advance written
notice and obtaining the approval of a majority of Williams
Partners outstanding common units, excluding those held by
the general partner and its affiliates, and furnishing an
opinion of counsel stating that such withdrawal (following the
selection of the successor general partner) would not result in
the loss of the limited liability of any of Williams
Partners limited partners or subsidiaries or cause
Williams Partners or any of its subsidiaries to be treated as an
association taxable as a corporation or
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WMZs general partner has agreed not to withdraw
voluntarily as the general partner prior to December 31, 2017
without first providing 90 days advance written
notice and obtaining the approval of a majority of WMZs
outstanding common units, excluding those held by the general
partner and its affiliates, and furnishing an opinion of counsel
stating that such withdrawal (following the selection of the
successor general partner) would not result in the loss of the
limited liability of any of WMZs limited partners or
subsidiaries or cause WMZ or any of its subsidiaries to be
treated as an association taxable as
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117
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Williams Partners
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WMZ
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otherwise to be taxed as an entity for federal income tax
purposes.
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a corporation or otherwise to be taxed as an entity for federal
income tax purposes.
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At any time after June 30, 2015, the Williams Partners
General Partner may withdraw as general partner without first
obtaining approval of any unitholder by giving
90 days advance written notice, and that withdrawal
will not constitute a breach of Williams Partners
partnership agreement. In addition, the general partner may
withdraw without unitholder approval upon 90 days
notice to Williams Partners limited partners if at least
50% of Williams Partners outstanding common units are held
or controlled by one person and its affiliates other than the
general partner and its affiliates.
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At any time after December 31, 2017, WMZs general partner
may withdraw as general partner without first obtaining approval
of any unitholder by giving 90 days advance written
notice, and that withdrawal will not constitute a breach of
WMZs partnership agreement. In addition, the general
partner may withdraw without unitholder approval upon
90 days notice to WMZs limited partners if at
least 50% of WMZs outstanding common units are held or
controlled by one person and its affiliates other than the
general partner and its affiliates.
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Upon the voluntary withdrawal of the Williams Partners General
Partner, the holders of a majority of Williams Partners
outstanding common units may elect a successor to the
withdrawing general partner. If a successor is not elected, or
is elected but an opinion of counsel regarding limited liability
and tax matters cannot be obtained, Williams Partners will be
dissolved, wound up and liquidated, unless within a specified
time period after that withdrawal, the holders of a majority of
Williams Partners outstanding units agree to continue
Williams Partners business and to appoint a successor
general partner.
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Upon the voluntary withdrawal of WMZs general partner, the
holders of a majority of WMZs outstanding common units,
excluding the units held by the withdrawing general partner and
its affiliates, and subordinated units, voting as separate
classes, may elect a successor to the withdrawing general
partner. If a successor is not elected, or is elected but an
opinion of counsel regarding limited liability and tax matters
cannot be obtained, WMZ will be dissolved, wound up and
liquidated, unless within a specified time period after that
withdrawal, the holders of a majority of WMZs outstanding
common units (excluding those held by the general partner or its
affiliates), and subordinated units, voting as separate classes,
agree to continue WMZs business and to appoint a successor
general partner.
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Removal
of General Partner
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Williams Partners
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WMZ
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The Williams Partners General Partner may not be removed unless
that removal is approved by the vote of the holders of not less
than
662/3%
of Williams Partners outstanding units, voting together as
a single class, including units held by the general partner and
its affiliates, and Williams Partners receives an opinion of
counsel regarding limited liability and tax matters. In
addition, any removal of the general partner is also subject to
the approval of a successor general partner by the vote of the
holders of a majority of Williams Partners outstanding
common units, including units held by the general partner and
its affiliates.
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WMZs general partner may not be removed unless that
removal is approved by the vote of the holders of not less than
662/3%
of WMZs outstanding units, voting together as a single
class, including units held by the general partner and its
affiliates, and WMZ receives an opinion of counsel regarding
limited liability and tax matters. In addition, any removal of
the general partner is also subject to the approval of a
successor general partner by the vote of the holders of a
majority of WMZs outstanding common units and Class B
units, if any, voting as a single class, and a majority of the
outstanding subordinated units voting as a class (including, in
each case, units held by the general partner and its
affiliates).
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If the general partner is removed under circumstances where
cause does not exist, and units held by the general partner and
its affiliates are not voted in favor of that removal, the
general partner will have the right to convert its general
partner interest and its incentive distribution rights into
common units or to receive cash in exchange for those interests
based on
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If
the general partner is removed under circumstances where cause
does not exist and units held by the general partner and its
affiliates are not voted in favor of such a removal:
the subordination
period will end, and all outstanding subordinated units will
immediately
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Williams Partners
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WMZ
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the fair market value of the interests at the time.
While Williams Partners partnership agreement limits the
ability of the general partner to withdraw, it allows the
general partner interest to be transferred to an affiliate or to
a third party as part of the merger or consolidation of the
general partner with or into another entity or the transfer by
the general partner of all or substantially all of its assets to
another entity.
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and automatically convert into common units on a one-for-one
basis;
any existing
arrearages in payment of the minimum quarterly distribution on
the common units will be extinguished; and
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the general
partner will have the right to convert its general partner
interest and its incentive distribution rights into common units
or to receive cash in exchange for those interests based on the
fair market value of those interests at that time.
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While
WMZs partnership agreement limits the ability of its
general partner to withdraw, it allows the general partner
interest to be transferred to an affiliate or to a third party
as part of the merger or consolidation of the general partner
with or into another entity or the transfer by the general
partner of all or substantially all of its assets to another
entity.
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Limited
Call Rights
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Williams Partners
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WMZ
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If at any time the Williams Partners General Partner and its
affiliates hold more than 80% of the then-issued and outstanding
limited partner interests of any class, the general partner will
have the right, which it may assign in whole or in part to its
affiliates or to Williams Partners, to purchase all, but not
less than all, of the outstanding limited partner interests of
that class that are held by unaffiliated persons as of a record
date to be selected by the general partner, on at least 10 but
not more than 60 days notice. The purchase price in
the event of a purchase under these provisions would be the
greater of (1) the current market price (as defined in
Williams Partners partnership agreement) of the limited
partner interests of the class as of the date three days before
the date the notice is mailed to the limited partners as
provided in Williams Partners partnership agreement and
(2) the highest price paid by the general partner or any of
its affiliates for any limited partner interest of the class
purchased within the 90 days preceding the date the general
partner mails notice of its election to purchase the units.
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If at any time WMZs general partner and its affiliates
hold more than 75% of the then-issued and outstanding limited
partner interests of any class, the general partner will have
the right, which it may assign in whole or in part to its
affiliates or to WMZ, to purchase all, but not less than all, of
the outstanding limited partner interests of that class that are
held by unaffiliated persons as of a record date to be selected
by the general partner, on at least 10 but not more than
60 days notice. The purchase price in the event of a
purchase under these provisions would be the greater of (1) the
current market price (as defined in WMZs partnership
agreement) of the limited partner interests of the class as of
the date three days before the date the notice is mailed to the
limited partners as provided in WMZs partnership agreement
and (2) the highest price paid by the general partner or any of
its affiliates for any limited partner interest of the class
purchased within the 90 days preceding the date the general
partner mails notice of its election to purchase the units.
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119
Limited
Preemptive Rights
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Williams Partners
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WMZ
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The Williams Partners General Partner has the right, which it
may from time to time assign in whole or in part to any of its
affiliates, to purchase partnership securities from Williams
Partners whenever, and on the same terms that, Williams Partners
issues partnership securities to persons other than the general
partner and its affiliates, to the extent necessary to maintain
the percentage interests of the general partner and its
affiliates equal to that which existed immediately prior to the
issuance of such partnership securities. The holders of common
units have no preemptive rights to acquire additional common
units or other partnership interest in Williams Partners.
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WMZs general partner has the right, which it may from time
to time assign in whole or in part to any of its affiliates, to
purchase partnership securities from WMZ whenever, and on the
same terms that, WMZ issues partnership securities to persons
other than the general partner and its affiliates, to the extent
necessary to maintain the percentage interests of the general
partner and its affiliates equal to that which existed
immediately prior to the issuance of such partnership
securities. The holders of common units have no preemptive
rights to acquire additional common units or other partnership
interest in WMZ.
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Amendment
of Partnership Agreement
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Williams Partners
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WMZ
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Amendments to Williams Partners partnership agreement may
be proposed only by the general partner. However, the general
partner will have no duty or obligation to propose any amendment
and may decline to do so free of any fiduciary duty or
obligation whatsoever to Williams Partners or its limited
partners, including any duty to act in good faith or in the best
interests of Williams Partners or its limited partners. Any
amendment that materially and adversely affects the rights or
preferences of any type or class of limited partner interests or
the general partner interest in relation to other types or
classes of limited partner interests or the general partner
interest will require the approval of at least a majority of the
type or class of limited partner interests or general partner
interests so affected. However, in some circumstances, more
particularly described in Williams Partners partnership
agreement, the general partner may make amendments to Williams
Partners partnership agreement without the approval of the
limited partners or assignees to reflect:
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Amendments to WMZs partnership agreement may be proposed
only by WMZs general partner. However, the general partner
will have no duty or obligation to propose any amendment and may
decline to do so free of any fiduciary duty or obligation
whatsoever to WMZ or its limited partners, including any duty to
act in good faith or in the best interests of WMZ or the limited
partners. Any amendment that materially and adversely affects
the rights or preferences of any type or class of limited
partner interests or the general partner interest in relation to
other types or classes of limited partner interests or the
general partner interest will require the approval of at least a
majority of the type or class of limited partner interests or
general partner interests so affected. However, in some
circumstances, more particularly described in WMZs
partnership agreement, the general partner may make amendments
to WMZs partnership agreement without the approval of the
limited partners or assignees to reflect:
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a change in the name of Williams
Partners, the location of its principal place of business, its
registered agent or its registered office;
the
admission, substitution, withdrawal or removal of partners;
a change that the general partner
determines to be necessary or appropriate to qualify or continue
Williams Partners qualification as a limited partnership
or a partnership in which the limited partners have limited
liability under the laws of any state or to ensure that neither
Williams Partners nor its operating company or subsidiaries will
be treated as an association taxable as a corporation or
otherwise taxed as an entity for federal income tax
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a change in the name of
WMZ, the location of its principal place of business, its
registered agent or its registered office;
the
admission, substitution, withdrawal or removal of partners;
a
change that the general partner determines to be necessary or
appropriate to qualify or continue WMZs qualification as a
limited partnership or a partnership in which the limited
partners have limited liability under the laws of any state or
to ensure that neither WMZ nor its operating company nor
Northwest Pipeline nor any of their subsidiaries will be treated
as an association taxable as a corporation or otherwise taxed as
an
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Williams Partners
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WMZ
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purposes;
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entity for federal income tax purposes;
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a change that the general
partner determines does not adversely affect the limited
partners (or any particular class of limited partners) in any
material respect;
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a change that the
general partner determines does not adversely affect the limited
partners (or any particular class of limited partners) in any
material respect;
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a change that the general
partner determines to be necessary or appropriate to
(a) satisfy any requirements conditions or guidelines
contained in any opinion, directive, order, ruling or regulation
of any federal or state agency or judicial authority or
contained in any federal or state statute or (b) facilitate
the trading of Williams Partners limited partner interests
or to comply with any rule, regulation, guideline or requirement
of any national securities exchange on which the limited partner
interests are or will be listed for trading;
a
change that the general partner determines to be necessary or
appropriate in connection with splits or combinations of
partnership securities;
a
change required to effect the intent of the provisions of
Williams Partners partnership agreement or otherwise
contemplated by the partnership agreement;
a
change in Williams Partners fiscal year or taxable year
and any changes that the general partner determines are
necessary or appropriate as a result of a change in Williams
Partners fiscal year or taxable year;
an
amendment that is necessary, in the opinion of counsel, to
prevent Williams Partners, or its general partner or its
directors, officers, trustees or agents from in any manner being
subjected to the provisions of the Investment Company Act of
1940, as amended, the Investment Advisers Act of 1940, as
amended, or plan asset regulations adopted under the
Employee Retirement Income Security Act of 1974, as amended,
whether or not substantially similar to plan asset regulations
currently applied or proposed;
an
amendment that the general partner determines to be necessary or
appropriate in connection with the authorization or issuance of
any class or series of partnership securities;
any
amendment expressly permitted by Williams Partners
partnership agreement to be made by the general partner acting
alone;
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a change that the
general partner determines to be necessary or appropriate to (a)
satisfy any requirements conditions or guidelines contained in
any opinion, directive, order, ruling or regulation of any
federal or state agency or judicial authority or contained in
any federal or state statute or (b) facilitate the trading of
WMZs limited partner interests or to comply with any rule,
regulation, guideline or requirement of any national securities
exchange on which the limited partner interests are or will be
listed for trading;
a
change that the general partner determines to be necessary or
appropriate in connection with splits or combinations of
partnership securities;
a
change required to effect the intent of the provisions of
WMZs partnership agreement or otherwise contemplated by
the partnership agreement;
a
change in WMZs fiscal year or taxable year and any changes
that the general partner determines are necessary or appropriate
as a result of a change in WMZs fiscal year or taxable
year;
an
amendment that is necessary, in the opinion of counsel, to
prevent WMZ, or its general partner or its directors, officers,
trustees or agents from in any manner being subjected to the
provisions of the Investment Company Act of 1940, as amended,
the Investment Advisers Act of 1940, as amended, or plan
asset regulations adopted under the Employee Retirement
Income Security Act of 1974, as amended, whether or not
substantially similar to plan asset regulations currently
applied or proposed;
an
amendment that the general partner determines to be necessary or
appropriate in connection with the authorization or issuance of
any class or series of partnership securities or rights to
acquire partnership securities, including any amendment that the
general partner determines is necessary or appropriate in
connection with (a) the adjustments of the minimum quarterly
distribution, first target distribution, second target
distribution and third target distribution; (b) the
implementation of the provisions relating to the general
partners right to reset its incentive distribution rights
in
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an amendment effected,
necessitated or contemplated by a merger agreement approved in
accordance with Williams Partners partnership
agreement;
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Williams Partners
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WMZ
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an amendment that the
Williams Partners General Partner determines to be necessary or
appropriate to reflect and account for the formation by Williams
Partners of, or an investment by Williams Partners in, any
corporation, partnership, joint venture, limited liability
company or other entity in connection with the conduct by
Williams Partners of activities permitted by Williams
Partners partnership agreement;
a
merger or conveyance to effect a change in Williams
Partners legal form; or
any
other amendments substantially similar to the foregoing.
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exchange for Class B units and additional general partner units
and; (c) any modifications to the incentive distribution rights
made in connection with the issuance of additional partnership
securities or rights to acquire partnership securities, provided
that any such modifications and related issuance of partnership
securities have received approval by a majority of the members
of the conflicts committee of the general partners board
of directors;
any amendment expressly
permitted by WMZs partnership agreement to be made by its
general partner acting alone;
an
amendment effected, necessitated or contemplated by a merger
agreement approved in accordance with WMZs partnership
agreement;
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Proposed amendments (other than those described above) must be
approved by the general partner and the holders of at least a
majority of the outstanding common units, unless a greater or
different percentage is required under Williams Partners
partnership agreement or by Delaware law. No provision of
Williams Partners partnership agreement that establishes a
percentage of outstanding units (including units deemed owned by
the general partner) required to take any action may be amended,
altered, changed, repealed or rescinded to reduce such voting
percentage unless such amendment is approved by the written
consent or the affirmative vote of holders of outstanding units
whose aggregate outstanding units constitute not less than the
voting requirement sought to be reduced.
No amendment to Williams Partners partnership agreement
(other than those that may be made by the general partner
without the approval of Williams Partners limited
partners) may enlarge the obligations of any limited partner
without its consent unless approved by at least a majority of
the type or class of limited partner interests so affected or
enlarge the obligations of, restrict in any way any action by or
rights of, or reduce in any way the amounts distributable,
reimbursable or otherwise payable to the general partner or any
of its affiliates, without the consent of the general partner,
which may be given or withheld at its option.
No amendment to the partnership agreement (other than those that
may be made by the general partner without the approval of
Williams Partners limited partners) will become effective
without the approval of the holders of at least 90% of the
outstanding units voting together as a single class unless
Williams Partners obtain an opinion of counsel to the effect
that such amendment will not affect the limited liability of any
limited partner under applicable law.
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an amendment that
WMZs general partner determines to be necessary or
appropriate to reflect and account for the formation by WMZ of,
or an investment by WMZ in, any corporation, partnership, joint
venture, limited liability company or other entity in connection
with the conduct by WMZ of activities permitted by its
partnership agreement;
a
merger or conveyance to effect a change in WMZs legal
form; or
any
other amendments substantially similar to the foregoing.
Proposed amendments (other than those described above) must be
approved by the general partner and the holders of at least a
majority of the outstanding common units (excluding common units
owned by the general partner and its affiliates), voting as a
class, and at least a majority of the outstanding subordinated
units, voting as a class, unless a greater or different
percentage is required under WMZs partnership agreement or
by Delaware law. No provision of the partnership agreement that
establishes a percentage of outstanding units (including units
deemed owned by the general partner) required to take any action
may be amended, altered, changed, repealed or rescinded to
reduce such voting percentage unless such amendment is approved
by the written consent or the affirmative vote of holders of
outstanding units whose aggregate outstanding units constitute
not less than the voting requirement sought to be reduced.
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No
amendment to the partnership agreement (other than those that
may be made by the general partner without the approval of
WMZs limited partners) may enlarge the obligations of any
limited partner without its consent unless approved by at least
a majority of
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Williams Partners
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WMZ
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the type or class of limited partner interests so affected or
enlarge the obligations of, restrict in any way any action by or
rights of, or reduce in any way the amounts distributable,
reimbursable or otherwise payable to the general partner or any
of its affiliates, without the consent of the general partner,
which may be given or withheld at its option.
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No
amendment to the partnership agreement (other than those that
may be made by the general partner without the approval of
WMZs limited partners) will become effective without the
approval of the holders of at least 90% of the outstanding units
voting together as a single class unless WMZ obtains an opinion
of counsel to the effect that such amendment will not affect the
limited liability of any limited partner under applicable law.
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Dissolution
of the Partnership
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Williams Partners
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WMZ
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Williams Partners will be dissolved, and its affairs wound up,
upon the occurrence of any of the following:
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WMZ will be dissolved, and its affairs wound up, upon the
occurrence of any of the following:
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an election by the general partner to
dissolve the partnership that is approved by the holders of a
majority of the outstanding units;
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the withdrawal or removal of the
general partner or any other event that results in its ceasing
to be the general partner (other than by reason of transfer in
accordance with WMZs partnership agreement or withdrawal
or removal following approval and admission of a successor);
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the entry of a decree of
judicial dissolution of the partnership pursuant to the
provisions of the Delaware Revised Uniform Limited Partnership
Act;
the
withdrawal or removal of the general partner or any other event
that results in its ceasing to be the general partner (other
than by reason of transfer in accordance with Williams
Partners partnership agreement or withdrawal or removal
following approval and admission of a successor); or
at
any time there are no limited partners, unless the partnership
is continued without dissolution in accordance with applicable
Delaware law.
Upon a dissolution under the third bullet above, the holders of
a majority of the outstanding units may also elect, within
specific time limitations, to continue the business on the same
terms and conditions described in Williams Partners
partnership agreement by appointing as a successor general
partner an entity approved by the holders of a majority of the
outstanding units, subject to Williams Partners receipt of
an opinion of counsel to the effect that the action would not
result in the loss of limited liability of any limited partner
and none of the partnership, its operating company nor any of
its subsidiaries would be treated as an association taxable as a
corporation
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an election by the
general partner to dissolve the partnership that is approved by
the holders of at least a majority of the outstanding common
units (excluding common units owned by the general partner and
its affiliates), voting as a class, and at least a majority of
the outstanding subordinated units, voting as a class (together
referred to below as a unit majority);
the
entry of a decree of judicial dissolution of the partnership
pursuant to the provisions of the Delaware Revised Uniform
Limited Partnership Act; or
at
any time there are no limited partners, unless the partnership
is continued without dissolution in accordance with applicable
Delaware law.
Upon
a dissolution under the first bullet above, the holders of units
representing a unit majority may also elect, within specific
time limitations, to continue the business on the same terms and
conditions described in the partnership agreement by appointing
as a successor general partner an entity approved by the holders
of units representing a unit majority, subject to WMZs
receipt of an opinion of counsel to the effect that the action
would not result in the loss of
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Williams Partners
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WMZ
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or otherwise be taxed as an entity for federal income tax
purposes upon the exercise of that right to continue.
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limited liability of any limited partner and none of the
partnership, its operating company, Northwest Pipeline, nor any
of WMZs subsidiaries would be treated as an association
taxable as a corporation or otherwise be taxed as an entity for
federal income tax purposes upon the exercise of that right to
continue.
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Liquidation
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Williams Partners
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WMZ
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Upon Williams Partners dissolution, unless Williams
Partners is reconstituted and continued as a new limited
partnership, the liquidator authorized to wind up Williams
Partners affairs will, acting with all the powers of the
general partner that are necessary or appropriate, liquidate
Williams Partners assets and apply the proceeds as
described above in Distributions of Cash Upon
Liquidation. The liquidator may defer liquidation or
distribution of Williams Partners assets for a reasonable
time. The liquidator may also distribute assets in kind to
partners if it determines that a sale would be impractical or
would cause undue loss to the partners.
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Upon WMZs dissolution, unless it is reconstituted and
continued as a new limited partnership, the liquidator
authorized to wind up WMZs affairs will, acting with all
the powers of the general partner that are necessary or
appropriate, liquidate WMZs assets and apply the proceeds
as described above in Distributions of Cash
Upon Liquidation. The liquidator may defer liquidation or
distribution of WMZs assets for a reasonable time. The
liquidator may also distribute assets in kind to partners if it
determines that a sale would be impractical or would cause undue
loss to the partners.
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Management
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Williams Partners
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WMZ
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The Williams Partners General Partner conducts, directs and
manages all activities of the partnership. Except as expressly
provided in Williams Partners partnership agreement, all
management powers over the business and affairs of Williams
Partners are exclusively vested in the general partner, and no
limited partner has any management power over the business and
affairs of Williams Partners. The Williams Partners General
Partner has full power and authority to do all things and on
such terms as it determines to be necessary or appropriate to
conduct Williams Partners business.
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WMZs general partner conducts, directs and manages all
activities of the partnership. Except as expressly provided in
WMZs partnership agreement, all management powers over the
business and affairs of WMZ are exclusively vested in the
general partner, and no limited partner has any management power
over the business and affairs of the partnership. WMZs
general partner has full power and authority to do all things
and on such terms as it determines to be necessary or
appropriate to conduct the business of WMZ.
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Change
of Management Provisions
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Williams Partners
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WMZ
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Williams Partners partnership agreement contains specific
provisions that are intended to discourage a person or group
from attempting to remove the general partner or otherwise
change management. Generally, if any person or group other than
the general partner and its affiliates acquires beneficial
ownership of 20% or more of any outstanding units of any class,
the units owned by such person or group cannot be voted on any
matter. This loss of voting rights does not apply to any person
or group that acquires the units from the general partner or its
affiliates and any transferees of that person or group approved
by the general partner or to any person or
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WMZs partnership agreement contains specific provisions
that are intended to discourage a person or group from
attempting to remove the general partner or otherwise change
management. Generally, If any person or group other than the
general partner and its affiliates acquires beneficial ownership
of 20% or more of any outstanding units of any class, the units
owned by such person or group cannot be voted on any matter.
This loss of voting rights does not apply to any person or group
that acquires the units from the general partner or its
affiliates and any transferees of that person or group approved
by the general partner or to any person or group who acquires
the
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Williams Partners
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WMZ
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group who acquires the units with the prior approval of the
board of directors of the general partner. Williams
Partners partnership agreement limits the ability of
unitholders to call meetings or to acquire information about
Williams Partners operations, in addition to other
provisions limiting the unitholders ability to influence
the manner or direction of management.
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units with the prior approval of the board of directors of the
general partner. WMZs partnership agreement limits the
ability of unitholders to call meetings or to acquire
information about WMZs operations, in addition to other
provisions limiting the unitholders ability to influence
the manner or direction of management.
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Meetings,
Voting
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Williams Partners
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WMZ
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Special meetings of Williams Partners common unitholders
may be called by the general partner or by limited partners
owning 20% or more of the outstanding units of the class or
classes for which a meeting is proposed, in accordance with the
procedures set forth in Williams Partners partnership
agreement. The general partner must send notice of any meetings
to all unitholders of record as of a record date which may not
be less than 10 or more than 60 days prior to the date of
the meeting (or, where approvals are sought without a meeting,
the date by which common unitholders must submit approvals) and
any such meeting may be held not less than 10 days or more
than 60 days after the mailing of notice of the meeting.
Unitholders may vote either in person or by proxy at meetings.
The holders of a majority of the outstanding units of the class
or classes for which a meeting has been called, represented in
person or by proxy, will constitute a quorum unless any such
action by the unitholders requires approval by holders of a
greater percentage of the units, in which case the quorum will
be the greater percentage. Any action that is required or
permitted to be taken by the unitholders may be taken either at
a meeting of the unitholders or without a meeting if consents in
writing describing the action so taken are signed by holders of
the number of units necessary to authorize or take that action
at a meeting.
Each
record holder of a unit has a vote according to its percentage
interest in Williams Partners, although additional limited
partner interests having special voting rights could be issued.
However, if at any time any person or group, other than the
general partner and its affiliates, their transferees,
transferees of their transferees (provided that the Williams
Partners General Partner has notified such secondary transferees
that the voting limitation shall not apply to them), or a person
or group who acquires units with the prior approval of the board
of directors of the general partner, acquires, in the aggregate,
beneficial ownership of 20% or more of any class of units then
outstanding, that person or group will lose voting
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Special meetings of WMZs common unitholders may be called
by the general partner or by limited partners owning 20% or more
of the outstanding units of the class or classes for which a
meeting is proposed, in accordance with the procedures set forth
in WMZs partnership agreement. The general partner must
send notice of any meetings to all unitholders of record as of a
record date which may not be less than 10 or more than
60 days prior to the date of the meeting (or, where
approvals are sought without a meeting, the date by which common
unitholders must submit approvals) and any such meeting may be
held not less than 10 days or more than 60 days after
the mailing of notice of the meeting. Unitholders may vote
either in person or by proxy at meetings. The holders of a
majority of the outstanding units of the class or classes for
which a meeting has been called, represented in person or by
proxy, will constitute a quorum unless any such action by the
unitholders requires approval by holders of a greater percentage
of the units, in which case the quorum will be the greater
percentage. Any action that is required or permitted to be taken
by the unitholders may be taken either at a meeting of the
unitholders or without a meeting if consents in writing
describing the action so taken are signed by holders of the
number of units necessary to authorize or take that action at a
meeting.
Each
record holder of a unit has a vote according to its percentage
interest in WMZ, although additional limited partner interests
having special voting rights could be issued. However, if at any
time any person or group, other than the general partner and its
affiliates, their transferees, transferees of their transferees
(provided that the Williams Partners General Partner has
notified such secondary transferees that the voting limitation
shall not apply to them)transferee of the general partner or its
affiliates, or a person or group who acquires units with the
prior approval of the board of directors of the general partner,
acquires, in the aggregate, beneficial ownership of 20% or more
of any class of units then outstanding, that person or group
will lose voting
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Williams Partners
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WMZ
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rights on all of its units and the units may not be voted on
any matter and will not be considered to be outstanding when
sending notices of a meeting to unitholders, calculating
required votes, determining the presence of a quorum or for
other similar purposes. Common units held in nominee or street
name account will be voted by the broker or other nominee in
accordance with the instruction of the beneficial owner unless
the arrangement between the beneficial owner and its nominee
provides otherwise. In the case of common units held by the
general partner on behalf of non-citizen assignees, the general
partner will distribute the votes on those common units in the
same ratios as the votes of limited partners and the general
partner on other units are cast.
Williams Partners common unitholders have no right to elect the
Williams Partners General Partner on an annual or other
continuing basis.
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rights on all of its units and the units may not be voted on
any matter and will not be considered to be outstanding when
sending notices of a meeting to unitholders, calculating
required votes, determining the presence of a quorum or for
other similar purposes. Common units held in nominee or street
name account will be voted by the broker or other nominee in
accordance with the instruction of the beneficial owner unless
the arrangement between the beneficial owner and its nominee
provides otherwise. In the case of common units held by the
general partner on behalf of non-citizen assignees, the general
partner will distribute the votes on those common units in the
same ratios as the votes of limited partners and the general
partner on other units are cast. Except as otherwise provided in
the partnership agreement, subordinated units will vote together
with common units and Class B units as a single class.
WMZ
common unitholders have no right to elect WMZs general
partner on an annual or other continuing basis.
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Transfer
of Units; Status as a Limited Partner or Assignee
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Williams Partners
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WMZ
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By acceptance of the transfer of common units or the issuance of
common units in a merger or consolidation in accordance with
Williams Partners partnership agreement, each transferee
of common units (including any nominee holder acting for the
account of another person) will be admitted as a limited partner
with respect to the common units transferred when such transfer
and admission is reflected in Williams Partners books and
records. In addition, each transferee represents that the
transferee has the capacity, power and authority to enter into
Williams Partners partnership agreement; agrees to be
bound by the terms and conditions of, and is deemed to have
executed, the partnership agreement; grants the powers of
attorney set forth in the partnership agreement; and gives the
consents, waivers and approvals contained in the partnership
agreement.
The
transfer of Williams Partners limited partner interests will not
be recognized until the certificates evidencing those limited
partner interests are surrendered for registration of transfer
and one or more new certificates evidencing the same aggregate
number and type of limited partner interests is executed and
delivered. An assignee will become a substituted limited partner
for the transferred common units upon the recording of the
transfer on Williams Partners books and records. The
Williams Partners General Partner may, at its discretion, treat
the nominee holder of a common unit as the absolute
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Each purchaser of WMZ common units must execute a transfer
application (including a taxation certification) whereby the
purchaser requests admission as a substituted limited partner
and makes representations and agrees to provisions stated in the
transfer application. If this action is not taken, a purchaser
will not be registered as a record holder of common units on the
books of the transfer agent or issued a common unit certificate.
Purchasers may hold common units in nominee accounts.
Each
transfer of WMZ limited partnership interests will not be
recognized by the partnership unless certificate(s) representing
those limited partnership interests are surrendered and such
interests are accompanied by a duly executed transfer
application. By executing and delivering a transfer application,
the transferee of common units requests admission as a
substituted limited partner; executes and agrees to be bound by
the terms and conditions of the partnership agreement;
represents that the transferee has the capacity, power and
authority to enter into the partnership agreement; grants powers
of attorney to the officers of the general partner and any
liquidator of WMZ as specified in its partnership agreement; and
gives the consents, waivers and approvals contained in the
partnership agreement. A transferee that executes and delivers a
properly completed transfer application will become a
substituted limited partner for the transferred common units
upon the recording of the transfer on WMZs books and
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Williams Partners
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WMZ
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owner. In that case, the beneficial holders rights are
limited solely to those that it has against the nominee holder
as a result of any agreement between the beneficial owner and
the nominee holder. Any transfer of a limited partner interest
will not entitle the transferee to share in the profits and
losses, to receive distributions, to receive allocations of
income, gain, loss, deduction or credit or any similar item or
to any other rights to which the transferor was entitled until
the transferee becomes a limited partner.
Common units are securities and are transferable according to
the laws governing transfer of securities. Until the transfer of
a common unit is reflected in Williams Partners books and
records, Williams Partners and the transfer agent may treat the
record holder of the unit as the absolute owner for all
purposes, except as otherwise required by law or stock exchange
regulations.
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records. A transferees broker, agent or nominee may
complete, execute and deliver a transfer application. WMZ is
entitled to treat the nominee holder of a common unit as the
absolute holder, in which case the beneficial holders
rights are limited solely to those that it has against the
nominee holder as a result of any agreement between the
beneficial owner and the nominee holder.
A
transferee who does not execute and deliver a transfer
application (including a taxation certification) will not be
admitted as a limited partner and will have only the rights of
an assignee, which include the right to transfer the common unit
to a purchaser or other transferee and the right to transfer the
right to request admission as a substituted limited partner in
the partnership for the transferred common units. Thus, a
purchaser or transferee of common units who does not execute and
deliver a properly completed transfer application will not
receive cash distributions and will not be allocated any
partnership income, gain, deduction, losses or credits for
federal income or other tax purposes, unless the common units
are held in nominee or street name account and the
nominee or broker has executed and delivered a transfer
application to the transfer agent. WMZs general partner
will vote and exercise other powers attributable to common units
owned by an assignee who has not become a substituted limited
partner at the direction of the assignee.
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Conflicts
of Interest
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Williams Partners
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WMZ
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The Williams Partners General Partner may take into account the
interests of other parties in addition to Williams
Partners interests when resolving conflicts of interest.
In effect, these provisions limit the general partners
fiduciary duties to Williams Partners unitholders. Williams
Partners partnership agreement also restricts the remedies
available to Williams Partners unitholders for actions taken by
the general partner that might, without those limitations,
constitute breaches of fiduciary duty. Whenever a potential
conflict of interest arises between the general partner or any
of its affiliates, on the one hand, and Williams Partners, its
subsidiaries or any partner, on the other, any resolution or
course of action by the general partner or its affiliates in
respect of such conflict of interest will be permitted and
deemed approved by all partners and will not breach the
partnership agreement or any duty in law or equity, if such
resolution or course of action is:
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WMZs general partner may take into account the interests
of other parties in addition to WMZs when resolving
conflicts of interest. In effect, these provisions limit the
general partners fiduciary duties to WMZ unitholders.
WMZs partnership agreement also restricts the remedies
available to WMZ unitholders for actions taken by the general
partner that might, without those limitations, constitute
breaches of fiduciary duty. Whenever a potential conflict of
interest arises between WMZs general partner or any of its
affiliates, on the one hand, and WMZ, its subsidiaries or any
partner, on the other, any resolution or course of action by the
general partner or its affiliates in respect of such conflict of
interest will be permitted and deemed approved by all partners
and will not breach the partnership agreement or any duty in law
or equity, if such resolution or course of action is:
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approved by a majority of the members
of the conflicts committee of the general partners board
of directors;
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approved by a majority of the members
of the conflicts committee of the general partners board
of directors;
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Williams Partners
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WMZ
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approved by the vote of a
majority of outstanding common units (excluding common units
owned by the general partner and its affiliates);
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approved by the vote of
a majority of outstanding common units (excluding common units
owned by the general partner and its affiliates);
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on terms no less
favorable to Williams Partners than those generally being
provided to or available from unrelated third parties; or
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on terms no less
favorable to WMZ than those generally being provided to or
available from unrelated third parties; or
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fair and reasonable to
Williams Partners, taking into account the totality of the
relationships between the parties involved (including other
transactions that may be particularly favorable or advantageous
to Williams Partners).
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fair and reasonable to
WMZ, taking into account the totality of the relationships
between the parties involved (including other transactions that
may be particularly favorable or advantageous to WMZ).
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The Williams Partners General Partner will not be required in
connection with its resolution of a conflict of interest to seek
special approval of the conflicts committee of the board of
directors and may adopt a resolution or course of action that
has not received such approval. If special approval is not
sought and the general partners board of directors
determines that the resolution or course of action satisfies the
third or fourth bullet points above, then it will be presumed
the board acted in good faith. Williams Partners
partnership agreement also entitles the general partner to take
or decline to take any action in its individual capacity, as
opposed to in its capacity as the general partner of Williams
Partners, free of any fiduciary duty or obligation whatsoever to
Williams Partners, its subsidiaries or any limited partner and
with no requirement to act in good faith. Examples include the
exercise of its limited call right, its voting rights with
respect to the units it owns and its determination whether or
not to consent to any merger or consolidation of the partnership
or amendment to the partnership agreement.
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The
general partner will not be required in connection with its
resolution of a conflict of interest to seek special approval of
the conflicts committee of the board of directors and may adopt
a resolution or course of action that has not received such
approval. If special approval is not sought and the general
partners board of directors determines that the resolution
or course of action satisfies the third or fourth bullet points
above, then it will be presumed the board acted in good faith.
WMZs partnership agreement also entitles the general
partner to take or decline to take any action in its individual
capacity, as opposed to in its capacity as the general partner
of WMZ, free of any fiduciary duty or obligation whatsoever to
WMZ, its subsidiaries or any limited partner and with no
requirement to act in good faith. Examples include the exercise
of its limited call right, its voting rights with respect to the
units it owns, its reset rights with respect to incentive
distribution levels and its determination whether or not to
consent to any merger or consolidation of the partnership or
amendment to the partnership agreement.
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DESCRIPTION
OF WILLIAMS PARTNERS COMMON UNITS
Generally, Williams Partners Common Units represent limited
partner interests that entitle the holders to participate in
Williams Partners cash distributions and to exercise the
rights and privileges available to limited partners under
Williams Partners partnership agreement. Williams Partners
Common Units are listed on the NYSE under the symbol
WPZ. The transfer agent and registrar for Williams
Partners Common Units is Computershare Investor Services, LLC.
Status as
Limited Partner or Assignee
Except as described below under Limited
Liability, the Common Units will be fully paid, and
unitholders will not be required to make additional capital
contributions to Williams Partners.
An assignee of, or person acquiring from Williams Partners,
Williams Partners Common Units will become a limited partner of
Williams Partners with respect to such transferred or issued
Common Units automatically upon the recording of the transfer or
issuance on Williams Partners and its transfer
agents books and records. Any transfer of a limited
partner interest evidenced by Common Units will not entitle the
transferee to share in the profits and losses, to receive
distributions, to receive allocations of income, gain, loss,
deduction or credit or any similar item or to any other rights
to which the transferor was entitled until the transferee
becomes a limited partner. Purchasers may hold Common Units in
nominee accounts. Common Units held in nominee or street name
account will be voted by the broker or other nominee in
accordance with the instruction of the beneficial owner unless
the arrangement between the beneficial owner and its nominee
provides otherwise. A nominee or broker holding Common Units in
street name or nominee accounts will receive distributions and
reports pertaining to its Common Units.
Limited
Liability
Assuming that a limited partner does not participate in the
control of Williams Partners business within the meaning
of the Delaware Revised Uniform Limited Partnership Act (the
Delaware Act) and that it otherwise acts in
conformity with the provisions of Williams Partners
partnership agreement, its liability under the Delaware Act will
be limited, subject to possible exceptions, generally to the
amount of capital it is obligated to contribute to Williams
Partners in respect of its Common Units plus its share of any
undistributed profits and assets of Williams Partners.
Under the Delaware Act, a limited partnership may not make a
distribution to a partner if, after the distribution, all
liabilities of the limited partnership, other than liabilities
to partners on account of their partnership interests and
liabilities for which the recourse of creditors is limited to
specific property of the partnership, would exceed the fair
value of the assets of the limited partnership. For the purpose
of determining the fair value of the assets of a limited
partnership, the Delaware Act provides that the fair value of
property subject to liability for which recourse of creditors is
limited shall be included in the assets of the limited
partnership only to the extent that the fair value of that
property exceeds the nonrecourse liability. The Delaware Act
provides that a limited partner who receives a distribution and
knew at the time of the distribution that the distribution was
in violation of the Delaware Act shall be liable to the limited
partnership for the amount of the distribution for three years
from the date of the distribution.
Reports
and Records
As soon as practicable, but in no event later than 120 days
after the close of each fiscal year, the Williams Partners
General Partner will furnish or make available to each
unitholder of record (as of a record date selected by the
Williams Partners General Partner) an annual report containing
audited financial statements for the past fiscal year. These
financial statements will be presented in accordance with
generally accepted accounting principles. In addition, no later
than 90 days after the close of each quarter (except the
fourth quarter), the Williams Partners General Partner will also
furnish or make available to each unitholder of record (as of a
record date selected by the Williams Partners General Partner) a
report containing Williams Partners unaudited financial
statements and any other information required by law.
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Williams Partners will furnish each unitholder of record
information reasonably required for tax reporting purposes
within 90 days after the close of each calendar year.
Williams Partners ability to furnish this summary tax
information to unitholders will depend on the cooperation of
unitholders in supplying Williams Partners with specific
information. Every unitholder will receive information to assist
in determining its federal and state tax liability and filing
its federal and state income tax returns, regardless of whether
it supplies Williams Partners with information.
A limited partner can, for a purpose reasonably related to its
interest as a limited partner, upon reasonable demand stating
the purpose of such demand and at its own expense, obtain:
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a current list of the name and last known address of each
partner;
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a copy of Williams Partners tax returns;
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information as to the amount of cash, and a description and
statement of the net agreed value of any other property or
services, contributed or to be contributed by each partner and
the date on which each became a partner;
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copies of Williams Partners partnership agreement, the
certificate of limited partnership of the partnership, all
amendments thereto and powers of attorney under which they have
been executed;
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information regarding the status of Williams Partners
business and financial condition; and
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any other information regarding Williams Partners affairs
as is just and reasonable.
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The Williams Partners General Partner may, and intends to, keep
confidential from the limited partners trade secrets or other
information the disclosure of which the Williams Partners
General Partner believes in good faith is not in Williams
Partners best interests, could damage Williams Partners or
its business or that Williams Partners is required by law or by
agreements with third parties to keep confidential.
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MATERIAL
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of the material U.S. federal
income tax consequences of the Merger that are applicable to
holders of Publicly Owned WMZ Common Units and Williams Partners
unitholders, as well as the material U.S. federal income
tax considerations that are applicable to owning Williams
Partners Common Units received in the Merger. Unless otherwise
noted, the description of the law and the legal conclusions set
forth in the discussion relating to the consequences of the
Merger to Williams Partners and its unitholders and the
consequences of holding Williams Partners Common Units received
in the Merger are the opinion of Andrews Kurth LLP, counsel to
Williams Partners, as to the material U.S. federal income
tax consequences relating to those matters. Unless otherwise
noted, the description of the law and the legal conclusions set
forth in the discussion relating to the consequences of the
Merger to WMZ and holders of Publicly Owned WMZ Common Units are
the opinion of Fulbright, counsel to WMZ, as to the material
U.S. federal income tax consequences relating to those
matters. This discussion is based upon current provisions of the
Internal Revenue Code of 1986, as amended, or the Code, existing
and proposed regulations and current administrative rulings and
court decisions, all of which are subject to change, possibly
with retroactive effect. Changes in these authorities may cause
the U.S. federal income tax consequences to vary
substantially from the consequences described below.
This discussion does not purport to be a complete discussion of
all U.S. federal income tax consequences of the Merger or
Williams Partners Common Unit ownership. Moreover, the
discussion focuses on holders of Publicly Owned WMZ Common Units
and Williams Partners unitholders who are individual citizens or
residents of the United States and has only limited application
to corporations, estates, trusts, nonresident aliens, other
unitholders subject to specialized tax treatment, such as
tax-exempt institutions, foreign persons, individual retirement
accounts, or IRAs, real estate investment trusts, or REITs,
employee benefit plans, mutual funds, traders in securities that
elect to
mark-to-market,
affiliates of each of the WMZ General Partner and the Williams
Partners General Partner, or persons who hold Publicly Owned WMZ
Common Units or Williams Partners Common Units as part of a
hedge, straddle or conversion transaction. Also, the discussion
assumes that the Publicly Owned WMZ Common Units and Williams
Partners Common Units are held as capital assets at the time of
the Merger. Accordingly, Williams Partners and WMZ strongly
urge each Williams Partners unitholder and holder of Publicly
Owned WMZ Common Units to consult with, and depend upon, its own
tax advisor in analyzing the federal, state, local and foreign
tax consequences particular to it of the Merger and subsequent
ownership and disposition of Williams Partners Common Units
received in the Merger.
Tax
Opinions Required As a Condition to Closing
No ruling has been or will be requested from the IRS with
respect to the U.S. federal income tax consequences of the
Merger. Instead, Williams Partners and WMZ will rely on the
opinions of their respective counsel regarding the tax
consequences of the Merger. It is a condition of Williams
Partners obligation to complete the Merger that Williams
Partners receive an opinion of its counsel, Andrews Kurth LLP,
to the effect that for U.S. federal income tax purposes:
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Williams Partners will not recognize any income or gain as a
result of the Merger (other than any gain resulting from any
decrease in partnership liabilities pursuant to Section 752
of the Code);
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no gain or loss will be recognized by Williams Partners
unitholders as a result of the Merger (other than any gain
resulting from any decrease in partnership liabilities pursuant
to Section 752 of the Code); and
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90% of the combined gross income of WMZ and Williams Partners
for the most recent four complete calendar quarters ending
before the closing date of the Merger for which the necessary
financial information is available are from sources treated as
qualifying income within the meaning of
Section 7704(d) of the Code.
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131
It is a condition of WMZs obligation to complete the
Merger that WMZ receive an opinion of its counsel, Fulbright, to
the effect that for U.S. federal income tax purposes,
except with respect to cash received in lieu of fractional
Williams Partners Common Units:
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WMZ should not recognize any income or gain as a result of the
Merger that would be allocated to the holders of Non-affiliated
WMZ Common Units (other than (x) any gain resulting from
any decrease in partnership liabilities pursuant to
Section 752 of the Code or (y) any liabilities
incurred other than in the ordinary course of the trade or
business of WMZ or a WMZ subsidiary), and
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no gain or loss should be recognized by holders of
Non-affiliated WMZ Common Units as a result of the receipt of
Williams Partners Common Units in the Merger (other than
(x) any income or gain resulting from any decrease in
partnership liabilities pursuant to Section 752 of the
Code, (y) any liabilities incurred other than in the
ordinary course of business of WMZ or a WMZ subsidiary or
(z) any difference between the amount of consideration per
Non-affiliated WMZ Common Unit payable to holders of
Non-affiliated WMZ Common Units and the amount of consideration
per WMZ Subordinated Units payable to holders of the WMZ
Subordinated Units).
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The opinions of counsel will assume that the Merger will be
consummated in the manner contemplated by, and in accordance
with, the terms set forth in the Merger Agreement and described
in this joint proxy statement/prospectus.
In addition, the tax opinions delivered to Williams Partners and
WMZ at closing will be based on certain assumptions and factual
representations made by Williams Partners, WMZ and their
respective general partners. If either Williams Partners or WMZ
waives the receipt of the requisite tax opinion as a condition
to closing and the changes to the U.S. federal income tax
consequences would be material, then this joint proxy
statement/prospectus will be amended and recirculated and
approval of a majority of holders of the outstanding
Non-affiliated WMZ Common Units will be resolicited.
Unlike a ruling, an opinion of counsel represents only that
counsels best legal judgment and does not bind the IRS or
the courts. Accordingly, no assurance can be given that the
above-described opinions and the opinions and statements made
hereafter in this joint proxy statement/prospectus will be
sustained by a court if contested by the IRS.
U.S.
Federal Income Tax Consequences of the Merger to WMZ and Holders
of Publicly Owned WMZ Common Units
The following is a summary of the material U.S. federal
income tax consequences of the Merger to holders of Publicly
Owned WMZ Common Units who, for U.S. federal income tax
purposes, are individual citizens or residents of the United
States that acquired their Publicly Owned WMZ Common Units for
cash and hold their Publicly Owned WMZ Common Units as capital
assets and are treated as partners of WMZ immediately prior to
the Merger (WMZ Holders). The discussion below
assumes that Williams Partners will be classified as a
partnership for U.S. federal income tax purposes at the
time of the Merger. Please read the discussion of the opinion of
Andrews Kurth LLP that Williams Partners is classified as a
partnership for U.S. federal income tax purposes at
Tax Consequences of Owning Williams Partners Common
Units Partnership Status below. If Williams
Partners were treated as a corporation for U.S. federal
income tax purposes at the time of the Merger, the Merger would
be a fully taxable transaction to the WMZ Holders, but
non-taxable to WMZ itself. Additionally, the discussion below
assumes that all of the liabilities of WMZ and its subsidiaries
that are deemed assumed by Williams Partners in the Merger as
described below qualify for an exception to the disguised
sale rules. Williams Partners and WMZ believe that such
liabilities qualify for one or more of the exceptions to the
disguised sale rules and intend to take the position
that neither WMZ nor the WMZ Holders will recognize any income
or gain as a result of the disguised sale rules. The
discussion below also assumes that, for U.S. federal income
tax purposes, there will be no difference between the amount of
consideration per Publicly Owned WMZ Common Unit received by WMZ
Holders and the amount of the consideration per WMZ Subordinated
Unit received by holders of the WMZ Subordinated Units. Williams
Partners and WMZ believe that there is no such difference and
intend to take the position that neither WMZ nor the WMZ Holders
will recognize any income or gain as a result of any such
difference.
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U.S.
Federal Income Tax Treatment of the Merger
For U.S. federal income tax purposes, the Merger is
intended to be a merger of Williams Partners and WMZ
within the meaning of regulations promulgated under
Section 708 of the Code, with Williams Partners being
treated as the continuing partnership and WMZ being treated as
the terminated partnership. Assuming the Merger is treated as
such, WMZ will be treated as if it contributed a portion of its
assets (subject to a portion of its liabilities) attributable to
the interests of the holders of Publicly Owned WMZ Common Units
(other than interests attributable to cash paid in lieu of
fractional Williams Partners Common Units) to Williams Partners
in exchange for the issuance to WMZ of Williams Partners Common
Units, followed by a liquidation of WMZ in which the Williams
Partners Common Units are distributed to the holders of Publicly
Owned WMZ Common Units in exchange for their Publicly Owned WMZ
Common Units and the remaining portion of WMZs assets
(subject to the remaining portion of its liabilities) are
distributed to Williams Partners in liquidation of its interest
in WMZ and the interest attributable to the cash paid in lieu of
fractional Williams Partners Common Units (the Assets-Over
Form).
Subject
to Certain Exceptions, WMZ Holders Should Not Recognize Income
or Gain in the Merger
Except as discussed below with respect to a net decrease in a
WMZ Holders share of nonrecourse liabilities and subject
to the discussion below with respect to cash received in lieu of
fractional Williams Partners Common Units, WMZ Holders should
not recognize income or gain for U.S. federal income tax
purposes as a result of the Merger.
Possible
Recognition of Gain to Certain WMZ Holders from Reallocation of
Nonrecourse Liabilities
Under Section 752 of the Code, each WMZ Holders tax
basis in its Publicly Owned WMZ Common Units includes its share
of the nonrecourse liabilities of WMZ, and after the Merger,
each WMZ Holders tax basis in its Williams Partners Common
Units received in the Merger will include its share of the
nonrecourse liabilities of Williams Partners. For
U.S. federal income tax purposes, nonrecourse liabilities
are generally liabilities for which no partner of WMZ or
Williams Partners, as applicable, has liability. As a result of
the Merger, each WMZ Holders share of nonrecourse
liabilities will be recalculated, and each WMZ Holder will be
treated as receiving a deemed cash distribution equal to the
excess, if any, of its share of nonrecourse liabilities of WMZ
immediately before the Merger over its share of nonrecourse
liabilities of Williams Partners immediately following the
Merger. If the amount of any deemed cash distribution received
by a WMZ Holder exceeds its basis in its Williams Partners
Common Units immediately after the Merger, such WMZ Holder will
recognize income or gain in an amount equal to such excess.
Williams Partners and WMZ do not expect that any WMZ Holder will
recognize income or gain in this manner. However, the
application of the rules governing the allocation of nonrecourse
liabilities in the context of the Merger is complex and subject
to uncertainty, and there can be no assurance that there will
not be a net decrease in the amount of nonrecourse liabilities
allocable to a WMZ Holder as a result of the Merger.
Gain
or Loss From Cash Received in Lieu of Fractional Williams
Partner Common Units
Under applicable Treasury regulations, cash received in lieu of
fractional Williams Partners Common Units will be respected as a
sale of part of a WMZ Holders Publicly Owned WMZ Common
Units to Williams Partners that occurs as part of the Merger if,
among other requirements, the WMZ Holder consents to treat that
portion of the transaction as a sale. The Merger Agreement
provides that each holder of WMZ Common Units shall be deemed to
have consented for U.S. federal income tax purposes to
report the cash received in lieu of fractional Williams Partners
Common Units in the Merger as a sale of the applicable portion
of the holders WMZ Common Units to Williams Partners
immediately prior to the Merger under applicable Treasury
regulations. There is some uncertainty as the whether such a
deemed consent is effective under the those Treasury
regulations. Williams Partners and WMZ believe that such deemed
consent should be effective and intend to take the position that
such deemed consent is effective. Assuming such deemed consent
is effective, a WMZ Holder who receives cash in lieu of a
fractional Williams Partners Common Unit in the Merger will
generally recognize gain or loss equal to the difference between
the amount of cash received and its adjusted tax basis allocable
to such fractional Williams Partners Common Unit. If such deemed
consent is
133
not effective, Williams Partners and WMZ believe that WMZ would
be treated as if it sold a portion of its assets to Williams
Partners for the cash deemed received plus a portion of its
liabilities deemed assumed by Williams Partners. Any resulting
gain recognized from this sale would be allocated to all the WMZ
partners for U.S. federal income tax purposes, whether or
not they receive any of the cash.
As a result, a WMZ Holder could be allocated taxable gain from
this sale that exceeds the amount, if any, of the cash it
receives in lieu of a fractional Williams Partners Common Unit.
Williams Partners and WMZ believe that the amount of any such
gain allocated to a WMZ Holder would not be material.
Tax
Basis of Williams Partners Common Units Received
A WMZ Holders initial aggregate tax basis in the Williams
Partners Common Units received in the Merger will be equal to
its aggregate tax basis in the WMZ Common Units exchanged
therefor, plus its share of Williams Partners nonrecourse
liabilities immediately after the Merger, minus its share of
WMZs nonrecourse liabilities attributable to its WMZ
Common Units exchanged immediately before the Merger.
Holding
Period of Williams Partners Common Units Received
As a result of the Assets-Over Form, a WMZ Holders holding
period in the Williams Partners Common Units received in the
Merger will not be determined by reference to its holding period
in the Publicly Owned WMZ Common Units exchanged therefor.
Instead, a WMZ Holders holding period for the Williams
Partners Common Units received in the Merger that are
attributable to WMZs capital assets or assets used in its
business as defined in Section 1231 of the Code will
include WMZs holding period in those assets. The holding
period for Williams Partners Common Units received by a WMZ
Holder attributable to other assets of WMZ, such as inventory
and receivables, or to Williams Partners Common Units deemed
received in a taxable transfer will begin on the day following
the Merger.
Effect
of Termination of WMZs Tax Year at Closing of
Merger
WMZ uses the year ending December 31 as its taxable year and the
accrual method of accounting for U.S. federal income tax
purposes. WMZ terminated as a partnership for U.S. federal
income tax purposes on February 17, 2010, as a result of
the Drop Down transaction. WMZs termination resulted in
the closing of its taxable year for all partners. As a result of
the Merger, WMZs taxable year will end and WMZ will be
required to file a final U.S. federal income tax return for
the taxable year ending upon the date the Merger is effected. As
such, WMZ will file two U.S. federal income tax returns for
the 2010 fiscal year, and the WMZ Holders may receive two
Schedules K-1 from WMZ for the 2010 fiscal year. However, the
IRS has recently announced a relief procedure whereby if a
publicly traded partnership that has terminated requests relief
and the IRS grants such relief, among other things, the publicly
traded partnership will only have to provide one
Schedule K-1
to its partners for the fiscal year in which the termination
occurs.
Each WMZ Holder will be required to include in income its share
of WMZs income, gain, loss and deduction through the date
the Merger is effected. A WMZ Holder whose taxable year ends on
a date other than December 31 and after the date the Merger is
effected must include its share of income, gain, loss and
deduction in income for its taxable year, with the result that
it will be required to include in income for its taxable year
its share of more than one year of income, gain, loss and
deduction from WMZ.
U.S.
Federal Income Tax Consequences of the Merger to Williams
Partners and its Unitholders
Neither Williams Partners nor its unitholders is expected to
recognize any income or gain for U.S. federal income tax
purposes as a result of the Merger. A reduction in a Williams
Partners unitholders share of nonrecourse liabilities may,
under certain circumstances, result in the recognition of income
or gain by a Williams Partners unitholder. As a result of the
Merger, each unitholders share of Williams Partners
nonrecourse liabilities will be recalculated, and each Williams
Partners unitholder will be treated as receiving a deemed cash
distribution equal to the excess, if any, of its share of
nonrecourse liabilities of Williams Partners immediately before
the Merger over its share of nonrecourse liabilities of Williams
Partners immediately following the Merger. If the amount of any
deemed cash distribution received by a Williams
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Partner unitholder exceeds its basis in its Williams Partners
Common Units immediately after the Merger, such Williams
Partners unitholder will recognize income or gain for
U.S. federal income tax purposes in an amount equal to such
excess. Williams Partners and WMZ do not expect that any
Williams Partners unitholder will recognize income or gain in
this manner.
Tax
Consequences of Owning Williams Partners Common Units
No ruling has been or will be requested from the IRS regarding
any matter affecting Williams Partners following the Merger or
the consequences of owning Williams Partners Common Units
received in the Merger. Instead, Williams Partners will rely on
opinions and advice of Andrews Kurth LLP with respect to such
matters. Unlike a ruling, an opinion of counsel represents only
that counsels best legal judgment and does not bind the
IRS or the courts. Accordingly, the opinions and statements made
below may not be sustained by a court if contested by the IRS.
Any contest of this sort with the IRS may materially and
adversely impact the market for the Williams Partners Common
Units and the prices at which Williams Partners Common Units
trade. In addition, the costs of any contest with the IRS,
principally legal, accounting and related fees, will result in a
reduction in cash available for distribution to Williams
Partners unitholders and general partner and thus will be
borne indirectly by the unitholders and the general partner.
Furthermore, the tax treatment of Williams Partners or of an
investment in Williams Partners may be significantly modified by
future legislative or administrative changes or court decisions.
Any modifications may or may not be retroactively applied.
For the reasons described below, Andrews Kurth LLP has not
rendered an opinion with respect to the following specific
federal income tax issues:
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the treatment of a unitholder whose Williams Partners Common
Units are loaned to a short seller to cover a short sale of
Williams Partners Common Units (please read
Tax Consequences of Williams Partners Common
Unit Ownership Treatment of Short Sales);
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whether Williams Partners monthly convention for
allocating taxable income and losses is permitted by existing
Treasury regulations (please read Disposition
of Williams Partners Common Units Allocations
Between Transferors and Transferees);
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whether Williams Partners method for depreciating
Section 743 adjustments is sustainable in certain cases
(please read Tax Consequences of Williams
Partners Common Unit Ownership Section 754
Election and Uniformity of Williams
Partners Common Units); and
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whether a WMZ unitholder will be able to utilize suspended
passive losses related to its WMZ units to offset income from
Williams Partners Common Units.
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Partnership
Status
A partnership is not a taxable entity and incurs no federal
income tax liability. Instead, each partner of a partnership is
required to take into account its share of items of income,
gain, loss and deduction of the partnership in computing its
federal income tax liability, regardless of whether cash
distributions are made to it by the partnership. Distributions
by a partnership to a partner are generally not taxable to the
partner unless the amount of cash distributed is in excess of
the partners adjusted basis in its partnership interest.
Section 7704 of the Code provides that publicly traded
partnerships will, as a general rule, be taxed as corporations.
However, an exception, referred to as the Qualifying
Income Exception, exists with respect to publicly traded
partnerships of which 90% or more of the gross income for every
taxable year consists of qualifying income.
Qualifying income includes income and gains derived from the
transportation, storage and processing of crude oil, natural gas
and products thereof and marketing of any mineral or natural
resource. Other types of qualifying income include interest
other than from a financial business, dividends, gains from the
sale of real property and gains from the sale or other
disposition of capital assets held for the production of income
that otherwise constitutes qualifying income. Williams Partners
estimates that less than 3% of its gross income after the
completion of the Merger is not qualifying income; however, this
estimate could change from time to time. Based on and subject to
this estimate, the factual representations made by Williams
Partners, WMZ and their general partners and a review of the
applicable legal authorities, Andrews Kurth LLP
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is of the opinion that at least 90% of the combined gross income
of Williams Partners and WMZ constitutes qualifying income.
No ruling has been or will be sought from the IRS and the IRS
has made no determination as to the status of Williams Partners
or WMZ as partnerships for federal income tax purposes or
whether Williams Partners operations generate
qualifying income under Section 7704 of the
Code. Instead, Williams Partners will rely on the opinion of
Andrews Kurth LLP that, based upon the Code, its regulations,
published revenue rulings and court decisions and the
representations described below, Williams Partners will be
classified as a partnership and the Operating Company will be
disregarded as an entity separate from Williams Partners for
federal income tax purposes.
In rendering its opinion, Andrews Kurth LLP has relied on
factual representations made by Williams Partners and its
general partner. The representations made by Williams Partners
and its general partner upon which Andrews Kurth LLP has relied
include:
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Neither Williams Partners nor the Operating Company has elected
or will elect to be treated as a corporation; and
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For each taxable year, more than 90% of Williams Partners
gross income has been and will be income that Andrews Kurth LLP
has opined or will opine is qualifying income within
the meaning of Section 7704(d) of the Code.
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If Williams Partners fails to meet the Qualifying Income
Exception, other than a failure that is determined by the IRS to
be inadvertent and that is cured within a reasonable time after
discovery (in which case the IRS may also require Williams
Partners to make adjustments with respect to its unitholders or
pay other amounts), Williams Partners will be treated as if it
had transferred all of its assets, subject to liabilities, to a
newly formed corporation, on the first day of the year in which
it fails to meet the Qualifying Income Exception, in return for
stock in that corporation, and then distributed that stock to
the unitholders in liquidation of their interests in it. This
deemed contribution and liquidation should be tax-free to
unitholders and Williams Partners so long as Williams Partners,
at that time, does not have liabilities in excess of the tax
basis of its assets. Thereafter, Williams Partners would be
treated as a corporation for federal income tax purposes.
If Williams Partners were taxable as a corporation in any
taxable year, either as a result of a failure to meet the
Qualifying Income Exception or otherwise, its items of income,
gain, loss and deduction would be reflected only on its tax
return rather than being passed through to the unitholders, and
its net income would be taxed at corporate rates. In addition,
any distribution made to a unitholder would be treated as either
taxable dividend income, to the extent of the current or
accumulated earnings and profits of Williams Partners, or, in
the absence of earnings and profits, a nontaxable return of
capital, to the extent of the unitholders tax basis in its
Williams Partners Common Units, or taxable capital gain, after
the unitholders tax basis in its Williams Partners Common
Units is reduced to zero. Accordingly, taxation as a corporation
would result in a material reduction in a unitholders cash
flow and after-tax return and thus would likely result in a
substantial reduction of the value of the Williams Partners
Common Units.
The discussion below is based on Andrews Kurth LLPs
opinion that Williams Partners will be classified as a
partnership for federal income tax purposes.
Limited
Partner Status
Unitholders who have become limited partners of Williams
Partners will be treated as partners of Williams Partners for
federal income tax purposes. Also, unitholders whose Williams
Partners Common Units are held in street name or by a nominee
and who have the right to direct the nominee in the exercise of
all substantive rights attendant to the ownership of their
Williams Partners Common Units will be treated as partners of
Williams Partners for federal income tax purposes.
A beneficial owner of Williams Partners Common Units whose units
have been transferred to a short seller to complete a short sale
would appear to lose its status as a partner with respect to
those units for
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federal income tax purposes. Please read Tax
Consequences of Williams Partners Common Unit
Ownership Treatment of Short Sales.
Items of Williams Partners income, gain, loss or deduction
would not appear to be reportable by a unitholder who is not a
partner for federal income tax purposes, and any cash
distributions received by a unitholder who is not a partner for
federal income tax purposes would therefore appear to be fully
taxable as ordinary income. These unitholders are urged to
consult their own tax advisors with respect to their tax
consequences of holding common units in Williams Partners for
federal income tax purposes. The references to
unitholders in the discussion that follows are to
persons who are treated as partners in Williams Partners for
federal income tax purposes.
Tax
Consequences of Williams Partners Common Unit
Ownership
Flow-through of Taxable Income. Williams
Partners will not pay any federal income tax. Instead, each
unitholder will be required to report on its income tax return
its share of the income, gains, losses and deductions of
Williams Partners without regard to whether corresponding cash
distributions are received by it. Consequently, Williams
Partners may allocate income to a unitholder even if it has not
received a cash distribution. Each unitholder will be required
to include in income its allocable share of the income, gains,
losses and deductions for the taxable year or years ending with
or within its taxable year. The taxable year of Williams
Partners ends on December 31.
Treatment of Distributions. Distributions by
Williams Partners to a unitholder generally will not be taxable
to the unitholder for federal income tax purposes, except to the
extent the amount of such cash distribution exceeds its tax
basis in its Williams Partners Common Units immediately before
the distribution. Cash distributions in excess of a
unitholders tax basis in its Williams Partners Common
Units generally will be considered to be gain from the sale or
exchange of the Williams Partners Common Units, taxable in
accordance with the rules described under
Disposition of Williams Partners Common
Units below. Any reduction in a unitholders share of
Williams Partners liabilities for which no partner, including
the general partner, bears the economic risk of loss, known as
nonrecourse liabilities, will be treated as a
distribution of cash to that unitholder. To the extent
distributions by Williams Partners cause a unitholders
at risk amount to be less than zero at the end of
any taxable year, it must recapture any losses deducted in
previous years. Please read Limitations on
Deductibility of Losses.
A decrease in a unitholders percentage interest in
Williams Partners because of the issuance of additional Williams
Partners Common Units will decrease its share of nonrecourse
liabilities, and thus will result in a corresponding deemed
distribution of cash which may constitute a non-pro rata
distribution. A non-pro rata distribution of money or property
may result in ordinary income to a unitholder, regardless of its
tax basis in its Williams Partners Common Units, if the
distribution reduces the unitholders share of Williams
Partners unrealized receivables, including
depreciation recapture,
and/or
substantially appreciated inventory items, both as
defined in Section 751 of the Code, and collectively,
Section 751 Assets. To that extent, it will be
treated as having been distributed its proportionate share of
the Section 751 Assets and then having exchanged those
assets with Williams Partners in return for the non-pro rata
portion of the actual distribution made to it. This latter
deemed exchange will generally result in the unitholders
realization of ordinary income, which will equal the excess of
the non-pro rata portion of that distribution over the
unitholders tax basis for the share of Section 751
Assets deemed relinquished in the exchange.
Basis of Williams Partners Common Units. A
unitholders initial tax basis for its Williams Partners
Common Units received in the Merger will be equal to its tax
basis in the WMZ units exchanged therefor, plus its share of
Williams Partners nonrecourse liabilities immediately after the
Merger, minus its share of WMZ nonrecourse liabilities
attributable to such WMZ units immediately before the Merger.
That initial tax basis generally will be increased by its share
of Williams Partners income and by any increases in its share of
Williams Partners nonrecourse liabilities. That basis generally
will be decreased, but not below zero, by distributions, by the
unitholders share of Williams Partners losses, by any
decreases in its share of Williams Partners nonrecourse
liabilities and by its share of Williams Partners
expenditures that are not deductible in computing taxable income
and are not required to be capitalized. A unitholder will have
no share of Williams
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Partners debt which is recourse to the general partner to the
extent of the general partners net value as
defined in regulations under Section 752 of the Code, but
will have a share, generally based on its share of profits, of
nonrecourse liabilities. Please read
Disposition of Williams Partners Common
Units Recognition of Gain or Loss.
Limitations on Deductibility of Losses. The
deduction by a unitholder of its share of Williams Partners
losses will be limited to the tax basis in its Williams Partners
Common Units and, in the case of an individual unitholder or a
corporate unitholder, if more than 50% of the value of the
corporate unitholders stock is owned directly or
indirectly by or for five or fewer individuals or some tax
exempt organizations, to the amount for which the unitholder is
considered to be at risk with respect to Williams
Partners activities, if that amount is less than its tax basis.
A unitholder subject to these limitations must recapture losses
deducted in previous years as income from such activity to the
extent that distributions cause its at risk amount to be less
than zero at the end of any taxable year. Losses disallowed to a
unitholder or recaptured as a result of these limitations will
carry forward and will be allowable as a deduction in a later
year to the extent that its tax basis or at risk amount,
whichever is the limiting factor, is subsequently increased,
provided such losses are otherwise allowable. Upon the taxable
disposition of a Williams Partners Common Unit, any gain
recognized by a unitholder can be offset by losses that were
previously suspended by the at risk limitation but may not be
offset by losses suspended by the basis limitation. Any excess
loss above that gain previously suspended by the at risk or
basis limitations is no longer utilizable.
In general, a unitholder will be at risk to the extent of the
tax basis of its Williams Partners Common Units, excluding any
portion of that basis attributable to its share of Williams
Partners nonrecourse liabilities, reduced by (i) any
portion of that basis representing amounts otherwise protected
against loss because of a guarantee, stop-loss agreement or
other similar arrangement and (ii) any amount of money it
borrows to acquire or hold its Williams Partners Common Units,
if the lender of those borrowed funds owns an interest in
Williams Partners, is related to another unitholder who has an
interest in Williams Partners or can look only to the Williams
Partners Common Units for repayment. A unitholders at risk
amount will increase or decrease as the tax basis of the
unitholders Williams Partners Common Units increases or
decreases, other than tax basis increases or decreases
attributable to increases or decreases in its share of Williams
Partners nonrecourse liabilities.
The passive loss limitations generally provide that individuals,
estates, trusts and some closely-held corporations and personal
service corporations can deduct losses from passive activities,
which are generally trade or business activities in which the
taxpayer does not materially participate, only to the extent of
the taxpayers income from those passive activities. The
passive loss limitations are applied separately with respect to
each publicly traded partnership. Consequently, any passive
losses generated by Williams Partners will be available to
offset only passive income generated by Williams Partners in the
future and will not be available to offset income from other
passive activities or investments, including Williams
Partners investments or investments in other publicly
traded partnerships, or a unitholders salary or active
business income. Passive losses that are not deductible because
they exceed a unitholders share of income Williams
Partners generates may be deducted in full when it disposes of
its entire ownership interest in Williams Partners in a fully
taxable transaction with an unrelated party. The passive loss
limitations are applied after other applicable limitations on
deductions, including the at risk rules and the basis limitation.
A unitholders share of Williams Partners net income may be
offset by any suspended passive losses, but it may not be offset
by any other current or carryover losses from other passive
activities, including those attributable to other publicly
traded partnerships.
There is no guidance as to whether suspended passive activity
losses of WMZ units, if any, will be available to offset passive
activity income that is allocated to a former WMZ unitholder
from Williams Partners activities after the Merger. The IRS may
contend that Williams Partners is not the same partnership as
WMZ and, accordingly, the passive loss limitations will not
allow use of such losses until such time as all of such
unitholders Williams Partners Common Units are sold. A
Williams Partners unitholder may take the position, however,
that Williams Partners should be deemed a continuation of WMZ
for this purpose such that any suspended WMZ losses would be
available to offset Williams Partners taxable income allocated
to such
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unitholder. Because of the lack of guidance with respect to this
issue, Andrews Kurth LLP is unable to opine as to whether
suspended passive activity losses arising from WMZ activities
will be available to offset Williams Partners taxable income
allocated to a former WMZ unitholder following the Merger.
Holders of Publicly Owned WMZ Common Units who have losses with
respect to their WMZ Common Units are urged to consult their tax
advisors.
Limitations on Interest Deductions. The
deductibility of a non-corporate taxpayers
investment interest expense is generally limited to
the amount of that taxpayers net investment
income. Investment interest expense includes:
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interest on indebtedness properly allocable to property held for
investment;
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Williams Partners interest expense attributed to portfolio
income; and
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the portion of interest expense incurred to purchase or carry an
interest in a passive activity to the extent attributable to
portfolio income.
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The computation of a unitholders investment interest
expense will take into account interest on any margin account
borrowing or other loan incurred to purchase or carry a Williams
Partners Common Unit. Net investment income includes gross
income from property held for investment and amounts treated as
portfolio income under the passive loss rules, less deductible
expenses, other than interest, directly connected with the
production of investment income, but generally does not include
gains attributable to the disposition of property held for
investment. The IRS has indicated that net passive income earned
by a publicly traded partnership will be treated as investment
income to its unitholders. In addition, the unitholders
share of Williams Partners portfolio income will be
treated as investment income.
Entity-Level Collections. If Williams
Partners is required or elects under applicable law to pay any
federal, state, local or foreign income tax on behalf of any
unitholder or the general partner or any former unitholder, it
is authorized to pay those taxes from its funds. That payment,
if made, will be treated as a distribution of cash to the
unitholder on whose behalf the payment was made. If the payment
is made on behalf of a person whose identity cannot be
determined, Williams Partners is authorized to treat the payment
as a distribution to all current unitholders. Williams Partners
is authorized to amend the partnership agreement in the manner
necessary to maintain uniformity of intrinsic tax
characteristics of Williams Partners Common Units and to adjust
later distributions so that after giving effect to these
distributions the priority and characterization of distributions
otherwise applicable under the partnership agreement is
maintained as nearly as is practicable. Payments by Williams
Partners as described above could give rise to an overpayment of
tax on behalf of an individual unitholder in which event the
unitholder would be required to file a claim in order to obtain
a credit or refund.
Allocation of Income, Gain, Loss and
Deduction. In general, if Williams Partners has a
net profit, items of income, gain, loss and deduction will be
allocated among the general partner and the unitholders in
accordance with their percentage interests in Williams Partners.
At any time that incentive distributions are made to the general
partner, gross income will be allocated to the general partner
to the extent of these distributions. If Williams Partners has a
net loss for the entire year, that loss will be allocated first
to the general partner and the unitholders in accordance with
their percentage interests to the extent of their positive
capital accounts and, second, to the general partner.
Specified items of income, gain, loss and deduction will be
allocated under Section 704(c) of the Code to account for
the difference between the tax basis and fair market value of
property contributed to Williams Partners by the general partner
and its affiliates, referred to in this discussion as
Contributed Property. The effect of these
allocations to a WMZ unitholder as a result of the Merger will
be essentially the same as if the tax basis of Williams
Partners assets were equal to their fair market value at
the time of the Merger. Conversely, specified items of income,
gain, loss and deduction will be allocated to account for the
difference between the tax basis and fair market value of
property deemed contributed to Williams Partners by WMZ in the
Merger. The effect of these allocations to a Williams Partners
unitholder as a result of the Merger will be essentially the
same as if the tax basis of WMZ assets were equal to their fair
market value at the time of Merger. In addition, items of
recapture income will be allocated to the extent possible to the
unitholder who
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was allocated the deduction giving rise to the treatment of that
gain as recapture income in order to minimize the recognition of
ordinary income by some unitholders. Finally, although Williams
Partners does not expect that its operations will result in the
creation of negative capital accounts, if negative capital
accounts nevertheless result, items of Williams Partners income
and gain will be allocated in such amount and manner as is
needed to eliminate the negative balance as quickly as possible.
Under these rules for example, in the event that Williams
Partners is required to divest itself of certain assets
following the Merger to satisfy regulatory requirements, all or
a portion of any gain recognized as a result of a divestiture of
assets formerly owned by WMZ may be required to be allocated to
the pre-merger WMZ unitholders, and all or a portion of any gain
recognized as a result of a divestiture of assets historically
owned by Williams Partners may be required to be allocated to
the pre-merger Williams Partners unitholders. In addition, any
income or gain Williams Partners recognizes as a result of any
transactions entered into to simplify the capital structure of
the combined company following the Merger will be allocated to
unitholders in accordance with Williams Partners
partnership agreement. No special distributions will be made to
the unitholders with respect to any tax liability resulting from
allocations described in this paragraph.
An allocation of items of Williams Partners income, gain, loss
or deduction, other than an allocation required by the Code to
eliminate the difference between a partners
book capital account, credited with the fair market
value of Contributed Property, and tax capital
account, credited with the tax basis of Contributed Property,
referred to in this discussion as the Book-Tax
Disparity, will generally be given effect for federal
income tax purposes in determining a partners share of an
item of income, gain, loss or deduction only if the allocation
has substantial economic effect. In any other case, a
partners share of an item will be determined on the basis
of its interest in Williams Partners, which will be determined
by taking into account all the facts and circumstances,
including its relative contributions to Williams Partners, the
interests of all the partners in profits and losses, the
interest of all the partners in cash flow and other
nonliquidating distributions and rights of all the partners to
distributions of capital upon liquidation.
Andrews Kurth LLP is of the opinion that, with the exception of
the issues described in Tax Consequences of
Williams Partners Common Unit Ownership
Section 754 Election, Uniformity of
Williams Partners Common Units and
Disposition of Williams Partners Common Units
Allocations Between Transferors and
Transferees, allocations under the Williams Partners
partnership agreement will be given effect for federal income
tax purposes in determining a partners share of an item of
income, gain, loss or deduction.
Treatment of Short Sales. A unitholder whose
Williams Partners Common Units are loaned to a short
seller to cover a short sale of Williams Partners Common
Units may be considered as having disposed of those units. If
so, such unitholder would no longer be treated for tax purposes
as a partner with respect to those Williams Partners Common
Units during the period of the loan and may recognize gain or
loss from the disposition. As a result, during this period:
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any of Williams Partners income, gain, loss or deduction
with respect to those Williams Partners Common Units would not
be reportable by the unitholder;
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any cash distributions received by the unitholder as to those
Williams Partners Common Units would be fully taxable; and
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all of these distributions would appear to be ordinary income.
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Andrews Kurth LLP has not rendered an opinion regarding the
treatment of a unitholder whose Williams Partners Common Units
are loaned to a short seller to cover a short sale of Williams
Partners Common Units; therefore, unitholders desiring to assure
their status as partners and avoid the risk of gain recognition
from a loan to a short seller are urged to modify any applicable
brokerage account agreements to prohibit their brokers from
loaning their Williams Partners Common Units. The IRS has
announced that it is studying issues relating to the tax
treatment of short sales of partnership interests. Please also
read Disposition of Williams Partners Common
Units Recognition of Gain or Loss.
Alternative Minimum Tax. Each unitholder will
be required to take into account its distributive share of any
items of Williams Partners income, gain, loss or deduction for
purposes of the alternative minimum tax.
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The current minimum tax rate for noncorporate taxpayers is 26%
on the first $175,000 of alternative minimum taxable income in
excess of the exemption amount and 28% on any additional
alternative minimum taxable income. Williams Partners
unitholders are urged to consult with their tax advisors as to
the impact of owning Williams Partners Common Units on their
liability for the alternative minimum tax.
Tax Rates. In general the highest effective
U.S. federal income tax rate for individuals is currently
35% and the maximum U.S. federal income tax rate for net
capital gains of an individual is currently 15% if the asset
disposed of was a capital asset held for more than
12 months at the time of disposition. However, absent new
legislation extending the current rates, beginning
January 1, 2011, the highest marginal U.S. federal
income tax rate applicable to ordinary income and long-term
capital gains of individuals will increase to 39.6% and 20%,
respectively. The recently enacted Patient Protection and
Affordable Care Act will impose a 3.8% Medicare tax on certain
investment income earned by individuals for taxable years
beginning after December 31, 2012. For these purposes,
investment income generally includes a unitholders
allocable share of Williams Partners income and gain
realized by a unitholder from a sale of units. The tax will be
imposed on the lesser of (i) the unitholders net
income from all investments, and (ii) the amount by which
the unitholders adjusted gross income exceeds $250,000 (if
the unitholder is married and filing jointly) or $200,000 (if
the unitholder is unmarried).
Section 754 Election. Williams Partners
has made the election permitted by Section 754 of the Code.
That election is irrevocable without the consent of the IRS. The
election will generally permit Williams Partners to adjust a
Williams Partners Common Unit purchasers tax basis in
Williams Partners assets (inside basis) under
Section 743(b) of the Code to reflect its purchase price.
This election does not apply to a person who purchases Williams
Partners Common Units directly from Williams Partners. The
Section 743(b) adjustment belongs to the purchaser and not
to other unitholders. For purposes of this discussion, a
unitholders inside basis in Williams Partners assets
will be considered to have two components (1) its share of
the tax basis in Williams Partners assets (common
basis) and (2) its Section 743(b) adjustment to
that basis.
Where the remedial allocation method is adopted (which Williams
Partners has adopted), Treasury Regulations under
Section 743 of the Code require a portion of the
Section 743(b) adjustment attributable to recovery property
under Section 168 of the Code to be depreciated over the
remaining cost recovery period for the propertys
unamortized Book-Tax Disparity. Under Treasury
regulation Section 1.167(c)-1(a)(6),
a Section 743(b) adjustment attributable to property
subject to depreciation under Section 167 of the Code,
rather than cost recovery deductions under Section 168, is
generally required to be depreciated using either the
straight-line method or the 150% declining balance method. Under
the Williams Partners partnership agreement, its general partner
is authorized to take a position to preserve the uniformity of
Williams Partners Common Units even if that position is not
consistent with these Treasury regulations. Please read
Tax Treatment of Operations and
Uniformity of Williams Partners Common
Units.
Although Andrews Kurth LLP is unable to opine as to the validity
of this approach because there is no controlling authority on
this issue, Williams Partners intends to depreciate the portion
of a Section 743(b) adjustment attributable to unrealized
appreciation in the value of Contributed Property, to the extent
of any unamortized Book-Tax Disparity, using a rate of
depreciation or amortization derived from the depreciation or
amortization method and useful life applied to the unamortized
Book-Tax Disparity of the property, or treat that portion as
non-amortizable
to the extent attributable to property the common basis of which
is not amortizable. This method is consistent with the Treasury
regulations under Section 743 but is arguably inconsistent
with Treasury
regulation Section 1.167(c)-1(a)(6),
which is not expected to directly apply to a material portion of
Williams Partners assets. To the extent this
Section 743(b) adjustment is attributable to appreciation
in value in excess of the unamortized Book-Tax Disparity,
Williams Partners will apply the rules described in the Treasury
regulations and legislative history. If Williams Partners
determines that this position cannot reasonably be taken, it may
take a depreciation or amortization position under which all
purchasers acquiring Williams Partners Common Units in the same
month would receive depreciation or amortization, whether
attributable to common basis or a Section 743(b)
adjustment, based upon the same applicable rate as if they had
purchased a direct interest in Williams Partners assets.
This kind of aggregate approach may result in lower annual
depreciation or amortization deductions than would otherwise be
allowable to some unitholders. Please read
Uniformity of Williams Partners Common
Units.
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A Section 754 election is advantageous if the
transferees tax basis in its Williams Partners Common
Units is higher than the units share of the aggregate tax
basis of Williams Partners assets immediately prior to the
transfer. In that case, as a result of the election the
transferee would have, among other items, a greater amount of
depreciation deductions and its share of any gain or loss on a
sale of Williams Partners assets would be less.
Conversely, a Section 754 election is disadvantageous if
the transferees tax basis in its Williams Partners Common
Units is lower than those units share of the aggregate tax
basis of the Williams Partners assets immediately prior to
the transfer. Thus the fair market value of the Williams
Partners Common Units may be affected either favorably or
unfavorably by the election. A basis adjustment is required
regardless of whether a Section 754 election is made in the
case of a transfer of an interest in Williams Partners if
Williams Partners has a substantial built-in loss immediately
after the transfer or if Williams Partners distributes property
and has a substantial built-in loss immediately after the
transfer or if Williams Partners distributes property and has a
substantial basis reduction. Generally a built-in loss or basis
reduction is substantial if it exceeds $250,000.
The calculations involved in the Section 754 election are
complex and will be made on the basis of assumptions as to the
value of Williams Partners assets and other matters. For
example, the allocation of the Section 743(b) adjustment
among Williams Partners assets must be made in accordance
with the Code. The IRS could seek to reallocate some or all of
any Section 743(b) adjustment allocated by Williams
Partners to its tangible assets to goodwill instead. Goodwill,
as an intangible asset, is generally either
non-amortizable
or amortizable over a longer period of time or under a less
accelerated method than Williams Partners tangible assets.
There are no assurances that the determinations Williams
Partners makes will not be successfully challenged by the IRS
and that the deductions resulting from them will not be reduced
or disallowed altogether. Should the IRS require a different
basis adjustment to be made, and should, in Williams
Partners opinion the expense of compliance exceed the
benefit of the election, it may seek permission from the IRS to
revoke its Section 754 election. If permission is granted,
a subsequent purchaser of Williams Partners Common Units may be
allocated more income than it would have been allocated had the
election not been revoked.
Tax
Treatment of Operations
Accounting Method and Taxable Year. Williams
Partners uses the year ending December 31 as its taxable year
and the accrual method of accounting for federal income tax
purposes. Each unitholder will be required to include in income
its share of income, gain, loss and deduction for Williams
Partners taxable year or years ending within or with its
taxable year. In addition, a unitholder who has a taxable year
different than Williams Partners taxable year and who
disposes of all of its Williams Partners Common Units following
the close of Williams Partners taxable year but before the
close of its taxable year must include its share of income,
gain, loss and deduction in income for its taxable year, with
the result that it will be required to include in income for its
taxable year its share of more than one year of income, gain,
loss and deduction. Please read Disposition of
Williams Partners Common Units Allocations Between
Transferors and Transferees.
Initial Tax Basis, Depreciation and
Amortization. The tax basis of Williams
Partners assets is used for purposes of computing
depreciation and cost recovery deductions and ultimately gain or
loss on the disposition of these assets. The federal income tax
burden associated with the difference between the fair market
value of Williams Partners assets and their tax basis
immediately prior to the Merger will be borne by its general
partner, its affiliates and the Williams Partners unitholders as
of that time, and the federal income tax burden associated with
the difference between the fair market value of WMZs
assets and their tax basis immediately prior to the Merger will
be borne by the WMZ unitholders as of that time. Please read
Tax Consequences of Williams Partners Common
Unit Ownership Allocation of Income, Gain, Loss and
Deduction.
To the extent allowable, Williams Partners may elect to use the
depreciation and cost recovery methods that will result in the
largest deductions being taken in the early years after assets
are placed in service. Property subsequently acquired or
constructed may be depreciated using accelerated methods
permitted by the Code.
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If Williams Partners disposes of depreciable property by sale,
foreclosure, or otherwise, all or a portion of any gain,
determined by reference to the amount of depreciation previously
deducted and the nature of the property, may be subject to the
recapture rules and taxed as ordinary income rather than capital
gain. Similarly, a unitholder who has taken cost recovery or
depreciation deductions with respect to property Williams
Partners owns will likely be required to recapture some or all
of those deductions as ordinary income upon a sale of its
interest in Williams Partners. Please read Tax
Consequences of Williams Partners Common Unit
Ownership Allocation of Income, Gain, Loss and
Deduction and Disposition of Williams
Partners Common Units Recognition of Gain or
Loss.
Valuation and Tax Basis of Williams Partners
Properties. The federal income tax consequences
of the ownership and disposition of Williams Partners Common
Units will depend in part on Williams Partners estimates
of the relative fair market values, and the tax bases, of
Williams Partners assets. Although Williams Partners may
from time to time consult with professional appraisers regarding
valuation matters, it will make many of the relative fair market
value estimates itself. These estimates and determinations of
basis are subject to challenge and will not be binding on the
IRS or the courts. If the estimates of fair market value or
basis are later found to be incorrect, the character and amount
of items of income, gain, loss or deductions previously reported
by unitholders might change, and unitholders might be required
to adjust their tax liability for prior years and incur interest
and penalties with respect to those adjustments.
Disposition
of Williams Partners Common Units
Recognition of Gain or Loss. Gain or loss will
be recognized on a sale of Williams Partners Common Units equal
to the difference between the unitholders amount realized
and the unitholders tax basis for the common units sold. A
unitholders amount realized will be measured by the sum of
the cash or the fair market value of other property received by
it plus its share of the Williams Partners nonrecourse
liabilities attributable to the common units sold. Because the
amount realized includes a unitholders share of the
Williams Partners nonrecourse liabilities, the gain recognized
on the sale of Williams Partners Common Units could result in a
tax liability in excess of any cash received from the sale.
Prior distributions from Williams Partners in excess of
cumulative net taxable income for a Williams Partners
Common Unit that decreased a unitholders tax basis in that
common unit will, in effect, become taxable income if the common
unit is sold at a price greater than the unitholders tax
basis in that common unit, even if the price received is less
than its original cost.
Except as noted below, gain or loss recognized by a unitholder,
other than a dealer in Williams Partners Common
Units, on the sale or exchange of a Williams Partners Common
Unit held for more than one year will generally be taxable as
capital gain or loss. Capital gain recognized by an individual
on the sale of Williams Partners Common Units held more than
12 months will generally be taxed at a maximum rate of 15%
through December 31, 2010 and 20% thereafter (absent
legislation extending the current rate). A portion of this gain
or loss, which will likely be substantial, will be separately
computed and taxed as ordinary income or loss under
Section 751 of the Code to the extent attributable to
assets giving rise to depreciation recapture or other
unrealized receivables or to inventory
items Williams Partners owns. The term unrealized
receivables includes potential recapture items including
depreciation recapture. Ordinary income attributable to
unrealized receivables, inventory items and depreciation
recapture may exceed net taxable gain realized on the sale of a
Williams Partners Common Unit and may be recognized even if
there is a net taxable loss realized on the sale of a Williams
Partners Common Unit. Thus a unitholder may recognize both
ordinary income and a capital loss upon a sale of Williams
Partners Common Units. Net capital loss may offset capital gains
and no more than $3,000 of ordinary income each year in the case
of individuals and may only be used to offset capital gains in
the case of corporations.
The IRS has ruled that a partner who acquires interests in a
partnership in separate transactions must combine those
interests and maintain a single adjusted tax basis for all those
interests. Upon a sale or other disposition of less than all of
those interests, a portion of that tax basis must be allocated
to the interests sold using an equitable
apportionment method, which generally means that the tax
basis allocated to the interest sold equals an amount that bears
the same relation to the partners tax basis in its entire
interest in the
143
partnership as the value of the interest sold bears to the value
of the partners entire interest in the partnership.
Treasury regulations under Section 1223 of the Code allow a
selling unitholder who can identify Williams Partners Common
Units transferred with an ascertainable holding period to elect
to use the actual holding period of the common units
transferred. Thus, according to the ruling, a unitholder will be
unable to select high or low basis Williams Partners Common
Units to sell as would be the case with corporate stock, but,
according to the Treasury regulations, may designate specific
common units sold for purposes of determining the holding period
of the common units transferred. A unitholder electing to use
the actual holding period of Williams Partners Common Units
transferred must consistently use that identification method for
all subsequent sales or exchanges of Williams Partners Common
Units. A unitholder considering the purchase of additional
Williams Partners Common Units or a sale of Williams Partners
Common Units purchased in separate transactions is urged to
consult its tax advisor as to the possible consequences of this
ruling and application of the Treasury regulations.
Specific provisions of the Code affect the taxation of some
financial products and securities, including partnership
interests, by treating a taxpayer as having sold an
appreciated partnership interest, one in which gain
would be recognized if it were sold, assigned or terminated at
its fair market value, if the taxpayer or related persons
enter(s) into:
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a short sale;
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an offsetting notional principal contract; or
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a futures or forward contract with respect to the partnership
interest or substantially identical property.
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Moreover, if a taxpayer has previously entered into a short
sale, an offsetting notional principal contract or a futures or
forward contract with respect to the partnership interest, the
taxpayer will be treated as having sold that position if the
taxpayer or a related person then acquires the partnership
interest or substantially identical property. The Secretary of
Treasury is also authorized to issue regulations that treat a
taxpayer that enters into transactions or positions that have
substantially the same effect as the preceding transactions as
having constructively sold the financial position.
Allocations Between Transferors and
Transferees. In general, Williams Partners
taxable income or loss will be determined annually, will be
prorated on a monthly basis and will be subsequently apportioned
among the unitholders in proportion to the number of Williams
Partners Common Units owned by each of them as of the opening of
the applicable exchange on the first business day of the month
(the Allocation Date). However, gain or loss
realized on a sale or other disposition of Williams
Partners assets other than in the ordinary course of
business will be allocated among the unitholders on the
Allocation Date in the month in which that gain or loss is
recognized. As a result, a unitholder transferring Williams
Partners Common Units may be allocated income, gain, loss and
deduction realized after the date of transfer.
The use of this method may not be permitted under existing
Treasury Regulations. Accordingly, Andrews Kurth LLP is unable
to opine on the validity of this method of allocating income and
deductions between unitholders. Williams Partners uses this
method because it is not administratively feasible to make these
allocations on a more frequent basis. If this method is not
allowed under the Treasury Regulations, or only applies to
transfers of less than all of the unitholders interest,
Williams Partners taxable income or losses might be
reallocated among the unitholders. Williams Partners is
authorized to revise its method of allocation between
unitholders, as well as among unitholders whose interests vary
during a taxable year, to conform to a method permitted under
future Treasury regulations.
A unitholder who owns Williams Partners Common Units at any time
during a quarter and who disposes of them prior to the record
date set for a cash distribution for that quarter will be
allocated items of income, gain, loss and deductions
attributable to that quarter but will not be entitled to receive
that cash distribution.
Notification Requirements. A unitholder who
sells any of its Williams Partners Common Units, other than
through a broker, generally is required to notify Williams
Partners in writing of that sale within 30 days after the
sale (or, if earlier, January 15 of the year following the
sale). A purchaser who purchases Williams Partners Common Units
from another unitholder is also generally required to notify
Williams Partners in
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writing of that purchase within 30 days after the purchase.
Upon receiving such notifications, Williams Partners is required
to notify the IRS of that transaction and to furnish specified
information to the transferor and transferee. Failure to notify
Williams Partners of a transfer of Williams Partners Common
Units may, in some cases, lead to the imposition of penalties.
However, these reporting requirements do not apply to a sale by
an individual who is a citizen of the U.S. and who effects
the sale or exchange through a broker who will satisfy such
requirements.
Constructive Termination. Williams Partners
will be considered to have been terminated for tax purposes if
there are sales or exchanges which, in the aggregate, constitute
50% or more of the total interests in its capital and profits
within a 12 month period. A constructive termination
results in the closing of Williams Partners taxable year
for all unitholders. In the case of a unitholder reporting on a
taxable year different from Williams Partners taxable
year, the closing of Williams Partners taxable year may
result in more than 12 months of Williams Partners
taxable income or loss being includable in its taxable income
for the year of termination. A constructive termination
occurring on a date other than December 31 will result in
Williams Partners filing two tax returns for one fiscal year and
the cost of preparation of these returns will be borne by all
unitholders. Williams Partners would be required to make new tax
elections after a termination, including a new election under
Section 754 of the Code, and a termination would result in
a deferral of deductions for depreciation. A termination could
also result in penalties if Williams Partners were unable to
determine that the termination had occurred. Moreover, a
termination might either accelerate the application of, or
subject Williams Partners to, any tax legislation enacted before
the termination.
Uniformity
of Williams Partners Common Units
Because Williams Partners cannot match transferors and
transferees of Williams Partners Common Units, it must maintain
uniformity of the economic and tax characteristics of the
Williams Partners Common Units to a purchaser of these units. In
the absence of uniformity, it may be unable to completely comply
with a number of federal income tax requirements, both statutory
and regulatory. A lack of uniformity can result from a literal
application of Treasury
regulation Section 1.167(c)-1(a)(6).
Any non-uniformity could have a negative impact on the value of
the Williams Partners Common Units. Please read
Tax Consequences of Williams Partners Common
Unit Ownership Section 754 Election.
Williams Partners intends to depreciate the portion of a
Section 743(b) adjustment attributable to unrealized
appreciation in the value of Contributed Property, to the extent
of any unamortized Book-Tax Disparity, using a rate of
depreciation or amortization derived from the depreciation or
amortization method and useful life applied to the unamortized
Book-Tax Disparity of that property or treat that portion as
nonamortizable, to the extent attributable to property which is
not amortizable, consistent with the Treasury regulations under
Section 743 even though that position may be inconsistent
with Treasury regulation
Section 1.167(c)-1(a)(6),
which is not expected to directly apply to a material portion of
Williams Partners assets. Please read
Tax Consequences of Williams Partners Common
Unit Ownership Section 754 Election. To
the extent that the Section 743(b) adjustment is
attributable to appreciation in value in excess of the
unamortized Book-Tax Disparity, Williams Partners will apply the
rules described in the Treasury regulations and legislative
history. If Williams Partners determines that this position
cannot reasonably be taken, it may adopt a depreciation and
amortization position under which all purchasers acquiring
Williams Partners Common Units in the same month would receive
depreciation and amortization deductions, whether attributable
to a common basis or Section 743(b) adjustment, based upon
the same applicable rate as if they had purchased a direct
interest in Williams Partners property. If this position
is adopted, it may result in lower annual depreciation and
amortization deductions than would otherwise be allowable to
some unitholders and risk the loss of depreciation and
amortization deductions not taken in the year that these
deductions are otherwise allowable. This position will not be
adopted if Williams Partners determines that the loss of
depreciation and amortization deductions will have a material
adverse effect on the unitholders. If Williams Partners chooses
not to utilize this aggregate method, it may use any other
reasonable depreciation and amortization method to preserve the
uniformity of the intrinsic tax characteristics of any Williams
Partners Common Units that would not have a material adverse
effect on the unitholders. Andrews Kurth LLP is unable to opine
on the validity of any of these positions. The IRS may challenge
any method of depreciating the
145
Section 743(b) adjustment described in this paragraph. If
this challenge were sustained, the uniformity of Williams
Partners Common Units might be affected and the gain from the
sale of Williams Partners Common Units might be increased
without the benefit of additional deductions. Williams Partners
does not believe these allocations will affect any material
items of income, gain, loss or deduction. Please read
Disposition of Williams Partners Common
Units Recognition of Gain or Loss.
Tax-Exempt
Organizations and Other Investors
Ownership of Williams Partners Common Units by employee benefit
plans, other tax exempt organizations, nonresident aliens,
foreign corporations and other foreign persons raises issues
unique to those investors and, as described below, may have
substantially adverse tax consequences to them.
Employee benefit plans and most other organizations exempt from
federal income tax, including IRAs and other retirement plans
are subject to federal income tax on unrelated business taxable
income. Virtually all of the income of Williams Partners
allocated to a unitholder that is a tax-exempt organization will
be unrelated business taxable income and will be taxable to them.
Nonresident aliens and foreign corporations, trusts or estates
that own Williams Partners Common Units will be considered to be
engaged in a trade or business in the United States because of
the ownership of the units. As a consequence they will be
required to file federal tax returns to report their share of
Williams Partners income, gain, loss or deduction and pay
federal income tax at regular rates on their share of
Williams Partners net income or gain. Under rules
applicable to publicly traded partnerships, Williams Partners
will withhold tax at applicable effective tax rates from cash
distributions made quarterly to foreign unitholders. Each
foreign unitholder must obtain a taxpayer identification number
from the IRS and submit that number to Williams Partners
transfer agent on a
Form W-8BEN
or applicable substitute form in order to obtain credit for
these withholding taxes. A change in applicable law may require
Williams Partners to change these procedures.
In addition, because a foreign corporation that owns Williams
Partners Common Units will be treated as engaged in a
U.S. trade or business, that corporation may be subject to
the U.S. branch profits tax at a rate of 30%, in addition
to regular federal income tax, on its share of Williams Partners
income and gain, as adjusted for changes in the foreign
corporations U.S. net equity, that is
effectively connected with the conduct of a U.S. trade or
business. That tax may be reduced or eliminated by an income tax
treaty between the United States and the country in which
the foreign corporate unitholder is a qualified
resident. In addition, this type of unitholder is subject
to special information reporting requirements under
Section 6038C of the Code.
Under a ruling of the IRS, a foreign unitholder who sells or
otherwise disposes of a Williams Partners Common Unit will be
subject to federal income tax on gain realized on the sale or
disposition of that unit to the extent that the gain is
effectively connected with a U.S. trade or business of the
foreign unitholder. Because a foreign unitholder is considered
to be engaged in a trade or business in the U.S. by virtue
of the ownership of the common units, under this ruling, a
foreign unitholder who sells or otherwise disposes of a common
unit generally will be subject to federal income tax on gain
realized on the sale or other disposition of the common units.
Apart from the ruling, a foreign unitholder will not be taxed or
subject to withholding upon the sale or disposition of a
Williams Partners Common Unit if it has owned less than 5% in
value of the Williams Partners Common Units during the five-year
period ending on the date of the disposition and if the Williams
Partners Common Units are regularly traded on an established
securities market at the time of the sale or disposition.
Administrative
Matters
Information Returns and Audit
Procedures. Williams Partners intends to furnish
to each unitholder, within 90 days after the close of each
taxable year, specific tax information, including a
Schedule K-1,
which describes its share of the income, gain, loss and
deduction for Williams Partners preceding taxable year. In
preparing this information, which will not be reviewed by
counsel, Williams Partners will take various accounting and
reporting positions, some of which have been mentioned earlier,
to determine the unitholders
146
share of income, gain, loss and deduction. There are no
assurances that those positions will in all cases yield a result
that conforms to the requirements of the Code, Treasury
regulations or administrative interpretations of the IRS.
Neither Williams Partners nor Andrews Kurth LLP can assure
unitholders that the IRS will not successfully contend in court
that those positions are impermissible. Any challenge by the IRS
could negatively affect the value of the Williams Partners
Common Units.
The IRS may audit Williams Partners federal income tax
information returns. Adjustments resulting from an IRS audit may
require each unitholder to adjust a prior years tax
liability, and possibly may result in an audit of its own
return. Any audit of a unitholders return could result in
adjustments not related to Williams Partners returns
as well as those related to Williams Partners returns.
Partnerships generally are treated as separate entities for
purposes of federal income tax audits, judicial review of
administrative adjustments by the IRS and tax settlement
proceedings. The tax treatment of partnership items of income,
gain, loss and deduction are determined in a partnership
proceeding rather than in separate proceedings with the
partners. The Code requires that one partner be designated as
the Tax Matters Partner for these purposes. The
Williams Partners partnership agreement names its general
partner as its Tax Matters Partner.
The Tax Matters Partner will make some elections on Williams
Partners behalf and on behalf of unitholders. In addition,
the Tax Matters Partner can extend the statute of limitations
for assessment of tax deficiencies against unitholders for items
in Williams Partners returns. The Tax Matters Partner may
bind a unitholder with less than a 1% interest in Williams
Partners profits to a settlement with the IRS unless that
unitholder elects, by filing a statement with the IRS, not to
give that authority to the Tax Matters Partner. The Tax Matters
Partner may seek judicial review, by which all the unitholders
are bound, of a final partnership administrative adjustment,
and, if the Tax Matters Partner fails to seek judicial review,
judicial review may be sought by any unitholder having at least
a 1% interest in profits or by any group of unitholders having
in the aggregate at least a 5% interest in profits. However,
only one action for judicial review will go forward, and each
unitholder with an interest in the outcome may participate in
that action.
A unitholder must file a statement with the IRS identifying the
treatment of any item on its federal income tax return that is
not consistent with the treatment of the item on Williams
Partners return. Intentional or negligent disregard of
this consistency requirement may subject a unitholder to
substantial penalties.
Nominee Reporting. Persons who hold an
interest in Williams Partners as a nominee for another person
are required to furnish the following information to Williams
Partners:
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the name, address and taxpayer identification number of the
beneficial owner and the nominee;
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a statement regarding whether the beneficial owner is
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(1) a person that is not a U.S. person,
(2) a foreign government, an international organization or
any wholly owned agency or instrumentality of either of the
foregoing, or
(3) a tax-exempt entity;
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the amount and description of Williams Partners Common Units
held, acquired or transferred for the beneficial owner; and
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specific information including the dates of acquisitions and
transfers, means of acquisitions and transfers, and acquisition
cost for purchases, as well as the amount of net proceeds from
sales.
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Brokers and financial institutions are required to furnish
additional information, including whether they are
U.S. persons and specific information on Williams Partners
Common Units they acquire, hold or transfer for their own
account. A penalty of $50 per failure, up to a maximum of
$l00,000 per calendar year, is imposed by the Code for failure
to report that information to Williams Partners. The nominee is
required to supply the beneficial owner of the Williams Partners
Common Units with the information furnished to Williams Partners.
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Accuracy-related Penalties. An additional tax
equal to 20% of the amount of any portion of an underpayment of
tax that is attributable to one or more specified causes,
including negligence or disregard of rules or regulations,
substantial understatements of income tax and substantial
valuation misstatements, is imposed by the Code. No penalty will
be imposed, however, for any portion of an underpayment if it is
shown that there was a reasonable cause for the underpayment of
that portion and that the taxpayer acted in good faith regarding
the underpayment of that portion.
For individuals, a substantial understatement of income tax in
any taxable year exists if the amount of the understatement
exceeds the greater of 10% of the tax required to be shown on
the return for the taxable year or $5,000. The amount of any
understatement subject to penalty generally is reduced if any
portion is attributable to a position adopted on the return:
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for which there is, or was, substantial
authority, or
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as to which there is a reasonable basis if the pertinent facts
of that position are adequately disclosed on the return.
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If any item of income, gain, loss or deduction included in the
distributive shares of unitholders might result in that kind of
an understatement of income for which no
substantial authority exists, Williams Partners
must disclose the pertinent facts on its return. In addition,
Williams Partners will make a reasonable effort to furnish
sufficient information for unitholders to make adequate
disclosure on their returns and to take other actions as may be
appropriate to permit unitholders to avoid liability for this
penalty. More stringent rules apply to tax shelters,
but Williams Partners believes it is not a tax shelter.
A substantial valuation misstatement exists if (a) the
value of any property, or the tax basis of any property, claimed
on a tax return is 150% or more of the amount determined to be
the correct amount of the valuation or tax basis, (b) the
price for any property or services (or for the use of property)
claimed on any such return with respect to any transaction
between persons described in Code Section 482 is 200% or
more (or 50% or less) of the amount determined under
Section 482 to be the correct amount of such price, or
(c) the net Code Section 482 transfer price adjustment
for the taxable year exceeds the lesser of $5 million or
10% of the taxpayers gross receipts. No penalty is imposed
unless the portion of the underpayment attributable to a
substantial valuation misstatement exceeds $5,000 ($10,000 for
most corporations). The penalty is increased to 40% in the event
of a gross valuation misstatement. Williams Partners does not
anticipate making any valuation misstatements.
Reportable Transactions. If Williams Partners
were to engage in a reportable transaction,
Williams Partners (and possibly its unitholders and others)
would be required to make a detailed disclosure of the
transaction to the IRS. A transaction may be a reportable
transaction based upon any of several factors, including the
fact that it is a type of tax avoidance transaction publicly
identified by the IRS as a listed transaction or a
transaction of interest or that it produces certain
kinds of losses in excess of $2 million in any single year,
or $4 million in any combination of six successive tax
years. Williams Partners participation in a reportable
transaction could increase the likelihood that its federal
income tax information return (and possibly its
unitholders tax returns) would be audited by the IRS.
Please read Information Returns and Audit
Procedures above.
Moreover, if Williams Partners were to participate in a
reportable transaction with a significant purpose to avoid or
evade tax, or in any listed transaction, its unitholders may be
subject to the following provisions of the American Jobs
Creation Act of 2004:
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accuracy-related penalties with a broader scope, significantly
narrower exceptions, and potentially greater amounts than
described above at Accuracy-related
Penalties;
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for those persons otherwise entitled to deduct interest on
federal tax deficiencies, nondeductibility of interest on any
resulting tax liability; and
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in the case of a listed transaction, an extended statute of
limitations.
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Williams Partners does not expect to engage in any
reportable transactions.
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State,
Local, Foreign and Other Tax Considerations
In addition to federal income taxes, each unitholder likely will
be subject to other taxes, such as state, local and foreign
income taxes, unincorporated business taxes, and estate,
inheritance or intangible taxes that may be imposed by the
various jurisdictions in which Williams Partners does business
or owns property or in which the unitholder is a resident.
Although an analysis of those various taxes is not presented
here, each prospective unitholder should consider their
potential impact on its investment in Williams Partners.
Williams Partners currently owns property or conducts business
in a number of states. Most of these states impose an income tax
on individuals, corporations and other entities. Williams
Partners may own property or do business in other jurisdictions
in the future. Although a unitholder may not be required to file
a return and pay taxes in some jurisdictions because its income
from that jurisdiction falls below the filing and payment
requirement, unitholders will be required to file income tax
returns and to pay income taxes in many of the jurisdictions in
which Williams Partners does business or owns property and may
be subject to penalties for failure to comply with those
requirements. In some jurisdictions, tax losses may not produce
a tax benefit in the year incurred and also may not be available
to offset income in subsequent taxable years. Some of the
jurisdictions may require Williams Partners, or Williams
Partners may elect, to withhold a percentage of income from
amounts to be distributed to a unitholder who is not a resident
of the jurisdiction. Withholding, the amount of which may be
greater or less than a particular unitholders income tax
liability to the jurisdiction, generally does not relieve a
nonresident unitholder from the obligation to file an income tax
return in that jurisdiction. Amounts withheld will be treated as
if distributed to unitholders for purposes of determining the
amounts distributed by Williams Partners. Please read
Tax Consequences of Williams Partners Common
Unit Ownership Entity-Level Collections.
Based on current law and Williams Partners estimate of
future operations, the general partner anticipates that any
amounts required to be withheld will not be material.
It is
the responsibility of each unitholder to investigate the legal
and tax consequences, under the laws of pertinent jurisdictions,
of its investment in Williams Partners. Accordingly, Williams
Partners and WMZ urge each unitholder to consult, and depend
upon, its own tax counsel or other advisor with regard to those
matters. Further, it is the responsibility of each unitholder to
file all state, local and foreign, as well as United States
federal, tax returns that may be required of it. Andrews Kurth
LLP has not rendered an opinion on the state, local or foreign
tax consequences of an investment in Williams
Partners.
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SUBMISSION
OF WMZ UNITHOLDER PROPOSALS
Under applicable Delaware law and the partnership agreement of
WMZ, WMZ is not required to hold an annual meeting of its
limited partners. Special meetings of the limited partners may
be called by the WMZ General Partner or by limited partners
owning 20% or more of the outstanding units of the class or
classes for which the meeting is proposed. Any holder of WMZ
Common Units who wishes to submit a proposal for inclusion in
the proxy materials for any future special meeting must submit a
proposal a reasonable time before WMZ begins to print and mail
its proxy materials.
The SEC rules set forth standards as to what proposals are
required to be included in a proxy statement for a meeting.
LEGAL
MATTERS
The validity of Williams Partners Common Units to be issued in
the Merger will be passed upon by Gibson, Dunn &
Crutcher LLP. Certain tax matters relating to the Merger will be
passed upon for Williams Partners by Andrews Kurth LLP, Houston,
Texas. Andrews Kurth LLP has provided legal services to WMZ in
the past regarding matters unrelated to the Merger. Certain tax
matters relating to the Merger will be passed upon for WMZ by
Fulbright & Jaworski L.L.P., Houston, Texas.
EXPERTS
The consolidated financial statements of Williams Partners for
the year ended December 31, 2009, appearing in Williams
Partners Current Report on
Form 8-K
filed on May 12, 2010, have been audited by
Ernst & Young LLP, independent registered public
accounting firm, as set forth in their report thereon included
therein and incorporated herein by reference, and are
incorporated herein by reference in reliance upon such report
given on the authority of such firm as experts in accounting and
auditing.
The effectiveness of Williams Partners internal control
over financial reporting as of December 31, 2009 has been
audited by Ernst & Young LLP, independent registered
public accounting firm, as set forth in their report thereon
included in Williams Partners Annual Report on
Form 10-K
for the year ended December 31, 2009 and incorporated
herein by reference, which report is incorporated herein by
reference in reliance upon such report given on the authority of
such firm as experts in accounting and auditing.
The consolidated financial statements of WMZ, appearing in its
Annual Report on
Form 10-K
for the year ended December 31, 2009, and WMZs
managements assessment of the effectiveness of internal
control over financial reporting as of December 31, 2009,
included therein, have been audited by Ernst & Young
LLP, independent registered public accounting firm, as set forth
in their reports thereon, which conclude, among other things,
that WMZ did not maintain effective internal control over
financial reporting as of December 31, 2009, based on
Internal Control Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway
Commission, because of the effects of the material weakness
described therein, and are incorporated herein by reference in
reliance upon such reports given on the authority of such firm
as experts in accounting and auditing.
The consolidated financial statements of Northwest Pipeline GP
for the year ended December 31, 2009, appearing in
WMZs Annual Report on
Form 10-K
for the year ended December 31, 2009, have been audited by
Ernst & Young LLP, independent registered public
accounting firm, as set forth in their report thereon included
therein and incorporated herein by reference, and are
incorporated herein by reference in reliance upon such report
given on the authority of such firm as experts in accounting and
auditing.
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WHERE YOU
CAN FIND MORE INFORMATION
Williams Partners and WMZ file annual, quarterly and current
reports, proxy statements and other information with the SEC.
You may read and copy any of this information at the SECs
public reference room at 100 F Street, N.E.,
Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330
or
202-942-8090
for further information on the public reference room. The SEC
also maintains a website at www.sec.gov that contains reports,
proxy statements and other information regarding issuers,
including Williams Partners and WMZ, who file reports and
information electronically with the SEC. The reports and other
information filed by Williams Partners with the SEC are also
available at its website. The address of its website is
www.williamslp.com. The reports and other information filed by
WMZ with the SEC are also available at WMZs website. The
address of WMZs website is
www.williamspipelinepartners.com. Williams Partners web
address and the web addresses of the SEC and WMZ have been
included as inactive textual references only. The information
contained on those websites is expressly not incorporated by
reference into this joint proxy statement/prospectus.
Williams Partners has filed with the SEC a registration
statement on
Form S-4
of which this joint proxy statement/prospectus forms a part. The
registration statement registers Williams Partners Common Units
to be issued to holders of Publicly Owned WMZ Common Units in
connection with the Merger. The registration statement,
including the attached exhibits and annexes, contains additional
relevant information about Williams Partners Common Units and
the WMZ Common Units, respectively. The rules and regulations of
the SEC allow Williams Partners to omit certain information
included in the registration statement from this joint proxy
statement/prospectus.
In addition, the SEC allows Williams Partners to disclose
important information to you by referring you to other documents
filed separately with the SEC. This information is considered to
be a part of this joint proxy statement/prospectus, except for
any information that is superseded by information included
directly in this joint proxy statement/prospectus or
incorporated by reference subsequent to the date of this joint
proxy statement/prospectus as described below. Statements
contained in this joint proxy statement/prospectus as to the
contents of any contract or other documents are not necessarily
complete, and in each instance stockholders are referred to the
copy of the contract or other document filed with the SEC, each
statement being qualified in all respects by such reference.
This joint proxy statement/prospectus incorporates by reference
the documents listed below that Williams Partners and WMZ have
previously filed with the SEC. They contain important
information about the companies and their financial condition,
business and prospects. You should analyze the information in
this joint proxy statement/prospectus and the additional
information in the documents described under the heading
Documents Incorporated By Reference below before you
vote.
You can obtain any of the other documents listed above from the
SEC, through the SECs website at the address described
above, or from Williams Partners by requesting them in writing
or by telephone at the following address:
Investor
Relations
Williams Partners L.P.
One Williams Center, Suite 5000
Tulsa, Oklahoma
74172-0172
Telephone:
(918) 573-2078
These documents are available from Williams Partners without
charge, excluding any exhibits to them unless the exhibit is
specifically listed as an exhibit to the registration statement
of which this joint proxy statement/prospectus forms a part.
In order to receive timely delivery of the documents in
advance of the Special Meeting, limited partners of WMZ must
request this information no later
than ,
2010.
151
DOCUMENTS
INCORPORATED BY REFERENCE
The SEC allows Williams Partners to incorporate by
reference certain information in documents Williams
Partners and WMZ file with the SEC, which means that Williams
Partners can disclose important information to you in this joint
proxy statement/prospectus by referring you to another document
filed separately with the SEC. The information incorporated by
reference is deemed to be part of this joint proxy
statement/prospectus, except for any information superseded by
information in this joint proxy
statement/prospectus,
or information filed subsequently that is incorporated by
reference and information in any joint proxy
statement/prospectus supplement. These documents contain
important business and financial information about Williams
Partners and WMZ, including information concerning financial
performance, and Williams Partners urges you to read them.
Williams Partners incorporates by reference into this joint
proxy statement/prospectus all of the following documents (other
than, in each case, documents or information deemed to have been
furnished and not filed in accordance with SEC rules):
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Williams Partners annual report on
Form 10-K
for the fiscal year ended December 31, 2009 and filed with
the SEC on February 25, 2010;
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Williams Partners quarterly report on
Form 10-Q
for the quarter ended March 31, 2010 and filed with the SEC
on May 5, 2010;
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Williams Partners current reports on
Form 8-K
filed with the SEC on January 19, 2010, January 22,
2010 (two filed on this date), February 2, 2010,
February 3, 2010, February 10, 2010, February 22,
2010, April 20, 2010 (two filed on this date),
April 29, 2010, and May 12, 2010; and
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the description of Williams Partners Common Units contained in
its registration statement on
Form 8-K/A,
filed December 20, 2006.
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In addition, Williams Partners incorporates by reference the
following documents filed by WMZ with the SEC:
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WMZs annual report on
Form 10-K
for the fiscal year ended December 31, 2009 and filed with
the SEC on February 23, 2010;
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WMZs quarterly report on
Form 10-Q
for the quarter ended March 31, 2010 and filed with the SEC
on May 5, 2010; and
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WMZs current reports on
Form 8-K
filed with the SEC on January 26, 2010 and May 26,
2010.
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All additional documents filed by Williams Partners and WMZ with
the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the filing of this joint proxy
statement/prospectus but, in the case of Williams Partners,
prior to the date on which the Merger is consummated, and in the
case of WMZ, prior to the Special Meeting, are also deemed to be
incorporated by reference. However, any documents or portions
thereof or any exhibits thereto that Williams Partners or WMZ
furnish to, but do not file with, the SEC shall not be
incorporated or deemed to be incorporated by reference into this
joint proxy statement/prospectus.
152
INFORMATION
REGARDING FORWARD-LOOKING STATEMENTS
Certain matters discussed in this joint proxy
statement/prospectus and the documents incorporated herein by
reference include forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements relate to the Merger,
Williams Partners anticipated financial performance,
managements plans and objectives for future operations,
business prospects, outcome of regulatory proceedings, market
conditions, and other matters.
All statements, other than statements of historical facts,
included or incorporated by reference in this joint proxy
statement/prospectus that address activities, events or
developments that Williams Partners expects, believes or
anticipates will exist or may occur in the future are
forward-looking statements. Forward-looking statements can be
identified by various forms of words such as
anticipates, believes,
seeks, could, may,
should, continues,
estimates, expects,
forecasts, intends, might,
goals, objectives, targets,
planned, potential,
projects, scheduled, will,
or other similar expressions. These statements are based on
managements beliefs and assumptions and on information
currently available to management and include, among others,
statements regarding:
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the liquidity and market price of Williams Partners Common Units;
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the realization of the expected benefits of the Merger, and the
effects of the consummation of the Merger;
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the consequences of the satisfaction or waiver of the Merger
conditions;
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the anticipated tax consequences of and the accounting treatment
of the Merger;
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amounts and nature of future capital expenditures;
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expansion and growth of Williams Partners business and
operations;
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financial condition and liquidity;
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business strategy;
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cash flow from operations or results of operations;
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the levels of cash distributions to unitholders;
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seasonality of certain business segments; and
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natural gas and NGL prices and demand.
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Forward-looking statements are based on numerous assumptions,
uncertainties, and risks that could cause future events or
results to be materially different from those stated or implied
in this joint proxy statement/prospectus. Limited partner units
are inherently different from the capital stock of a
corporation, although many of the business risks to which
Williams Partners is subject are similar to those that would be
faced by a corporation engaged in a similar business. You should
carefully consider the risk factors discussed above and in the
documents incorporated by reference herein in addition to the
other information in this joint proxy statement/prospectus. If
any of the following risks were actually to occur, Williams
Partners business, results of operations and financial
condition could be materially adversely affected. Many of the
factors that could adversely affect Williams Partners
business, results of operations and financial condition are
beyond its ability to control or predict. Specific factors that
could cause actual results to differ from results contemplated
by the forward-looking statements include, among others, the
following:
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whether Williams Partners has sufficient cash from operations to
enable it to maintain current levels of cash distributions or to
pay the minimum quarterly distribution following establishment
of cash reserves and payment of fees and expenses, including
payments to its general partner;
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availability of supplies (including the uncertainties inherent
in assessing and estimating future natural gas reserves), market
demand, volatility of prices, and the availability and cost of
capital;
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153
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inflation, interest rates and general economic conditions
(including future disruptions and volatility in the global
credit markets and the impact of these events on Williams
Partners customers and suppliers);
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the strength and financial resources of Williams Partners
competitors;
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development of alternative energy sources;
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the impact of operational and development hazards;
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costs of, changes in, or the results of laws, government
regulations (including proposed climate change legislation),
environmental liabilities, litigation, and rate proceedings;
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Williams Partners allocated costs for defined benefit
pension plans and other postretirement benefit plans sponsored
by Williams Partners affiliates;
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changes in maintenance and construction costs;
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changes in the current geopolitical situation;
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risks related to strategy and financing, including restrictions
stemming from Williams Partners debt agreements, future
changes in its credit ratings, and the availability and cost of
credit;
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risks associated with future weather conditions;
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acts of terrorism; and
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additional risks described in Williams Partners filings
with the SEC.
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Given the uncertainties and risk factors that could cause
Williams Partners actual results to differ materially from
those contained in any forward-looking statement, Williams
Partners cautions you not to unduly rely on its forward-looking
statements. Williams Partners disclaims any obligations to and
does not intend to update the above list to announce publicly
the result of any revisions to any of the forward-looking
statements to reflect future events or developments.
In addition to causing Williams Partners actual results to
differ, the factors listed above and referred to below may cause
Williams Partners intentions to change from those
statements of intention set forth in this joint proxy
statement/prospectus. Such changes in Williams Partners
intentions may also cause its results to differ. Williams
Partners may change its intentions, at any time and without
notice, based upon changes in such factors, its assumptions, or
otherwise.
Because forward-looking statements involve risks and
uncertainties, Williams Partners cautions that there are
important factors, in addition to those listed above, that may
cause actual results to differ materially from those contained
in the forward-looking statements. These factors include the
risks set forth under the caption Risk Factors in
this joint proxy statement/prospectus, the risks set forth in
the Williams Partners Annual Report on
Form 10-K
for the year ended December 31, 2009, and the risks set
forth in the WMZ 2009
10-K,
incorporated by reference in this joint proxy
statement/prospectus.
154
Annex A
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
dated as of
May 24, 2010
by and among
WILLIAMS PARTNERS L.P.,
WILLIAMS PARTNERS GP LLC,
WILLIAMS PARTNERS OPERATING LLC,
WPZ OPERATING COMPANY MERGER SUB LLC,
WILLIAMS PIPELINE PARTNERS L.P.
and
WILLIAMS PIPELINE GP LLC
TABLE OF
CONTENTS
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Page
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ARTICLE I DEFINITIONS
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A-1
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Section 1.1
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Definitions
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A-1
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Section 1.2
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Rules of Construction
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A-8
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ARTICLE II MERGER
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A-8
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Section 2.1
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Closing of the Merger
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A-8
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE WPZ
PARTIES
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A-12
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Section 3.1
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Organization
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A-12
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Section 3.2
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Authority and Approval
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A-12
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Section 3.3
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No Conflict; Consents
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A-12
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Section 3.4
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Capitalization; Title to Membership and Limited Partner Interests
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A-13
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Section 3.5
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SEC Documents; Internal Controls
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A-13
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Section 3.6
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Financial Statements; Undisclosed Liabilities
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A-14
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Section 3.7
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Real Property;
Rights-of-Way
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A-15
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Section 3.8
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Litigation; Laws and Regulations
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A-15
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Section 3.9
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No Adverse Changes
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A-16
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Section 3.10
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Taxes
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A-16
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Section 3.11
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Environmental Matters
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A-16
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Section 3.12
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Condition of Assets
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A-17
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Section 3.13
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Licenses; Permits
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A-17
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Section 3.14
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Contracts
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A-17
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Section 3.15
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Employees and Employee Benefits
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A-18
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Section 3.16
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Labor Matters
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A-20
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Section 3.17
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Transactions with Affiliates
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A-20
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Section 3.18
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Insurance
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A-20
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Section 3.19
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Intellectual Property Rights
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A-20
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Section 3.20
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Investment Company Act
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A-20
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Section 3.21
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Brokerage Arrangements
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A-20
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Section 3.22
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Liabilities Associated with Natural Gas Contracts
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A-20
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Section 3.23
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Waivers and Disclaimers
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A-21
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Section 3.24
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Operating Surplus
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A-21
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Section 3.25
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State Takeover Laws
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A-21
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE WMZ PARTIES
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A-21
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Section 4.1
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Organization and Existence
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A-21
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Section 4.2
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Authority and Approval
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A-21
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Section 4.3
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No Conflict; Consents
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A-22
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Section 4.4
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Capitalization; Title to Membership and Limited Partner Interests
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A-22
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Section 4.5
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Brokerage Arrangements
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A-23
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Section 4.6
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Litigation
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A-23
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Section 4.7
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SEC Documents
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A-23
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Section 4.8
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No Adverse Changes
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A-23
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Section 4.9
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Taxes
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A-23
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A-i
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Page
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ARTICLE V ADDITIONAL AGREEMENTS, COVENANTS, RIGHTS AND
OBLIGATIONS
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A-24
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Section 5.1
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Conduct of Parties
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A-24
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Section 5.2
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Access to Information; Confidentiality
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A-25
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Section 5.3
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Certain Filings
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A-25
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Section 5.4
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WMZ Limited Partners Meeting
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A-26
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Section 5.5
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No Solicitation
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A-26
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Section 5.6
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Commercially Reasonable Efforts; Further Assurances
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A-28
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Section 5.7
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No Public Announcement
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A-28
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Section 5.8
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Expenses
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A-29
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Section 5.9
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Regulatory Issues
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A-29
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Section 5.10
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Tax Matters
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A-29
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Section 5.11
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D&O Indemnification and Insurance
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A-29
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Section 5.12
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Distributions
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A-30
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Section 5.13
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Consent to Use of Financial Statements; Financing Cooperation
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A-30
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ARTICLE VI CONDITIONS TO CLOSING
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A-30
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Section 6.1
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Conditions to Each Partys Obligations
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A-30
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Section 6.2
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Conditions to the WPZ Parties Obligations
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A-31
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Section 6.3
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Conditions to the WMZ Parties Obligations
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A-31
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Section 6.4
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Frustration of Conditions
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A-32
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ARTICLE VII EMPLOYEE BENEFITS
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A-32
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Section 7.1
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WMZ Restricted Units
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A-32
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ARTICLE VIII TERMINATION
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A-33
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Section 8.1
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Termination by Mutual Consent
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A-33
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Section 8.2
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Termination by WMZ or WPZ
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A-33
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Section 8.3
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Termination by WMZ
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A-33
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Section 8.4
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Termination by WPZ
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A-33
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Section 8.5
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Effect of Certain Terminations
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A-33
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Section 8.6
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Survival
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A-34
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Section 8.7
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Enforcement of this Agreement
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A-34
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Section 8.8
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No Waiver Relating to Claims for Fraud/Willful Misconduct
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A-34
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ARTICLE IX MISCELLANEOUS
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A-34
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Section 9.1
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Notices
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A-34
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Section 9.2
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Governing Law; Jurisdiction; Waiver of Jury Trial
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A-35
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Section 9.3
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Entire Agreement; Amendments and Waivers
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A-35
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Section 9.4
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Binding Effect and Assignment
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A-36
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Section 9.5
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Severability
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A-36
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Section 9.6
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Execution
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A-36
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EXHIBIT A
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A-39
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A-ii
AGREEMENT
AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this
Agreement) dated as of May 24, 2010 (the
Execution Date), is entered into by and
among Williams Partners L.P., a Delaware limited partnership
(WPZ), Williams Partners GP LLC, a Delaware
limited liability company and the general partner of WPZ
(WPZ General Partner), Williams Partners
Operating LLC, a Delaware limited liability company and a wholly
owned subsidiary of WPZ (Operating Company),
WPZ Operating Company Merger Sub LLC, a Delaware limited
liability company and a wholly-owned subsidiary of Operating
Company (Merger Sub), Williams Pipeline
Partners L.P., a Delaware limited partnership
(WMZ), and Williams Pipeline GP LLC, a
Delaware limited liability company and the general partner of
WMZ (WMZ General Partner).
WITNESSETH:
WHEREAS, WPZ and WMZ desire to combine their businesses on the
terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the
respective representations, warranties, covenants, agreements
and conditions contained herein, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. In
this Agreement, unless the context otherwise requires, the
following terms shall have the following meanings respectively:
Affiliate has the meaning set forth in
Rule 405 of the rules and regulations under the Securities
Act, unless otherwise expressly stated herein; provided,
however, that prior to the Closing (i) with respect to
the WPZ Group Entities, the term Affiliate shall
exclude each of the WMZ Group Entities (other than NWP) and
(ii) with respect to the WMZ Group Entities, the term
Affiliate shall exclude each of the WPZ Group
Entities.
Agreement has the meaning set forth in
the Preamble.
Aggregated Group has the meaning set
forth in Section 3.15(d).
May 12, 2010
8-K
has the meaning set forth in Section 3.6(a).
Associated Employees has the meaning
set forth in Section 3.15(a).
Book-Entry WMZ Common Units has the
meaning set forth in Section 2.1(c)(i).
Business Day means any day on which
commercial banks are generally open for business in New York,
New York other than a Saturday, a Sunday or a day observed as a
holiday in New York, New York under the Laws of the State of New
York or the federal Laws of the United States of America.
CERCLA means the Comprehensive
Environmental Response, Compensation, and Liability Act.
Closing has the meaning set forth in
Section 2.1(a).
Closing Date has the meaning set forth
in Section 2.1(a).
Code means the Internal Revenue Code
of 1986, as amended.
Consolidated Group means the WMZ
Controlled Group, on one hand, and the WPZ Group Entities, on
the other hand. A reference to a Consolidated Group is a
reference to each of the members of such Consolidated Group.
D&O Insurance has the meaning set
forth in Section 5.11(b).
Delaware Courts has the meaning set
forth in Section 9.2.
A-1
DLLCA means the Delaware Limited
Liability Company Act, as amended.
Drop-Dead Date has the meaning set
forth in Section 8.2(a).
DRULPA means the Delaware Revised
Uniform Limited Partnership Act, as amended.
Effective Time has the meaning set
forth in Section 2.1(b).
Employee Benefit Plan means any
employee benefit plan (within the meaning of
Section 3(3) of ERISA), and any equity-based purchase,
option,
change-in-control,
collective bargaining, incentive, employee loan, deferred
compensation, pension, profit-sharing, retirement, bonus,
retention bonus, severance and other employee benefit or fringe
benefit plan, agreement, program, policy or other arrangement,
whether or not subject to ERISA (including any funding mechanism
now in effect or required in the future), whether formal or
informal, oral or written, legally binding or not, maintained
by, sponsored by or contributed to by or obligated to be
contributed to by the entity in question or with respect to
which the entity in question has any obligation or liability,
whether secondary, contingent or otherwise.
Environmental Laws means, without
limitation, the following laws, in effect as of the Closing
Date, as amended: (i) the Resource Conservation and
Recovery Act; (ii) the Clean Air Act; (iii) CERCLA;
(iv) the Federal Water Pollution Control Act; (v) the
Safe Drinking Water Act; (vi) the Toxic Substances Control
Act; (vii) the Emergency Planning and Community
Right-to-Know
Act; (viii) the National Environmental Policy Act;
(ix) the Pollution Prevention Act of 1990; (x) the Oil
Pollution Act of 1990; (xi) the Hazardous Materials
Transportation Act; (xii) the Occupational Safety and
Health Act; and (xiii) all laws, statutes, rules,
regulations, orders, judgments, decrees promulgated or issued
with respect to the foregoing Environmental Laws by Governmental
Entities with jurisdiction in the premises and any other
federal, state or local statutes, laws, ordinances, rules,
regulations, orders, codes, decisions, injunctions or decrees
that regulate or otherwise pertain to the protection of human
health, safety or the environment, including but not limited to
the management, control, discharge, emission, treatment,
containment, handling, removal, use, generation, permitting,
migration, storage, release, transportation, disposal,
remediation, manufacture, processing or distribution of
Hazardous Materials that are or may present a threat to human
health or the environment.
ERISA means the Employee Retirement
Income Security Act of 1974, as amended, and the rules and
regulations promulgated thereunder.
Exchange Act means the Securities
Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
Exchange Agent has the meaning set forth
in Section 2.1(f).
Exchange Fund has the meaning set
forth in Section 2.1(f).
Exchange Ratio means the exchange
ratio of WPZ Common Units per WMZ Common Unit in the Merger as
described in Section 2.1(c)(i).
Execution Date has the meaning set
forth in the Preamble.
First Quarter 2010
10-Q
has the meaning set forth in Section 3.6(a).
Fractional Unit Payment has the
meaning set forth in Section 2.1(d).
GAAP has the meaning set forth in
Section 1.2.
General Partner Units has the meaning
set forth in Section 3.4(c).
Governing Documents means, with
respect to any Person, the certificate or articles of
incorporation, by-laws, articles of organization, limited
liability company agreement, partnership agreement, formation
agreement, joint venture agreement, operating agreement,
unanimous equityholder agreement or declaration or other similar
governing documents of such Person.
Governmental Entity means any federal,
state, municipal or other government, governmental court,
department, commission, board, bureau, agency or instrumentality.
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Gulfstream means Gulfstream Natural
Gas System, L.L.C.
Hazardous Material means any
substance, whether solid, liquid, or gaseous: (i) which is
listed, defined, or regulated as a hazardous
material, hazardous waste, solid
waste, hazardous substance, toxic
substance, pollutant, or
contaminant, or words of similar meaning or import
found in any applicable Environmental Law; or (ii) which is
or contains asbestos, polychlorinated biphenyls, radon, urea
formaldehyde foam insulation, explosives, or radioactive
materials; or (iii) any petroleum, petroleum hydrocarbons,
petroleum substances, petroleum or petrochemical products,
natural gas, crude oil and any components, fractions, or
derivatives thereof, any oil or gas exploration or production
waste, and any natural gas, synthetic gas and any mixtures
thereof; or (iv) radioactive material, waste and
pollutants, radiation, radionuclides and their progeny, or
nuclear waste including used nuclear fuel; or (v) which
causes or poses a threat to cause contamination or nuisance on
any properties, or any adjacent property or a hazard to the
environment or to the health or safety of persons on or about
any properties.
Holders means, when used with
reference to the WPZ Common Units and the WMZ Common Units, the
holders of such units shown from time to time in the registers
maintained by or on behalf of WMZ or WPZ, as applicable.
HSR Act means the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, 15 U.S.C.
§ 18a, as amended.
Incentive Distribution Rights has the
meaning set forth in Section 3.4(c).
Intellectual Property means all
intellectual or industrial property and rights therein, however
denominated, throughout the world, whether or not registered,
including all (a) inventions (whether patentable or
unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and
patent disclosures, together with all reissuances,
continuations, continuations in part, revisions, extensions, and
reexaminations relating thereto, (b) trademarks, service
marks, trade styles or dress, logos, trade names, and corporate
names, and all goodwill associated therewith, together with all
translations, adaptations, derivations, and combinations,
applications, registrations, and renewals relating thereto,
(c) works of authorship, moral rights of authorship, rights
in designs, copyrightable works, all copyrights, and all
applications, registrations, and renewals relating thereto,
(d) trade secrets and confidential business information
(including ideas, invention disclosures, research and
development, know how, technology, improvements, formulas,
compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and
business and marketing plans and proposals), (e) computer
software (including all data and related documentation),
(f) other proprietary rights, (g) mask works and all
applications, registrations, and renewals relating thereto,
(h) domain names, email addresses, telephone numbers, and
vanity numbers, (i) copies and tangible embodiments of the
foregoing (in whatever form or medium) and (j) all other
intellectual and industrial property rights, whether or not
subject to statutory registration or protection and common law
rights, and causes of action relating to any of the foregoing.
Knowledge as used in this Agreement
with respect to a party hereto, means the actual knowledge of
that partys designated personnel, after reasonable
inquiry. The designated personnel for the WPZ Parties are Alan
Armstrong, Don Chappel, Mac Hummel, Robert Cronk, Craig Rainey,
Tom Sell, Rory Miller, Randy Newcomer, Phil Wright, Rick
Rodekohr, Randy Conklin, Frank Ferazzi, Rodney Sailor, Ted
Timmermans, Allison Bridges and Randy Barnard. The designated
personnel for the WMZ Parties are Don Chappel, Phil Wright, Rick
Rodekohr, Randy Conklin, Allison Bridges and Randy Barnard.
Laws means all statutes, regulations,
statutory rules, orders, judgments, decrees and terms and
conditions of any grant of approval, permission, authority,
permit or license of any court, Governmental Entity, statutory
body or self-regulatory authority (including the NYSE).
Letter of Transmittal has the meaning
set forth in Section 2.1(g).
Liens means any mortgage, deed of
trust, lien, security interest, pledge, conditional sales
contract, charge or encumbrance.
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Material Contract shall have the
meaning ascribed to such term in Section 3.14(a).
Materiality Requirement means any
requirement in a representation or warranty that a condition,
event or state of fact be material, correct or true
in all material respects, have a WPZ Material
Adverse Effect or an WMZ Material Adverse
Effect or be or not be reasonably expected to have a
WPZ Material Adverse Effect or reasonably expected
to have a WMZ Material Adverse Effect (or other words or
phrases of similar effect or impact) in order for such
condition, event or state of facts to cause such representation
or warranty to be inaccurate.
Merger means the merger of Merger Sub
with and into WMZ, with WMZ as the sole surviving entity.
NGL means natural gas liquids.
Non-affiliated WMZ Common Units has
the meaning set forth in Section 5.4. For the
avoidance of doubt, Holders of Non-affiliated WMZ Common Units
shall be deemed not to include Williams or any of its Affiliates
as such term is defined in the WMZ Partnership Agreement.
Notice has the meaning set forth in
Section 9.1.
NWP means Northwest Pipeline GP, a
Delaware general partnership.
NYSE means the New York Stock Exchange.
Operating Company has the meaning set
forth in the Preamble.
Partially Owned Entity means, with
respect to a specified Person, an entity that is owned in part
by such specified Person, but is not wholly owned by such
specified Person.
Party Group means the WMZ Parties, on
the one hand, and the WPZ Parties, on the other hand. A
reference to a Party Group is a reference to each of the members
of such Party Group.
Permits shall have the meaning
ascribed to such term in Section 3.13(a).
Permitted Lien means all:
(i) mechanics, materialmens, carriers,
workmens, repairmens, vendors, operators
or other like Liens, if any, that do not materially detract from
the value of or materially interfere with the use of any of the
assets of the WPZ Group Entities or WMZ Group Entities, as
applicable, subject thereto; (ii) Liens arising under
original purchase price conditional sales contracts and
equipment leases with third parties entered into in the ordinary
course of business; (iii) title defects or Liens (other
than those constituting Liens for the payment of indebtedness),
if any, that, individually or in the aggregate, do not or would
not impair in any material respect the use or occupancy of the
assets of the WPZ Group Entities or WMZ Group Entities, as
applicable, taken as a whole; (iv) Liens for Taxes that are
not due and payable or that may thereafter be paid without
penalty; and (v) Liens supporting surety bonds, performance
bonds and similar obligations issued in connection with the
businesses of the WPZ Group Entities or WMZ Group Entities, as
applicable.
Person means an individual or entity,
including any partnership, corporation, association, trust,
limited liability company, joint venture, unincorporated
organization or other entity or Governmental Entity.
Proxy Statement/Prospectus has the
meaning set forth in Section 5.3.
Record Holder has the meaning set
forth in Section 2.1(c).
Registration Statement has the meaning
set forth in Section 5.3.
Representatives has the meaning set
forth in Section 5.5(a).
Rights-of-Way
has the meaning set forth in Section 3.7(b).
Sarbanes-Oxley Act has the meaning set
forth in Section 3.5(c).
SEC means the United States Securities
and Exchange Commission.
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Securities Act means the Securities
Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
Services Agreements means the
(i) Administrative Services Agreement, dated as of
February 17, 2010, between Transco Pipeline Services LLC
and Transco, (ii) the Secondment Agreement, dated as of
February 17, 2010, among Williams, WPZ and WPZ General
Partner and (iii) Administrative Services Agreement, dated
October 1, 2007, between Northwest Pipeline Services LLC
and NWP.
Special Approval has the meaning set
forth in the WMZ Partnership Agreement.
Superior Proposal means any bona fide
written offer made by a third party that (i) if
consummated, would result in such Person (or its equityholders)
owning, directly or indirectly, the general partner interest in
WMZ and at least a majority of the WMZ Common Units then
outstanding (or of the surviving entity in a merger or the
direct or indirect parent of the surviving entity in a merger)
or all or substantially all of the assets of the WMZ Controlled
Group, taken as a whole, (ii) includes terms that the WMZ
Conflicts Committee determines in its good faith judgment (after
consultation with its outside financial advisor and outside
legal counsel, and after taking into account all the terms and
conditions of such third party offer, including any
break-up
fees, expense reimbursement provisions and conditions to
consummation, as well as any bona fide written offer to revise
the terms of the Merger or this Agreement made by WPZ after
being notified pursuant to Section 5.5) are more
favorable to the Holders of Non-affiliated WMZ Common Units
(excluding consideration of any interests that any Holder may
have other than as a unitholder of WMZ entitled to the WMZ
Consideration) from a financial point of view than the Merger,
(iii) is reasonably likely to be completed on the terms and
conditions so proposed, taking into account all legal,
financial, regulatory and other aspects of such proposal and
(iv) is not subject to any financing contingencies.
Surrender means the proper delivery of
a WMZ Certificate or the proper completion, with respect to a
Book-Entry WMZ Common Unit, of all procedures necessary, in
either case, to effect the transfer of such WMZ units in
accordance with the terms of the Letter of Transmittal.
Tax or Taxes
means all taxes, however denominated, including any interest,
penalties or other additions to tax that may become payable in
respect thereof, imposed by any Governmental Entity, which taxes
shall include, without limiting the generality of the foregoing,
all income or profits taxes (including, but not limited to,
federal income taxes and state income taxes), gross receipts
taxes, net proceeds taxes, alternative or add-on minimum taxes,
sales taxes, use taxes, real property gains or transfer taxes,
ad valorem taxes, property taxes, value-added taxes, franchise
taxes, production taxes, severance taxes, windfall profit taxes,
withholding taxes, payroll taxes, employment taxes, excise taxes
and other obligations of the same or similar nature to any of
the foregoing.
Tax Return means all reports,
estimates, declarations of estimated Tax, information statements
and returns relating to, or required to be filed in connection
with, any Taxes, including information returns or reports with
respect to backup withholding and other payments to third
parties.
Title IV Plans has the meaning
set forth in Section 3.15(e).
Transco means Transcontinental Gas
Pipe Line Company, LLC, a Delaware limited liability company.
Transfer Agent has the meaning set
forth in Section 2.1(c).
Unit Majority has the meaning set
forth in Section 6.1(a).
Williams means The Williams Companies,
Inc., a Delaware corporation.
WMZ has the meaning set forth in the
Preamble.
WMZ Board means the Board of Directors
of WMZ General Partner.
WMZ Certificate has the meaning set
forth in Section 2.1(c)(i).
WMZ Common Units means the Common
Units of WMZ issued or otherwise outstanding pursuant to the WMZ
Partnership Agreement.
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WMZ Conflicts Committee means the
Conflicts Committee of the WMZ Board.
WMZ Consideration has the meaning set
forth in Section 2.1(c)(i).
WMZ Controlled Group means the WMZ
Group Entities other than NWP.
WMZ D&O Indemnified Party means
any Person who is not an employee of Williams and is or was an
officer or director of any entity in the WMZ Controlled Group
and any Person who is or was serving at the request of any
entity in the WMZ Controlled Group as an officer, director,
employee, member, partner, agent, fiduciary or trustee of
another Person; provided, that a Person shall not be a
WMZ D&O Indemnified Party by reason of providing, on a
fee-for-services
basis, trustee, fiduciary or custodial services.
WMZ Disclosure Schedule means the
disclosure schedule prepared and delivered by WMZ to WPZ as of
the date of this Agreement.
WMZ Financial Statements means the
audited consolidated statements of income, partners
capital and cash flows for each of the three years in the period
ended December 31, 2009 and audited balance sheets as of
December 31, 2008 and 2009 of WMZ, including the notes
thereto.
WMZ General Partner has the meaning
set forth in the Preamble.
WMZ GP LLC Agreement means the First
Amended and Restated Limited Liability Company Agreement of WMZ
General Partner dated as of January 24, 2008.
WMZ Group Entities means the WMZ
Parties and the WMZ Subsidiaries.
WMZ Limited Partners Meeting has
the meaning set forth in Section 5.4.
WMZ Material Adverse Effect means a
material adverse effect on or a material adverse change in
(i) the business, assets, liabilities, properties,
financial condition or results of operations of WMZ, other than
any effect or change (u) in the natural gas gathering,
processing, treating, transportation and storage industries
generally and NGL marketing industry generally (including any
change in the prices of natural gas, natural gas liquids or
other hydrocarbon products, industry margins or any regulatory
changes or changes in applicable Law) (v) in
United States or global economic conditions or financial
markets in general, (w) resulting from any outbreak of
hostilities, terrorism, war or other similar national emergency,
(x) resulting from the announcement of this Agreement or
any of the transactions contemplated hereby, (y) in the Law
or in accounting principles that materially affects this
Agreement or the transactions contemplated hereby or
(z) resulting from WMZ taking any action required or
contemplated by this Agreement; provided, that in the
case of clauses (u), (v), (w) and
(y) the impact on WMZ is not materially disproportionate
to the impact on similarly situated parties, or (ii) the
ability of either of the WMZ Parties to perform their
obligations under this Agreement or to consummate the
transactions contemplated by this Agreement.
WMZ Partially Owned Entities means the
Partially Owned Entities of WMZ.
WMZ Parties means WMZ and WMZ General
Partner.
WMZ Partnership Agreement means the
First Amended and Restated Agreement of Limited Partnership of
WMZ dated as of January 24, 2008.
WMZ Recommendation has the meaning set
forth in Section 5.4.
WMZ Recommendation Change has the
meaning set forth in Section 5.5(b).
WMZ SEC Reports has the meaning set
forth in Section 4.7.
WMZ Subordinated Units means the
Subordinated Units of WMZ issued or otherwise outstanding
pursuant to the WMZ Partnership Agreement.
WMZ Subsidiaries means the entities
that are partially or wholly owned, directly or indirectly, by
WMZ.
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WMZ Takeover Proposal means any
inquiry, proposal or offer from any Person (other than the WPZ
Group Entities) relating to, or that could reasonably be
expected to, lead to any direct or indirect acquisition or
purchase, in one transaction or a series of transactions, of
assets (other than product sales in the ordinary course of
business) or businesses that constitute 30% or more of the
revenues, net income or assets of the WMZ Controlled Group,
taken as a whole, or 30% or more of any class of equity
securities of any WMZ Party, any tender offer or exchange offer
that if consummated would result in any Person beneficially
owning 30% or more of any class of equity securities of any WMZ
Party, or any merger, consolidation, business combination,
recapitalization, liquidation, dissolution, joint venture,
binding unit exchange or similar transaction involving the WMZ
Group Entities pursuant to which any Person or the equityholders
of any Person would own 30% or more of any class of equity
securities of any WMZ Party or of any resulting parent company
of any WMZ Party, other than the transactions contemplated by
this Agreement.
WMZ Unitholder Approval has the
meaning set forth in Section 6.1(a).
WMZ Units means the WMZ Common Units
and the WMZ Subordinated Units.
WPZ has the meaning set forth in the
Preamble.
WPZ Board means the Board of Directors
of WPZ General Partner.
WPZ Common Units means the Common
Units of WPZ issued or otherwise outstanding pursuant to the WPZ
Partnership Agreement.
WPZ Disclosure Schedule means the
disclosure schedule prepared and delivered by WPZ to WMZ as of
the date of this Agreement.
WPZ Financial Statements has the
meaning set forth in Section 3.6(a).
WPZ General Partner has the meaning
set forth in the Preamble.
WPZ Group Entities means the WPZ
Parties and the WPZ Subsidiaries.
WPZ Material Adverse Effect means a
material adverse effect on or a material adverse change in
(i) the business, assets, liabilities, properties,
financial condition or results of operations of WPZ, other than
any effect or change (u) in the natural gas gathering,
processing, treating, transportation and storage industries
generally and NGL marketing industry generally (including any
change in the prices of natural gas, natural gas liquids or
other hydrocarbon products, industry margins or any regulatory
changes or changes in applicable Law) (v) in
United States or global economic conditions or financial
markets in general, (w) resulting from any outbreak of
hostilities, terrorism, war or other similar national emergency,
(x) resulting from the announcement of this Agreement or
any of the transactions contemplated hereby, (y) in the Law
or in accounting principles that materially affects this
Agreement or the transactions contemplated hereby or
(z) resulting from WPZ taking any action required or
contemplated by this Agreement; provided, that in the
case of clauses (u), (v), (w) and
(y) the impact on WPZ is not materially disproportionate
to the impact on similarly situated parties, or (ii) the
ability of any of the WPZ Parties to perform their obligations
under this Agreement or to consummate the transactions
contemplated by this Agreement.
WPZ Partially Owned Entities means the
Partially Owned Entities of WPZ, other than WMZ.
WPZ Parties means WPZ, WPZ General
Partner, Operating Company and Merger Sub.
WPZ Partnership Agreement means the
Amended and Restated Agreement of Limited Partnership of WPZ
dated as of August 23, 2005, as amended as of
August 7, 2006; August 23, 2006; December 13,
2006; April 15, 2008; April 16, 2009 and
February 17, 2010; and as further amended from time to time
after the Execution Date in accordance with this Agreement.
WPZ SEC Reports has the meaning set
forth in Section 3.5(a).
WPZ Subsidiaries means the entities
that are partially or wholly owned, directly or indirectly, by
WPZ, excluding WMZ, WMZ General Partner and the WMZ Subsidiaries
(other than NWP).
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Section 1.2 Rules
of Construction. The division of this Agreement
into articles, sections and other portions and the insertion of
headings are for convenience of reference only and shall not
affect the construction or interpretation hereof. Unless
otherwise indicated, all references to an Article or
Section followed by a number or a letter refer to
the specified Article or Section of this Agreement. The terms
this Agreement, hereof,
herein and hereunder and similar
expressions refer to this Agreement (including the WMZ
Disclosure Schedule and the WPZ Disclosure Schedule) and not to
any particular Article, Section or other portion hereof. Unless
otherwise specifically indicated or the context otherwise
requires, (a) all references to dollars or
$ mean United States dollars, (b) words
importing the singular shall include the plural and vice versa
and words importing any gender shall include all genders,
(c) include, includes and
including shall be deemed to be followed by the
words without limitation, and (d) all words
used as accounting terms shall have the meanings assigned to
them under United States generally accepted accounting
principles applied on a consistent basis during the periods
involved (GAAP). In the event that any date
on which any action is required to be taken hereunder by any of
the parties hereto is not a Business Day, such action shall be
required to be taken on the next succeeding day that is a
Business Day. Reference to any party hereto is also a reference
to such partys permitted successors and assigns. The
Exhibits attached to this Agreement are hereby incorporated by
reference into this Agreement and form part hereof. Unless
otherwise indicated, all references to an Exhibit
followed by a number or a letter refer to the specified Exhibit
to this Agreement. The parties hereto have participated jointly
in the negotiation and drafting of this Agreement. In the event
an ambiguity or question of intent or interpretation arises, it
is the intention of the parties hereto that this Agreement shall
be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or
disfavoring any Person by virtue of the authorship of any of the
provisions of this Agreement.
ARTICLE II
MERGER
Section 2.1 Closing
of the Merger.
(a) Closing Date. Subject to the
satisfaction or waiver of the conditions to closing set forth in
Article VI, the closing (the
Closing) of the Merger and the transactions
contemplated by this Section 2.1 shall be held at
the offices of Gibson, Dunn & Crutcher LLP at 1801
California Street, Denver, Colorado 80202 on the next Business
Day following the satisfaction or waiver of all of the
conditions set forth in Article VI (other than
conditions that would normally be satisfied on the Closing Date)
commencing at 9:00 a.m., local time, or such other place,
date and time as may be mutually agreed upon in writing by the
parties hereto. The Closing Date, as referred
to herein, shall mean the date of the Closing.
(b) Merger. At the Closing, the Merger
shall occur by the filing of a certificate of merger with the
Secretary of State of the State of Delaware, executed in
accordance with the relevant provisions of DRULPA and DLLCA, as
applicable (the date and time of such filing (or such later time
and date as may be expressed therein as the effective date and
time of the Merger) being the Effective
Time). As a result of the Merger, the separate
existence of Merger Sub shall cease, and WMZ shall continue as
the surviving limited partnership in the Merger.
(c) Effect of the Merger on Equity
Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of WPZ, Operating
Company, Merger Sub, WMZ, WMZ General Partner, any Holder of WMZ
Units or any other Person:
(i) Each of the outstanding WMZ Common Units, other than
the WMZ Common Units owned by WMZ General Partner, shall be
converted into the right to receive 0.7584 of one WPZ Common
Unit, which WPZ Common Units shall be duly authorized and
validly issued in accordance with applicable Laws and the WPZ
Partnership Agreement, fully paid and non-assessable (except to
the extent such non-assessability may be affected by DRULPA or
the provisions of the WPZ Partnership Agreement). Each WMZ
Common Unit converted into the right to receive WPZ Common Units
pursuant to this Section 2.1(c)(i) (such amount of
WPZ Common Units the WMZ Consideration) shall
cease to be
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outstanding and shall be canceled and retired and shall cease to
exist, and each Holder of WMZ Common Units immediately prior to
the Effective Time shall thereafter cease to be a limited
partner of WMZ or have any rights with respect to such WMZ
Common Units, except the right to be admitted to WPZ as a
limited partner of WPZ and receive the WPZ Common Units to be
issued in consideration therefor and any distributions to which
Holders of WMZ Common Units become entitled all in accordance
with this Article II upon the Surrender of
(A) a certificate that immediately prior to the Effective
Time represented WMZ Common Units (a WMZ
Certificate) or (B) uncertificated WMZ Common
Units represented in book-entry form (Book-Entry WMZ
Common Units).
(ii) Each of the outstanding WMZ Units owned by WMZ General
Partner shall cease to be outstanding and shall be canceled and
retired and shall cease to exist without consideration therefor
and without any further action by any person; provided,
however, that WMZ General Partner shall continue as the
sole general partner of WMZ with a general partner interest
which constitutes 2% of the aggregate partnership interest (as
defined in DRULPA) of all partners in WMZ. Each outstanding
limited liability company interest in Merger Sub issued and
outstanding immediately prior to the Effective Time shall cease
to be outstanding and shall be canceled. Operating Company
agrees that at the Effective Time, Operating Company shall be
automatically bound by the WMZ Partnership Agreement (as amended
and restated at the Effective Time), and Operating Company shall
be admitted to WMZ as a limited partner of WMZ with a limited
partner interest which constitutes 98% of the aggregate
partnership interest (as defined in DRULPA) of all partners in
WMZ immediately upon the Effective Time. At the Effective Time,
the books and records of WMZ shall be revised to reflect the
admission of Operating Company as a limited partner of WMZ and
all other limited partners of WMZ simultaneously ceasing to be
limited partners of WMZ, and WMZ shall continue without
dissolution. Immediately after the Effective Time, Operating
Company will be the sole limited partner of WMZ and the WMZ
General Partner will be the sole general partner of WMZ.
(iii) Operating Companys limited liability company
interests outstanding immediately prior to the Effective Time
shall be unchanged and remain outstanding and WPZ shall continue
as the sole member of Operating Company.
(iv) WPZs partnership interests issued and
outstanding immediately prior to the Effective Time shall be
unchanged and remain outstanding and each limited partner and
general partner admitted to WPZ immediately prior to the
Effective Time shall continue as a limited partner and general
partner, as applicable.
The Merger shall have the effects set forth in the applicable
provisions of DRULPA and DLLCA. At the Effective Time, the WMZ
Partnership Agreement shall be amended and restated to read in
its entirety as set forth in Exhibit A hereto, and,
as so amended and restated, shall continue in effect until
thereafter changed or amended as provided therein or by
applicable Law. WPZ General Partner consents to the admission to
WPZ as a limited partner of WPZ of each Holder of WMZ Common
Units who is issued WPZ Common Units in exchange for such
Holders WMZ Common Units in accordance with this
Article II upon the proper Surrender of a WMZ
Certificate or Book-Entry WMZ Common Units. Upon such Surrender
of a WMZ Certificate (or upon a waiver of the requirement to
Surrender a WMZ Certificate granted by WPZ General Partner in
its sole discretion) or Book-Entry WMZ Common Units and the
recording of the name of such Person as a limited partner of WPZ
(and as the Record Holder (as such term is defined in the WPZ
Partnership Agreement) of such WPZ Common Units) on the books
and records of WPZ and its Transfer Agent (as such term is
defined in the WPZ Partnership Agreement), such Person shall
automatically and effective as of the Effective Time be admitted
to WPZ as a limited partner of WPZ and be bound by the WPZ
Partnership Agreement as such. By its Surrender of a WMZ
Certificate or Book-Entry WMZ Common Units, or by its acceptance
of WPZ Common Units, a Holder of WMZ Common Units confirms its
agreement to be bound by all of the terms and conditions of the
WPZ Partnership Agreement, including the power of attorney
granted in Section 2.6 thereof.
(d) Fractional Units. Notwithstanding any
other provision of this Agreement, (i) no certificates or
scrip representing fractional WPZ Common Units shall be issued,
and such fractional units will not entitle the owner thereof to
vote or to any rights as a unitholder of WPZ and (ii) each
registered Holder of WMZ
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Common Units exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fractional WPZ Common
Unit (after taking into account all WMZ Common Units held by
such Holder immediately prior to the Effective Time) shall
receive, in lieu thereof, from WPZ in exchange for such
fractional unit, an amount (a Fractional Unit
Payment) in cash (payable in dollars, without
interest) equal to the product of (A) such fraction,
multiplied by (B) the average of the closing price of WPZ
Common Units on the NYSE Composite Transaction Reporting System
as reported in The Wall Street Journal (but subject to
correction for typographical or other manifest errors in such
reporting) over the five trading day period ending on the third
trading day immediately preceding the Effective Time.
(e) Certain Adjustments. If between the
date of this Agreement and the Effective Time, whether or not
permitted pursuant to the terms of this Agreement, the
outstanding WMZ Common Units or WPZ Common Units shall be
changed into a different number of units or other securities by
reason of any split, combination, merger, consolidation,
reorganization or other similar transaction, or any distribution
payable in equity securities shall be declared thereon with a
record date within such period, the Exchange Ratio (and the
number of WPZ Common Units issuable in the Merger) and the form
of securities issuable in the Merger shall be appropriately
adjusted to provide the Holders of WMZ Common Units the same
economic effect as contemplated by this Agreement prior to such
event.
(f) Exchange Agent. Prior to the mailing
of the Proxy Statement/Prospectus, WPZ shall appoint
Computershare Inc., together with its subsidiary Computershare
Trust Company, N.A., to act as exchange agent (the
Exchange Agent) for the payment of the WPZ
Common Units and any Fractional Unit Payment. At or prior to the
Closing Date, WPZ shall (i) deposit with the Exchange
Agent, for the benefit of the Holders of WMZ Common Units, an
amount of cash equal to the estimated aggregate Fractional Unit
Payment (the Exchange Fund),
(ii) reserve with the Exchange Agent the WPZ Common Units
to be issued as WMZ Consideration and (iii) authorize the
Exchange Agent to exchange WPZ Common Units in accordance with
this Section 2.1. WPZ shall deposit with the
Exchange Agent any additional funds in excess of the Exchange
Fund as and when necessary to pay any Fractional Unit Payment
and other amounts required to be paid under this Agreement. WPZ
shall pay all costs and fees of the Exchange Agent and all
expenses associated with the exchange process. Any WPZ Common
Units, or fraction thereof, and any remaining amount of the
Exchange Fund or other funds deposited shall be returned to WPZ
after the earlier to occur of (1) payment in full of all
amounts due to the Holders of WMZ Common Units or to the
Exchange Agent or (2) the expiration of the period
specified in Section 2.1(j).
(g) Exchange Procedures. Promptly after
the Effective Time, WPZ shall cause the Exchange Agent to mail
to each Holder, as of the Effective Time, of WMZ Common Units
(other than the WMZ General Partner) a form of letter of
transmittal (the Letter of Transmittal)
(which shall specify that delivery shall be effected, and risk
of loss and title to the WMZ Certificates shall pass, only upon
proper delivery of the WMZ Certificates to the Exchange Agent
or, in the case of Book-Entry WMZ Common Units, upon adherence
to the procedures set forth in the Letter of Transmittal, and
which shall have such other provisions as may be necessary for
the Holders of WMZ Common Units to be admitted to WPZ as limited
partners of WPZ and which shall be in such form and have such
other provisions as WPZ General Partner and WMZ General Partner
may reasonably specify) and instructions for effecting the
Surrender of such WMZ Certificates or Book-Entry WMZ Common
Units in exchange for the WPZ Common Units, together with any
distributions with respect thereto and any Fractional Unit
Payment. Upon Surrender to the Exchange Agent of such WMZ
Certificates or Book-Entry WMZ Common Units, together with such
properly completed and duly executed Letter of Transmittal, the
Holder of a WMZ Certificate or Book-Entry WMZ Common Units shall
be entitled to (i) the number of full WPZ Common Units
(which shall be in uncertificated book-entry form unless a
physical certificate is requested) into which the WMZ
Certificates or Book-Entry WMZ Common Units Surrendered shall
have been converted pursuant to this Agreement and (ii) the
Fractional Unit Payment, if any, payable in redemption of any
fractional WPZ Common Unit otherwise issuable. The instructions
for effecting the Surrender of WMZ Certificates shall set forth
procedures that must be taken by the Holder of any WMZ
Certificate that has been lost, destroyed or stolen. It shall be
a condition to the right of such Holder to receive WPZ Common
Units and the Fractional Unit Payment, if any, that the Exchange
Agent shall have received, along with the Letter of Transmittal,
a duly executed lost certificate affidavit, including an
agreement to
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indemnify WPZ, signed exactly as the name or names of the
registered Holder or Holders appeared on the books of WMZ
immediately prior to the Effective Time, together with a
customary bond and such other documents as WPZ may reasonably
require in connection therewith. After the Effective Time, there
shall be no further transfer on the records of WMZ or its
transfer agent of WMZ Certificates or Book-Entry WMZ Common
Units; and if such WMZ Certificates or Book-Entry WMZ Common
Units are presented to WMZ or its transfer agent for transfer,
they shall be canceled against delivery of the WPZ Common Units
and any Fractional Unit Payment as hereinabove provided. Until
Surrendered as contemplated by this Section 2.1(g),
each WMZ Certificate or Book-Entry WMZ Common Unit shall be
deemed at any time after the Effective Time to represent only
the right to receive upon such Surrender the WPZ Common Units,
together with any distributions with respect thereto, and any
Fractional Unit Payment, as contemplated by this
Section 2.1. No interest will be paid or will accrue
on any Fractional Unit Payment.
(h) Distributions with Respect to Unexchanged WMZ Common
Units. No dividends or other distributions with
respect to WPZ Common Units with a record date after the
Effective Time shall be paid to the Holder of any WMZ
Certificate or Book-Entry WMZ Common Units not Surrendered with
respect to WPZ Common Units issuable in respect thereof and no
Fractional Unit Payment shall be paid to any such Holder until
the Surrender of such WMZ Certificate or Book-Entry WMZ Common
Units in accordance with this Section 2.1. Subject
to the effect of applicable Laws, there shall be paid to the
Holder of each WMZ Certificate or Book-Entry WMZ Common Units,
without interest, (i) at the time of Surrender of any such
WMZ Certificate or Book-Entry WMZ Common Units, the amount of
any Fractional Unit Payment to which such Holder is entitled and
the amount of dividends or other distributions previously paid
with respect to the whole WPZ Common Units issuable with respect
to such WMZ Certificate or Book-Entry WMZ Common Units that have
a record date after the Effective Time and a payment date on or
prior to the time of Surrender and (ii) at the appropriate
payment date, the amount of dividends or other distributions
payable with respect to such whole WPZ Common Units with a
record date after the Effective Time and prior to such Surrender
and a payment date subsequent to such Surrender.
(i) No Further Ownership Rights in WMZ Common
Units. All WPZ Common Units issued upon the
Surrender for exchange of WMZ Certificates or Book-Entry WMZ
Common Units in accordance with the terms of this
Section 2.1 (including any Fractional Unit Payment)
shall be deemed to have been issued (and paid) in full
satisfaction of all rights pertaining to the WMZ Common Units
heretofore represented by such WMZ Certificates or Book-Entry
WMZ Common Units (including all rights to common units
arrearages), subject, however, to WPZs obligation, with
respect to WMZ Common Units outstanding immediately prior to the
Effective Time, to pay any distributions with a record date
prior to the Effective Time that may have been declared or made
by WMZ on such WMZ Common Units in accordance with the terms of
this Agreement on or prior to the Effective Time and that remain
unpaid at the Closing Date.
(j) Termination of Exchange Fund. Any
portion of the Exchange Fund that remains undistributed to the
Holders of the WMZ Certificates or Book-Entry WMZ Common Units
for twelve months after the Closing Date shall be delivered to
WPZ, upon demand, and any Holders of the WMZ Certificates or
Book-Entry WMZ Common Units who have not theretofore complied
with this Section 2.1 shall thereafter look only to
WPZ and only as general creditors thereof for payment of their
claim for WPZ Common Units, any Fractional Unit Payment and any
distributions with respect to WMZ Common Units or WPZ Common
Units to which such Holders may be entitled.
(k) No Liability. None of WPZ, WPZ
General Partner, WMZ, WMZ General Partner or the Exchange Agent
shall be liable to any Person in respect of any WPZ Common Units
(or distributions with respect thereto) or Fractional Unit
Payment properly delivered to a public official pursuant to any
applicable abandoned property, escheat or similar Law. If any
WMZ Certificates or Book-Entry WMZ Common Units shall not have
been Surrendered prior to such date on which any WPZ Common
Units, any Fractional Unit Payment or any distributions with
respect to WMZ Common Units or WPZ Common Units in respect of
such WMZ Certificate or Book-Entry WMZ Common Units would
escheat to or become the property of any Governmental Entity,
any such units, cash, dividends or distributions in respect of
such WMZ Certificates or Book-Entry WMZ Common Units shall, to
the extent permitted by applicable Law, become the property of
WPZ, free and clear of all claims or interest of any Person
previously entitled thereto.
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(l) Withholding Rights. WPZ shall be
entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement such amounts as it is
required to deduct and withhold with respect to the making of
such payment under the Code and the rules and regulations
promulgated thereunder, or any provision of state, local or
foreign Tax law. To the extent that amounts are so withheld or
paid over to or deposited with the relevant Governmental Entity
by WPZ, such amounts shall be treated for all purposes of this
Agreement as having been paid to the Person in respect of which
such deduction and withholding was made by WPZ.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE WPZ PARTIES
Except as set forth in a section of the WPZ Disclosure Schedule
delivered concurrently herewith corresponding to the applicable
sections of this Article III to which such
disclosure applies (provided that any information set
forth in one section of the WPZ Disclosure Schedule shall be
deemed to apply to each other section thereof to which its
relevance is reasonably apparent on its face), the WPZ Parties
hereby represent and warrant, jointly and severally, to the WMZ
Parties that:
Section 3.1 Organization.
(a) Each of the WPZ Parties is a limited partnership or
limited liability company duly formed, validly existing and in
good standing under the laws of the State of Delaware and has
all requisite limited partnership or limited liability company
power and authority to own, operate and lease its properties and
assets and to carry on its business as now conducted.
(b) Each of the WPZ Subsidiaries (other than the WPZ
Parties) is a corporation, limited partnership, general
partnership or limited liability company duly organized or
formed, as applicable, validly existing and in good standing
under the laws of its respective jurisdiction of organization or
formation and has all requisite corporate, limited partnership,
general partnership or limited liability company power and
authority to own, operate and lease its properties and assets
and to carry on its business as now conducted. Each of the WPZ
Group Entities is duly licensed or qualified to do business and
is in good standing in the states in which the character of the
properties and assets owned or held by it or the nature of the
business conducted by it requires it to be so licensed or
qualified, except where the failure to be so qualified or in
good standing would not, individually or in the aggregate,
reasonably be expected to have a WPZ Material Adverse Effect.
WPZ has made available to WMZ true and complete copies of the
charter documents, bylaws, certificates of formation or limited
partnership, limited liability company agreements, limited
partnership agreements or equivalent Governing Documents of each
WPZ Party in effect as of the date of this Agreement.
Section 3.2 Authority
and Approval. Each of the WPZ Parties has full
limited liability company or limited partnership power and
authority to execute and deliver this Agreement, to consummate
the transactions contemplated hereby and to perform all of the
terms and conditions hereof to be performed by it. The execution
and delivery by the WPZ Parties of this Agreement, the
consummation of the transactions contemplated hereby and the
performance of all of the terms and conditions hereof to be
performed by the WPZ Parties have been duly authorized and
approved by all requisite limited liability company or limited
partnership action on the part of each of the WPZ Parties. The
WPZ Board approved, by unanimous written consent, this Agreement
and the transactions contemplated hereby. This Agreement has
been duly executed and delivered by each of the WPZ Parties and
constitutes the valid and legally binding obligation of each of
them, enforceable against each of the WPZ Parties in accordance
with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws affecting the
enforcement of creditors rights and remedies generally and
by general principles of equity (whether applied in a proceeding
at law or in equity).
Section 3.3 No
Conflict; Consents.
(a) The execution, delivery and performance of this
Agreement by each of the WPZ Parties does not, and the
fulfillment and compliance with the terms and conditions hereof
and the consummation of the transactions
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contemplated hereby will not: (i) violate, conflict with
any of, result in any breach of, or require the consent of any
Person under, the terms, conditions or provisions of the
Governing Documents of any of the WPZ Group Entities;
(ii) violate any provision of applicable Laws;
(iii) conflict with, result in a breach of, constitute a
default under (whether with notice or the lapse of time or
both), or accelerate or permit the acceleration of the
performance required by, or require any consent, authorization
or approval under, or result in the suspension, termination or
cancellation of, or in a right of suspension, termination or
cancellation of, any indenture, mortgage, agreement, contract,
commitment, license, concession, permit, lease, joint venture or
other instrument to which any of the WPZ Group Entities is a
party or by which any of the WPZ Group Entities or any of their
assets are bound; or (iv) result in the creation of any
Lien (other than Permitted Liens) on any of the assets or
businesses of any of the WPZ Group Entities under any such
indenture, mortgage, agreement, contract, commitment, license,
concession, permit lease, joint venture or other instrument,
except in the case of clauses (ii), (iii) and
(iv) for those items that, individually or in the
aggregate, would not reasonably be expected to have a WPZ
Material Adverse Effect.
(b) No consent, approval, license, permit, order or
authorization of any Governmental Entity or other Person is
required to be obtained or made by any of the WPZ Group Entities
in connection with the execution, delivery, and performance of
this Agreement or the consummation of the transactions
contemplated hereby or thereby, except (i) as have been
waived or obtained or with respect to which the time for
asserting such right has expired, (ii) for those which
individually or in the aggregate would not reasonably be
expected to have a WPZ Material Adverse Effect (including such
consents, approvals, licenses, permits, orders or authorizations
that are not customarily obtained prior to the Closing and are
reasonably expected to be obtained in the ordinary course of
business following the Closing), (iii) pursuant to the
applicable requirements of the HSR Act or (iv) for matters
expressly contemplated by this Agreement.
Section 3.4 Capitalization;
Title to Membership and Limited Partner Interests.
(a) All of the outstanding shares of capital stock or other
equity interests of each WPZ Subsidiary owned directly or
indirectly by the WPZ Parties (i) are owned, beneficially
and of record free and clear of all Liens in the percentages set
out on WPZ Disclosure Schedule 3.4(a) and
(ii) have been duly authorized and are validly issued,
fully paid (to the extent required under the limited liability
company agreement or limited partnership agreement of the
applicable WPZ Subsidiary) and nonassessable (except as such
nonassessability may be affected by
Sections 18-303,
18-607 and
18-804 of
the DLLCA or by
Sections 17-303,
17-403,
17-607 and
17-804 of
the DRULPA and the Governing Documents of the applicable entity).
(b) There are no outstanding subscriptions, options,
warrants, preemptive rights, preferential purchase rights,
rights of first refusal or any other rights issued or granted
by, or binding upon, any of the WPZ Group Entities to purchase
or otherwise acquire or to sell or otherwise dispose of any of
the WPZ Subsidiaries or the equity interests of the WPZ
Subsidiaries, except as set forth in the Governing Documents of
Gulfstream.
(c) As of the date hereof, the outstanding capitalization
of WPZ consists of 255,777,452 WPZ Common Units, 5,219,674
General Partner Units and the Incentive Distribution Rights (the
terms General Partner Units and Incentive
Distribution Rights have the meanings set forth in the WPZ
Partnership Agreement). All of such WPZ Common Units and
Incentive Distribution Rights and the limited partner interests
represented thereby have been duly authorized and validly issued
in accordance with the WPZ Partnership Agreement, and are fully
paid (to the extent required under the WPZ Partnership
Agreement) and nonassessable (except as such nonassessability
may be affected by
Sections 17-303,
17-607 and
17-804 of
the DRULPA and the WPZ Partnership Agreement) and are held free
and clear of all Liens. The General Partner Units of WPZ have
been duly authorized and validly issued in accordance with the
WPZ Partnership Agreement. There are no outstanding
subscriptions, options, warrants, preemptive rights,
preferential purchase rights, rights of first refusal or any
similar rights issued or granted by, or binding upon, WPZ to
purchase or otherwise acquire or to sell or otherwise dispose of
any equity interests in WPZ, except as set forth in the WPZ SEC
Reports.
Section 3.5 SEC
Documents; Internal Controls.
(a) Since January 1, 2007, all reports, including but
not limited to the Annual Reports on
Form 10-K,
the Quarterly Reports on
Form 10-Q
and the Current Reports on
Form 8-K,
forms, schedules, statements, exhibits
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and other documents required to be filed or furnished by WPZ,
NWP, and Transco, respectively, with or to the SEC, as
applicable, pursuant to the Exchange Act have been or will be
timely filed or furnished (the WPZ SEC
Reports). Each of the WPZ SEC Reports
(i) complied or will comply in all material respects with
the requirements of applicable Law (including the Exchange Act),
and (ii) as of its filing date did not or will not contain
any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except
for any statements in any WPZ SEC Report that may have been
modified by an amendment to such report or a subsequent report
filed with the SEC prior to the date hereof.
(b) Other than NWP and Transco, no WPZ Subsidiary is
required to file reports, forms or other documents with the SEC
pursuant to the Exchange Act. There are no outstanding comments
from, or unresolved issues raised by, the staff of the SEC with
respect to the WPZ SEC Reports. No enforcement action has been
initiated against WPZ, NWP or Transco relating to disclosures
contained or omitted from any WPZ SEC Report.
(c) Each of WPZ, NWP and Transco makes and keeps books,
records, and accounts and has devised and maintains a system of
internal controls, in each case as required pursuant to
Section 13(b)(2) under the Exchange Act. Each of WPZ, NWP
and Transco has established and maintains disclosure controls
and procedures and internal control over financial reporting (as
such terms are defined in paragraphs (e) and (f),
respectively, of
Rule 13a-15
under the Exchange Act) as required by
Rule 13a-15
under the Exchange Act and the applicable listing standards of
the NYSE. Such disclosure controls and procedures are reasonably
designed to ensure that all material information required to be
disclosed by each of WPZ, NWP and Transco in the reports that it
files under the Exchange Act are recorded, processed, summarized
and reported within the time periods specified in the rules and
forms of the SEC, and that all such material information is
accumulated and communicated to its management as appropriate to
allow timely decisions regarding required disclosure and to make
the certifications required pursuant to Sections 302 and
906 of the Sarbanes-Oxley Act of 2002, as amended, and the rules
and regulations promulgated thereunder (the
Sarbanes-Oxley Act).
(d) Since January 1, 2007, the principal executive
officer and principal financial officer of each of WPZ General
Partner, NWP and Transco have made all certifications required
by the Sarbanes-Oxley Act, and the statements contained in any
such certifications are complete and correct, and none of such
entities or its officers have received notice from any
Governmental Entity questioning or challenging the accuracy,
completeness, form or manner of filing or submission of such
certification. As of the date hereof, and except as disclosed in
the Annual Reports on
Form 10-K
for the fiscal year ended December 31, 2009 and the
Quarterly Reports on
Form 10-Q
for the quarter ended March 31, 2009 for any of WPZ, NWP or
Transco, none of such entities has any Knowledge of any material
weaknesses in the design or operation of such internal controls
over financial reporting.
Section 3.6 Financial
Statements; Undisclosed Liabilities.
(a) The Current Report on
Form 8-K
filed by WPZ with the SEC on May 12, 2010 (the
May 12, 2010
8-K)
sets forth a true and complete copy of the consolidated audited
statements of income (loss), comprehensive income (loss) and
partners equity, and statements of cash flow for the
fiscal years ended December 31, 2007, 2008 and 2009 and
balance sheets as of December 31, 2008 and 2009 for WPZ,
including the notes thereto, which in each case have been
retrospectively adjusted to reflect the consolidation of the
historical results of the entities contributed to WPZ in
connection with the Contribution Agreement, dated
January 15, 2010, among Williams, WPZ and certain of their
Affiliates throughout the periods presented, and the Quarterly
Report on
Form 10-Q
filed by WPZ with the SEC on May 5, 2010 (the
First Quarter 2010
10-Q)
sets forth a true and complete copy of the consolidated
unaudited statements of income (loss), comprehensive income
(loss) and partners equity, and statements of cash flow
for the three month periods ended March 31, 2010 and 2009
and balance sheets as of December 31, 2009 and
March 31, 2010 for WPZ, including the notes thereto, (the
financial statements set forth in both the May 12, 2010
8-K and the
First Quarter 2010
10-Q are
collectively referred to as the WPZ Financial
Statements). The WPZ Financial Statements have been
prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby (except as may be
indicated in the notes thereto) and present fairly in all
material respects the
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financial condition of WPZ as of such dates and the results of
operations of WPZ for such periods, except as otherwise noted
therein and subject, in the case of the unaudited financial
statements, to normal and recurring adjustments and the absence
of certain notes that are included in an annual filing. Except
as set forth in the May 12, 2010
8-K and the
First Quarter 2010
10-Q, there
are no off-balance sheet arrangements that have or are
reasonably likely to have a WPZ Material Adverse Effect. None of
WPZ, NWP or Transco has had any disagreement with its respective
independent public accounting firm requiring disclosure in the
WPZ SEC Reports.
(b) There are no liabilities or obligations of WPZ, WPZ
General Partner or the WPZ Subsidiaries (whether known or
unknown and whether accrued, absolute, contingent or otherwise)
and there are no facts or circumstances that would reasonably be
expected to result in any such liabilities or obligations,
whether arising in the context of federal, state or local
judicial, regulatory, administrative or permitting agency
proceedings, other than (i) liabilities or obligations
reflected or reserved against in the WPZ Financial Statements,
(ii) current liabilities incurred in the ordinary course of
business since December 31, 2009, (iii) liabilities or
obligations set forth on WPZ Disclosure
Schedule 3.6(b) and (iv) liabilities or
obligations (whether known or unknown and whether accrued,
absolute, contingent or otherwise) that would not, individually
or in the aggregate, reasonably be expected to have a WPZ
Material Adverse Effect.
Section 3.7 Real
Property;
Rights-of-Way.
(a) Each of the WPZ Group Entities has good and marketable
title to all real property and good title to all tangible
personal property owned by the WPZ Group Entities and which is
sufficient for the operation of their respective businesses as
presently conducted, free and clear of all Liens except
Permitted Liens, except as would not reasonably be expected to
have, individually or in the aggregate, a WPZ Material Adverse
Effect.
(b) Each of the WPZ Group Entities has such consents,
easements,
rights-of-way,
permits and licenses from each Person (collectively,
Rights-of-Way)
as are sufficient to conduct its business in the manner
described, and subject to the limitations, qualifications,
reservations and encumbrances contained, in any WPZ SEC Report
filed on or prior to the date hereof, except for such
Rights-of-Way
the absence of which has not had, and would not reasonably be
expected to have, individually or in the aggregate, a WPZ
Material Adverse Effect. Each of the WPZ Group Entities has
fulfilled and performed all of its material obligations with
respect to such
Rights-of-Way
and no event has occurred that allows, or after notice or lapse
of time would allow, revocation or termination thereof or would
result in any impairment of the rights of the holder of any such
Rights-of-Way,
except for such revocations, terminations and impairments that
have not had, and would not reasonably be expected to have,
individually or in the aggregate, a WPZ Material Adverse Effect;
and none of such
Rights-of-Way
contains any restriction that is materially burdensome to the
WPZ Group Entities, taken as a whole.
(c) Except as set forth on WPZ Disclosure
Schedule 3.7(c), (i) (A) there are no pending
proceedings or actions to modify the zoning classification of,
or to condemn or take by power of eminent domain, all or any of
the assets of the WPZ Group Entities and (B) none of the
WPZ Parties have Knowledge of any such threatened proceeding or
action, which (in either case), if pursued, would reasonably be
expected to have a WPZ Material Adverse Effect, (ii) to the
extent located in jurisdictions subject to zoning, the assets of
the WPZ Group Entities that are real property (owned or leased)
are properly zoned for the existence, occupancy and use of all
of the improvements located on the owned and leased real
property and on the
rights-of-way
and easements held by any of the WPZ Group Entities, except as
would not reasonably be expected to have a WPZ Material Adverse
Effect, and (iii) none of such improvements are subject to
any conditional use permits or permitted non-conforming
use or permitted non-conforming structure
classifications or similar permits or classifications, except as
would not, either currently or in the case of a rebuilding of or
additional construction of improvements, reasonably be expected
to have a WPZ Material Adverse Effect.
Section 3.8 Litigation;
Laws and Regulations. Except as set forth on
WPZ Disclosure Schedule 3.8 and, with respect to any
WPZ Partially Owned Entity, to the Knowledge of the WPZ Parties:
(a) There are no (i) civil, criminal or administrative
actions, suits, claims, hearings, arbitrations, investigations
or proceedings pending or, to the WPZ Parties Knowledge,
threatened against or affecting
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the WPZ Group Entities, their assets, or any of the operations
of the WPZ Group Entities related thereto or
(ii) judgments, orders, decrees or injunctions of any
Governmental Entity, whether at law or in equity, against or
affecting the WPZ Group Entities, their assets, or any of the
operations of the WPZ Group Entities related thereto, except in
each case, for those items that would not, individually or in
the aggregate, reasonably be expected to have a WPZ Material
Adverse Effect.
(b) None of the WPZ Group Entities is in violation of or in
default under its Governing Documents or any applicable Law,
except as would not, individually or in the aggregate,
reasonably be expected to have a WPZ Material Adverse Effect.
Section 3.9 No
Adverse Changes. Except as set forth on WPZ
Disclosure Schedule 3.9 or described in the WPZ
Financial Statements and, with respect to any WPZ Partially
Owned Entity, to the Knowledge of the WPZ Parties:
(a) since December 31, 2009, there has not been a WPZ
Material Adverse Effect;
(b) there has not been any material damage, destruction or
loss to any material portion of the assets of the WPZ Group
Entities, whether or not covered by insurance; and
(c) since March 31, 2010, there has been no delay in,
or postponement of, the payment of any liabilities owed to the
WPZ Group Entities, individually or in the aggregate, in excess
of $50,000,000 and there is no contract, commitment or agreement
to do any of the foregoing.
Section 3.10 Taxes. Except
as would not reasonably be expected to have a WPZ Material
Adverse Effect and, with respect to any WPZ Partially Owned
Entity, to the Knowledge of the WPZ Parties, (i) all Tax
Returns required to be filed by or with respect to WPZ or any of
the WPZ Subsidiaries or their assets have been filed on a timely
basis (taking into account all extensions of due dates);
(ii) all Taxes owed by WPZ or any of the WPZ Subsidiaries
with respect to their assets, which are or have become due, have
been timely paid in full; (iii) there are no Liens on any
of the assets of WPZ or any of the WPZ Subsidiaries that arose
in connection with any failure (or alleged failure) to pay any
Tax on any of such assets, other than Liens for Taxes not yet
due and payable or the amount or validity of which is being
contested in good faith by appropriate proceedings for which an
adequate reserve has been established therefor; (iv) there is no
pending action, proceeding or investigation for assessment or
collection of Taxes and no Tax assessment, deficiency or
adjustment has been asserted or proposed with respect to WPZ or
any of the WPZ Subsidiaries or their assets; (v) each of
WPZ or any of the WPZ Subsidiaries that is classified as a
partnership for U.S. federal tax purposes has in effect an
election under Section 754 of the Code; (vi) WPZ is a
publicly traded partnership for U.S. federal
income tax purposes; (vii) at least 90% of the gross income
of WPZ for each taxable year since its formation up to and
including the current taxable year has been income that is
qualifying income within the meaning of
Section 7704(d) of the Code; and (viii) neither WPZ
nor Operating Company has elected to be treated as a corporation
for U.S. federal income tax purposes.
Section 3.11 Environmental
Matters. Except as disclosed in WPZ Disclosure
Schedule 3.11, or as would not reasonably be expected,
individually or in the aggregate, to have a WPZ Material Adverse
Effect: (a) the WPZ Group Entities, their assets and their
operations relating thereto are in compliance with applicable
Environmental Laws; (b) no circumstances exist with respect
to the WPZ Group Entities, their assets or their operations
relating thereto that give rise to an obligation by the WPZ
Group Entities to investigate, remediate, monitor, report or
otherwise address the presence or release,
on-site or
offsite, of Hazardous Materials under any applicable
Environmental Laws; (c) the WPZ Group Entities, their
assets or their operations related thereto are not subject to
any pending or, to the Knowledge of the WPZ Parties, threatened,
claim, action, suit, investigation, inquiry or proceeding under
any Environmental Law (including designation as a potentially
responsible party under CERCLA or any similar local or state
law); (d) all notices, permits, permit exemptions, licenses
or similar authorizations, if any, required to be obtained or
filed by the WPZ Group Entities, with respect to their assets or
their operations relating thereto have been duly obtained or
filed and are valid and currently in effect and will be legally
usable by the WPZ Group Entities at the time of the Closing;
(e) there has been no release of any Hazardous Material
into the environment by the WPZ Group Entities, their assets, or
their operations relating thereto, except in compliance with
applicable Environmental Law; and (f) there has
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been no exposure of any Person or property to any Hazardous
Material in connection with their assets or their operations.
Section 3.12 Condition
of Assets. The assets of the WPZ Group Entities
have been maintained and repaired in the same manner as would a
prudent operator of such assets, and are adequate for the
purposes for which they are currently used. The assets of the
WPZ Group Entities are adequate to conduct their businesses
substantially in accordance with past practice.
Section 3.13 Licenses;
Permits.
(a) Except as set forth in WPZ Disclosure
Schedule 3.13, the WPZ Group Entities have all
licenses, permits and authorizations issued or granted by
Governmental Entities that are necessary for the conduct of
their respective businesses as now being conducted or have
obtained valid waivers therefrom (collectively,
Permits), except in each case for such items
which the failure to obtain would not result, individually or in
the aggregate, in a WPZ Material Adverse Effect.
(b) All Permits are validly held by the WPZ Group Entities
and are in full force and effect, except as would not,
individually or in the aggregate, reasonably be expected to have
a WPZ Material Adverse Effect.
(c) The WPZ Group Entities have complied with all terms and
conditions of the Permits, except as would not, individually or
in the aggregate, reasonably be expected to have a WPZ Material
Adverse Effect.
(d) The Permits, a list of which has been provided to the
WMZ Parties, will not be subject to suspension, modification,
revocation or non-renewal as a result of the execution and
delivery of this Agreement or the consummation of the
transactions contemplated hereby, except, in each case, as would
not, individually or in the aggregate, reasonably be expected to
have a WPZ Material Adverse Effect.
(e) No proceeding is pending or, to the Knowledge of the
WPZ Parties, threatened with respect to any alleged failure by
the WPZ Group Entities to have any material Permit necessary for
the operation of any asset or the conduct of their businesses or
to be in compliance therewith.
Section 3.14 Contracts.
(a) WPZ Disclosure Schedule 3.14 contains a
true and complete listing and, with respect to any WPZ Partially
Owned Entity, a true and complete listing to the Knowledge of
the WPZ Parties, of the following contracts and other agreements
with respect to their assets or businesses, to which any of the
WPZ Group Entities is a party (each such contract or agreement
being referred to herein as a Material
Contract):
(i) any natural gas gathering, processing, treating,
transportation, storage, purchase or other agreement or NGL
marketing purchase or other agreement (or group of related
agreements with the same Person) that involves annual revenues
or payments in excess of $100,000,000;
(ii) any agreement (or group of related agreements with the
same Person) for the lease of personal property to or from any
Person providing for lease payments in excess of $100,000,000
per annum;
(iii) any agreement (or group of related agreements with
the same Person) for the purchase or sale of raw materials,
commodities, supplies, products, or other personal property, or
for the furnishing or receipt of services, the performance of
which is reasonably expected to involve annual consideration in
excess of $100,000,000;
(iv) any agreement concerning a partnership, joint venture,
investment or other arrangement (A) involving a sharing of
profits or losses relating to all or any portion of the business
of any of the WPZ Group Entities or (B) requiring any of
the WPZ Group Entities to invest funds in or make loans to, or
purchase any securities of, another Person, venture or other
business enterprise, in each case, that could reasonably be
expected to be in excess of $100,000,000;
(v) any agreement (or group of related agreements with the
same Person) with respect to the creation, incurrence,
assumption, or guaranteeing of any indebtedness for borrowed
money, or any capitalized lease obligation;
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(vi) any agreement that prohibits or otherwise materially
limits the ability of any of the WPZ Group Entities to compete
in any material respect in any line of business or with any
Person or in any material geographic area during any period of
time after the Closing;
(vii) any agreement with any of the WPZ Group Entities that
individually involves annual revenues or payments in excess of
$100,000,000;
(viii) any collective bargaining agreement;
(ix) any lease under which a WPZ Group Entity is the lessor
or lessee of real property that provides for an annual base
rental to or from any of the WPZ Group Entities of more than
$100,000,000;
(x) any easement agreement,
right-of-way
agreement, license or permit involving an annual payment of more
than $100,000,000;
(xi) any agreement that governs the use or development of
Intellectual Property (other than
off-the-shelf
software license agreements);
(xii) any agreement under which the consequences of a
default or termination would reasonably be expected to have a
WPZ Material Adverse Effect; or
(xiii) any other agreement (or group of related agreements
with the same Person) not enumerated in this
Section 3.14, the performance of which by any party
thereto involves consideration in excess of $100,000,000.
(b) The WPZ Parties have made available to the WMZ Parties
a correct and complete copy of each written agreement listed in
WPZ Disclosure Schedule 3.14.
(c) With respect to each of the WPZ Group Entities and,
with respect to any WPZ Partially Owned Entity, to the Knowledge
of the WPZ Parties: (i) each Material Contract is legal,
valid and binding on and enforceable against such entity, and in
full force and effect; (ii) each Material Contract will
continue to be legal, valid and binding on and enforceable
against such entity, and in full force and effect on identical
terms following the consummation of the transactions
contemplated by this Agreement; (iii) such entity that is a
party to each Material Contract is not in breach or default, and
no event has occurred which with notice or lapse of time would
constitute a breach or default by any such party, or permit
termination, modification, or acceleration, under the Material
Contract; and (iv) to the Knowledge of the WPZ Parties, no
other party to any Material Contract is in breach or default,
and no event has occurred which with notice or lapse of time
would constitute a breach or default by such other party, or
permit termination, modification or acceleration under any
Material Contract other than in accordance with its terms nor
has any other party repudiated any provision of the Material
Contract.
Section 3.15 Employees
and Employee Benefits.
(a) None of the employees of Williams or its Affiliates who
provide exclusive or shared services to the assets or businesses
of the WPZ Group Entities (collectively, the Associated
Employees) are covered by a collective bargaining
agreement. Except as would not, individually or in the
aggregate, reasonably be expected to have a WPZ Material Adverse
Effect or as set forth on WPZ Disclosure
Schedule 3.15(a), none of the WPZ Parties have
Knowledge of any facts or circumstances that have resulted or
would reasonably be expected to result in a claim on behalf of
an individual or a class in excess of $3,750,000 for unlawful
discrimination, unpaid overtime or any other violation of state
or federal laws relating to employment of the Associated
Employees.
(b) Except with respect to the Services Agreements, the WPZ
Partnership Agreement, the WPZ General Partner Long-Term
Incentive Plan and the WPZ General Partner Directors
Compensation Policy, none of the WPZ Group Entities sponsor,
maintain or contribute to, or have any legal or equitable
obligation to establish, any compensation or benefit plan,
agreement, program or policy (whether written or oral, formal or
informal) for the benefit of any present or former directors,
officers, employees, agents, consultants or other similar
representatives, including, but not limited to, any Employee
Benefit Plan.
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(c) Except as would not, individually or in the aggregate,
reasonably be expected to result in a WPZ Material Adverse
Effect, (i) each Employee Benefit Plan in which Associated
Employees participate and that is intended to be qualified under
Section 401(a) of the Code has received a favorable
determination letter or opinion letter from the Internal Revenue
Service regarding its qualified status, and (ii) each
Employee Benefit Plan in which Associated Employees participate
is and has been operated and maintained in material compliance
with its terms and the provisions of all applicable Laws,
including, without limitation, ERISA and the Code.
(d) With respect to any Employee Benefit Plan that the WPZ
Parties (or any entity treated as a single employer with any WPZ
Party for purposes of Section 414 of the Code or
Section 4001(a)(14) of ERISA (the Aggregated
Group)) have maintained within the last six years or
have had any obligation to contribute to within the past six
years, (i) except for an event described in
Section 4043(c)(3) of ERISA and except for an event that
would not, individually or in the aggregate, reasonably be
expected to result in a WPZ Material Adverse Effect, there has
been no reportable event, as that term is defined in
Section 4043 of ERISA, for which the
30-day
reporting requirement has not been waived, and the transactions
contemplated by this Agreement will not result in such a
reportable event for which a waiver does not apply,
(ii) none of the WPZ Group Entities or any member of the
Aggregated Group has incurred any direct or indirect liability
under Title IV of ERISA other than liability for premiums
to the Pension Benefit Guaranty Corporation that have been
timely paid and other than any liabilities for which the WPZ
Group Entities have no direct or indirect responsibility or
obligation (other than with respect to the Services Agreements
or the WPZ Partnership Agreement) and (iii) there does not
exist any accumulated funding deficiency within the meaning of
Section 412 of the Code or Section 302 of ERISA,
whether or not waived that, in either case, would give rise to a
Lien on any of the assets of the WPZ Group Entities or that
would reasonably be expected to result in a WPZ Material Adverse
Effect. None of the WPZ Group Entities or any member of the
Aggregated Group contributes to, or has an obligation to
contribute to, and has not within six years prior to the Closing
Date contributed to, or had an obligation to contribute to, a
multiemployer plan within the meaning of
Section 3(37) of ERISA (x) that is, or is reasonably
expected to be in critical or endangered
status as defined in Section 432 of the Code or
Section 305 of ERISA, or (y) in respect of which the
WPZ Group Entities or any member of the Aggregated Group has or
may reasonably be expected to incur any withdrawal liability (as
defined in Section 4201 of ERISA).
(e) The present value of the aggregate benefit liabilities
under each of the Employee Benefit Plans sponsored by any member
of the Aggregated Group subject to Title IV of ERISA (other
than multiemployer plans) (the Title IV
Plans), determined as of the end of such Title IV
Plans most recently ended plan year on the basis of the
actuarial assumptions specified for funding purposes in such
Title IV Plans actuarial valuation report for such
plan year, did not exceed the aggregate current value of the
assets of such Title IV Plan allocable to such benefit
liabilities. The term benefit liabilities has the
meaning specified in section 4001 of ERISA and the terms
current value and present value have the
meaning specified in section 3 of ERISA.
(f) Except as would not result in any liability to the WPZ
Group Entities (other than with respect to liability of the WPZ
Group Entities arising from it being a party to a Services
Agreement or the WPZ Partnership Agreement), the execution and
delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement will not (either
alone or upon the occurrence of any subsequent
employment-related event) result in any payment becoming due,
result in the acceleration of the time of payment or vesting of
any such benefits, result in the incurrence or acceleration of
any other obligation related to the Employee Benefit Plans or to
any employee or former employee of the WPZ Group Entities or any
of their Affiliates.
(g) All costs and liabilities associated with Associated
Employees and any former employees who have provided services
with respect to the assets of the WPZ Group Entities have been
allocated in good faith amongst the WPZ Group Entities.
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Section 3.16 Labor
Matters. There is no labor strike, or other
material dispute, slowdown or stoppage pending or, to the
Knowledge of the WPZ Parties, threatened against any of the WPZ
Group Entities with respect to any Associated Employee.
Section 3.17 Transactions
with Affiliates. Except as otherwise contemplated
in this Agreement or as set forth on WPZ Disclosure
Schedule 3.17, none of the WPZ Group Entities is party
to, and immediately after Closing will not be party to, any
agreement, contract or arrangement between such WPZ Group
Entity, on the one hand, and any of its Affiliates, on the other
hand, other than (a) those entered into in the ordinary
course of business relating to the provision of natural gas
gathering, processing, treating, transportation and storage
services and NGL marketing services or for the purchase of
power, the purchase or sale of natural gas for fuel or system
requirements or the purchase or sale of liquid products, in each
case, on commercially reasonable terms and (b) those
entered into for purposes of hedging future anticipated
purchases or sales of commodities as authorized under and in
compliance with the Williams Midstream Commodity Transaction
Policy, a copy of which has been made available to the WMZ
Parties.
Section 3.18 Insurance. Except
as set forth in WPZ Disclosure Schedule 3.18, the
businesses and assets of the WPZ Group Entities are covered by,
and insured under, insurance policies underwritten by reputable
insurers that include coverages and related limits and
deductibles that are customary in the natural gas gathering,
processing, treating, transportation and storage industries and
NGL marketing industry. All such insurance policies are in full
force and effect and all premiums due and payable on such
policies have been paid. No notice of cancellation of, or
indication of an intention not to renew, any such insurance
policy has been received by the WPZ Parties other than in the
ordinary course of business.
Section 3.19 Intellectual
Property Rights. Each of the WPZ Group Entities
owns or has the right to use all Intellectual Property necessary
for or used in the conduct of its business as currently
conducted, and as currently proposed to be conducted, and their
respective products and services do not infringe upon,
misappropriate or otherwise violate any Intellectual Property of
any third party. All Intellectual Property owned by the WPZ
Group Entities is free and clear of all Liens (other than
Permitted Liens). Neither the execution or delivery of this
Agreement, nor the consummation of the transactions contemplated
hereby will, with or without notice or lapse of time, result in,
or give any other Person the right or option to change the terms
and conditions of use of the Intellectual Property, or cause or
declare, a breach or termination of, or cancellation or
reduction in rights of any of the WPZ Group Entities under any
contract providing for the license of any Intellectual Property
to any of the WPZ Group Entities, except for any such
terminations, cancellations or reductions that, individually or
in the aggregate, would not have a WPZ Material Adverse Effect.
There is no Intellectual Property-related action, suit,
proceeding, hearing, investigation, notice or complaint pending
or threatened, by any third party before any court or tribunal
(including, without limitation, the United States Patent and
Trademark Office or equivalent authority anywhere in the world)
relating to the businesses, assets or operations of any of the
WPZ Group Entities, nor has any claim or demand been made by any
third party that alleges any infringement, misappropriation, or
violation of any Intellectual Property of any third party, or
unfair competition or trade practices by any of the WPZ Group
Entities. Except as would not result in a WPZ Material Adverse
Effect, each of the WPZ Group Entities have taken reasonable
measures to protect the confidentiality of all material trade
secrets.
Section 3.20 Investment
Company Act. None of the WPZ Group Entities is,
nor immediately after the Closing will be, subject to regulation
under the Investment Company Act of 1940, as amended.
Section 3.21 Brokerage
Arrangements. None of the WPZ Parties has entered
(directly or indirectly) into any agreement with any Person that
would obligate any of the WMZ Parties to pay any commission,
brokerage or finders fee or other similar fee
in connection with this Agreement or the transactions
contemplated hereby.
Section 3.22 Liabilities
Associated with Natural Gas Contracts. There has
been no misallocation, calculation error, measurement problem or
similar event relating to the performance by the WPZ Group
Entities under any natural gas gathering, processing, treating,
transportation or storage contract or NGL marketing contract
that would give rise to a correcting adjustment under any such
contract that would reasonably be expected to result in a
liability to the WPZ Group Entities in excess of $37,500,000.
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Section 3.23 Waivers
and Disclaimers. NOTWITHSTANDING ANYTHING TO THE
CONTRARY CONTAINED IN THIS AGREEMENT, EXCEPT FOR THE EXPRESS
REPRESENTATIONS AND WARRANTIES AND OTHER COVENANTS AND
AGREEMENTS MADE BY THE WPZ PARTIES IN THIS AGREEMENT, THE WPZ
PARTIES HAVE NOT MADE, DO NOT MAKE, AND SPECIFICALLY NEGATE AND
DISCLAIM ANY REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS,
AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER,
WHETHER EXPRESS, IMPLIED OR STATUTORY, ORAL OR WRITTEN, PAST OR
PRESENT REGARDING (A) THE VALUE, NATURE, QUALITY OR
CONDITION OF THEIR RESPECTIVE ASSETS INCLUDING, WITHOUT
LIMITATION, THE WATER, SOIL, GEOLOGY OR ENVIRONMENTAL CONDITION
OF THEIR RESPECTIVE ASSETS GENERALLY, INCLUDING THE PRESENCE OR
LACK OF HAZARDOUS SUBSTANCES OR OTHER MATTERS ON THEIR
RESPECTIVE ASSETS, (B) THE INCOME TO BE DERIVED FROM THEIR
RESPECTIVE ASSETS, (C) THE SUITABILITY OF THEIR RESPECTIVE
ASSETS FOR ANY AND ALL ACTIVITIES AND USES THAT MAY BE CONDUCTED
THEREON, (D) THE COMPLIANCE OF OR BY THEIR RESPECTIVE
ASSETS OR THEIR RESPECTIVE OPERATION WITH ANY LAWS (INCLUDING
WITHOUT LIMITATION ANY ZONING, ENVIRONMENTAL PROTECTION,
POLLUTION OR LAND USE LAWS, RULES, REGULATIONS, ORDERS OR
REQUIREMENTS), OR (E) THE HABITABILITY, MERCHANTABILITY,
MARKETABILITY, PROFITABILITY OR FITNESS FOR A PARTICULAR PURPOSE
OF THEIR RESPECTIVE ASSETS. EXCEPT TO THE EXTENT PROVIDED IN
THIS AGREEMENT, NEITHER THE WPZ PARTIES NOR ANY OF THEIR
AFFILIATES SHALL BE LIABLE OR BOUND IN ANY MANNER BY ANY VERBAL
OR WRITTEN STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING
TO THE WPZ PARTIES, THEIR RESPECTIVE BUSINESSES OR THEIR
RESPECTIVE ASSETS FURNISHED BY ANY AGENT, EMPLOYEE, SERVANT OR
THIRD PARTY. THE PROVISIONS OF THIS SECTION 3.23
HAVE BEEN NEGOTIATED BY THE PARTIES AFTER DUE CONSIDERATION AND
ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY
REPRESENTATIONS OR WARRANTIES, WHETHER EXPRESS, IMPLIED OR
STATUTORY, WITH RESPECT TO THE WPZ GROUP ENTITIES, THEIR
RESPECTIVE BUSINESSES OR THEIR RESPECTIVE ASSETS THAT MAY ARISE
PURSUANT TO ANY LAW NOW OR HEREAFTER IN EFFECT, OR OTHERWISE,
EXCEPT AS SET FORTH IN THIS AGREEMENT.
Section 3.24 Operating
Surplus. All distributions made by WPZ during its
existence have been made from Operating Surplus or Capital
Surplus (as such terms are defined in the WPZ Partnership
Agreement).
Section 3.25 State
Takeover Laws. No approvals are required under
state takeover or similar Laws in connection with the
performance by the WPZ Parties of their obligations under this
Agreement.
ARTICLE IV
REPRESENTATIONS
AND WARRANTIES OF THE WMZ PARTIES
Except as set forth in a section of the WMZ Disclosure Schedule
delivered concurrently herewith corresponding to the applicable
sections of this Article IV to which such disclosure
applies (provided that any information set forth in one
section of the WMZ Disclosure Schedule shall be deemed to apply
to each other section thereof to which its relevance is
reasonably apparent on its face), the WMZ Parties hereby
represent and warrant, jointly and severally, to the WPZ Parties
that:
Section 4.1 Organization
and Existence. WMZ is a limited partnership duly
formed, validly existing and in good standing under the laws of
the State of Delaware and has all requisite limited partnership
power and authority to own, operate and lease its properties and
assets and to carry on its business as now conducted.
Section 4.2 Authority
and Approval. Each of the WMZ Parties has full
limited partnership or limited liability company power and
authority, as applicable, to execute and deliver this Agreement,
to consummate the transactions contemplated hereby and to
perform all of the terms and conditions hereof to be performed
by it. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and the
performance of all of the terms and conditions hereof to be
performed by the WMZ Parties have been duly authorized and
approved (subject to WMZ Unitholder Approval) by all requisite
limited partnership
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action or limited liability company action, as applicable, of
each of the WMZ Parties. The WMZ Board sought Special Approval
with respect to this Agreement and the transactions contemplated
hereby. At a meeting duly called and held, the WMZ Conflicts
Committee determined, by unanimous vote, that this Agreement and
the transactions contemplated hereby are in the best interests
of WMZ and the Holders of Non-affiliated WMZ Common Units, and
determined to recommend the approval of this Agreement and the
consummation of the transactions contemplated hereby to the WMZ
Board. Upon the recommendation of the WMZ Conflicts Committee,
the WMZ Board approved, by unanimous written consent, this
Agreement and the transactions contemplated hereby. This
Agreement has been duly executed and delivered by each of the
WMZ Parties and constitutes the valid and legally binding
obligation of each of them, enforceable against each of them in
accordance with its terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws
affecting the enforcement of creditors rights and remedies
generally and by general principles of equity (whether applied
in a proceeding at law or in equity).
Section 4.3 No
Conflict; Consents.
(a) The execution, delivery and performance of this
Agreement by the WMZ Parties does not, and the fulfillment and
compliance with the terms and conditions hereof and the
consummation of the transactions contemplated hereby (subject to
WMZ Unitholder Approval) will not: (i) violate, conflict
with any of, result in any breach of, or require the consent of
any Person under, the terms, conditions or provisions of the
limited liability company agreement or limited partnership
agreement of either of the WMZ Parties; (ii) violate any
provision of any law or administrative rule or regulation or any
judicial, administrative or arbitration order, award, judgment,
writ, injunction or decree applicable to the WMZ Parties or any
property or asset of the WMZ Parties; (iii) conflict with,
result in a breach of, constitute a default under (whether with
notice or the lapse of time or both), or accelerate or permit
the acceleration of the performance required by, or require any
consent, authorization or approval under, any indenture,
mortgage, agreement, contract, commitment, license, concession,
permit, lease, joint venture or other instrument to which either
of the WMZ Parties is a party or by which either of them is
bound or to which any of their property is subject; or
(iv) result in the creation of any Lien (other than
Permitted Liens) on any of the assets or businesses of any of
the WMZ Parties under any such indenture, mortgage, agreement,
contract, commitment, license, concession, permit lease, joint
venture or other instrument, except in the case of clauses
(ii), (iii) or (iv), for those items which
individually or in the aggregate would not reasonably be
expected to have a WMZ Material Adverse Effect.
(b) No consent, approval, license, permit, order or
authorization of any Governmental Entity or other Person is
required to be obtained or made by or with respect to either of
the WMZ Parties in connection with the execution, delivery, and
performance of this Agreement or the consummation of the
transactions contemplated hereby, except (i) for WMZ
Unitholder Approval, (ii) as have been waived or obtained
or with respect to which the time for asserting such right has
expired, (iii) for those which individually or in the
aggregate would not reasonably be expected to have a WMZ
Material Adverse Effect (including such consents, approvals,
licenses, permits, orders or authorizations that are not
customarily obtained prior to the Closing and are reasonably
expected to be obtained in the ordinary course of business
following the Closing), or (iv) pursuant to the applicable
requirements of the HSR Act.
Section 4.4 Capitalization;
Title to Membership and Limited Partner Interests.
(a) All of the outstanding shares of capital stock or other
equity interests of each WMZ Subsidiary owned directly or
indirectly by the WMZ Parties (i) are owned, beneficially
and of record free and clear of all Liens in the percentages set
out on WMZ Disclosure Schedule 4.4(a) and
(ii) have been duly authorized and are validly issued,
fully paid (to the extent required under the limited liability
company agreement or partnership agreement of the applicable WMZ
Subsidiary) and nonassessable (except as such nonassessability
may be affected by
Sections 18-303,
18-607 and
18-804 of
the DLLCA or by
Sections 17-303,
17-403,
17-607 and
17-804 of
the DRULPA and the Governing Documents of the applicable entity).
(b) There are no outstanding subscriptions, options,
warrants, preemptive rights, preferential purchase rights,
rights of first refusal or any similar rights issued or granted
by, or binding upon, any of the WMZ
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Group Entities to purchase or otherwise acquire or to sell or
otherwise dispose of any of the WMZ Subsidiaries or the equity
interests of the WMZ Subsidiaries, except as contemplated by
this Agreement.
(c) As of the date hereof, the outstanding capitalization
of WMZ consists of 22,607,430 Common Units, 10,957,900
Subordinated Units, 684,869 General Partner Units and the
Incentive Distribution Rights (all such capitalized terms having
the meanings set forth in the WMZ Partnership Agreement). All of
such Common Units, Subordinated Units and Incentive Distribution
Rights and the limited partner interests represented thereby
have been duly authorized and validly issued in accordance with
the WMZ Partnership Agreement, and are fully paid (to the extent
required under the WMZ Partnership Agreement) and nonassessable
(except as such nonassessability may be affected by
Sections 17-303,
17-607 and
17-804 of
the DRULPA and the WMZ Partnership Agreement) and are held free
and clear of all Liens. The General Partner Units of WMZ have
been duly authorized and validly issued in accordance with the
WMZ Partnership Agreement. There are no outstanding
subscriptions, options, warrants, preemptive rights,
preferential purchase rights, rights of first refusal or any
similar rights issued or granted by, or binding upon, WMZ to
purchase or otherwise acquire or to sell or otherwise dispose of
any equity interests in WMZ, except as set forth in the WMZ SEC
Reports.
Section 4.5 Brokerage
Arrangements. None of the WMZ Parties has entered
(directly or indirectly) into any agreement with any Person that
would obligate any of the WMZ Parties to pay any commission,
brokerage or finders fee or other similar fee
in connection with this Agreement or the transactions
contemplated hereby, except as set forth on WMZ Disclosure
Schedule 4.5.
Section 4.6 Litigation. There
are no civil, criminal or administrative actions, suits, claims,
hearings, arbitrations, investigations or proceedings pending,
or to the Knowledge of the WMZ Parties, threatened that
(a) question or involve the validity or enforceability of
any of the obligations of the WMZ Parties under this Agreement
or (b) seek (or reasonably might be expected to seek)
(i) to prevent or delay the consummation by the WMZ Parties
of the transactions contemplated by this Agreement or
(ii) damages in connection with any such consummation.
Section 4.7 SEC
Documents. Since January 1, 2008, all
reports, including but not limited to the Annual Reports on
Form 10-K,
the Quarterly Reports on
Form 10-Q
and the Current Reports on
Form 8-K,
forms, schedules, statements and other documents required to be
filed or furnished by WMZ with or to the SEC, as applicable,
pursuant to the Exchange Act have been or will be timely filed
or furnished (the WMZ SEC Reports). The
WMZ SEC Reports (i) complied or will comply in all material
respects with the requirements of applicable Law (including the
Exchange Act), and (ii) as of its filing date did not or
will not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading,
except for any statements in any WMZ SEC Report that may have
been modified by an amendment to such report or a subsequent
report filed with the SEC prior to the date hereof.
Section 4.8 No
Adverse Changes. Except as set forth on WMZ
Disclosure Schedule 4.8 or described in the WMZ
Financial Statements, and with respect to any WMZ Partially
Owned Entity, to the Knowledge of the WMZ Parties:
(a) since December 31, 2009, there has not been a WMZ
Material Adverse Effect; and
(b) there has not been any material damage, destruction or
loss to any material portion of the assets of the WMZ Group
Entities, whether or not covered by insurance; and
(c) since March 31, 2010, there has been no delay in,
or postponement of, the payment of any liabilities owed to the
WMZ Group Entities, individually or in the aggregate, in excess
of $3,000,000, and there is no contract, commitment or agreement
to do any of the foregoing.
Section 4.9 Taxes. Except
as would not reasonably be expected to have a WMZ Material
Adverse Effect and, with respect to any WMZ Partially Owned
Entity, to the Knowledge of the WMZ Parties, (i) all Tax
Returns required to be filed by or with respect to WMZ or any of
the WMZ Subsidiaries or their assets have been filed on a timely
basis (taking into account all extensions of due dates);
(ii) all Taxes owed by WMZ or any of the WMZ Subsidiaries
with respect to their assets, which are or have become due, have
been
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timely paid in full; (iii) there are no Liens on any of the
assets of WMZ or any of the WMZ Subsidiaries that arose in
connection with any failure (or alleged failure) to pay any Tax
on any of such assets, other than Liens for Taxes not yet due
and payable or the amount or validity of which is being
contested in good faith by appropriate proceedings for which an
adequate reserve has been established therefor; (iv) there
is no pending action, proceeding or investigation for assessment
or collection of Taxes and no Tax assessment, deficiency or
adjustment has been asserted or proposed with respect to WMZ or
any of the WMZ Subsidiaries or their assets; (v) each of
WMZ or any of the WMZ Subsidiaries that is classified as a
partnership for U.S. federal tax purposes has in effect an
election under Section 754 of the Code; (vi) WMZ is a
publicly traded partnership for U.S. federal
income tax purposes; (vii) at least 90% of the gross income
of WMZ for each taxable year since its formation up to and
including the current taxable year has been income that is
qualifying income within the meaning of
Section 7704(d) of the Code; and (viii) none of WMZ or
any of the WMZ Subsidiaries has elected to be treated as a
corporation for U.S. federal income tax purposes.
ARTICLE V
ADDITIONAL
AGREEMENTS, COVENANTS,
RIGHTS AND
OBLIGATIONS
Section 5.1 Conduct
of Parties.
(a) From the Execution Date until the Closing Date, neither
Party Group shall take any action not permitted by this
Agreement or fail to take any action contemplated by this
Agreement that would be reasonably likely to materially delay
the consummation of the Merger or result in the failure of a
condition to closing pursuant to Article VI.
(b) Without limiting the generality of
Section 5.1(a), except (1) as otherwise
contemplated by this Agreement, (2) as otherwise required
by Law or (3) as set forth in WMZ Disclosure
Schedule 5.1(b) or in WPZ Disclosure
Schedule 5.1(b), without the prior written consent of
the other Party Group (which consent will not be unreasonably
withheld, delayed or conditioned), each Party Group will not,
and agrees that it will cause its respective Consolidated Group
not to:
(i) make any material change in the nature of its business
and operations;
(ii) make any change in its governing documents in any
manner that would reasonably be expected to adversely affect in
a material way the rights of holders of its securities;
(iii) (A) issue, deliver or sell any of its equity
securities for cash and at a material discount to the lower of
prevailing market prices at the time of their issuance or at the
time of commitment to do so, or (B) authorize or propose
the issuance, delivery or sale of any subscriptions, rights,
warrants or options to acquire or other agreements or
commitments of any character obligating it to issue any equity
securities (other than issuances pursuant to options and
warrants in existence on the Execution Date) for cash and at a
material discount to the lower of prevailing market prices of
such equity securities at the time of their issuance or at the
time such subscriptions, rights, warrants, options, agreements
or commitments are entered into;
(iv) except for distributions to the holders of limited
partnership units consistent with past or previously announced
practices, the proportionate distribution on the general partner
interests and payments under incentive distribution rights, or
any distributions from the WMZ Subsidiaries to WMZ, or from the
WPZ Subsidiaries to WPZ, declare, set aside or pay any
distributions in respect of its equity securities, or split,
combine or reclassify any of its equity securities or issue or
authorize the issuance of any other securities in respect of, in
lieu of or in substitution for any of its equity securities;
provided that, in the case of distributions in respect of equity
securities, consent to such distributions shall not be
unreasonably withheld, delayed or conditioned;
(v) settle any claims, demands, lawsuits or state or
federal regulatory proceedings seeking damages or an injunction
or other equitable relief where such settlements would be
reasonably likely in the aggregate to have a WMZ Material
Adverse Effect or a WPZ Material Adverse Effect, as applicable;
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(vi) adopt or vote to adopt a plan of complete or partial
dissolution or liquidation;
(vii) make any material change in its tax methods,
principles or elections that would reasonably be expected to
materially adversely affect the ability of Andrews Kurth LLP or
Fulbright & Jaworski L.L.P. to deliver its tax opinion
at Closing pursuant to Sections 6.2(b) or 6.3(b),
respectively; or
(viii) agree or commit to do any of the foregoing.
(c) From the Execution Date until the Closing Date, each
Party Group shall promptly notify the other Party Group in
writing of (i) any event, condition or circumstance that
could reasonably be expected to result in any of the conditions
set forth in Article VI not being satisfied at the
Effective Time, and (ii) any material breach by the
notifying Party Group of any covenant, obligation or agreement
contained in this Agreement; provided, however, that the
delivery of any notice pursuant to this
Section 5.1(b) shall not limit or otherwise affect
the remedies available hereunder to the notified Party Group.
Section 5.2 Access
to Information; Confidentiality. Subject to
applicable Laws, upon reasonable notice, each Party Group shall
(and shall cause its Consolidated Group to) afford the officers,
employees, counsel, accountants and other Representatives and
advisors of the requesting Party Group reasonable access, during
normal business hours from the Execution Date until the Closing
Date, to its properties, books, contracts and records as well as
to their management personnel; provided that such access
shall be provided on a basis that minimizes the disruption to
the operations of the disclosing Party Group and its
Consolidated Group; provided further that the WPZ Group
Entities shall be obligated to provide such access to their
respective properties to any WMZ Group Entity only upon
reasonable request in order to determine whether or not a
condition to Closing has been satisfied. The disclosing Party
Group shall not be responsible to the requesting Party Group for
personal injuries sustained by the requesting Party Groups
officers, employees, counsel, accountants and other
representatives and advisors in connection with the access
provided pursuant to this Section 5.2, and shall be
indemnified and held harmless by the requesting Party Group for
any losses suffered by the disclosing Party Group or its
officers, employees or representatives in connection with any
such personal injuries. Subject to applicable Laws, during such
period, each Party Group shall (and shall cause its Consolidated
Group to) furnish promptly to the other Party Group (i) a
copy of each report, schedule, registration statement and other
document filed, published, announced or received by it in
connection with the transactions contemplated by this Agreement
during such period pursuant to the requirements of Federal,
state or foreign laws (including pursuant to the HSR Act, the
Securities Act, the Exchange Act and the rules of any
Governmental Entity thereunder), as applicable (other than
documents which such Party Group is not permitted to disclose
under applicable Laws) and (ii) all information concerning
the disclosing Party Groups business, properties and
personnel as the requesting Party Group may reasonably request,
including all information relating to environmental matters.
Notwithstanding the foregoing, a Party Group shall have no
obligation to disclose or provide access to any information the
disclosure of which such Party Group has concluded may
jeopardize any privilege available to such Party Group or its
Consolidated Group relating to such information or would be in
violation of a confidentiality obligation binding on such Party
Group or Consolidated Group.
Section 5.3 Certain
Filings. As promptly as practicable following the
Execution Date (i) the parties shall prepare and file with
the Federal Trade Commission and the U.S. Department of
Justice the appropriate filings and any supplemental information
which may be reasonably requested in connection therewith under
the HSR Act, it being agreed that WPZ is the primary
Acquiring Person for purposes of the HSR Act and
shall pay the required filing fee, (ii) WMZ and WPZ shall
prepare and file with or furnish to the SEC a Proxy
Statement/Prospectus to be distributed to the Holders of WMZ
Common Units in connection with the WMZ Limited Partners
Meeting (the Proxy Statement/Prospectus) and
to be part of the Registration Statement described below,
(iii) WPZ shall prepare and file with or furnish to the SEC
a registration statement on
Form S-4
(the Registration Statement) with respect to
the issuance of WPZ Common Units in connection with the Merger,
(iv) WPZ shall use its commercially reasonable efforts to
cause the WPZ Common Units to be issued in the Merger to be
listed on the NYSE, and (v) the parties hereto shall make
all required filings under applicable state securities and blue
sky Laws, provided, however, that no such filings shall
be required in any jurisdiction where, as a result thereof, WPZ
would become subject to general service of process or to
taxation or qualification to do business as a foreign
partnership doing business in such jurisdiction solely as a
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result of such filing. Each of the WMZ Parties and WPZ Parties
further agrees that if it shall become aware prior to the date
of the WMZ Limited Partners Meeting of any information
that would cause any of the statements in the Proxy
Statement/Prospectus to become false or misleading with respect
to any material fact, or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not false or
misleading, it will promptly inform the other parties thereof
and take the necessary steps to correct the Proxy
Statement/Prospectus. Each of WPZ and WMZ will provide the other
with reasonable opportunity to review and comment on the Proxy
Statement/Prospectus and any amendment or supplement thereto
prior to filing the Proxy Statement/Prospectus or any such
amendment or supplement, and further agree that each of them
will be provided with such number of copies of all filings made
with the SEC as such party shall reasonably request. WPZ will
provide WMZ with reasonable opportunity to review and comment on
the Registration Statement and any amendment or supplement
thereto prior to filing any such document with the SEC. No
filings of the Registration Statement or the Proxy
Statement/Prospectus (or any amendments or supplements to either
of them) shall be made without the consent of WMZ and WPZ (which
consent shall not be unreasonably withheld, delayed or
conditioned); provided that with respect to documents
that are incorporated by reference into the Registration
Statement or the Proxy Statement/Prospectus, the foregoing
consent right shall only apply with respect to information
relating to the other party or its business, financial condition
or results of operations. Each of WMZ and WPZ shall
(1) promptly notify the other of receipt of any comments
from the SEC or its staff or any other applicable government
official and of any requests by the SEC or its staff or any
other applicable government official for amendments or
supplements to any of the filings with the SEC in connection
with the Merger and other transactions contemplated hereby or
for additional information and (2) promptly supply the
other with copies of all correspondence between WMZ or any of
its representatives, or WPZ or any of its representatives, as
the case may be, on the one hand, and the SEC or its staff or
any other applicable government official, on the other hand,
with respect thereto. WPZ and WMZ shall use their respective
commercially reasonable efforts to respond to any comments of
the SEC or its staff with respect to the Proxy
Statement/Prospectus or the Registration Statement as promptly
as practicable.
Section 5.4 WMZ
Limited Partners Meeting. The WMZ Parties
shall, in accordance with applicable Law and the WMZ Partnership
Agreement, cause a meeting of the Limited Partners (as such term
is defined in the WMZ Partnership Agreement) of WMZ (the
WMZ Limited Partners Meeting) to be
duly called and held as soon as practicable after the
Registration Statement is declared effective under the
Securities Act to consider and vote upon the adoption and
approval of this Agreement and the Merger. Except as permitted
by Section 5.5(c), the WMZ Board shall unanimously
recommend approval and adoption of this Agreement and the Merger
by the Holders of WMZ Units and the WMZ Conflicts Committee
shall unanimously recommend approval and adoption of this
Agreement and the Merger (the WMZ
Recommendation) by the Holders of WMZ Common Units
other than the WMZ General Partner and its Affiliates (as such
term is defined in the WMZ Partnership Agreement) (the
Non-affiliated
WMZ Common Units) and shall include such WMZ
Recommendation in the Proxy Statement/Prospectus. The WMZ
General Partner shall be present at the WMZ Limited
Partners Meeting in its capacity as a Holder of WMZ Units,
and shall vote all of the WMZ Subordinated Units held by it to
approve and adopt this Agreement and the Merger at the WMZ
Limited Partners Meeting.
Section 5.5 No
Solicitation.
(a) The WMZ Parties shall not, and the WMZ Parties shall
cause the WMZ Subsidiaries not to, and the WMZ Parties shall
direct and use their reasonable best efforts to cause the WMZ
Parties respective directors, officers or employees or any
investment bank, financial advisor, attorney, accountant or
other advisor, agent or representative retained by them or any
of the WMZ Subsidiaries, including for clarification and without
limitation the WMZ Conflicts Committee and its members,
financial advisors, attorneys and other advisors (collectively,
Representatives) not to, directly or
indirectly, take any action to solicit, initiate, or knowingly
encourage or knowingly facilitate the making of any WMZ Takeover
Proposal or any inquiry with respect thereto or engage in
discussions or negotiations with any Person with respect thereto
(except to notify such Person of the existence of the provisions
of this Section 5.5), or disclose any non-public
information or afford access to properties, books or records to,
any Person that has made, or to the WMZ Parties Knowledge
is
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considering making, any WMZ Takeover Proposal or any inquiry
with respect thereto, or approve or recommend, or propose to
approve or recommend, or execute or enter into any letter of
intent, agreement in principle, merger agreement, option
agreement, acquisition agreement or other similar agreement
relating to a WMZ Takeover Proposal, or propose publicly or
agree to do any of the foregoing relating to a WMZ Takeover
Proposal or any inquiry with respect thereto. The WMZ Parties
shall, and shall cause the WMZ Subsidiaries to, immediately
cease and cause to be terminated, and shall use their reasonable
best efforts to cause their Representatives to immediately cease
and cause to be terminated, all existing discussions or
negotiations with any Person conducted heretofore with respect
to any WMZ Takeover Proposal. The WMZ Parties shall enforce, and
not terminate or grant any waiver with respect to, existing
confidentiality, standstill or similar agreements.
Notwithstanding the foregoing, at any time prior to (but not
after) the date of the WMZ Unitholder Approval, in response to a
bona fide written WMZ Takeover Proposal, which WMZ Takeover
Proposal was not solicited, initiated, knowingly encouraged or
knowingly facilitated by the WMZ Parties or their respective
Representatives, was made after the date hereof and did not
otherwise result from a breach of this
Section 5.5(a), the WMZ Parties may, if and only if
(i) the WMZ Conflicts Committee determines in good faith
(A) after consultation with its financial advisor and legal
counsel, that the WMZ Takeover Proposal constitutes or is
reasonably likely to result in a Superior Proposal and
(B) after consultation with outside legal counsel, that the
failure to do so would be reasonably likely to constitute a
violation of its fiduciary duties owed to the Holders of WMZ
Units under applicable Law and (ii) the WMZ Parties comply
with all of their obligations under this
Section 5.5, (x) furnish information with
respect to the WMZ Group Entities to the Person making such WMZ
Takeover Proposal (and its Representatives) pursuant to an
executed confidentiality agreement, provided that all
such information has previously been provided to WPZ and
(y) participate in discussions or negotiations with the
Person making such WMZ Takeover Proposal (and its
Representatives) regarding such WMZ Takeover Proposal.
(b) Neither the WMZ Board nor the WMZ Conflicts Committee,
in each case unless permitted by Section 5.5(c),
shall (i) (A) withdraw, modify or qualify, or propose
publicly to withdraw, modify or qualify, in any manner adverse
to WPZ, the approval, recommendation or declaration of
advisability by such WMZ Board or WMZ Conflicts Committee of
this Agreement, the Merger or the other transactions
contemplated by this Agreement, (B) recommend, adopt or
approve, or propose publicly to recommend, adopt or approve, any
WMZ Takeover Proposal, or (C) fail to reaffirm (publicly if
so requested) the WMZ Recommendation within six days after WPZ
requests in writing that such WMZ Recommendation be affirmed
(any action described in clauses (A), (B) or
(C) of this clause (i) being referred to as a
WMZ Recommendation Change) or
(ii) approve or recommend, or propose to approve or
recommend, or allow any WMZ Group Entity to execute or enter
into, any letter of intent, memorandum of understanding,
agreement in principle, merger agreement, acquisition agreement,
option agreement, joint venture agreement, partnership agreement
or other similar agreement constituting or related to, or that
is intended to or would reasonably be expected to lead to, any
WMZ Takeover Proposal (other than a confidentiality agreement
permitted to be entered into pursuant to
Section 5.5(a)).
(c) (i) Notwithstanding any other provision of this
Agreement, the WMZ Conflicts Committee shall be permitted to
make a WMZ Recommendation Change, only if and to the extent that
all of the following conditions are met: (A) the WMZ
Unitholder Approval has not been obtained; (B) the WMZ
Conflicts Committee determines in good faith, after consulting
with outside legal counsel, that failure to so make a WMZ
Recommendation Change would be reasonably likely to constitute a
violation of its fiduciary duties owed to the Holders of WMZ
Units under applicable Law; (C) at least three Business
Days prior to taking any such action, WMZ gives WPZ written
notice advising WPZ of the decision of the WMZ Conflicts
Committee to take such action, including the reasons therefor
and, in the event that such decision relates to a WMZ Takeover
Proposal, such notice specifies the material terms and
conditions of such WMZ Takeover Proposal and identifies the
Person making such WMZ Takeover Proposal (and WMZ keeps WPZ
reasonably and promptly informed with respect to the status and
changes in the material terms and conditions of such proposal);
and (D) WMZ has given WPZ at least three Business Days
after delivery of each such notice to propose revisions to the
terms of this Agreement (or to make another proposal) and has
negotiated in good faith with WPZ with respect to such proposed
revisions or other proposal, if any.
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(ii) Notwithstanding any other provision of this Agreement,
the WMZ Board shall be permitted to make a WMZ Recommendation
Change, only if and to the extent that all of the following
conditions are met: (A) the WMZ Conflicts Committee has
made a WMZ Recommendation Change pursuant to
Section 5.5(c)(i); (B) the WMZ Unitholder
Approval has not been obtained; (C) the WMZ Board
determines in good faith, after consulting with outside legal
counsel, that failure to so make a WMZ Recommendation Change
would be reasonably likely to constitute a violation of its
fiduciary duties owed to the Holders of WMZ Units under
applicable Law; (D) at least three Business Days prior to
taking any such action, WMZ gives WPZ written notice advising
WPZ of the decision of the WMZ Board to take such action,
including the reasons therefor and, in the event that such
decision relates to a WMZ Takeover Proposal, such notice
specifies the material terms and conditions of such WMZ Takeover
Proposal and identifies the Person making such WMZ Takeover
Proposal (and WMZ keeps WPZ reasonably and promptly informed
with respect to the status and changes in the material terms and
conditions of such proposal); and (E) WMZ has given WPZ at
least three Business Days after delivery of each such notice to
propose revisions to the terms of this Agreement (or to make
another proposal) and has negotiated in good faith with WPZ with
respect to such proposed revisions or other proposal, if any.
(d) In the event the WMZ Parties receive a WMZ Takeover
Proposal, or any request for non-public information relating to
the WMZ Parties or for access to the properties, books or
records of the WMZ Parties by any Person that has made, or to
the WMZ Parties Knowledge may be considering making, a WMZ
Takeover Proposal, the WMZ Parties will (i) promptly (and
in no event later than twenty-four hours after receipt of any
WMZ Takeover Proposal) notify (which notice shall be provided
orally and in writing and shall identify the Person making such
WMZ Takeover Proposal or request and set forth the material
terms thereof) WPZ thereof and (ii) will keep WPZ
reasonably and promptly informed of any material changes to the
terms of any such WMZ Takeover Proposal or request.
(e) Nothing contained in this Agreement shall prohibit WMZ
from (i) taking and disclosing to its unitholders a
position contemplated by
Rule 14e-2(a)
promulgated under the Exchange Act with regard to a WMZ Takeover
Proposal or (ii) making any required disclosure to Holders
of WMZ Units if, in the good faith judgment of the WMZ Conflicts
Committee after consultation with outside legal counsel, failure
to so disclose would be reasonably likely to constitute a
violation of its fiduciary duties owed to the Holders of WMZ
Units under applicable Law; provided, however,
that no WMZ Recommendation Change shall occur in any event
except as permitted by Section 5.5(c), and despite
any WMZ Recommendation Change, the WMZ Limited Partners
Meeting shall take place as originally contemplated prior to
such WMZ Recommendation Change.
(f) The WMZ Parties agree that they will take all necessary
steps promptly to inform the WMZ Subsidiaries and
Representatives of the obligations undertaken in this
Section 5.5.
Section 5.6 Commercially
Reasonable Efforts; Further Assurances. From and
after the Execution Date, upon the terms and subject to the
conditions hereof, each of the parties hereto shall use its
commercially reasonable efforts to take, or cause to be taken,
all appropriate action, and to do or cause to be done, all
things necessary, proper or advisable under applicable Laws to
consummate and make effective the transactions contemplated by
this Agreement as promptly as practicable. Without limiting the
foregoing but subject to the other terms of this Agreement, the
parties hereto agree that, from time to time, whether before, at
or after the Closing Date, each of them will execute and
deliver, or cause to be executed and delivered, such instruments
of assignment, transfer, conveyance, endorsement, direction or
authorization as may be necessary to consummate and make
effective the transactions contemplated by this Agreement.
Section 5.7 No
Public Announcement. On the Execution Date, the
parties hereto shall issue a joint press release with respect to
the execution of this Agreement and the Merger, which press
release shall be reasonably satisfactory to WPZ General Partner
and the WMZ Conflicts Committee. No party hereto shall issue any
other press release or make any other public announcement
concerning this Agreement or the transactions contemplated by
this Agreement (other than a WMZ Recommendation Change, public
announcements at industry road shows and conferences, as may be
required by Law or by obligations pursuant to any listing
agreement with the NYSE, in which event the party making the
public announcement or press release shall, to the extent
practicable, notify WPZ General Partner or the WMZ Conflicts
Committee, as applicable,
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in advance of such public announcement or press release) without
the prior approval of WPZ General Partner or the WMZ Conflicts
Committee, as applicable, which approval shall not be
unreasonably withheld, delayed or conditioned.
Section 5.8 Expenses. Whether
or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement, including legal
fees, accounting fees, financial advisory fees and other
professional and non-professional fees and expenses, shall be
paid by the party hereto incurring such expenses, except that
WPZ and WMZ shall each pay for one-half of (a) any filing
fees with respect to the Registration Statement and the Proxy
Statement/Prospectus and (b) the costs of printing and
mailing of the Proxy Statement/Prospectus.
Section 5.9 Regulatory
Issues. WMZ and WPZ shall cooperate fully with
respect to any filing, submission or communication with a
Governmental Entity having jurisdiction over the Merger. Such
cooperation shall include the parties: (i) providing,
in the case of oral communications with a Governmental Entity,
advance notice of any such communication and an opportunity for
the other party to participate; (ii) providing, in the case
of written communications, an opportunity for the other party to
comment on any such communication and provide the other with a
final copy of all such communications; and (iii) complying
promptly with any request for information from a Governmental
Entity (including an additional request for information and
documentary material), unless directed not to do so by the other
party hereto. Notwithstanding the foregoing, nothing in this
Agreement will require any party hereto to hold separate or make
any divestiture not expressly contemplated herein of any asset
or otherwise agree to any restriction on its operations or other
burdensome condition which would in any such case be material to
its assets, liabilities or business in order to obtain any
consent or approval or other clearance required by this
Agreement.
Section 5.10 Tax
Matters.
(a) The WPZ Parties shall, to the extent permissible by
applicable Laws, treat the combined businesses of WMZ and WPZ as
a single activity for purposes of Section 469 of the Code.
(b) To the extent applicable, each Holder of WMZ Common
Units shall be deemed to have consented for U.S. federal
income tax purposes (and to the extent applicable, state or
local income tax purposes) to report the cash received for
fractional WMZ Common Units in the Merger as a sale of a portion
of the Holders WMZ Common Units to WPZ consistent with
Treasury
Regulation Section 1.708-1(c)(4).
Section 5.11 D&O
Indemnification and Insurance.
(a) All rights to indemnification, advancement of expenses
and exculpation from liabilities for acts or omissions occurring
at or prior to the Effective Time (including the transactions
contemplated by this Agreement) now existing in favor of the WMZ
D&O Indemnified Parties as provided in the Governing
Documents of any WMZ Group Entity (other than NWP), under
applicable Delaware law, or otherwise, shall continue in full
force and effect in accordance with their terms after the
Effective Time.
(b) For a period of six years after the Effective Time, WPZ
shall maintain officers and directors liability
insurance covering each WMZ D&O Indemnified Party who is or
at any time prior to the Effective Time was covered by the
existing officers and directors liability insurance
applicable to the WMZ Group Entities (D&O
Insurance) on terms substantially no less advantageous
to the WMZ D&O Indemnified Parties than such existing
insurance with respect to acts or omissions, or alleged acts or
omissions, prior to the Effective Time (whether claims, actions
or other proceedings relating thereto are commenced, asserted or
claimed before or after the Effective Time); provided,
however, that WPZ shall not be required to pay an annual
premium for the D&O Insurance in excess of 200% of the
current annual premium currently paid by the WMZ Group Entities
for such insurance, but in such case shall purchase as much of
such coverage as possible for such amount. Such insurance shall
contain a no rescission endorsement or the
substantive equivalent thereof. WPZ shall have the right to
cause coverage to be extended under the D&O Insurance by
obtaining a six-year tail policy on terms and
conditions no less advantageous than the existing D&O
Insurance, and such tail policy shall satisfy the
provisions of this Section 5.11.
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(c) The provisions of this Section 5.11 shall survive
the consummation of the Merger and expressly are intended to
benefit each of the WMZ D&O Indemnified Parties.
(d) In the event WPZ or any of its successors or assigns
(i) consolidates with or merges into any other Person and
shall not be the continuing or surviving entity in such
consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any Person,
then and in either such case, WPZ shall cause proper provision
to be made so that its successors and assigns, as the case may
be, shall assume the obligations set forth in this
Section 5.11.
Section 5.12 Distributions. The
WPZ Parties and the WMZ Parties shall coordinate with each other
the declaration of and the setting of record dates and payment
dates for, and the taking of any other actions necessary with
respect to:
(a) distributions in respect of the WMZ Common Units and
WPZ Common Units so that, in respect of any fiscal quarter,
Holders of WMZ Common Units do not (i) receive more than
one distribution in respect of (A) WMZ Common Units and
(B) WPZ Common Units received pursuant to the Merger in
exchange therefor or (ii) fail to receive a distribution in
respect of either (x) WMZ Common Units and (y) WPZ
Common Units received pursuant to the Merger in exchange
therefor; and
(b) distributions with respect to the General Partner Units
and Incentive Distribution Rights so that, in respect of any
fiscal quarter, the holders thereof receive a full distribution
reflective of the portion of such fiscal quarter for which such
interests were outstanding.
Section 5.13 Consent
to Use of Financial Statements; Financing
Cooperation. The WMZ Parties hereby consent to
the WPZ Group Entities use of and reliance on any audited
or unaudited financial statements, including the WMZ Financial
Statements, relating to the WMZ Group Entities reasonably
requested by the WPZ Parties to be used in any financing or
other activities of the WPZ Parties, including any filings that
the WPZ Parties desire to make with the SEC. In addition, the
WMZ Parties will use commercially reasonable efforts, at the WPZ
Parties sole cost and expense, to obtain the consent of
Ernst & Young LLP to the inclusion of the financial
statements referenced above in appropriate filings with the SEC.
Prior to the Closing, the WMZ Parties will provide the WPZ
Parties such information, and make available such personnel, as
the WPZ Parties may reasonably request in order to assist any of
the WPZ Group Entities in connection with financing activities,
including any public offerings to be registered under the
Securities Act or private offerings.
ARTICLE VI
CONDITIONS
TO CLOSING
Section 6.1 Conditions
to Each Partys Obligations. The obligation
of the parties hereto to proceed with the Closing is subject to
the satisfaction on or prior to the Closing Date of all of the
following conditions, any one or more of which may be waived in
writing, in whole or in part, as to a party by such other
parties:
(a) WMZ Limited Partners
Meeting. Each of the items described in
Section 5.4 to be submitted to the Holders of WMZ
Units at the WMZ Limited Partners Meeting shall have been
approved by the affirmative vote of the Holders of at least a
Unit Majority (as such term is defined in the WMZ Partnership
Agreement) (the WMZ Unitholder Approval).
(b) Approvals. The applicable waiting
periods under the HSR Act shall have expired or been terminated
(including any extended waiting period arising as a result of a
request for additional information). The parties hereto shall
have received all other governmental consents and approvals, the
absence of which would, individually or in the aggregate, have a
WMZ Material Adverse Effect or a WPZ Material Adverse Effect.
(c) Registration Statement. The
Registration Statement shall have become effective under the
Securities Act, no stop order suspending the effectiveness of
the Registration Statement shall have been
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issued and no proceedings for that purpose shall have been
initiated or threatened by the SEC or any other Governmental
Entity.
(d) NYSE Listing. The WPZ Common Units to
be issued in the Merger shall have been approved for listing on
the NYSE subject to official notice of issuance.
(e) No Governmental Restraint. No order,
decree or injunction of any Governmental Entity shall be in
effect, and no Laws shall have been enacted or adopted, that
enjoin, prohibit or make illegal the consummation of any of the
transactions contemplated by this Agreement, and no action,
proceeding or investigation by any Governmental Entity with
respect to the Merger or the other transactions contemplated by
this Agreement shall be pending that seeks to restrain, enjoin,
prohibit or delay consummation of the Merger or such other
transactions or to impose any material restrictions or
requirements thereon or on the WPZ Parties or the WMZ Parties
with respect thereto.
Section 6.2 Conditions
to the WPZ Parties Obligations. The
obligation of the WPZ Parties to proceed with the Closing is
subject to the satisfaction on or prior to the Closing Date of
all of the following conditions, any one or more of which may be
waived in writing, in whole or in part, by the WPZ Parties (in
their sole discretion):
(a) Representations and Warranties;
Performance. (i) The representations and
warranties of the WMZ Parties set forth in
Article IV, other than as set forth in
Sections 4.1, 4.2 and 4.4, shall be
true and correct (without regard to Materiality Requirements
therein) as of the Closing, as if remade on the date thereof
(except for representations and warranties made as of a specific
date, which shall be true and correct as of such specific date),
except where the failure of such representations and warranties
to be true and correct would not, in the aggregate, result in a
WMZ Material Adverse Effect; (ii) the representations and
warranties of the WMZ Parties set forth in
Sections 4.1, 4.2 and 4.4 shall be
true and correct (except as permitted pursuant to
Section 5.1) as of the Closing, as if remade on the
date thereof (except for representations and warranties made as
of a specific date, which shall be true and correct as of such
specific date); (iii) each of the WMZ Parties shall have
performed or complied with all agreements and covenants required
to be performed by it hereunder that have Materiality
Requirements and shall have performed or complied in all
material respects with all other agreements and covenants
required to be performed by it hereunder that are not so
qualified; and (iv) WPZ General Partner shall have received
a certificate, dated as of the Closing Date, of an executive
officer of WMZ General Partner certifying to the matters set
forth in this Section 6.2(a).
(b) Tax Opinion. The WPZ Parties shall
have received an opinion of Andrews Kurth LLP or another
nationally-recognized tax counsel dated as of the Closing Date
in form and substance reasonably satisfactory to WPZ and a copy
of which shall have been provided to WMZ to the effect that, for
U.S. federal income tax purposes, (i) WPZ will not
recognize any income or gain as a result of the Merger (other
than any gain resulting from any decrease in partnership
liabilities pursuant to Section 752 of the Code),
(ii) no gain or loss will be recognized by Holders of WPZ
Common Units as a result of the Merger (other than any gain
resulting from any decrease in partnership liabilities pursuant
to Section 752 of the Code), and (iii) 90% or more of
the combined gross income of WMZ and WPZ for the most recent
four complete calendar quarters ending before the Closing Date
for which the necessary financial information is available are
from sources treated as qualifying income within the
meaning of Section 7704(d) of the Code. In rendering such
opinion, such counsel shall be entitled to receive and rely upon
representations of officers of the WPZ Parties and the WMZ
Parties and any of their respective Affiliates as to such
matters as such counsel may reasonably request.
Section 6.3 Conditions
to the WMZ Parties Obligations. The
obligation of the WMZ Parties to proceed with the Closing is
subject to the satisfaction on or prior to the Closing Date of
all of the following conditions, any one or more of which may be
waived in writing, in whole or in part, by the WMZ Parties (in
their sole discretion):
(a) Representations and Warranties;
Performance. (i) The representations and
warranties of the WPZ Parties set forth in
Article III, other than those set forth in
Sections 3.1(a), 3.2 and 3.4, shall be
true
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and correct (without regard to Materiality Requirements therein)
as of the Closing, as if remade on the date thereof (except for
representations and warranties made as of a specific date, which
shall be true and correct as of such specific date), except
where the failure of such representations and warranties to be
true and correct would not, in the aggregate, result in a WPZ
Material Adverse Effect; (ii) the representations and
warranties of the WPZ Parties set forth in
Sections 3.1(a), 3.2 and 3.4 shall be
true and correct (except as permitted pursuant to
Section 5.1) as of the Closing, as if remade on the
date thereof (except for representations and warranties made as
of a specific date, which shall be true and correct as of such
specific date); (iii) each of the WPZ Parties shall have
performed or complied with all agreements and covenants required
to be performed by it hereunder that have Materiality
Requirements and shall have performed or complied in all
material respects with all other agreements and covenants
required to be performed by it hereunder that are not so
qualified; and (iv) WMZ General Partner shall have received
a certificate, dated as of the Closing Date, of an executive
officer of WPZ General Partner certifying to the matters set
forth in this Section 6.3(a).
(b) Tax Opinion. The WMZ Parties shall
have received an opinion of Fulbright & Jaworski
L.L.P. or another nationally-recognized tax counsel dated as of
the Closing Date in form and substance reasonably satisfactory
to WMZ and a copy of which shall have been provided to WPZ to
the effect that, for U.S. federal income tax purposes,
except with respect to cash received in lieu of fractional WPZ
Common Units, (i) WMZ should not recognize any income or
gain as a result of the Merger that would be allocated to the
holders of Non-affiliated WMZ Common Units (other than
(x) any gain resulting from any decrease in partnership
liabilities pursuant to Section 752 of the Code or
(y) any liabilities incurred other than in the ordinary
course of the trade or business of WMZ or a WMZ Subsidiary), and
(ii) no gain or loss should be recognized by holders of
Non-affiliated WMZ Common Units as a result of the receipt of
WPZ Common Units in the Merger (other than (x) any income
or gain resulting from any decrease in partnership liabilities
pursuant to Section 752 of the Code, (y) any
liabilities incurred other than in the ordinary course of
business of WMZ or a WMZ Subsidiary or (z) any difference
between the amount of consideration per Non-affiliated WMZ
Common Unit payable to holders of Non-affiliated WMZ Common
Units and the amount of consideration per WMZ Subordinated Unit
payable to holders of the WMZ Subordinated Units). In rendering
such opinion, such counsel shall be entitled to receive and rely
upon representations of officers of the WMZ Parties and the WPZ
Parties and any of their respective Affiliates as to such
matters as such counsel may reasonably request and may assume
that WPZ is classified as a partnership and Operating Company is
disregarded as an entity separate from WPZ for U.S. federal
income tax purposes.
Section 6.4 Frustration
of Conditions. None of parties to this Agreement
may rely on the failure of any condition set forth in this
Article VI to be satisfied if such failure was
caused by such partys failure to act in good faith or such
partys failure to observe in any material respect any of
its obligations under this Agreement.
ARTICLE VII
EMPLOYEE
BENEFITS
Section 7.1 WMZ
Restricted Units. As soon as practicable
following the Execution Date, the WMZ Board (or, if appropriate,
any committee thereof administering the Williams Pipeline GP LLC
Long-Term Incentive Plan) shall adopt such resolutions or take
such other actions as may be required to make such changes to
the Williams Pipeline GP LLC Long-Term Incentive Plan as WPZ
General Partner and WMZ General Partner may agree are
appropriate to give effect to the Merger.
The parties agree to negotiate in good faith regarding the need
for any treatment different from that otherwise provided herein
to ensure that the treatment of such restricted stock units or
other long-term incentive awards granted under the Williams
Pipeline GP LLC Long-Term Incentive Plan does not cause the
imposition of an additional tax under Section 409A of the
Code.
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ARTICLE VIII
TERMINATION
Section 8.1 Termination
by Mutual Consent. This Agreement may be
terminated at any time prior to the Effective Time by the mutual
written agreement of the parties hereto.
Section 8.2 Termination
by WMZ or WPZ. At any time prior to the Effective
Time, this Agreement may be terminated by WMZ or WPZ if:
(a) the Effective Time shall not have occurred on or before
November 1, 2010 (the Drop-Dead
Date); provided, however, that if the Effective
Time has not occurred by such date by reason of nonsatisfaction
of the condition set forth in Section 6.1(b) and all
other conditions set forth in Article VI have
theretofore been satisfied or waived or are then capable of
being satisfied, the Drop-Dead Date will be December 31,
2010; provided, further, that the right to terminate this
Agreement pursuant to this Section 8.2(a) shall not
be available to WPZ if the WPZ Parties fail to perform or
observe in any material respect or to WMZ if the WMZ Parties
fail to perform or observe in any material respect any of their
respective obligations under this Agreement in any manner shall
have been the principal cause of, or resulted in, the failure of
the Effective Time to occur on or before such date;
(b) a Governmental Entity shall have issued an order,
decree or ruling or taken any other action (including the
enactment of any statute, rule, regulation, decree or executive
order) permanently restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other
action (including the enactment of any statute, rule,
regulation, decree or executive order) shall have become final
and
non-appealable;
provided, however, that the Person seeking to
terminate this Agreement pursuant to this
Section 8.2(b) shall have complied with
Section 5.3 and Section 5.6; or
(c) if the approval of the Holders of the Non-affiliated
Common Units shall not have been obtained at the WMZ Limited
Partners Meeting (or at any reconvened meeting after an
adjournment or postponement thereof).
Section 8.3 Termination
by WMZ. This Agreement may be terminated by WMZ
at any time prior to the Effective Time (notwithstanding any
approval of the unitholders of WMZ) if the condition set forth
in Section 6.3(a) cannot be satisfied (with or
without the passage of time); provided, that the right to
terminate this Agreement pursuant to this
Section 8.3 shall not be available to WMZ if, at
such time, the condition set forth in Section 6.2(a)
cannot be satisfied.
Section 8.4 Termination
by WPZ. This Agreement may be terminated by WPZ
at any time prior to the Effective Time:
(a) (notwithstanding any approval of the unitholders of
WMZ) if the condition set forth in Section 6.2(a)
cannot be satisfied (with or without the passage of time);
provided, that the right to terminate this Agreement
pursuant to this Section 8.4(a) shall not be
available to WPZ if, at such time, the condition set forth in
Section 6.3(a) cannot be satisfied; or
(b) if a WMZ Recommendation Change shall have occurred,
whether or not permitted by the terms of this Agreement.
Section 8.5 Effect
of Certain Terminations. In the event of
termination of this Agreement pursuant to
Article VIII, this Agreement, except for
Section 5.7, Section 5.8,
Article VIII and Article IX, shall
forthwith become null and void and there shall be no liability
on the part of any party to this Agreement and all rights and
obligations of the parties hereto under this Agreement shall
terminate, except the provisions of Section 5.7,
Section 5.8, Article VIII and
Article IX shall survive such termination;
provided that nothing herein shall relieve any party
hereto from any liability for any intentional or willful and
material breach by such party of any of its representations,
warranties, covenants or agreements set forth in this Agreement
and all rights and remedies of a nonbreaching party under this
Agreement in the case of such intentional or willful and
material breach, at law or in equity, shall be preserved.
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Section 8.6 Survival. Except
as otherwise provided in Section 2.1,
Section 5.11, paragraphs (a) and (b)
of Section 7.1, this Section 8.6 and
Article IX, none of the representations, warranties,
agreements, covenants or obligations in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive
the consummation of the Merger.
Section 8.7 Enforcement
of this Agreement. The parties hereto acknowledge
and agree that an award of money damages would be inadequate for
any breach of this Agreement by any party and any such breach
would cause the non-breaching parties irreparable harm.
Accordingly, the parties hereto agree that prior to the
termination of this Agreement, in the event of any breach or
threatened breach of this Agreement by one of the parties, the
parties will also be entitled, without the requirement of
posting a bond or other security, to equitable relief, including
injunctive relief and specific performance, provided such
party is not in material default hereunder. Such remedies will
not be the exclusive remedies for any breach of this Agreement
but will be in addition to all other remedies available at law
or equity to each of the parties.
Section 8.8 No
Waiver Relating to Claims for Fraud/Willful
Misconduct. The liability of any party under this
Article VIII shall be in addition to, and not
exclusive of, any other liability that such party may have at
law or in equity based on such partys (a) fraudulent
acts or omissions or (b) willful misconduct. None of the
provisions set forth in this Agreement shall be deemed to be a
waiver by or release of any party of any right or remedy that
such party may have at law or equity based on any other
partys fraudulent acts or omissions or willful misconduct
nor shall any such provisions limit, or be deemed to limit,
(i) the amounts of recovery sought or awarded in any such
claim for fraud or willful misconduct, (ii) the time period
during which a claim for fraud or willful misconduct may be
brought, or (iii) the recourse that any such party may seek
against another party with respect to a claim for fraud or
willful misconduct.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Notices. Any
notice, request, instruction, correspondence or other document
to be given hereunder by any party to another party (each, a
Notice) shall be in writing and delivered in
person or by courier service requiring acknowledgment of receipt
of delivery or mailed by U.S. registered or certified mail,
postage prepaid and return receipt requested, or by telecopier,
as follows; provided, that copies to be delivered below
shall not be required for effective notice and shall not
constitute notice:
If to any of the WPZ Parties, addressed to:
Williams Partners L.P.
One Williams Center
Tulsa, Oklahoma
74172-0172
Attention: Chief Financial Officer
Telecopy:
(918) 573-0871
with a copy to:
Gibson, Dunn & Crutcher LLP
1801 California Street, 42nd Floor
Denver, CO 80202
Attention: Richard M. Russo
Telecopy:
(303) 298-5907
If to any of the WMZ Parties, addressed to:
Williams Pipeline Partners L.P.
One Williams Center
Tulsa, Oklahoma
74172-0172
Attention: Chief Financial Officer
Telecopy:
(918) 573-0871
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with copies to:
Williams Pipeline Partners L.P.
One Williams Center
Tulsa, Oklahoma
74172-0172
Attention: General Counsel and Conflicts Committee Chair
Telecopy:
(918) 573-5942
and
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, TX 77010
Attention: Peggy A. Heeg
Telecopy:
(713) 651-5151
Notice given by personal delivery, courier service or mail shall
be effective upon actual receipt. Notice given by telecopier
shall be confirmed by appropriate answer back and shall be
effective upon actual receipt if received during the
recipients normal business hours, or at the beginning of
the recipients next Business Day after receipt if not
received during the recipients normal business hours. All
Notices by telecopier shall be confirmed promptly after
transmission in writing by certified mail or personal delivery.
Any party may change any address to which Notice is to be given
to it by giving Notice as provided above of such change of
address.
Section 9.2 Governing
Law; Jurisdiction; Waiver of Jury Trial. To the
maximum extent permitted by applicable Law, the provisions of
this Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of Delaware, without
regard to principles of conflicts of law. Each of the parties
hereto agrees that this Agreement involves at least $100,000 and
that this Agreement has been entered into in express reliance
upon 6 Del. C. §2708. Each of the parties hereto
irrevocably and unconditionally confirms and agrees that it is
and shall continue to be (a) subject to the jurisdiction of
the courts of the State of Delaware and of the federal courts
sitting in the State of Delaware, and (b) subject to
service of process in the State of Delaware. Each party hereto
hereby irrevocably and unconditionally (i) consents and
submits to the exclusive jurisdiction of any federal or state
court located in the State of Delaware, including the Delaware
Court of Chancery in and for New Castle County (the
Delaware Courts) for any actions, suits or
proceedings arising out of or relating to this Agreement or the
transactions contemplated by this Agreement (and agrees not to
commence any litigation relating thereto except in such courts),
(ii) waives any objection to the laying of venue of any
such litigation in the Delaware Courts and agrees not to plead
or claim in any Delaware Court that such litigation brought
therein has been brought in any inconvenient forum and
(c) acknowledges and agrees that any controversy that may
arise under this Agreement is likely to involve complicated and
difficult issues, and therefore each such party hereby
irrevocably and unconditionally waives any right such party may
have to a trial by jury in respect of any litigation directly or
indirectly arising or relating to this Agreement or the
transactions contemplated by this Agreement.
Section 9.3 Entire
Agreement; Amendments and Waivers. This Agreement
and the exhibits and schedules hereto constitute the entire
agreement between and among the parties hereto pertaining to the
subject matter hereof and supersede all prior agreements,
understandings, negotiations and discussions, whether oral or
written, of the parties, and there are no warranties,
representations or other agreements between or among the parties
in connection with the subject matter hereof except as set forth
specifically herein or contemplated hereby. Except as expressly
set forth in this Agreement (including the representations and
warranties set forth in Articles III and IV),
(a) the parties acknowledge and agree that neither the WMZ
Group Entities nor any other Person has made, and the WPZ Group
Entities are not relying upon, any covenant, representation or
warranty, expressed or implied, as to the WMZ Group Entities or
as to the accuracy or completeness of any information regarding
any WMZ Group Entity furnished or made available to any WPZ
Group Entity and (b) the WMZ Parties shall not have or be
subject to any liability to any WPZ Group Entity or any other
Person, or any other remedy in connection herewith, based upon
the distribution to any WPZ Group Entity of, or any WPZ Group
Entitys use of or reliance on, any such information or any
information, documents or material made available to the WPZ
Group Parties in any data rooms, virtual data
rooms, management
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presentations or in any other form in expectation of, or in
connection with, the transactions contemplated hereby. This
Agreement may be amended by the parties hereto, by or pursuant
to action taken by their (or their general partners or
their managing members general partners) respective
boards of directors or conflicts committees, at any time before
or after approval of the matters presented in connection with
the Merger and related transactions by the Holders of WMZ Common
Units, but, after any such approval, no amendment shall be made
which by Law requires further approval by such unitholders
without such further approval. No supplement, modification or
waiver of this Agreement shall be binding unless executed in
writing by the party to be bound thereby. The failure of a party
to exercise any right or remedy shall not be deemed or
constitute a waiver of such right or remedy in the future. No
waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provision
hereof (regardless of whether similar), nor shall any such
waiver constitute a continuing waiver unless otherwise expressly
provided.
Section 9.4 Binding
Effect and Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and
their respective permitted successors and assigns. Except as
provided in Article II and Section 5.11,
nothing in this Agreement, express or implied, is intended to
confer upon any Person other than the parties hereto and their
respective permitted successors and assigns, any rights,
benefits or obligations hereunder. No party hereto may assign,
transfer, dispose of or otherwise alienate this Agreement or any
of its rights, interests or obligations under this Agreement
(whether by operation of law or otherwise). Any attempted
assignment, transfer, disposition or alienation in violation of
this Agreement shall be null, void and ineffective.
Section 9.5 Severability. If
any term or other provision of this Agreement is invalid,
illegal, or incapable of being enforced by any rule of
applicable 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 or legal substance of
the transactions contemplated by this Agreement are not affected
in any manner materially adverse to any party hereto. Upon such
determination that any term or other provision is invalid,
illegal, or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties hereto as closely as
possible in a mutually acceptable manner in order that the
transactions contemplated by this Agreement are consummated as
originally contemplated to the fullest extent possible.
Section 9.6 Execution. This
Agreement may be executed in multiple counterparts each of which
shall be deemed an original and all of which shall constitute
one instrument.
[The
remainder of this page is blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their respective officers or agents
hereunto duly authorized, all as of the date first written above.
WILLIAMS PARTNERS L.P.
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By:
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Williams Partners GP LLC, its general partner
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By:
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/s/ Donald
R. Chappel
Name: Donald
R. Chappel
Title: Chief Financial Officer
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WILLIAMS PARTNERS GP LLC
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By:
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/s/ Donald
R. Chappel
Name: Donald
R. Chappel
Title: Chief Financial Officer
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WILLIAMS PARTNERS OPERATING LLC
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By:
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Williams Partners L.P., its managing member
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By:
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Williams Partners GP LLC, its general partner
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By:
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/s/ Donald
R. Chappel
Name: Donald
R. Chappel
Title: Chief Financial Officer
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WPZ OPERATING COMPANY MERGER SUB LLC
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By:
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Williams Partners Operating LLC, its sole member
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By:
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Williams Partners L.P., its managing member
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By:
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Williams Partners GP LLC, its general partner
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By:
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/s/ Donald
R. Chappel
Name: Donald
R. Chappel
Title: Chief Financial Officer
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Agreement
and Plan of Merger
A-37
WILLIAMS PIPELINE PARTNERS L.P.
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By:
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Williams Pipeline GP LLC, its general partner
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By:
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/s/ Donald
R. Chappel
Name: Donald
R. Chappel
Title: Chief Financial Officer
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WILLIAMS PIPELINE GP LLC
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By:
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/s/ Donald
R. Chappel
Name: Donald
R. Chappel
Title: Chief Financial Officer
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Agreement
and Plan of Merger
A-38
EXHIBIT A
SECOND
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
WILLIAMS PIPELINE PARTNERS L.P.
This Second Amended and Restated Agreement of Limited
Partnership (as it may be amended, supplemented or restated from
time to time, the Agreement) of Williams Pipeline
Partners L.P. (the Partnership) dated as of
[ ],
2010 and effective as of the Effective Time (as defined below),
is entered into by and between Williams Pipeline GP LLC, a
Delaware limited liability company, as the general partner (the
General Partner) and Williams Partners Operating
LLC, a Delaware limited liability company, as the limited
partner (the Limited Partner).
WHEREAS, on August 31, 2007, the General Partner and
Williams Pipeline Services LLC, a Delaware limited liability
company (formerly known as Williams Pipeline Services Company)
(the Initial Limited Partner) formed the Partnership
pursuant to and in accordance with the Delaware Revised Uniform
Limited Partnership Act, as amended from time to time (the
Act);
WHEREAS, on January 24, 2008, the General Partner and the
Initial Limited Partner amended and restated the original
Agreement of Limited Partnership of the Partnership (as amended
and restated, the First Amended and Restated Partnership
Agreement).
WHEREAS, the Partnership, the General Partner, Williams Partners
L.P., Williams Partners GP LLC, the Limited Partner and WPZ
Operating Company Merger Sub (Merger Sub) entered
into an Agreement and Plan of Merger (the Merger
Agreement) dated as of May 24, 2010, providing for,
among other things, the merger of Merger Sub with and into the
Partnership, the admission of the Limited Partner as a limited
partner of the Partnership, all other limited partners of the
Partnership simultaneously ceasing to be limited partners of the
Partnership and the amendment and restatement of the First
Amended and Restated Partnership Agreement.
NOW, THEREFORE, pursuant to the Merger Agreement, the General
Partner and the Limited Partner do hereby amend and restate the
First Amended and Restated Partnership Agreement as follows, to
be effective as of the Effective Time (as such term is defined
in the Merger Agreement):
1. Name. The name of the limited
partnership formed by the Partnerships Certificate of
Limited Partnership shall continue to be Williams Pipeline
Partners L.P.
2. Purpose. The Partnership is
formed for the object and purpose of, and the nature of the
business to be conducted and promoted by the Partnership is,
engaging in any lawful act or activity for which limited
partnerships may be formed under the Act and engaging in any and
all activities necessary or incidental to the foregoing.
3. Registered Office. The
registered office of the Partnership in the State of Delaware is
The Corporation Trust Company, 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801.
4. Registered Agent. The name and
address of the registered agent of the Partnership for service
of process on the Partnership in the State of Delaware is The
Corporation Trust Company, 1209 Orange Street, Wilmington,
New Castle County, Delaware 19801.
5. Partners. The names and the
business, residence or mailing addresses of the General Partner
(which hereby continues as the sole general partner of the
Partnership) and the Limited Partner (which is hereby admitted
as the sole limited partner of the Partnership) are as follows:
General Partner:
Williams Pipeline GP LLC
One Williams Center, Suite 4700
Tulsa, Oklahoma 74172
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Limited Partner:
Williams Partners Operating LLC
One Williams Center, Suite 4700
Tulsa, Oklahoma 74172
6. Powers. The Partnership shall
be managed by the General Partner, and the powers of the General
Partner include all powers, statutory and otherwise, possessed
by general partners under the laws of the State of Delaware.
Notwithstanding any other provisions of this Agreement, the
General Partner is authorized to execute and deliver any
document on behalf of the Partnership without any vote or
consent of any other partner.
7. Dissolution. The Partnership
shall dissolve, and its affairs shall be wound up if
(a) all of the partners of the Partnership approve in
writing, (b) an event of withdrawal of a general partner
has occurred under the Act unless there is a remaining general
partner who is hereby authorized to, and does, carry on the
business of the Partnership without dissolution or the business
of the Partnership is continued without dissolution in
accordance with the Act, (c) there are no limited partners
of the Partnership unless the business of the Partnership is
continued without dissolution in accordance with the Act, or
(d) an entry of a decree of judicial dissolution has
occurred under
§ 17-802
of the Act.
8. Partnership Interests. As of
the date of this Agreement, the General Partner has a general
partner interest in the Partnership which constitutes 2% of the
aggregate partnership interest (as defined in the Act) of all
partners in the Partnership and the Limited Partner has a
limited partner interest in the Partnership which constitutes
98% of the aggregate partnership interest (as defined in the
Act) of all partners in the Partnership.
9. Distributions. Distributions
shall be made to the partners of the Partnership at the times
and in the aggregate amounts determined by the General Partner.
Such distributions shall be allocated among the partners of the
Partnership in accordance with their percentage interests in the
Partnership. Notwithstanding any other provision of this
Agreement, neither the Partnership, nor the General Partner on
behalf of the Partnership, shall be required to make a
distribution to a partner of the Partnership on account of its
interest in the Partnership if such distribution would violate
the Act or other applicable law.
10. Taxes. The General Partner
shall prepare and timely file (on behalf of the Partnership) all
state and local tax returns, if any, required to be filed by the
Partnership. The Partnership and the partners acknowledge that
for federal income tax purposes, the Partnership is intended to
be disregarded as an entity separate from the partners of the
Partnership.
11. Assignments.
(a) The Limited Partner may assign all or any part of its
partnership interest in the Partnership and may withdraw from
the Partnership only if the Partnership will have a limited
partner after such withdrawal. Upon the withdrawal of the
Limited Partner, the Limited Partner shall receive any amount
the Limited Partner contributed to the Partnership.
(b) The General Partner may assign all or any part of its
partnership interest in the Partnership and may withdraw from
the Partnership without the consent of the Limited Partner.
12. Withdrawal. Except to the
extent set forth in Section 11, no right is given to any
partner of the Partnership to withdraw from the Partnership.
13. Admission of Additional or Substitute
Partners.
(a) One or more additional or substitute limited partners
of the Partnership may be admitted to the Partnership with only
the consent of the General Partner.
(b) One or more additional or substitute general partners
of the Partnership may be admitted to the Partnership with only
the consent of the General Partner.
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14. Indemnification.
(a) As used in Sections 14, 15 and 16, the following
terms shall have the following meanings respectively:
Indemnitee means any Person who
is not an employee of The Williams Companies, Inc. and is or was
an officer or director of any entity in the Partnership
Controlled Group and any Person who is or was serving at the
request of any entity in the Partnership Controlled Group as an
officer, director, employee, member, partner, agent, fiduciary
or trustee of another Person; provided, that a Person shall not
be an Indemnitee by reason of providing, on a
fee-for-services
basis, trustee, fiduciary or custodial services.
Partnership Controlled Group
means the Partnership, the General Partner, Williams Pipeline
Operating LLC, a Delaware limited liability company, and
Williams Pipeline Partners Holdings LLC, a Delaware limited
liability company.
Person means an individual or a
corporation, firm, limited liability company, partnership, joint
venture, trust, unincorporated organization, association,
government agency or political subdivision thereof or other
entity.
(b) To the fullest extent permitted by law but subject to
the limitations expressly provided in this Agreement, all
Indemnitees shall be indemnified and held harmless by the
Partnership from and against any and all losses, claims,
damages, liabilities, joint or several, expenses (including
legal fees and expenses), judgments, fines, penalties, interest,
settlements or other amounts arising from any and all claims,
demands, actions, suits or proceedings, whether civil, criminal,
administrative or investigative, in which any Indemnitee may be
involved, or is threatened to be involved, as a party or
otherwise, by reason of its status as an Indemnitee, for acts or
omissions occurring at or prior to the Effective Time (as
defined in the Merger Agreement); provided, that the
Indemnitee shall not be indemnified and held harmless if there
has been a final and non-appealable judgment entered by a court
of competent jurisdiction determining that, in respect of the
matter for which the Indemnitee is seeking indemnification
pursuant to this Section 14, the Indemnitee acted in bad
faith or engaged in fraud, willful misconduct or, in the case of
a criminal matter, acted with knowledge that the
Indemnitees conduct was unlawful. Any indemnification
pursuant to this Section 14 shall be made only out of the
assets of the Partnership, it being agreed that the General
Partner shall not be personally liable for such indemnification
and shall have no obligation to contribute or loan any monies or
property to the Partnership to enable it to effectuate such
indemnification.
(c) To the fullest extent permitted by law, expenses
(including legal fees and expenses) incurred by an Indemnitee
who is indemnified pursuant to Section 14(b) in defending
any claim, demand, action, suit or proceeding shall, from time
to time, be advanced by the Partnership prior to a determination
that the Indemnitee is not entitled to be indemnified upon
receipt by the Partnership of any undertaking by or on behalf of
the Indemnitee to repay such amount if it shall be determined
that the Indemnitee is not entitled to be indemnified as
authorized in this Section 14.
(d) The indemnification provided by this Section 14
shall be in addition to any other rights to which an Indemnitee
may be entitled under any agreement, as a matter of law or
otherwise, both as to actions in the Indemnitees capacity
as an Indemnitee and as to actions in any other capacity, and
shall continue as to an Indemnitee who has ceased to serve in
such capacity and shall inure to the benefit of the heirs,
successors, assigns and administrators of the Indemnitee.
(e) The Partnership may purchase and maintain (or reimburse
the General Partner or its affiliates for the cost of)
insurance, on behalf of the General Partner, its affiliates and
such other Persons as the General Partner shall determine,
against any liability that may be asserted against, or expense
that may be incurred by, such Person in connection with the
Partnerships activities or such Persons activities
on behalf of the Partnership, regardless of whether the
Partnership would have the power to indemnify such Person
against such liability under the provisions of this Agreement.
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(f) For purposes of this Section 14, the Partnership
shall be deemed to have requested an Indemnitee to serve as
fiduciary of an employee benefit plan whenever the performance
by it of its duties to the Partnership also imposes duties on,
or otherwise involves services by, it to the plan or
participants or beneficiaries of the plan; excise taxes assessed
on an Indemnitee with respect to an employee benefit plan
pursuant to applicable law shall constitute fines
within the meaning of Section 14(b); and action taken or
omitted by it with respect to any employee benefit plan in the
performance of its duties for a purpose reasonably believed by
it to be in the best interest of the participants and
beneficiaries of the plan shall be deemed to be for a purpose
that is in the best interests of the Partnership.
(g) In no event may an Indemnitee subject the Limited
Partner to personal liability by reason of the indemnification
provisions set forth in this Agreement.
(h) An Indemnitee shall not be denied indemnification in
whole or in part under this Section 14 because the
Indemnitee had an interest in the transaction with respect to
which the indemnification applies if the transaction was
otherwise permitted by the terms of this Agreement or the First
Amended and Restated Partnership Agreement.
(i) The provisions of this Section 14 are for the
benefit of the Indemnitees, their heirs, successors, assigns and
administrators and shall not be deemed to create any rights for
the benefit of any other Persons.
(j) No amendment, modification or repeal of this
Section 14 or any provision hereof shall in any manner
terminate, reduce or impair the right of any past, present or
future Indemnitee to be indemnified by the Partnership, nor the
obligations of the Partnership to indemnify any such Indemnitee
under and in accordance with the provisions of this
Section 14 as in effect immediately prior to such
amendment, modification or repeal with respect to claims arising
from or relating to matters occurring, in whole or in part,
prior to such amendment, modification or repeal, regardless of
when such claims may arise or be asserted.
15. Liability of Indemnitees.
(a) Notwithstanding anything to the contrary set forth in
this Agreement, no Indemnitee shall be liable for monetary
damages to the Partnership, the Limited Partner or a permitted
assignee thereof or any other Persons who have acquired equity
interests in the Partnership or are otherwise bound by this
Agreement, for losses sustained or liabilities incurred as a
result of any act or omission of an Indemnitee unless there has
been a final and non-appealable judgment entered by a court of
competent jurisdiction determining that, in respect of the
matter in question, the Indemnitee acted in bad faith or engaged
in fraud, willful misconduct or, in the case of a criminal
matter, acted with knowledge that the Indemnitees conduct
was criminal.
(b) To the extent that, at law, in equity or otherwise, an
Indemnitee has duties (including fiduciary duties) and
liabilities relating thereto to the Partnership or to the
partners, and any other Indemnitee acting in connection with the
Partnerships business or affairs shall not be liable to
the Partnership, any partner or any of their permitted assignees
or any other Person bound by this Agreement for its good faith
reliance on the provisions of this Agreement.
(c) Any amendment, modification or repeal of this
Section 15 or any provision hereof shall be prospective
only and shall not in any way affect the limitations on the
liability of the Indemnitees under this Section 15 as in
effect immediately prior to such amendment, modification or
repeal with respect to claims arising from or relating to
matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise
or be asserted.
16. Third-Party
Beneficiaries. Each partner agrees that any
Indemnitee shall be entitled to assert rights and remedies
hereunder as a third-party beneficiary hereto with respect to
those provisions of this Agreement affording a right, benefit or
privilege to such Indemnitee.
17. Governing Law. This Agreement
shall be governed by, and construed under, the laws of the State
of Delaware, all rights and remedies being governed by said laws.
[Remainder
of this page intentionally left blank.]
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IN WITNESS WHEREOF, the undersigned, intending to be legally
bound hereby, have duly executed this Second Amended and
Restated Agreement of Limited Partnership as of the date first
written above.
GENERAL PARTNER
WILLIAMS PIPELINE GP LLC
LIMITED PARTNER
WILLIAMS PARTNERS OPERATING LLC
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By:
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WILLIAMS PARTNERS L.P.,
its sole member
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By:
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WILLIAMS PARTNERS GP LLC,
its general partner
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By:
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A-43
Annex B
Simmons
& Company
INTERNATIONAL
May 21, 2010
Conflicts Committee of the Board of Directors
Williams Pipeline GP LLC
One Williams Center
Tulsa, OK
74172-0172
Members of the Conflicts Committee of the Board of Directors:
You have asked us to advise you with respect to the fairness to
the holders of common units of Williams Pipeline Partners L.P.
(WMZ or the Company) (other than the
general partner of WMZ and its Affiliates (as defined in that
certain First Amended and Restated Agreement of Limited
Partnership of WMZ dated as of January 24, 2008)), from a
financial point of view, of the consideration to be received by
such holders pursuant to the terms of the most recent draft of
the Agreement and Plan of Merger, dated as of even date herewith
(the Merger Agreement) among Williams Partners L.P.
(WPZ or the Merger Partner), Williams
Partners GP LLC, Williams Partners Operating LLC, WPZ Operating
Company Merger Sub LLC (Merger Sub), the Company and
Williams Pipeline GP LLC (the WMZ General Partner),
providing for the merger (the Merger) of Merger Sub
with and into the Company. Each outstanding WMZ common unit
other than WMZ common units held by the general partner of WMZ
and its Affiliates is referred to herein as a
Non-affiliated WMZ Common Unit. Pursuant to the
Merger, each outstanding common unit of the Company (other than
those held by the WMZ General Partner) will be converted into
the right to receive 0.7584 common units of the Merger Partner
(the Consideration).
In arriving at our opinion, we have reviewed and analyzed, among
other things, the following:
(i) the Merger Agreement;
(ii) the financial statements and other information
concerning the Company, including that contained in the
Companys Annual Reports on
Form 10-K
for each of the years in the two year period ended
December 31, 2009; and the Companys Quarterly Reports
on
Form 10-Q
for the quarters ended September 30, 2009 and
March 31, 2010;
(iii) certain other internal information, primarily
financial in nature, relating to the Company, which was provided
to us by the Company, including the projected financial results,
developed by the Company, for the five year period ending
December 31, 2014;
(iv) certain publicly available information concerning the
trading of, and trading market for, the Companys common
units;
(v) the financial statements and other information
concerning the Merger Partner, including that contained in the
Merger Partners Annual Reports on
Form 10-K
for each of the years in the three year period ended
December 31, 2009; the Merger Partners Quarterly
Reports on
Form 10-Q
for the quarters ended September 30, 2009 and
March 31, 2010; the Merger Partners draft
Form S-4
dated as of even date herewith; the Merger Partners
Current Reports on Forms 425 and
8-K filed
during the period from January 1, 2010 to even date
herewith; and various other reports and documents provided to us
by the Merger Partner;
(vi) certain other internal information, primarily
financial in nature, relating to the Merger Partner, which was
provided to us by the Merger Partner, including projected
financial results, developed by the Merger Partner, for the five
year period ending December 31, 2014;
(vii) certain publicly available information concerning the
trading of, and the trading market for, the Merger
Partners common units;
700
Louisiana, Suite 1900 Houston, Texas 77002 (713) 236-9999
MEMBER FINRA/SIPC
B-1
(viii) certain publicly available information with respect
to certain other publicly traded companies and limited
partnerships we believe to be comparable to the Company and the
Merger Partner and the trading markets for certain of such
companies securities;
(ix) certain publicly available information concerning the
estimates of the future operating and financial performance of
Merger Partner, the Company and the comparable companies
prepared by industry experts unaffiliated with either the Merger
Partner or the Company;
(x) certain publicly available information concerning the
markets in which the Merger Partner and the Company operate
prepared by industry experts unaffiliated with either Merger
Partner or the Company;
(xi) certain publicly available information concerning the
nature and terms of certain other transactions considered
relevant to our analysis; and
(xii) such other analyses and examinations as we have
deemed necessary and appropriate.
We have also met with certain officers and employees of the
Company and the Merger Partner to discuss the foregoing, as well
as other matters believed relevant to the inquiry.
In connection with our review, we have not independently
verified any of the foregoing information (including the
information contained in the
Form S-4)
and have relied on its being complete and accurate in all
material respects. With respect to the financial forecasts, we
have assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments
of the Companys and the Merger Partners management
as to the future financial performance of the Company and the
Merger Partner. We have assumed that the Merger will be
consummated in accordance with the terms set forth in the Merger
Agreement without any waiver, amendment or delay of any terms or
conditions in any way material to our analysis. We have assumed
that in connection with the receipt of all necessary
governmental, regulatory or other approvals and consents
required for the Merger, no delays, limitations, conditions or
restrictions will be imposed that would have a material adverse
effect on the contemplated benefits expected to be derived by
the Merger. We are not legal, tax or regulatory advisors and
have relied upon, without independent verification, the
assessment of the Company and its legal, tax and regulatory
advisors with respect to such matters. We have not performed any
tax analysis, nor have we been furnished with any such analysis.
In addition, we have not made an independent evaluation or
appraisal of the assets of the Company or the Merger Partner,
nor have we been furnished with any such appraisals. We were not
required to, and did not, solicit third party indications of
interest in acquiring all or any part of the Company.
In conducting our analysis and arriving at our opinion as
expressed herein, we have considered such financial and other
factors as we deemed appropriate under the circumstances
including, among others, the following: (i) the historical
and current financial position and results of operations of the
Company and the Merger Partner; (ii) the business prospects
of the Company and the Merger Partner; (iii) the historical
and current market for the Companys common units, the
Merger Partners common units and for the equity securities
of certain other companies believed to be comparable to the
Company or the Merger Partner; (iv) the respective
contributions in terms of various financial measures of the
Company and the Merger Partner to the combined company, and the
relative pro forma ownership of the Merger Partner after the
Merger by the current holders of the Companys common units
and the Merger Partners common units; (v) the value
of the discounted cash flows of the Company and the Merger
Partner and related sensitivities; and (vi) the nature and
terms of certain other merger and acquisition transactions that
we believe to be relevant. We have also taken into account our
assessment of general economic, market and financial conditions
and our experience in connection with similar transactions and
securities valuation generally.
Our opinion necessarily is based upon conditions as they exist
and can be evaluated on, and on the information made available
at, the date hereof. Events occurring after the date hereof may
affect this opinion and the assumptions used in preparing it,
and we do not assume any obligation to update, revise or
reaffirm this opinion.
Our opinion does not constitute a recommendation to any common
unitholder as to how such common unitholder should vote on the
Merger.
Simmons & Company International (Simmons)
is an internationally recognized investment banking firm and is
engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions,
B-2
leveraged buyouts, negotiated underwritings, secondary
distributions of listed and unlisted securities and private
placements.
Simmons will receive a fee for rendering this opinion. In
addition, the Company has agreed to indemnify us for certain
liabilities that may arise out of our engagement.
It is understood that this letter is for the information of the
Conflicts Committee of the Board of Directors of the WMZ General
Partner and is not to be quoted or referred to, in whole or in
part, in any registration statement, prospectus, or proxy
statement (except for the registration statement, proxy
statement, or prospectus related to the Merger as provided
below), or in any other written document used in connection with
the offering or sale of securities, nor shall this letter be
used for any other purposes, without Simmons prior written
consent. It is further understood that, if reference to, or
description of, our opinion is included in the registration
statement, proxy statement or prospectus in connection with the
Merger, this letter will be reproduced in such registration
statement, proxy statement or prospectus in full, and any
description of or reference to Simmons or summary of the opinion
in such registration statement, proxy statement or prospectus
will be in a form acceptable to Simmons and its counsel. This
opinion does not address the Companys underlying business
decision to pursue the Merger, the relative merits of the Merger
as compared to any alternative business strategies that might
exist for the Company or the effects of any other transaction in
which the Company might engage. This opinion does not address
the fairness of the amount or nature of the compensation to any
of the Companys officers, directors or employees; any of
the Companys general partners or any of their affiliates
or any class of any such persons or entities; relative to the
compensation to the public common unitholders of the Company.
The issuance of our opinion has been approved by a Simmons
Fairness Committee.
Based upon and subject to the foregoing, including the various
assumptions and limitations set forth herein, it is our opinion
that, as of the date hereof, the Consideration to be received by
the holders of Non-affiliated WMZ Common Units as set forth in
the Merger Agreement is fair to such common unitholders from a
financial point of view.
Very truly yours,
Simmons & Company International
Managing Director
B-3
PART II
INFORMATION
NOT REQUIRED IN PROSPECTUS
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Item 20.
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Indemnification
of Officers and Directors
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Williams Partners L.P. has no employees, officers or directors,
but is managed and operated by the employees, officers and
directors of Williams Partners L.P.s general partner,
Williams Partners GP LLC, and its affiliates.
Williams Partners L.P. will generally indemnify officers,
directors and affiliates of its general partner to the fullest
extent permitted by the law against all losses, claims, damages
or similar events.
Section 17-108
of the Delaware Revised Uniform Limited Partnership Act provides
that, subject to such standards and restrictions, if any, as are
set forth in its partnership agreement, a Delaware limited
partnership may, and shall have the power to, indemnify and hold
harmless any partner or other person from and against any and
all claims and demands whatsoever.
Section 18-108
of the Delaware Limited Liability Company Act provides that,
subject to such standards and restrictions, if any, as are set
forth in its limited liability company agreement, a Delaware
limited liability company may, and shall have the power to,
indemnify and hold harmless any member or manager or other
person from and against any and all claims and demands
whatsoever.
The amended and restated limited liability company agreement of
Williams Partners GP LLC contains the following provisions
relating to indemnification of, among others, its officers and
directors:
Section 10.01 Indemnification. To
the fullest extent permitted by law but subject to the
limitations expressly provided in this Agreement, all
Indemnitees shall be indemnified and held harmless by the
Company from and against any and all losses, claims, damages,
liabilities, joint or several, expenses (including legal fees
and expenses), judgments, fines, penalties, interest,
settlements or other amounts arising from any and all claims,
demands, actions, suits or proceedings, whether civil, criminal,
administrative or investigative, in which any Indemnitee may be
involved, or is threatened to be involved, as a party or
otherwise, by reason of its status as an Indemnitee; provided,
that the Indemnitee shall not be indemnified and held harmless
if there has been a final and non-appealable judgment entered by
a court of competent jurisdiction determining that, in respect
of the matter for which the Indemnitee is seeking
indemnification pursuant to this Section 10.01, the
Indemnitee acted in bad faith or engaged in fraud or willful
misconduct or, in the case of a criminal matter, acted with
knowledge that the Indemnitees conduct was unlawful. Any
indemnification pursuant to this Section 10.01 shall be
made only out of the assets of the Company, it being agreed that
the Members shall not be liable for such indemnification and
shall have no obligation to contribute or loan any monies or
property to the Company to enable it to effectuate such
indemnification.
(b) To the fullest extent permitted by law, expenses
(including legal fees and expenses) incurred by an Indemnitee
who is indemnified pursuant to Section 10.01(a) in
defending any claim, demand, action, suit or proceeding shall,
from time to time, be advanced by the Company prior to a
determination that the Indemnitee is not entitled to be
indemnified upon receipt by the Company of any undertaking by or
on behalf of the Indemnitee to repay such amount if it shall be
determined that the Indemnitee is not entitled to be indemnified
as authorized in this Section 10.01.
(c) The indemnification provided by this Section 10.01
shall be in addition to any other rights to which an Indemnitee
may be entitled under any agreement, as a matter of law or
otherwise, both as to actions in the Indemnitees capacity
as an Indemnitee and as to actions in any other capacity, and
shall continue as to an Indemnitee who has ceased to serve in
such capacity and shall inure to the benefit of the heirs,
successors, assigns and administrators of the Indemnitee.
(d) The Company may purchase and maintain insurance on
behalf of the Company, its Affiliates and such other Persons as
the Company shall determine, against any liability that may be
asserted against, or expense that may be incurred by, such
Person in connection with the Companys activities or such
Persons activities
II-1
on behalf of the Company, regardless of whether the Company
would have the power to indemnify such Person against such
liability under the provisions of this Agreement.
(e) For purposes of this Section 10.01, (i) the
Company shall be deemed to have requested an Indemnitee to serve
as fiduciary of an employee benefit plan whenever the
performance by it of its duties to the Company also imposes
duties on, or otherwise involves services by, it to the plan or
participants or beneficiaries of the plan; (ii) excise
taxes assessed on an Indemnitee with respect to an employee
benefit plan pursuant to applicable law shall constitute
fines within the meaning of Section 10.01(a);
and (iii) action taken or omitted by the Indemnitee with
respect to any employee benefit plan in the performance of its
duties for a purpose reasonably believed by it to be in the best
interest of the participants and beneficiaries of the plan shall
be deemed to be for a purpose that is in the best interests of
the Company.
(f) An Indemnitee shall not be denied indemnification in
whole or in part under this Section 10.01 because the
Indemnitee had an interest in the transaction with respect to
which the indemnification applies if the transaction was
otherwise permitted by the terms of this Agreement.
(g) The provisions of this Section 10.01 are for the
benefit of the Indemnitees, their heirs, successors, assigns and
administrators and shall not be deemed to create any rights for
the benefit of any other Persons.
(h) No amendment, modification or repeal of this
Section 10.01 or any provision hereof shall in any manner
terminate, reduce or impair the right of any past, present or
future Indemnitee to be indemnified by the Company, nor the
obligations of the Company to indemnify any such Indemnitee
under and in accordance with the provisions of this
Section 10.01 as in effect immediately prior to such
amendment, modification or repeal with respect to claims arising
from or relating to matters occurring, in whole or in part,
prior to such amendment, modification or repeal, regardless of
when such claims may arise or be asserted.
Section 10.02 Liability of
Indemnitees.
(a) Notwithstanding anything to the contrary set forth in
this Agreement, no Indemnitee shall be liable for monetary
damages to the Company or any other Persons who have acquired
membership interests in the Company, for losses sustained or
liabilities incurred as a result of any act or omission of an
Indemnitee unless there has been a final and non-appealable
judgment entered by a court of competent jurisdiction
determining that, in respect of the matter in question, the
Indemnitee acted in bad faith or engaged in fraud or willful
misconduct or, in the case of a criminal matter, acted with
knowledge that the Indemnitees conduct was criminal.
(b) To the extent that, at law or in equity, an Indemnitee
has duties (including fiduciary duties) and liabilities relating
thereto to the Company, such Indemnitee acting in connection
with the Companys business or affairs shall not be liable
to the Company or to any Member for its good faith reliance on
the provisions of this Agreement. The provisions of this
Agreement, to the extent that they restrict or otherwise modify
the duties and liabilities of an Indemnitee otherwise existing
at law or in equity, are agreed by the Members to replace such
other duties and liabilities of such Indemnitee.
(c) Any amendment, modification or repeal of this
Section 10.02 or any provision hereof shall be prospective
only and shall not in any way affect the limitations on the
liability of the Indemnitees under this Section 10.02 as in
effect immediately prior to such amendment, modification or
repeal with respect to claims arising from or relating to
matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise
or be asserted.
The Williams Companies, Inc. has purchased insurance designed to
protect Williams Partners L.P. and the directors and officers of
Williams Partners GP LLC against losses arising from certain
claims, including claims under the Securities Act of 1933, as
amended.
A list of exhibits filed as part of this registration statement
is set forth in the Exhibit Index, which is incorporated
herein by reference.
II-2
The undersigned registrant hereby undertakes that, for the
purpose of determining liability under the Securities Act of
1933 to any purchaser, each prospectus filed pursuant to
Rule 424(b) as part of a registration statement relating to
an offering, other than registration statements relying on
Rule 430B or other than prospectuses filed in reliance on
Rule 430A, shall be deemed to be part of and included in
the registration statement as of the date it is first used after
effectiveness. Provided, however, that no
statement made in a registration statement or prospectus that is
part of the registration statement or made in a document
incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of
contract of sale prior to such first use, supersede or modify
any statement that was made in the registration statement or
prospectus that was part of the registration statement or made
in any such document immediately prior to such date of first use.
The undersigned registrant hereby undertakes that, for the
purpose of determining liability of the registrant under the
Securities Act of 1933 to any purchaser in the initial
distribution of the securities: The undersigned registrant
undertakes that in a primary offering of securities of the
undersigned registrant pursuant to this registration statement,
regardless of the underwriting method used to sell the
securities to the purchaser, if the securities are offered or
sold to such purchaser by means of any of the following
communications, the undersigned registrant will be a seller to
the purchaser and will be considered to offer or sell such
securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the
undersigned registrant relating to the offering required to be
filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering
prepared by or on behalf of the undersigned registrant or used
or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus
relating to the offering containing material information about
the undersigned registrant or its securities provided by or on
behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the
offering made by the undersigned registrant to the purchaser.
The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933,
each filing of the registrants 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 plans 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.
The undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to
be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain
the information called for by the applicable registration form
with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the
other Items of the applicable form.
The registrant undertakes that every prospectus (i) that is
filed pursuant to the paragraph immediately preceding, or
(ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the registration statement
and will not be used until such amendment is effective, and
that, for purposes of determining any liability under the
Securities Act 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.
II-3
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 registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that 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
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 Act and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into
the prospectus pursuant to Item 4, 10(b), 11 or 13 of this
Form, within one business day of receipt of such request, and to
send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the
registration statement through the date of responding to the
request.
The undersigned registrant hereby undertakes to supply by means
of a post-effective amendment all information concerning a
transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration
statement when it became effective.
II-4
Signatures
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized on June 25, 2010.
WILLIAMS PARTNERS L.P.
(Registrant)
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By:
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Williams Partners GP LLC,
its general partner
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By:
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/s/ La Fleur
C. Browne
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La Fleur C. Browne
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated:
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Date: June 25, 2010
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By:
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*
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Steven J. Malcolm,
Chief Executive Officer and Chairman of the Board
(Principal Executive Officer)
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Date: June 25, 2010
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By:
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*
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Donald R. Chappel,
Chief Financial Officer and Director
(Principal Financial Officer)
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Date: June 25, 2010
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By:
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*
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Ted T. Timmermans,
Chief Accounting Officer and Controller
(Principal Accounting Officer)
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Date: June 25, 2010
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By:
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*
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Alan S. Armstrong,
Director
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Date: June 25, 2010
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By:
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*
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H. Michael Krimbill,
Director
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Date: June 25, 2010
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By:
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*
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Bill Z. Parker,
Director
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Date: June 25, 2010
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By:
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*
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Alice M. Peterson,
Director
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Date: June 25, 2010
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By:
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*
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Phillip D. Wright,
Director
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*By:
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/s/ La Fleur
C. Browne
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Attorney-in-Fact
II-5
EXHIBIT INDEX
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Exhibit
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No.
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Description
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(4
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.1)
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Certificate of Limited Partnership of Williams Partners L.P.
(incorporated by reference to Exhibit 3.1 to Williams
Partners L.P.s registration statement on
Form S-1
(File
No. 333-124517)
filed with the SEC on May 2, 2005)
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(4
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.2)
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Amended and Restated Agreement of Limited Partnership of
Williams Partners L.P., as amended by Amendments Nos. 1, 2, 3,
4, 5 and 6 (incorporated by reference to Exhibit 3.3 to
Williams Partners L.P.s annual report on
Form 10-K
(File
No. 001-32599)
filed with the SEC on February 25, 2010)
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(4
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.3)
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Certificate of Formation of Williams Partners GP LLC
(incorporated by reference to Exhibit 3.3 to Williams
Partners L.P.s registration statement on
Form S-1
(File
No. 333-124517)
filed with the SEC on May 2, 2005)
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(4
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.4)
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Amended and Restated Limited Liability Company Agreement of
Williams Partners GP LLC (incorporated by reference to
Exhibit 3.2 to Williams Partners L.P.s current report
on
Form 8-K
(File
No. 001-32599)
filed with the SEC on August 26, 2005)
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5
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.1
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Opinion of Gibson, Dunn & Crutcher LLP regarding the
legality of the securities being issued
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8
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.1
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Opinion of Andrews Kurth LLP regarding tax matters
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8
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.2
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Opinion of Fulbright & Jaworski L.L.P. regarding tax
matters
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23
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.1
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Consent of Ernst & Young LLP, Houston, Texas
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23
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.2
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Consent of Ernst & Young LLP, Tulsa, Oklahoma
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23
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.3
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Consent of Gibson, Dunn & Crutcher LLP (included in
Exhibit 5.1)
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23
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.4
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Consent of Andrews Kurth LLP (included in Exhibit 8.1)
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23
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.5
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Consent of Fulbright & Jaworski L.L.P. (included in
Exhibit 8.2)
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24
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.1
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Power of Attorney
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99
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.1*
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Form of Proxy Card for holders of Publicly Owned WMZ Common Units
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99
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.2
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Consent of Simmons & Company International
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Previously filed with this registration statement. |
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* |
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To be filed by amendment. |