AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 28, 2002
REGISTRATION NO. 333-85566
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
THE WILLIAMS COMPANIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 4922 73-0569878
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
WILLIAM G. VON GLAHN, ESQ.
ONE WILLIAMS CENTER ONE WILLIAMS CENTER
TULSA, OKLAHOMA 74172 TULSA, OKLAHOMA 74172
(918) 573-2000 (918) 573-2000
(Address, Including Zip Code, and Telephone (Name, Address, Including Zip Code, and
Number, Including Area Code, of Registrant's Telephone Number, Including Area Code, of
Principal Executive Offices) Agent For Service)
Copy to:
JOHN W. OSBORN, ESQ.
PHYLLIS G. KORFF, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
FOUR TIMES SQUARE
NEW YORK, NEW YORK 10036
(212) 735-3000
(212) 735-2000 (FAX)
------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable following the effectiveness of this registration statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ________
CALCULATION OF REGISTRATION FEE
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED NOTE(1) PRICE(1) REGISTRATION FEE
-----------------------------------------------------------------------------------------------------------------
9.25% Notes due March 15,
2004......................... $1,400,000,000 100% $1,400,000,000 $128,800(2)
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(f) promulgated under the Securities Act of 1933, as
amended.
(2) Fee previously paid.
------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT EXCHANGE THE OUTSTANDING SENIOR SECURED NOTES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THE NEW NOTES AND IT IS NOT SOLICITING AN
OFFER TO BUY THE NEW NOTES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED MAY 28, 2002.
OFFER TO EXCHANGE
UP TO $1,400,000,000
OF
9.25% NOTES DUE MARCH 15, 2004
OF
THE WILLIAMS COMPANIES, INC.
FOR ANY AND ALL OUTSTANDING
8.25% SENIOR SECURED NOTES DUE 2004
OF
WCG NOTE TRUST AND WCG NOTE CORP., INC.
------------------
THE NEW NOTES ISSUED BY WILLIAMS:
- Maturity Date: March 15, 2004.
- Principal Amount: We will issue up to $1.4 billion aggregate principal amount
of new notes.
- Interest Rate: 9.25% per year, payable semi-annually on March 15 and
September 15 of each year, beginning September 16, 2002. Holders of new notes
will receive interest from March 16, 2002.
- Resale: The new notes will be freely tradeable.
THE EXCHANGE OFFER:
- Expiration: 5:00 p.m., New York City time, on , 2002, unless we
extend the expiration date.
- Conditions: The exchange offer is not conditioned upon any aggregate
principal amount of outstanding senior secured notes being tendered.
- Tendered Securities: All outstanding senior secured notes that are validly
tendered and not validly withdrawn will be exchanged for an equal principal
amount of new notes that are registered under the Securities Act of 1933. If
you fail to tender your outstanding senior secured notes, you will continue to
hold unregistered senior secured notes of WCG Note Trust and WCG Note Corp.,
Inc., and your ability to transfer them could be adversely affected. In
addition, you may be entitled to receive an extra payment from us if you do
not exchange your senior secured notes for new notes in the exchange offer.
- Withdrawal: Tenders of outstanding senior secured notes may be withdrawn at
any time prior to the expiration of the exchange offer.
- Tax Consequences: If you tender outstanding senior secured notes in the
exchange offer, the exchange will be a taxable event.
- Trading: The new notes will not be listed on any securities exchange.
SEE THE SECTION ENTITLED "RISK FACTORS" THAT BEGINS ON PAGE 13 FOR A DISCUSSION
OF THE RISKS THAT YOU SHOULD CONSIDER PRIOR TO TENDERING YOUR OUTSTANDING SENIOR
SECURED NOTES FOR EXCHANGE.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The dealer managers for the exchange offer are:
SALOMON SMITH BARNEY
BANC OF AMERICA SECURITIES LLC JPMORGAN
The date of this prospectus is , 2002
The information contained in this prospectus was obtained from us and other
sources believed by us to be reliable. This prospectus also incorporates
important business and financial information about us that is not included in or
delivered with this prospectus. The documents containing this information are
listed under the section entitled "Where You Can Find More Information." We will
provide a copy of any and all of these documents to you by first-class mail,
without charge, upon written or oral request. ANY REQUEST FOR DOCUMENTS SHOULD
BE MADE BY , 2002 TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS PRIOR TO
THE EXPIRATION DATE OF THE EXCHANGE OFFER. Requests for documents should be
directed to:
The Williams Companies, Inc.
One Williams Center
Tulsa, Oklahoma 74172
Attention: Corporate Secretary
Telephone: (918) 573-2000
You should rely only on the information contained in this prospectus or any
supplement and any information incorporated by reference in this prospectus or
any supplement. We have not authorized anyone to provide you with any
information that is different. If you receive any unauthorized information, you
must not rely on it. You should disregard anything we said in an earlier
document that is inconsistent with what is in or incorporated by reference in
this prospectus.
You should not assume that the information in this prospectus or any
supplement is current as of any date other than the date on the front page of
this prospectus. This prospectus is not an offer to sell nor is it seeking an
offer to buy these securities in any state or jurisdiction where the offer or
sale is not permitted.
None of Williams, the trustee under the indenture, the exchange agent or
any of the dealer managers is making any recommendation to you as to whether or
not you should tender your outstanding senior secured notes in connection with
this exchange offer, and no one has been authorized by any of them to make any
such recommendation. You must make your own decision as to whether to tender
your outstanding senior secured notes and, if so, the principal amount of senior
secured notes to tender.
You should read this document and the letter of transmittal carefully
before making a decision to tender your outstanding senior secured notes.
We include cross references in the prospectus to captions in these
materials where you can find further related discussions. The following table of
contents tells you where to find these captions.
TABLE OF CONTENTS
PAGE
NO.
----
Prospectus Summary.................... 1
Risk Factors.......................... 13
Use of Proceeds....................... 20
The Exchange Offer.................... 20
Description of the New Notes.......... 29
United States Federal Income Tax
Consequences........................ 37
PAGE
NO.
----
Forward-Looking Statements............ 39
Legal Matters......................... 39
Experts............................... 39
Where You Can Find More Information... 39
Incorporation of Documents by
Reference........................... 40
i
PROSPECTUS SUMMARY
This summary highlights selected information from this prospectus to help
you understand our business and the new notes. It likely does not contain all
the information that is important to you or that you should consider in making
an investment decision. To understand all of the terms of the exchange offer and
to attain a more complete understanding of our business and financial situation,
you should read carefully this entire prospectus and should consider consulting
with your own legal and tax advisors. References in this prospectus to
"Williams," "we," "us" or "our" refer to The Williams Companies, Inc.
THE WILLIAMS COMPANIES, INC.
Williams, through Williams Energy Marketing & Trading Company, Williams Gas
Pipeline Company, LLC and Williams Energy Services, LLC, and their respective
subsidiaries, engages in the following types of energy-related activities:
- price risk management services and the purchase and sale, and arranging
of transportation or transmission, of energy and energy-related
commodities including natural gas and gas liquids, crude oil and refined
products and electricity;
- transportation and storage of natural gas and related activities through
the operating and ownership of four wholly-owned interstate natural gas
pipelines, several pipeline joint ventures and a wholly-owned liquefied
natural gas terminal;
- exploration, production and marketing of oil and gas through ownership of
3.2 trillion cubic feet equivalent of proved natural gas reserves
primarily located in the Rocky Mountain, Mid-Continent and Gulf Coast
regions of the United States;
- direct investments in international energy projects located primarily in
South America and Lithuania, investments in energy and infrastructure
development funds in Asia and South America and soda ash mining
operations in Colorado;
- natural gas gathering, treating and processing activities through
ownership and operation of approximately 11,200 miles of gathering lines
(approximately 1,700 miles of which may be sold in the near future), 10
natural gas treating plants and 18 natural gas processing plants (three
of which are partially owned) located in the United States and Canada;
- natural gas liquids transportation through ownership and operation of
approximately 14,300 miles of natural gas liquids pipeline (4,770 miles
of which are partially owned);
- through a majority-owned subsidiary, transportation of petroleum products
and related terminal services through ownership or operation of
approximately 6,747 miles of petroleum products pipeline and 39 petroleum
products terminals;
- light hydrocarbon/olefin transportation through 300 miles of pipeline in
southern Louisiana;
- ethylene production through a 5/12 interest in a 1.3 billion pounds per
year facility in Geismar, Louisiana;
- production and marketing of ethanol and bio-products through operation
and ownership of two ethanol plants (one of which is partially owned) and
ownership of minority interests of investments in four other plants;
- refining of petroleum products through operation and ownership of two
refineries;
- retail marketing through 61 travel centers;
- through a majority-owned subsidiary, petroleum products terminal services
through the ownership and operation of five marine terminals and 25
inland terminals that form a distribution network for gasoline and other
refined petroleum products throughout the southeastern United States; and
1
- through a majority-owned subsidiary, ammonia transportation and terminal
services through ownership and operation of an ammonia pipeline and
terminal system that extends for approximately 1,100 miles from Texas and
Oklahoma to Minnesota.
Williams was incorporated under the laws of the State of Nevada in 1949 and
was reincorporated under the laws of the State of Delaware in 1987. Williams
maintains its principal executive offices at One Williams Center, Tulsa,
Oklahoma 74172, telephone (918) 573-2000.
RECENT DEVELOPMENTS
Since the events surrounding the Enron bankruptcy filing in the fourth
quarter of 2001, Williams has been engaged in various discussions with
investors, analysts, rating agencies and financial institutions regarding the
implications of such events on the business strategy for Williams' energy
trading activities. Williams has also been evaluating its contingent obligations
regarding guarantees and payment obligations with respect to certain financial
obligations of Williams Communications Group, Inc., which we refer to in this
prospectus as "Williams Communications," because of uncertainty regarding
Williams Communications' ability to perform and the announcement by Williams
Communications that it is seeking reorganization under the bankruptcy laws.
Although the three major rating agencies have recently confirmed Williams'
investment grade ratings, they have all changed their view to negative as a
result of these developments. In addition, on May 8, 2002, Moody's Investors
Service, Inc. announced that it is reviewing Williams' credit ratings for
possible downgrade. The following is a summary of the steps that are
contemplated, are in progress or have been completed which Williams believes
will strengthen its balance sheet and enable it to retain its investment grade
rating:
- On March 5, 2002, Williams received the requisite approvals for its
consent solicitation to amend the terms of the senior secured notes.
Prior to the spinoff of Williams Communications, Williams had provided
indirect credit support for the senior secured notes through a commitment
to make available proceeds of a Williams equity issuance upon the
occurrence of certain trigger events. The amendment, among other things,
eliminated a bankruptcy by Williams Communications and a Williams credit
ratings downgrade from the enumerated list of events that could cause an
acceleration of the senior secured notes. Williams is liable for all
payments related to the senior secured notes, which bear an interest rate
of 8.25% and mature in March 2004. Williams may now fund such payments
with any available sources. With the exception of the March and September
2002 interest payments, Williams Communications remains obligated to
reimburse Williams for any payments Williams is required to make in
connection with the senior secured notes. However, Williams cannot
provide any assurances as to the recoverability of this reimbursement
obligation or the form it may take.
- In its December 31, 2001 financial statements, Williams recognized a
$2.05 billion charge ($1.84 billion to discontinued operations and $213
million to continuing operations) in connection with its assessment of
certain receivables and guarantee and payment obligations associated with
Williams Communications. In its March 31, 2002 financial statements,
Williams recognized an additional $232 million charge in connection with
receivables of Williams Communications. Investors should refer to the
more detailed discussion on pages 5 and 6 of Williams' Quarterly Report
on Form 10-Q for the quarter ended March 31, 2002 for an explanation of
how these charges were calculated. In addition, Williams may recognize
additional losses relating to Williams Communications in the future.
- On March 8, 2002, a unit of Williams Communications exercised its
purchase option for certain leased assets for which Williams was
guarantor. The assets consist of a segment of fiber-optic network and
associated facilities. On March 29, 2002, Williams funded the purchase
price of $754 million and became entitled to an unsecured note from
Williams Communications for the same amount. This event was previously
factored into the earnings, balance sheet and liquidity numbers that
Williams reported in public filings.
2
- In January 2002, Williams announced its goal of reducing its annual
operating expenses based on its current cost structure by $50 million,
effective 2003 (this goal has been significantly increased as discussed
below). Management is evaluating its organizational structure to
determine effective and efficient ways to align services to meet
Williams' current business requirements as an energy-only company. In
conjunction with this goal, Williams offered an enhanced-benefit early
retirement option to certain employee groups. The impact on 2002 expenses
is expected to be approximately $35 to $70 million. Additionally,
Williams will offer severance and redeployment services to employees
whose positions are eliminated as a result of the organizational changes.
- During the fourth quarter of 2001, Williams announced its intention to
eliminate its exposure to "ratings trigger" clauses incorporated in
certain of its agreements (in addition to the triggers contained in the
senior secured notes). Williams now has approximately $182 million of
total exposure under two such agreements, both of which mature in 2003.
In order to obtain removal of ratings triggers from the Snow Goose
transaction (see Note 14 of Notes to Consolidated Financial Statements
included in our Current Report on Form 8-K dated May 28, 2002 for a
description of the Snow Goose transaction), Williams agreed to guarantee
all payments due under the transaction and to amortize the loan from Snow
Goose to Arctic Fox by paying $112,000,000 quarterly through April 7,
2003.
- On March 27, 2002, Williams closed the sale of its Kern River interstate
natural gas pipeline business to a unit of MidAmerican Energy Holdings
Company for $450 million in cash and the assumption of $510 million in
debt. As a result of the sale, Williams expects that its capital
expenditure requirements will be reduced by approximately $1.26 billion
over the next one and a half years.
- On March 27, 2002, Williams closed the sale of $275 million of its 9 7/8%
cumulative convertible preferred stock to MEHC Investment, Inc., a
wholly-owned subsidiary of MidAmerican Energy Holdings Company, and a
member of the Berkshire Hathaway family of companies. MEHC Investment
acquired 1,466,667 shares of the security at a purchase price of $187.50
per share, pursuant to a stock purchase agreement between the companies.
Each share of the security is convertible into 10 shares of Williams'
common stock.
- On April 11, 2002, Williams Energy Partners L.P., a majority-owned
subsidiary of Williams, acquired Williams Pipe Line for $1 billion.
Williams Pipe Line, is comprised of 6,747 miles of active pipe that
delivers petroleum products to 11 midwestern states. Last year, the
system transported approximately 260 million barrels. Thirty-nine storage
and distribution terminals connected to Williams Pipe Line are included
in the purchase. The facilities have an aggregate storage capacity of
26.5 million barrels.
- On May 28, 2002, Williams announced that, in addition to the significant
steps already taken to strengthen its balance sheet, Williams plans over
the next 12 months to, (i) issue $1 billion to $1.5 billion in common
equity, (ii) sell an additional $1.5 billion to $3 billion in assets,
(iii) continue its focus on monetization of the significant hedged
cash-flow positions in marketing and trading contracts (iv) reduce annual
costs by $100 million, twice the previously announced goal, (v) fund
base-level capital expenditures, including mandatory, efficiency and
highest-priority growth needs, with cash flow from operations, providing
for funding of additional growth opportunities with an appropriate mix of
follow-on equity and debt, and (vi) apply all proceeds from asset sales
and initial equity issuance to pay down debt or increase liquidity.
Williams also announced that it will continue to evaluate the level of
its common-stock dividend, and that an internal team has been formed
within its energy marketing and trading business to evaluate potential
"joint venture" or other alternative structural solutions to enhance that
unit's risk-mitigation tools.
WCG NOTE TRUST
WCG Note Trust is a statutory business trust established under the laws of
the State of Delaware pursuant to a trust agreement, dated as of March 28, 2001,
among Williams Communications, LLC, as
3
holder of the beneficial ownership interests in the trust, Wilmington Trust
Company, as issuer trustee, and the trust. The trust agreement may be amended by
the holder of the beneficial ownership interests in the trust and the issuer
trustee, subject to the consent of the trustee for the senior secured notes.
The trust was established for the limited purpose of engaging in the
following activities:
- entering into, complying with its obligations under, and consummating the
transactions and engaging in the activities contemplated by the indenture
governing the senior secured notes and the related transaction documents
to which it is a party;
- owning all the outstanding shares of WCG Note Corp., Inc.;
- issuing evidence of the beneficial ownership interests in the trust to
Williams Communications, LLC;
- issuing and selling the senior secured notes together with WCG Note
Corp.;
- assigning, granting, transferring, pledging, mortgaging and conveying its
trust estate to the trustee for the senior secured notes;
- holding, managing and distributing to the holder of the beneficial
ownership interests in the trust any portion of its trust estate released
from the lien of, and remitted to the trust pursuant to, the indenture
governing the senior secured notes;
- making payments to the trustee for the senior secured notes for the
benefit of the holders of the senior secured notes, making payments to
Williams and making distributions to the holder of the beneficial
ownership interests in the trust;
- purchasing and holding a $1.5 billion promissory note issued by Williams
Communications Group, Inc. on March 28, 2001;
- receiving payments and other distributions from Williams Communications
with respect to that promissory note;
- causing a sale of all or a portion of that promissory note under certain
circumstances;
- engaging in those activities that are necessary to accomplish the
foregoing or other incidental activities; and
- subject to compliance with the various transaction documents, engaging in
such other activities as may be required or expressly permitted in
connection with conservation of its trust estate and making distributions
to the holder of the beneficial ownership interests in the trust.
On March 5, 2002, the indenture governing the senior secured notes was
amended after we received the requisite approvals pursuant to our consent
solicitation. In connection with those amendments, we entered into a payment
agreement with the trust which affirmed our obligation to pay all amounts due to
the holders of the senior secured notes on a timely basis if not otherwise paid.
The trust will terminate when all of its assets have been disposed of and
distributed as provided in the trust agreement after the indenture governing the
senior secured notes has been terminated. The trust agreement is governed by the
laws of the State of Delaware. Under Delaware law, the holder of the beneficial
ownership interests in the trust will not be liable for any debt, claim, demand,
judgment or obligation of any kind of, against or with respect to the trust by
reason of its being the beneficial owner.
WCG NOTE CORP., INC.
WCG Note Corp. is a wholly-owned special purpose subsidiary of the trust,
incorporated under the laws of the State of Delaware. WCG Note Corp. has no
material assets or liabilities other than as co-issuer of the senior secured
notes. WCG Note Corp.'s activities are limited to issuing the senior secured
notes and engaging in other incidental activities. WCG Note Corp. did not
receive any of the proceeds of
4
the offering of the senior secured notes and does not own or have a beneficial
interest in the $1.5 billion promissory note issued by Williams Communications.
POTENTIAL SALE OF COLLATERAL
Prior to, simultaneously with or shortly after the consummation of the
exchange offer, we may exercise our rights to cause the trustee for the senior
secured notes to sell, at the highest reasonably available market price, the
$1.5 billion promissory note issued by Williams Communications, which is
currently held as security for the senior secured notes. Under the indenture
governing the senior secured notes, the proceeds of this sale would be applied
on a pro rata basis to cause an early redemption of a portion of the senior
secured notes. Such redemption would be at a price equal to 100% of the
principal amount of the senior secured notes redeemed plus a "make whole"
premium. The early redemption may occur before, after or simultaneously with the
completion of the exchange offer, or not at all.
MATERIAL CONTRACTS
We are not a party to any material contracts or similar arrangements with
the trust or WCG Note Corp. other than the payment agreement described above and
the various transaction documents we executed in connection with the issuance
and sale of the senior secured notes. Williams Communications, our former
telecommunications subsidiary, is an affiliate of the trust and WCG Note Corp.
We have several material contracts with Williams Communications, the details of
which have been previously disclosed. See "Risk Factors -- We may be subject to
additional liabilities pertaining to our spun-off telecommunications business
unit."
SUMMARY OF THE EXCHANGE OFFER
You are entitled to exchange in the exchange offer your outstanding senior
secured notes of WCG Note Trust and WCG Note Corp., Inc. for new notes of
Williams. You should read the discussion under the heading "Description of the
New Notes" beginning on page 29 for information regarding the new notes.
NEW NOTES VERSUS SENIOR SECURED NOTES
The new notes differ from the senior secured notes in a variety of ways,
including the following:
- the new notes will be senior unsecured obligations of Williams that rank
on a parity with all other senior unsecured indebtedness of Williams,
while the senior secured notes are senior secured limited recourse
obligations of WCG Note Trust and WCG Note Corp., Inc.;
- interest on the new notes will accrue at the annual rate of 9.25%, while
interest on the senior secured notes accrues at the annual rate of 8.25%;
and
- the offering of the new notes will be registered under the Securities Act
of 1933 and transfers of the new notes will be unrestricted, while the
senior secured notes bear restrictive legends and are subject to
restrictions on transfer.
We summarize the terms of the exchange offer below. You should read the
discussion under the heading "The Exchange Offer" beginning on page 20 for
further information regarding the exchange offer.
Securities to be Exchanged.... On March 28, 2001, WCG Note Trust and WCG Note
Corp., Inc. issued and sold $1.4 billion
aggregate principal amount of outstanding 8.25%
Senior Secured Notes due 2004 to initial
purchasers in transactions exempt from the
registration requirements of the Securities
Act.
The Exchange Offer............ We are offering to exchange up to $1.4 billion
aggregate principal amount of new notes of
Williams for up to $1.4 billion
5
aggregate principal amount of outstanding
senior secured notes of WCG Note Trust and WCG
Note Corp. Outstanding senior secured notes may
be exchanged only in integral multiples of
$1,000.
Record Date................... The record date for the exchange offer is
, 2002. Only registered holders of
outstanding senior secured notes on the record
date may participate in the exchange offer.
Expiration Date............... The exchange offer will expire at 5:00 p.m.,
New York City time, on , 2002, or
such later date and time to which we extend it.
Withdrawal of Tenders......... You may withdraw your tender of outstanding
senior secured notes at any time prior to 5:00
p.m., New York City time, on the expiration
date. To withdraw, the exchange agent must
receive a notice of withdrawal at its address
indicated under "The Exchange Offer -- Exchange
Agent" before 5:00 p.m., New York City time, on
the expiration date. We will return to you,
without charge, promptly after the expiration
or termination of the exchange offer any
outstanding senior secured notes that you
tendered but that were not accepted for
exchange.
Conditions to the Exchange
Offer......................... We will not be required to accept outstanding
senior secured notes for exchange if various
conditions are not satisfied or waived by us.
The exchange offer is not conditioned upon any
minimum aggregate principal amount of
outstanding senior secured notes being
tendered. Please read the section "The Exchange
Offer -- Conditions to the Exchange Offer" on
page 25 for more information regarding the
conditions to the exchange offer.
Procedures for Tendering
Outstanding Senior Secured
Notes......................... If your outstanding senior secured notes are
held through The Depository Trust Company and
you wish to participate in the exchange offer,
you may do so through the automated tender
offer program of DTC. By participating in the
exchange offer, you will agree to be bound by
the letter of transmittal that we are providing
with this prospectus as though you had signed
the letter of transmittal.
We will accept for exchange any and all
outstanding senior secured notes which are
properly tendered (and not withdrawn) in the
exchange offer prior to the expiration date.
The new notes issued pursuant to the exchange
offer will be delivered promptly following the
expiration date. See "The Exchange
Offer -- Acceptance of Outstanding Senior
Secured Notes for Exchange."
Effect of Not Tendering....... Outstanding senior secured notes that are not
tendered or that are tendered but not accepted
will, following the completion of the exchange
offer, remain outstanding and will continue to
be subject to their existing terms. See "The
Exchange Offer -- Consequences of Failure to
Exchange." Following the completion of the
exchange offer, we will have no obligation to
exchange new notes for outstanding senior
secured notes.
6
The trading market for outstanding senior
secured notes not exchanged in the exchange
offer may be significantly more limited than it
is at present. Therefore, if your senior
secured notes are not tendered and accepted in
the exchange offer, it may become more
difficult for you to sell or transfer your
unexchanged senior secured notes.
In addition, as described below, you may be
entitled to receive an extra payment from us if
you do not exchange your senior secured notes
for new notes in the exchange offer.
Extra Payments on the
Outstanding Senior Secured
Notes......................... On March 5, 2002, we received the requisite
approvals for our consent solicitation to amend
the terms relating to the senior secured notes.
In connection with our consent solicitation, we
agreed that if we had not completed an exchange
offer or a similar transaction before specified
dates, we would pay holders of the outstanding
senior secured notes the amounts specified in
the consent solicitation statement. Since we
expect to complete the exchange offer before
those specified dates and since the exchange
offer is not conditioned upon any minimum
aggregate principal amount of outstanding
senior secured notes being tendered, we do not
anticipate making these additional payments to
holders of the outstanding senior secured
notes.
We also agreed that if we consummate the
exchange offer by August 1, 2002, but less than
a majority in aggregate principal amount of
outstanding senior secured notes are tendered,
then, on September 16, 2002, we will make an
extra payment of $18.33 in cash for each $1,000
principal amount of outstanding senior secured
notes to the registered holders of senior
secured notes entitled to receive the interest
payment on the senior secured notes on
September 16, 2002. Holders of new notes will
not be entitled to this extra payment from us.
If a majority in aggregate principal amount of
outstanding senior secured notes are tendered,
but you do not tender your senior secured
notes, you will not receive the extra payment.
Early Redemption of Senior
Secured Notes................. Prior to, simultaneously with or shortly after
the consummation of the exchange offer, we may
exercise our rights to cause the trustee for
the senior secured notes to sell, at the
highest reasonably available market price, the
$1.5 billion promissory note issued by Williams
Communications, which is currently held as
security for the senior secured notes. Under
the indenture governing the senior secured
notes, the proceeds of this sale would be
applied on a pro rata basis to cause an early
redemption of a portion of the senior secured
notes. Such redemption would be at a price
equal to 100% of the principal amount of the
senior secured notes redeemed plus a "make
whole" premium. The early redemption may occur
before, after or simultaneously with the
completion of the exchange offer, or not at
all. If the early redemption were to occur
prior to the completion of the exchange offer,
holders of outstanding senior secured notes
would only have the opportunity to exchange
those
7
senior secured notes that remained outstanding.
If the early redemption were to occur following
the completion of the exchange offer, a portion
of any outstanding senior secured notes that
were not tendered in the exchange offer would
be redeemed. In addition, if we consummate the
exchange offer by August 1, 2002, but are
required to make the extra payment described
above because less than a majority in aggregate
principal amount of outstanding senior secured
notes were tendered, holders of senior secured
notes will only be entitled to receive the
extra payment with respect to the portion of
their senior secured notes that remain
outstanding following any early redemption. See
"The Exchange Offer -- Early Redemption of
Senior Secured Notes."
Special Procedures for
Beneficial Owners............. If you are the beneficial owner of book-entry
interests and your name does not appear on a
security position listing of DTC as the holder
of those book-entry interests or you own a
beneficial interest in outstanding senior
secured notes that are registered in the name
of a broker, dealer, commercial bank, trust
company or other nominee, and you wish to
tender that book-entry interest of outstanding
senior secured notes in the exchange offer, you
should contact the registered holder promptly
and instruct the registered holder to tender on
your behalf.
Guaranteed Delivery
Procedures.................... If you wish to tender your outstanding senior
secured notes and cannot comply, prior to the
expiration date, with the applicable procedures
under the automated tender offer program of
DTC, you must tender your outstanding senior
secured notes according to the guaranteed
delivery procedures described in "The Exchange
Offer -- Procedures for Tendering Outstanding
Senior Secured Notes -- Guaranteed Delivery"
beginning on page 24.
U.S. Federal Income Tax
Consequences.................. If you are a beneficial owner of senior secured
notes that is subject to U.S. federal income
tax on a net income basis in respect of the
senior secured notes (a "U.S. Holder") and you
hold the senior secured notes as "capital
assets" within the meaning of Internal Revenue
Code section 1221, an exchange of senior
secured notes for new notes in the exchange
offer will result in your recognition of a
capital gain or loss equal to the difference
between the fair market value of the new notes
received in the exchange and your basis in the
senior secured notes (except to the extent of
accrued market discount, if any, which will be
treated as ordinary income to the extent of any
gain that you recognize). If a U.S. Holder of
senior secured notes fails to tender its
outstanding senior secured notes and Williams
makes the extra payment referred to above, a
deemed exchange of senior secured notes for a
new debt instrument will result in a U.S.
Holder recognizing capital gain or loss equal
to the difference between the fair market value
of such new debt instrument (plus the amount of
the extra payment) and the U.S. Holder's basis
in such senior secured notes (except to the
extent of accrued market discount, if any,
which will be treated
8
as ordinary income to the extent of any gain
that is recognized). A U.S. Holder may be
subject to backup withholding on the extra
payment. Please read "United States Federal
Income Tax Consequences" on page 37.
Use of Proceeds............... We will not receive any cash proceeds from the
issuance of the new notes.
Exchange Agent................ We have appointed Bank One Trust Company, N.A.,
as the exchange agent for the exchange offer.
The mailing address and telephone number of the
exchange agent are 1 Bank One Plaza, Mail Code
IL1-0134, Chicago, Illinois 60670-0134, phone:
(800) 524-9472. See "The Exchange
Offer -- Exchange Agent."
Dealer Managers............... We have appointed Salomon Smith Barney Inc.,
Banc of America Securities LLC and J.P. Morgan
Securities Inc. as the dealer managers for the
exchange offer. See "The Exchange Offer --
Dealer Managers."
SUMMARY OF THE TERMS OF THE NEW NOTES
New Notes Offered............. Up to $1.4 billion principal amount of 9.25%
Notes due March 15, 2004 of Williams.
Maturity...................... The maturity date for the new notes is March
15, 2004.
Interest Rate................. 9.25% per year.
Interest Payment Dates........ March 15 and September 15 of each year,
beginning September 16, 2002. Holders of new
notes will receive interest from March 16,
2002.
Use of Proceeds............... We will not receive any cash proceeds from the
exchange offer.
Ranking....................... The new notes will be senior unsecured
obligations of Williams that will rank equally
with all of our other outstanding senior
unsecured indebtedness.
Optional Redemption........... We may redeem some or all of the new notes at
any time at the redemption price described in
this prospectus, plus accrued and unpaid
interest, if any, to the redemption date, as
described in "Description of the New
Notes -- Terms and Conditions."
Optional Exchange............. Holders of outstanding senior secured notes may
opt not to tender their senior secured notes in
the exchange offer. Therefore, it is possible
that not all new notes offered by this
prospectus will be issued.
Covenants..................... We will issue the new notes under an indenture
between us and Bank One Trust Company, N.A., as
trustee. The indenture contains covenants that,
among other things, limit our ability to:
- create liens; and
- consolidate, merge or sell material assets.
These covenants are subject to a number of
important limitations and exceptions. See
"Description of the New Notes -- Covenants" for
a more comprehensive description of the
covenants contained in the indenture.
9
RISK FACTORS
See "Risk Factors" beginning on page 13 for a discussion of factors that
should be considered by holders of outstanding senior secured notes before
tendering their senior secured notes in the exchange offer.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDEND
REQUIREMENTS
The following table presents our consolidated ratio of earnings to combined
fixed charges and preferred stock dividend requirements for the periods shown.
QUARTER ENDED MARCH 31, YEAR ENDED DECEMBER 31,
----------------------- --------------------------------
2002 2001 2000 1999 1998 1997
---- ---- ---- ---- ---- ----
1.96 2.66 3.02 1.84 1.64 2.37
For purposes of computing these ratios, earnings means income (loss) from
continuing operations before:
- income taxes;
- extraordinary gain (loss);
- minority interest in income (loss) and preferred returns of consolidated
subsidiaries;
- interest expense, net of interest capitalized;
- interest expense of 50-percent-owned companies;
- that portion of rental expense that we believe to represent an interest
factor;
- pretax effect of dividends on preferred stock of Williams (1999 and
prior);
- adjustment to equity earnings to exclude equity investments with losses;
and
- adjustment to equity earnings to reflect actual distributions from equity
investments.
Fixed charges means the sum of the following:
- interest expense;
- that portion of rental expense that we believe to represent an interest
factor;
- pretax effect of dividends on preferred stock of Williams (1999 and
prior);
- pretax effect of dividends on preferred stock and other preferred returns
of consolidated subsidiaries; and
- interest expense of 50-percent-owned companies.
10
PRO FORMA FINANCIAL INFORMATION
The table below contains unaudited pro forma condensed statements of income
for Williams for the year ended December 31, 2001 and the three months ended
March 31, 2002. The unaudited pro forma income statement data illustrates the
interest expense effects of the new notes as if exchanged at the beginning of
the respective periods. We have provided this unaudited pro forma financial data
for informational purposes only. This data is not necessarily indicative of the
operating results that may be obtained in the future.
YEAR ENDED YEAR ENDED
DECEMBER 31, 2001 DECEMBER 31, 2001
AS REPORTED(A) ADJUSTMENT PRO FORMA
----------------- ---------- -----------------
Revenues.................................. $10,873.4 $ -- $10,873.4
Segment costs and expenses
Costs and operating expenses............ 7,340.3 -- 7,340.3
Selling, general and administrative..... 918.1 -- 918.1
Impairment of soda ash mining
facility............................. 170.0 -- 170.0
Other (income) expense -- net........... (28.8) -- (28.8)
--------- ------- ---------
Total segment costs and expenses..... 8,399.6 -- 8,399.6
General corporate expenses................ 124.3 -- 124.3
--------- ------- ---------
Operating income.......................... 2,349.5 -- 2,349.5
Interest accrued.......................... (748.1) (149.9)(b) (898.0)
Interest capitalized...................... 39.4 -- 39.4
Investing income (loss)................... (200.1) -- (200.1)
Preferred returns and minority interest
income of consolidated subsidiaries..... (67.5) -- (67.5)
Other income (expense) -- net............. 27.9 -- 27.9
--------- ------- ---------
Income from continuing operations before
income taxes............................ 1,401.1 (149.9) 1,251.2
Provision for income taxes................ (606.8) 58.5 (548.3)
--------- ------- ---------
Income from continuing operations......... $ 794.3 $ (91.4) $ 702.9
========= ======= =========
Earnings per share from continuing
operations:
Basic..................................... $ 1.60 $ (.19) $ 1.41
Diluted................................... $ 1.59 $ (.19) $ 1.40
Basic weighted average shares............. 496,935
Diluted weighted average shares........... 500,567
---------------
(a) As reported in a Current Report on Form 8-K filed May 28, 2002.
(b) Adjustment reflects interest of 9.25% on $1.4 billion for the entire year
and the amortization of fees paid related to the consent solicitation.
11
THREE MONTHS THREE MONTHS
ENDED MARCH 31, ENDED MARCH 31,
2002 2002
AS REPORTED ADJUSTMENT PRO FORMA
------------------ ---------- ------------------
Revenues................................ $2,184.8 $ -- $2,184.8
Segment costs and expenses
Costs and operating expenses.......... 1,305.2 -- 1,305.2
Selling, general and administrative... 196.5 -- 196.5
Other (income) expense -- net......... (1.9) -- (1.9)
-------- ------ --------
Total segment costs and expenses... 1,499.8 -- 1,499.8
General corporate expenses.............. 38.2 -- 38.2
-------- ------ --------
Operating income........................ 646.8 -- 646.8
Interest accrued........................ (217.4) (25.8)(a) (243.2)
Interest capitalized.................... 5.7 -- 5.7
Investing income (loss):
Estimated loss on realization of
amounts due from WCG............... (232.0) -- (232.0)
Other................................. 16.1 -- 16.1
Preferred returns and minority interest
income of consolidated subsidiaries... (15.2) -- (15.2)
Other income (expense) -- net........... 6.3 -- 6.3
-------- ------ --------
Income from continuing operations before
income taxes.......................... 210.3 (25.8) 184.5
Provision for income taxes.............. (87.1) 10.1 (77.0)
-------- ------ --------
Income from continuing operations....... $ 123.2 $(15.7) $ 107.5
======== ====== ========
Earnings per share from continuing
operations: (b)
Basic................................... $ .10 $ (.03) $ .07
Diluted................................. $ .10 $ (.03) $ .07
Basic weighted average shares........... 519,224
Diluted weighted average shares......... 521,240
---------------
(a) Adjustment reflects interest of 9.25% on $1.4 billion for the quarter,
reduced by $9.6 million of interest on 8.25% senior secured notes accrued
in March 2002, and amortization of fees paid related to the consent
solicitation.
(b) The income from continuing operations used in the calculation of basic and
diluted earnings per share has been reduced by $69.7 million of preferred
dividends, $69.4 million of which represents a one-time non-cash dividend
associated with a beneficial conversion option (see note 12 in our
Quarterly Report on Form 10-Q for the quarter ended March 31, 2002 for
further explanation).
12
RISK FACTORS
In addition to the other information contained in or incorporated by
reference into this prospectus, you should carefully consider the following risk
factors in deciding whether to exchange your outstanding senior secured notes in
the exchange offer.
RISKS ARISING FROM THE EXCHANGE OFFER
HOLDERS WHO DO NOT TENDER THEIR OUTSTANDING SENIOR SECURED NOTES WILL NOT BE
ENTITLED TO RECEIVE AN EXTRA PAYMENT FROM US IF A MAJORITY OF THE OUTSTANDING
SENIOR SECURED NOTES ARE TENDERED IN THE EXCHANGE OFFER.
If a majority of the outstanding senior secured notes are tendered in the
exchange offer, we are not required to make an extra payment to the remaining
holders of senior secured notes. If we consummate the exchange offer by August
1, 2002, but less than a majority in aggregate principal amount of outstanding
senior secured notes are tendered, then, on September 16, 2002, we will make an
extra payment of $18.33 in cash for each $1,000 principal amount of outstanding
senior secured notes to the registered holders of senior secured notes entitled
to receive the interest payment on the senior secured notes on September 16,
2002. Therefore, in deciding whether to tender senior secured notes, holders
should consider the likelihood that an extra payment will be made to them if
they do not tender.
THE TRADING MARKET FOR OUTSTANDING SENIOR SECURED NOTES NOT EXCHANGED IN THE
EXCHANGE OFFER MAY BE SIGNIFICANTLY MORE LIMITED THAT IT IS AT PRESENT.
To the extent that senior secured notes are tendered and accepted for
exchange pursuant to the exchange offer, the trading market for senior secured
notes that remain outstanding may be significantly more limited than it is at
present. The senior secured notes have not been registered under the Securities
Act and are subject to customary transfer restrictions. In addition, a debt
security with a smaller outstanding principal amount available for trading (a
smaller "float") may command a lower price than would a comparable debt security
with a larger float. Therefore, the market price for senior secured notes that
are not tendered and accepted for exchange pursuant to the exchange offer may be
affected adversely to the extent that the principal amount of the senior secured
notes exchanged pursuant to the exchange offer reduces the float. A reduced
float may also make the trading price of senior secured notes that are not
exchanged in the exchange offer more volatile.
RISKS RELATING TO WILLIAMS AND OUR BUSINESS
OUR FINANCIAL CONDITION WOULD BE ADVERSELY AFFECTED IF OUR CREDIT RATINGS WERE
DOWNGRADED.
Our energy marketing and trading business relies upon the credit ratings of
our senior unsecured long-term debt to satisfy credit support requirements of
many counterparties. Any downgrade of our senior unsecured debt credit ratings
could have a material adverse impact on our energy marketing and trading
business. If our credit ratings were to decline below investment grade, our
ability to participate in energy marketing and trading activity could be
significantly limited. Alternate credit support would be required under certain
existing agreements and would be necessary to support future transactions.
Without an investment grade rating, we would be required to fund margin
requirements pursuant to industry standard derivative agreements with cash,
letters of credit or other negotiable instruments. At December 31, 2001, the
total notional amounts that could require such funding, in the event of a credit
rating decline of Williams to below investment grade, was approximately $500
million after consideration of offsetting positions but before consideration of
margin deposits from the same counterparties. Additionally, aside from the
triggers contained in the senior secured notes (which were eliminated as a
result of our recent consent solicitation), we have approximately $182 million
of total exposure under our financing transactions that contain triggers tied to
our credit ratings. In the event our senior unsecured long-term debt ratings
decline below investment grade levels, subject to certain limited exceptions,
our obligations under those financing transactions could be accelerated. Our
credit ratings will likely come under greater pressure if we are unsuccessful in
timely executing our various financial enhancement initiatives.
13
WE MAY HAVE DIFFICULTY ACCESSING CAPITAL ON ATTRACTIVE TERMS OR AT ALL.
As a result of the occurrence of several recent events, including the
September 11, 2001 terrorist attack on the United States, the ongoing war
against terrorism by the United States and the bankruptcy of Enron Corp., one of
our major competitors, the availability and cost of capital for our business and
that of our competitors has been adversely affected. In addition, the bankruptcy
of Enron has caused the credit ratings agencies to more thoroughly review the
capital structure, cash flow and earnings potential of energy companies,
including us. These events have constrained the capital available to the energy
industry and could adversely affect our access to funding for our operations.
Our business is capital intensive and achievement of our growth targets is
dependent, at least in part, upon our ability to access capital at rates and on
terms we determine to be attractive. We currently have a $2.2 billion 364-day
revolving credit facility to support our liquidity needs. That facility will
mature on July 24, 2002. We will be seeking to renew or replace the facility
prior to its maturity. However, no assurance can be made that we will be able to
renew or replace the facility at the same commitment level or on terms that are
as attractive as the current terms. If our ability to access capital on
attractive terms becomes significantly constrained, our financial condition and
future results of operations could be materially adversely affected.
CREDIT EXPOSURE TO ENRON MAY ADVERSELY AFFECT OUR CASH FLOW.
Through a variety of contractual arrangements, consisting primarily of
energy commodity and derivative trading contracts, we have credit exposure to
Enron Corp. and certain of its subsidiaries which have sought protection from
creditors under Chapter 11 of the U.S. Bankruptcy Code. During the fourth
quarter of 2001, we recorded a decrease in revenues of approximately $130
million as a part of our valuation of energy commodity and derivative trading
contracts with Enron entities, $91 million of which was recorded pursuant to
events immediately preceding and following the announced bankruptcy of Enron.
Other of our subsidiaries recorded approximately $5 million of bad debt expense
related to amounts receivable from Enron entities in the fourth quarter of 2001,
reflected in selling, general and administrative expenses. At December 31, 2001,
we have reduced our recorded exposure to accounts receivable from Enron
entities, net of margin deposits, to expected recoverable amounts. On March 28,
2002, we sold certain of our claims against Enron North America for $24.5
million. Claims against other Enron affiliates continue to be held by us. If we
are unable to recover these expected amounts, our cash flow could be adversely
affected.
WE MAY BE SUBJECT TO ADDITIONAL LIABILITIES PERTAINING TO OUR SPUN-OFF
TELECOMMUNICATIONS BUSINESS UNIT.
In the fourth quarter of 2001, we recorded $2.05 billion in pre-tax charges
and in the first quarter of 2002 we recorded an additional $232 million pre-tax
charge because we concluded that it is probable that we will not fully realize
$375 million of receivables from Williams Communications and will be required to
perform on $2.21 billion of guarantee and payment obligations of Williams
Communications, including $750 million on the guarantee of the purchase of
certain fiber-optic network assets and associated facilities leased by Williams
Communications, which we paid in full on March 29, 2002, and $1.4 billion on the
outstanding senior secured notes. Although we are an unsecured creditor of
Williams Communications with respect to these receivables and will become an
unsecured creditor of Williams Communications for any amounts paid by us under
the guarantee and payment obligations, we expect that we will be able to recover
only a portion of the amounts we are owed. Based on various factors, we have
developed a range of loss on receivables for which we currently estimate a
minimum loss of approximately 90% on certain of the receivables and unsecured
balances arising from performance of the guarantee and payment obligations.
Estimating the range of loss as an unsecured creditor involves complex judgments
and assumptions. The actual recoveries may ultimately differ from the currently
estimated recoveries due to numerous factors, which include, but are not limited
to, the future demand for telecommunications services and the state of the
telecommunications industry, Williams Communications' individual performance,
the form of consideration we may receive from Williams Communications'
restructuring under bankruptcy, the length of time Williams Communications
remains in bankruptcy, customer reaction to Williams Communications' bankruptcy,
challenges to our claims which may be raised in the bankruptcy
14
proceedings, negotiations among Williams Communications' creditors, its
unsecured creditors and us, the resolution of any related claims, issues or
challenges that may be raised in the bankruptcy proceedings and the nature of
any restructuring of Williams Communications' balance sheet. Accordingly, we may
record additional losses in the future with respect to these unsecured claims
against Williams Communications.
In April 2001, we spun off Williams Communications, our telecommunications
unit, which was subject to certain lawsuits and settlement negotiations,
including claims for damages, indemnification for royalties and other
contractual claims by third parties. Further, the unit was subject to a putative
class action brought on behalf of all landowners on whose property the
plaintiffs have alleged our former telecommunications unit installed fiber-optic
cable without the permission of the landowner. Another potential putative class
action may challenge the unit's railroad or pipeline rights of way. If
successfully brought against us, this purported class action and other purported
class actions against our former telecommunications unit could have a
significant adverse effect on our results of operations and financial condition.
We have received a private letter ruling from the Internal Revenue Service
(IRS) stating that the distribution of Williams Communications common stock
would be tax-free to us and our stockholders. Although private letter rulings
are generally binding on the IRS, we will not be able to rely on this ruling if
any of the factual representations or assumptions that were made to obtain the
ruling are, or become, incorrect or untrue in any material respect. However, we
are not aware of any facts or circumstances that would cause any of the
representations or assumptions to be incorrect or untrue in any material
respect. The distribution could also become taxable to us, but not our
shareholders, under the Internal Revenue Code (IRC) in the event that our or
Williams Communications' business combinations were deemed to be part of a plan
contemplated at the time of distribution and would constitute a total cumulative
change of more than 50 percent of the equity interest in either company. Such a
taxable event could have a material adverse effect on our cash flow.
RECENT AND ONGOING LAWSUITS MAY IMPAIR OUR FINANCIAL CONDITION AND LIQUIDITY
AND COULD DIVERT THE ATTENTION OF OUR MANAGEMENT.
Since January 29, 2002, we have been named in numerous shareholder class
action suits that have been filed in the United States District Court for the
Northern District of Oklahoma. The majority of the suits allege that we and
co-defendants, Williams Communications and certain corporate officers, have
acted jointly and separately to inflate the stock price of both companies. Other
suits allege similar causes of action related to a public offering in early
January 2002 known as the FELINE PACS offering and an August 2001 bond offering.
These cases were filed against us, certain corporate officers, all members of
our board of directors and all of the offering's underwriters. In addition,
class action complaints have been filed against us and the members of our board
of directors under the Employee Retirement Income Security Act by participants
in our 401(k) plan and a derivative shareholder suit has been filed in state
court in Oklahoma, all based on similar allegations. The Oklahoma Department of
Securities has also initiated an investigation into the spin off and subsequent
bankruptcy of Williams Communications. If any of these cases result in a
substantial monetary judgment against us or are settled on unfavorable terms,
our results of operations, financial condition and cash flow could be materially
adversely affected.
PRICING REGULATIONS FOR POWER SOLD IN CALIFORNIA AND THE WESTERN UNITED STATES
MAY ADVERSELY AFFECT OUR PROFITABILITY.
The prices that we charge, and have charged, for power in California
markets have been challenged in various proceedings, including before the
Federal Energy Regulatory Commission, or the "FERC." In December 2000, the FERC
issued an order which provided that for the period between October 2, 2000 and
December 31, 2002, it may order refunds from us and other similarly situated
companies if the FERC finds that the wholesale markets in California are unable
to produce competitive, just and reasonable prices, or that market power or
other individual seller conduct has been exercised to produce an unjust and
unreasonable rate. Beginning on March 9, 2001, the FERC issued a series of
orders directing us and other similarly situated companies to provide refunds
for any prices charged in excess of FERC established
15
proxy prices from January 1, 2001 to May 29, 2001 or to provide justification
for the prices charged during those months. According to the FERC, our total
potential refund liability for this period is approximately $30 million.
Commencing May 29, 2001, a new prospective proxy price methodology was
established by FERC that was further adjusted by an order of June 19, 2001. We
have filed justification for our prices with the FERC and calculated our refund
liability under the methodology used by the FERC to compute refund amounts at
approximately $11 million. However, in our FERC filings, we continue our
objections to refunds in any amount. No assurances can be given that the FERC
will not seek refunds of additional amounts for the period commencing October 2,
2000 forward. A FERC administrative law judge held extensive settlement
discussions in June and July 2001 regarding refunds and after failing to reach a
settlement, recommended a refund methodology to the FERC. On July 25, 2001, the
FERC adopted, to a significant extent, the judge's methodology. On December 19,
2001 and further on May 15, 2002, the FERC clarified the methodology on
rehearing. This methodology will establish the rates for October 2, 2000 through
June 19, 2001 and will determine refunds and offsets for that period. All refund
amounts discussed above will be subsumed within this proceeding. The judge
presiding over the refund proceedings is expected to issue his findings in
November 2002 and the FERC will subsequently issue a refund order based on these
findings. This proceeding could result in a refund liability that could have a
material adverse effect on our results of operations and financial condition.
Certain parties have also asked the FERC to revoke our authority to sell power
from California-based generating units at market-based rates; to limit us to
cost-based rates for future sales from such units; and to order refunds of
excessive rates with interest back to May 1, 2000 and possibly earlier. Although
we believe these requests are ill-founded, if the FERC were to take such action,
it could have a material adverse effect on our results of operations and
financial condition.
The June 19, 2001 order discussed above also implements a price mitigation
and market monitoring plan for wholesale power sales by all suppliers of
electricity, including us, in spot markets for a region that includes California
and ten other western states (the "Western Systems Coordinating Council," or
"WSCC"). In general, the plan, which will be in effect from June 20, 2001
through September 30, 2002, establishes a market clearing price for spot sales
in all hours of the day that is based on the bid of the highest-cost gas-fired
California generating unit that is needed to serve the California Independent
System Operator's load. When generation operating reserves fall below 7% in
California (a "reserve deficiency period"), absent cost based justification for
a higher price, the maximum price that we may charge for wholesale spot sales in
the WSCC is the market clearing price. When generation operating reserves rise
to 7% or above in California, absent cost based justification for a higher
price, our maximum price will be limited to 85% of the highest hourly price that
was in effect during the most recent reserve deficiency period. This price
mitigation plan could result in a material adverse effect on our results of
operations and financial condition.
The California Public Utilities Commission (CPUC) filed a complaint with
FERC on February 25, 2002, seeking to void or, alternatively, reform a number of
the long-term power purchase contracts entered into between the State of
California and several suppliers in 2001, including us. The CPUC alleges that
the contracts are tainted with the exercise of market power and significantly
exceed "just and reasonable" prices. The Electricity Oversight Board (EOB) made
a similar filing on February 27, 2002. These cases have been set for hearing.
Various civil actions have also been filed in State Court in California seeking
to void these contracts. While we believe these complaints are ill-founded, no
assurance can be provided with respect to any actions that FERC may take in
response to these complaints.
On February 13, 2002, the FERC issued an Order Directing Staff
Investigation commencing a proceeding titled Fact-Finding Investigation of
Potential Manipulation of Electric and Natural Gas Prices. Through the
investigation, the FERC intends to determine whether "any entity, including
Enron Corporation (through any of its affiliates or subsidiaries), manipulated
short-term prices for electric energy or natural gas in the West or otherwise
exercised undue influence over wholesale electric prices in the West, since
January 1, 2000, resulting in potentially unjust and unreasonable rates in
long-term power sales contracts subsequently entered into by sellers in the
West." This investigation does not constitute a Federal Power Act complaint;
rather, results of the investigation will be used by the FERC in any existing or
16
subsequent Federal Power Act or Natural Gas Act complaint. The FERC Staff is
directed to complete the investigation as soon as "is practicable." We, through
many of our subsidiaries, are a major supplier of natural gas and power in the
West and as such anticipate being the subject of certain aspects of the
investigation. In fact, Williams and others have received numerous inquiries as
of this date including requests for admissions regarding certain trading
practices first revealed with the publication of an internal Enron memorandum
and also regarding natural gas and power "wash" or "round-trip" trading. We
responded to one such request for admissions regarding the Enron memorandum on
May 22, 2002 (see exhibit 99.2 of our Current Report on Form 8-K filed May 22,
2002 for a complete copy of the response), and subsequent responses are due on
May 31 and June 7, 2002. If we are named by FERC in a subsequent complaint, and
that complaint is later resolved on terms unfavorable to us, our results of
operations and financial condition could be adversely affected.
CREDIT EXPOSURE IN CALIFORNIA MAY ADVERSELY AFFECT OUR PROFITABILITY.
Through a long-term contractual relationship with affiliates of AES Corp.,
we have marketing rights to nearly 4,000 megawatts of generation capacity in the
Los Angeles basin. We sell much of this capacity on a forward basis through
contracts with various counterparties. The remainder of our available capacity
is sold in the spot and short term market primarily through the California
Independent System Operator. During the period of the summer of 2000 through the
winter of 2000-2001, tight supply and increased demand resulted in higher
wholesale power prices to California utilities. At the same time, two of the
three major utilities have been operating under a retail rate freeze. As a
result, there was significant underrecovery of costs by the utilities, one of
which, Pacific Gas & Electric, has filed for bankruptcy protection. On May 3,
2002, we sold certain of our claims against the California Independent System
Operator Corporation ultimately payable by Pacific Gas & Electric for $78.7
million. In addition, Southern California Edison has entered into an agreement
with the State of California regarding various arrangements that could prevent
its bankruptcy. Williams believes that as of March 1, 2002, Southern California
Edison has become current on all of its obligations to the market through
payments it made to the California Power Exchange which is currently in
bankruptcy. While we believe we will eventually be paid by the California Power
Exchange, no assurance can be made. Our credit exposure to the California
utilities could result in a material adverse effect on our results of operations
and financial condition.
CLASS ACTION LAWSUITS AND FEDERAL AND STATE INITIATIVES, INVESTIGATIONS AND
PROCEEDINGS RELATING TO OUR ACTIVITIES IN CALIFORNIA MAY ADVERSELY AFFECT OUR
RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
A number of federal and state initiatives addressing the issues of the
California electric power industry are also ongoing and may result in
restructuring of various markets in California and elsewhere. Discussions in
California and other states have ranged from threats of re-regulation to
suspension of plans to move forward with deregulation. Allegations have also
been made that wholesale price increases resulted from the exercise of market
power and collusion of the power generators and sellers, such as us. These
allegations have resulted in multiple state and federal investigations. In May
2001, the Department of Justice issued a Civil Investigative Demand commencing
an antitrust investigation relating to an agreement between one of our
subsidiaries and AES Southland alleging that the agreement limits the expansion
of electric generating capacity at or near the AES Southland plants that are
subject to a long-term tolling agreement between us and AES. We are cooperating
with the investigation. The Attorney General of California is also investigating
this matter as well as whether AES and Williams have improperly acted to
withhold generation from the market.
The allegations have also resulted in the filing of class action lawsuits
in which we were named as a defendant. Between November 2000 and May 2001, class
actions were filed on behalf of California ratepayers against California power
generators and traders, including Williams Energy Marketing & Trading Company,
one of our subsidiaries. These lawsuits concern the increase in power prices in
California during the summer of 2000 through the winter of 2000-01 and claim
that the defendants acted to manipulate prices in violation of the California
antitrust and business practice statutes and other state and federal laws.
Plaintiffs are seeking injunctive relief as well as restitution, disgorgement,
appointment of
17
a receiver, and damages, including treble damages. These cases have been
consolidated before the San Diego County Superior Court. Related suits have also
been filed by additional plaintiffs in April and May 2002.
In addition, on March 11, 2002, the California Attorney General's office
filed a civil complaint against us. This complaint alleges violations of Section
17200 of the California Business & Professions Code which prohibits acts of
unfair competition. The alleged unfair competition revolves around Williams'
practice under its FERC-approved tariff of selling ancillary services and then
selling the power associated with those services separately. Similar separate
suits were filed against other marketers. We dispute the allegations and intend
to vigorously defend against them. The Attorney General of California has also
brought an action against us in both State Court and at FERC alleging that we
have not properly filed our rates with FERC. Most of these initiatives,
investigations and proceedings are in their preliminary stages and their likely
outcome cannot be estimated. There can be no assurance that these initiatives,
investigations and proceedings will not have an adverse effect on Williams'
results of operations or financial condition. We may incur significant costs in
responding to these actions which may have an adverse effect on our cash flows.
Additionally, if these actions result in substantial judgments against us, our
results of operations and financial condition could be materially adversely
affected.
OUR FINANCIAL CONDITION COULD BE ADVERSELY AFFECTED BY CHANGES IN THE LEVEL OF
ACTIVITY IN THE OIL AND GAS INDUSTRY AND THIS ACTIVITY IS SIGNIFICANTLY
AFFECTED BY VOLATILE OIL AND GAS PRICES.
Our financial condition could be adversely affected by changes in the level
of activity in oil and gas exploration, development and production in markets
worldwide. Oil and gas prices, market expectations of potential changes in these
prices and a variety of political and economic factors significantly affect this
level of activity. Oil and gas prices are extremely volatile and are affected by
numerous factors, including:
- worldwide demand for oil and gas;
- the ability of the Organization of Petroleum Exporting Countries,
commonly called "OPEC," to set and maintain production levels and
pricing;
- the level of production in non-OPEC countries; and
- the policies of the various governments regarding exploration and
development of their oil and gas reserves.
OUR OPERATIONS ARE SUBJECT TO OPERATIONAL HAZARDS, UNINSURED RISKS AND
ENVIRONMENTAL RISKS.
Our exploration, production, transportation, gathering, refining and
processing operations are subject to the inherent risks normally associated with
those operations, including explosions, pollution, release of toxic substances,
fires and other hazards, each of which could result in damage to or destruction
of our facilities or damage to persons and property. If any of these events were
to occur, we could suffer substantial losses. Although we maintain insurance
against these types of risks to the extent and in amounts that we believe are
reasonable, our financial condition and operations could be adversely affected
if a significant event occurs that is not fully covered by insurance.
Our current and former operations also involve management of regulated
materials and are subject to various environmental laws and regulations. Certain
of our subsidiaries have been identified as potentially responsible parties at
hazardous materials disposal sites under the federal environmental laws, and
have incurred, or are alleged to have incurred, various other hazardous
materials removal and remediation obligations under environmental laws. Further,
certain of our subsidiaries are currently negotiating settlements with the U.S.
Department of Justice and the U.S. Environmental Protection Agency with respect
to their waste management practices and air emissions. In settlement of several
of these matters, our relevant subsidiary has agreed, during the fourth quarter
of 2001, to pay monetary fines and/or conduct supplemental environmental
projects. These fines and projects are estimated to cost approximately $2.9
million in the aggregate. If we are required to make future expenditures related
to environmental matters, they could have an adverse effect on our cash flow.
18
TERRORIST ATTACKS, SUCH AS THE ATTACKS THAT OCCURRED ON SEPTEMBER 11, 2001,
AND WAR OR RISK OF WAR MAY ADVERSELY IMPACT OUR RESULTS OF OPERATIONS, OUR
ABILITY TO RAISE CAPITAL OR OUR FUTURE GROWTH.
The impact that the terrorist attacks of September 11, 2001 may have on the
energy industry in general, and on us in particular, is not known at this time.
Uncertainty surrounding military strikes or a sustained military campaign may
impact our operations in unpredictable ways, including changes in the insurance
markets, disruptions of fuel supplies and markets, particularly oil, and the
possibility that infrastructure facilities, including pipelines, production
facilities, refineries, electric generation, transmission and distribution
facilities, could be direct targets of, or indirect casualties of, an act of
terror. War or risk of war may also have an adverse effect on the economy. The
terrorist attacks on September 11, 2001 and the changes in the insurance markets
attributable to the terrorist attacks have made it difficult for us to obtain
certain types of insurance coverage. We may be unable to secure the levels and
types of insurance we would otherwise have secured prior to September 11, 2001.
There can be no assurance that insurance will be available to us without
significant additional costs. A lower level of economic activity could also
result in a decline in energy consumption which could adversely affect our
revenues or restrict our future growth. Instability in the financial markets as
a result of terrorism or war could also affect our ability to raise capital.
RISK RELATING TO THE NEW NOTES
WE DEPEND ON PAYMENTS FROM OUR SUBSIDIARIES, AND CLAIMS OF NOTE HOLDERS RANK
JUNIOR TO THOSE OF CREDITORS OF OUR SUBSIDIARIES.
We are a holding company and we conduct substantially all of our operations
through our subsidiaries. We perform management, legal, financial, tax,
consulting, administrative and other services for our subsidiaries. Our
principal sources of cash are from external financings, dividends and advances
from our subsidiaries, investments, payments by our subsidiaries for services
rendered, and interest payments from our subsidiaries on cash advances. The
amount of dividends available to us from our subsidiaries largely depends upon
each subsidiary's earnings and operating capital requirements. The terms of some
of our subsidiaries' borrowing arrangements limit the transfer of funds to us.
In addition, the ability of our subsidiaries to make any payments to us will
depend on our subsidiaries' earnings, business and tax considerations and legal
restrictions.
As a result of our holding company structure, the new notes will
effectively rank junior to all existing and future debt, trade payables and
other liabilities of our subsidiaries. Any right of Williams and our creditors
to participate in the assets of any of our subsidiaries upon any liquidation or
reorganization of any such subsidiary will be subject to the prior claims of
that subsidiary's creditors, including trade creditors, except to the extent
that we may ourselves be a creditor of such a subsidiary.
THE COVENANTS CONTAINED IN OUR INDENTURE GENERALLY DO NOT LIMIT OUR ABILITY TO
ENGAGE IN TRANSACTIONS THAT COULD ADVERSELY AFFECT OUR OPERATIONS.
Except for the covenant limiting liens contained in our indenture, neither
our indenture nor the new notes contains any covenants or other provisions
designed to afford holders of the new notes protection in the event of a highly
leveraged transaction involving us or any restrictions on the amount of
additional indebtedness that we may issue. If we were to engage in a highly
leveraged transaction or substantially increase our outstanding indebtedness, it
could negatively affect our operations in a number of ways, including limiting
our ability to obtain additional financing, reducing funds available for other
corporate purposes and limiting our flexibility to respond to downturns in our
business. In addition, we would be required to repay any additional indebtedness
as it matured. We might not have sufficient funds or might be unable to arrange
for additional financing to repay any additional debt as it became due.
19
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the new notes in
exchange for the outstanding senior secured notes. We are making this exchange
solely to satisfy our obligations under the consent solicitation statement. In
consideration for issuing the new notes, we will receive outstanding senior
secured notes in aggregate principal amount equal to the aggregate principal
amount of the new notes.
THE EXCHANGE OFFER
EXCHANGE TERMS
An aggregate of $1.4 billion principal amount of outstanding senior secured
notes are currently issued and outstanding. The maximum principal amount of new
notes that will be issued in exchange for outstanding senior secured notes is
$1.4 billion.
The new notes differ from the senior secured notes in a variety of ways,
including the following:
- the new notes will be senior unsecured obligations of Williams that rank
on a parity with all other senior unsecured indebtedness of Williams,
while the senior secured notes are senior secured limited recourse
obligations of WCG Note Trust and WCG Note Corp., Inc.;
- interest on the new notes will accrue at the annual rate of 9.25%, while
interest on the senior secured notes accrues at the annual rate of 8.25%;
and
- the offering of the new notes will be registered under the Securities Act
and transfers of the new notes will be unrestricted, while the senior
secured notes bear restrictive legends and are subject to restrictions on
transfer.
The new notes will bear interest at a rate of 9.25% per year, payable
semiannually on March 15 and September 15 of each year, beginning September 16,
2002. Holders of new notes will receive interest accrued from March 16, 2002,
the day immediately following the date of the last payment of interest on the
outstanding senior secured notes. Holders of new notes will not receive any
payment on account of accrued interest on outstanding senior secured notes
tendered and accepted for exchange.
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, we will accept for exchange any outstanding
senior secured notes properly tendered in the exchange offer, and the exchange
agent will deliver the new notes promptly after the expiration date (as defined
below) of the exchange offer. We expressly reserve the right to delay acceptance
of any of the tendered outstanding senior secured notes not already accepted if
any condition set forth below under "-- Conditions to the Exchange Offer" has
not been satisfied or waived by us.
If you tender your outstanding senior secured notes, you will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of the
outstanding senior secured notes. We will pay all charges, expenses and transfer
taxes in connection with the exchange offer, other than certain taxes described
below under "-- Transfer Taxes."
You may tender some or all of your senior secured notes in connection with
this exchange offer. However, senior secured notes may be tendered only in
integral multiples of $1,000.
EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The Exchange Offer will expire at 5:00 p.m., New York City time, on
, 2002, the "expiration date," unless extended by us. We expressly
reserve the right to extend the exchange offer on a daily basis or for such
period or periods as we may determine in our sole discretion from time to time
by giving oral, confirmed in writing, or written notice to the exchange agent
and by making a public announcement by press release to the Dow Jones News
Service prior to 9:00 a.m., New York City time, on the first business day
following the previously scheduled expiration date. During any extension of the
20
exchange offer, all outstanding senior secured notes previously tendered, not
validly withdrawn and not accepted for exchange will remain subject to the
exchange offer and may be accepted for exchange by us.
To the extent we are legally permitted to do so, we expressly reserve the
absolute right, in our sole discretion, to:
- waive any condition to the exchange offer; and
- amend any of the terms of the exchange offer.
Any waiver or amendment to the exchange offer will apply to all outstanding
senior secured notes tendered, regardless of when or in what order the
outstanding senior secured notes were tendered. If we make a material change in
the terms of the exchange offer or if we waive a material condition of the
exchange offer, we will disseminate additional exchange offer materials. If the
amendment or waiver is made less than ten business days before the expiration of
the exchange offer, we will extend the exchange offer so that holders have at
least ten business days to tender or withdraw.
We expressly reserve the right, in our sole discretion, to terminate the
exchange offer if any of the conditions set forth under "-- Conditions to the
Exchange Offer" exists. Any such termination will be followed promptly by a
public announcement. In the event we terminate the exchange offer, we will give
immediate notice to the exchange agent, and all outstanding senior secured notes
previously tendered and not accepted for payment will be returned promptly to
the tendering holders.
In the event that the exchange offer is withdrawn or otherwise not
completed, new notes will not be given to holders of outstanding senior secured
notes who have tendered their outstanding senior secured notes.
ACCEPTANCE OF OUTSTANDING SENIOR SECURED NOTES FOR EXCHANGE
If the conditions specified below under "-- Conditions to the Exchange
Offer" have been satisfied or waived on or prior to the expiration date of the
exchange offer, we will accept for exchange outstanding senior secured notes
validly tendered pursuant to the exchange offer, or defectively tendered, if
such defect has been waived by us, and not withdrawn prior to the expiration
date of the exchange offer. We will not accept outstanding senior secured notes
for exchange subsequent to the expiration date of the exchange offer. Tenders of
outstanding senior secured notes will be accepted only in principal amounts
equal to $1,000 or integral multiples thereof.
We expressly reserve the right, in our sole discretion, to:
- delay acceptance for exchange of outstanding senior secured notes
tendered under the exchange offer, subject to Rule 14e-1 under the
Exchange Act, which requires that an offeror pay the consideration
offered or return the securities deposited by or on behalf of the holders
promptly after the termination or withdrawal of a tender offer; or
- terminate the exchange offer and not accept for exchange any outstanding
senior secured notes not theretofore accepted for exchange, if any of the
conditions set forth below under "-- Conditions to the Exchange Offer"
has not been satisfied or waived by us. In all cases, new notes will be
issued only after timely receipt by the exchange agent of certificates
representing outstanding senior secured notes, or confirmation of
book-entry transfer, a properly completed and duly executed letter of
transmittal, or a manually signed facsimile thereof, and any other
required documents. For purposes of the exchange offer, we will be deemed
to have accepted for exchange validly tendered outstanding senior secured
notes, or defectively tendered outstanding senior secured notes with
respect to which we have waived such defect, if, as and when we give
oral, confirmed in writing, or written notice to the exchange agent.
Promptly after the expiration date, we will deposit the new notes with
the exchange agent, who will act as agent for the tendering holders for
the purpose of receiving the new notes and transmitting them to the
holders. The exchange agent will deliver the new notes to holders of
outstanding senior secured notes accepted for exchange after the exchange
agent receives the new notes.
21
If for any reason, we delay acceptance for exchange of validly tendered
outstanding senior secured notes or we are unable to accept for exchange validly
tendered outstanding senior secured notes, then the exchange agent may,
nevertheless, on our behalf, retain tendered outstanding senior secured notes,
without prejudice to our rights described under "-- Expiration Date; Extensions;
Termination; Amendments," "-- Withdrawal of Tenders" and "-- Conditions to the
Exchange Offer," subject to Rule 14e-1 under the Exchange Act, which requires
that an offeror pay the consideration offered or return the securities deposited
by or on behalf of the holders thereof promptly after the termination or
withdrawal of a tender offer.
If any tendered outstanding senior secured notes are not accepted for
exchange for any reason, including if certificates are submitted evidencing more
outstanding senior secured notes than those that are tendered, certificates
evidencing outstanding senior secured notes that are not exchanged will be
returned, without expense, to the tendering holder, or, in the case of
outstanding senior secured notes tendered by book-entry transfer into the
exchange agent's account at a book-entry transfer facility under the procedure
set forth under "-- Procedures for Tendering Outstanding Senior Secured
Notes -- Book-Entry Transfer," such outstanding senior secured notes will be
credited to the account maintained at such book-entry transfer facility from
which such outstanding senior secured notes were delivered, unless otherwise
required by such holder under "Special Delivery Instructions" in the letter of
transmittal, promptly following the expiration date or the termination or
withdrawal of the exchange offer.
Tendering holders of outstanding senior secured notes exchanged in the
exchange offer will not be obligated to pay brokerage commissions or transfer
taxes with respect to the exchange of their outstanding senior secured notes
other than as described in "-- Transfer Taxes" or in Instruction 9 to the letter
of transmittal. We will pay all other charges and expenses in connection with
the exchange offer.
PROCEDURES FOR TENDERING OUTSTANDING SENIOR SECURED NOTES
Any beneficial owner whose outstanding senior secured notes are registered
in the name of a broker, dealer, commercial bank, trust company or other nominee
or held through a book-entry transfer facility and who wishes to tender
outstanding senior secured notes should contact such registered holder promptly
and instruct such registered holder to tender outstanding senior secured notes
on such beneficial owner's behalf.
Tender of Outstanding Senior Secured Notes Held Through DTC. The exchange
agent and DTC have confirmed that the exchange offer is eligible for the DTC
automated tender offer program. Accordingly, DTC participants may electronically
transmit their acceptance of the exchange offer by causing DTC to transfer
outstanding senior secured notes to the exchange agent in accordance with DTC's
automated tender offer program procedures for transfer. DTC will then send an
agent's message to the exchange agent.
The term "agent's message" means a message transmitted by DTC, received by
the exchange agent and forming part of the book-entry confirmation, which states
that DTC has received an express acknowledgement from the participant in DTC
tendering outstanding senior secured notes that are the subject of that
book-entry confirmation that the participant has received and agrees to be bound
by the terms of the letter of transmittal, and that we may enforce such
agreement against such participant. In the case of an agent's message relating
to guaranteed delivery, the term means a message transmitted by DTC and received
by the exchange agent, which states that DTC has received an express
acknowledgement from the participant in DTC tendering outstanding senior secured
notes that they have received and agree to be bound by the notice of guaranteed
delivery.
Tender of Outstanding Senior Secured Notes Held in Physical Form. For a
holder to validly tender outstanding senior secured notes held in physical form:
- the exchange agent must receive at its address set forth in this
prospectus a properly completed and validly executed letter of
transmittal, or a manually signed facsimile thereof, together with any
22
signature guarantees and any other documents required by the instructions
to the letter of transmittal; and
- the exchange agent must receive certificates for tendered outstanding
senior secured notes at such address, or such outstanding senior secured
notes must be transferred pursuant to the procedures for book-entry
transfer described above. A confirmation of such book-entry transfer must
be received by the exchange agent prior to the expiration date of the
exchange offer. A holder who desires to tender outstanding senior secured
notes and who cannot comply with the procedures set forth in this
prospectus for tender on a timely basis or whose outstanding senior
secured notes are not immediately available must comply with the
procedures for guaranteed delivery set forth below.
LETTERS OF TRANSMITTAL AND OUTSTANDING SENIOR SECURED NOTES SHOULD BE SENT
ONLY TO THE EXCHANGE AGENT AND NOT TO US OR TO ANY BOOK-ENTRY TRANSFER FACILITY.
THE METHOD OF DELIVERY OF OUTSTANDING SENIOR SECURED NOTES, LETTERS OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE
ELECTION AND RISK OF THE HOLDER TENDERING OUTSTANDING SENIOR SECURED NOTES.
DELIVERY OF SUCH DOCUMENTS WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY
THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL, WE SUGGEST THAT THE HOLDER USE
PROPERLY INSURED, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, AND THAT THE
MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE OF THE EXCHANGE
OFFER TO PERMIT DELIVERY TO THE EXCHANGE AGENT PRIOR TO SUCH DATE. NO
ALTERNATIVE, CONDITIONAL OR CONTINGENT TENDERS OF OUTSTANDING SENIOR SECURED
NOTES WILL BE ACCEPTED.
Signature Guarantees. Signatures on the letter of transmittal must be
guaranteed by an eligible institution unless:
- the letter of transmittal is signed by the registered holder of the
outstanding senior secured notes tendered therewith, or by a participant
in one of the book-entry transfer facilities whose name appears on a
security position listing it as the owner of those outstanding senior
secured notes, or if any outstanding senior secured notes for principal
amounts not tendered are to be issued directly to the holder, or, if
tendered by a participant in one of the book-entry transfer facilities,
any outstanding senior secured notes for principal amounts not tendered
or not accepted for exchange are to be credited to the participant's
account at the book-entry transfer facility, and neither the "Special
Issuance Instructions" nor the "Special Delivery Instructions" box on the
letter of transmittal has been completed, or
- the outstanding senior secured notes are tendered for the account of an
eligible institution.
An eligible institution is a firm that is a participant in the Security
Transfer Agents Medallion Program or the Stock Exchanges Medallion Program,
which is generally a member of a registered national securities exchange, a
member of the National Association of Securities Dealers, Inc., or a commercial
bank or trust company having an office in the United States.
Book-Entry Transfer. The exchange agent will seek to establish a new
account or utilize an outstanding account with respect to the outstanding senior
secured notes at DTC promptly after the date of this prospectus. Any financial
institution that is a participant in the book-entry transfer facility system and
whose name appears on a security position listing it as the owner of the
outstanding senior secured notes may make book-entry delivery of outstanding
senior secured notes by causing the book-entry transfer facility to transfer
such outstanding senior secured notes into the exchange agent's account.
HOWEVER, ALTHOUGH DELIVERY OF OUTSTANDING SENIOR SECURED NOTES MAY BE EFFECTED
THROUGH BOOK-ENTRY TRANSFER INTO THE EXCHANGE AGENT'S ACCOUNT AT A BOOK-ENTRY
TRANSFER FACILITY, A PROPERLY COMPLETED AND VALIDLY EXECUTED LETTER OF
TRANSMITTAL, OR A MANUALLY SIGNED FACSIMILE THEREOF, MUST BE RECEIVED BY THE
EXCHANGE AGENT AT ITS ADDRESS SET FORTH IN THIS PROSPECTUS ON OR PRIOR TO THE
EXPIRATION DATE OF THE EXCHANGE OFFER, OR ELSE THE GUARANTEED DELIVERY
PROCEDURES DESCRIBED BELOW MUST BE COMPLIED WITH. The confirmation of a book-
entry transfer of outstanding senior secured notes into the exchange agent's
account at a book-entry transfer facility is referred to in this prospectus as a
"book-entry confirmation." DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER
FACILITY IN ACCORDANCE WITH THAT BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES
NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
23
Guaranteed Delivery. If you wish to tender your outstanding senior secured
notes and:
- certificates representing your outstanding senior secured notes are not
lost but are not immediately available;
- time will not permit your letter of transmittal, certificates
representing your outstanding senior secured notes and all other required
documents to reach the exchange agent on or prior to the expiration date
of the exchange offer; or
- the procedures for book-entry transfer cannot be completed on or prior to
the expiration date of the exchange offer,
then, you may tender if both of the following are complied with:
- your tender is made by or through an eligible institution; and
- on or prior to the expiration date of the exchange offer, the exchange
agent has received from the eligible institution a properly completed and
validly executed notice of guaranteed delivery, by manually signed
facsimile transmission, mail or hand delivery, in substantially the form
provided with this prospectus.
The notice of guaranteed delivery must:
- set forth your name and address, the registered number(s) of your
outstanding senior secured notes and the principal amount of outstanding
senior secured notes tendered;
- state that the tender is being made thereby;
- guarantee that, within three New York Stock Exchange trading days after
the expiration date of the exchange offer, the letter of transmittal or
facsimile thereof properly completed and validly executed, together with
certificates representing the outstanding senior secured notes, or a
book-entry confirmation, and any other documents required by the letter
of transmittal and the instructions thereto, will be deposited by the
eligible institution with the exchange agent; and
- the exchange agent receives the properly completed and validly executed
letter of transmittal or facsimile thereof with any required signature
guarantees, together with certificates for all outstanding senior secured
notes in proper form for transfer, or a book-entry confirmation, and any
other required documents, within three New York Stock Exchange trading
days after the date of the notice of guaranteed delivery.
Other Matters. New notes will be issued in exchange for outstanding senior
secured notes accepted for exchange only after timely receipt by the exchange
agent of:
- certificates for (or a timely book-entry confirmation with respect to)
your outstanding senior secured notes, a properly completed and duly
executed letter of transmittal or facsimile thereof with any required
signature guarantees, or, in the case of a book-entry transfer, an
agent's message; and
- any other documents required by the letter of transmittal.
All questions as to the form of all documents and the validity, including
time of receipt, and acceptance of all tenders of outstanding senior secured
notes will be determined by us, in our sole discretion, the determination of
which shall be final and binding. ALTERNATIVE, CONDITIONAL OR CONTINGENT TENDERS
OF OUTSTANDING SENIOR SECURED NOTES WILL NOT BE CONSIDERED VALID. We reserve the
absolute right to reject any or all tenders of outstanding senior secured notes
that are not in proper form or the acceptance of which, in our opinion, would be
unlawful. We also reserve the right to waive any defects, irregularities or
conditions of tender as to particular outstanding senior secured notes.
Our interpretation of the terms and conditions of the exchange offer,
including the instructions in the letter of transmittal, will be final and
binding.
24
Any defect or irregularity in connection with tenders of outstanding senior
secured notes must be cured within the time we determine, unless waived by us.
Tenders of outstanding senior secured notes will not be deemed to have been made
until all defects and irregularities have been waived by us or cured. Neither
we, the exchange agent, the dealer managers nor any other person will be under
any duty to give notice of any defects or irregularities in tenders of
outstanding senior secured notes, or will incur any liability to holders for
failure to give any such notice.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, you may withdraw your
tender of outstanding senior secured notes at any time prior to 5:00 p.m., New
York City time, on the expiration date.
For a withdrawal to be effective:
- the exchange agent must receive a written notice of withdrawal at its
address set forth below under "-- Exchange Agent," or
- you must comply with the appropriate procedures of DTC's automated tender
offer program system.
Any notice of withdrawal must:
- specify the name of the person who tendered the outstanding senior
secured notes to be withdrawn; and
- identify the outstanding senior secured notes to be withdrawn, including
the principal amount of the outstanding senior secured notes.
If outstanding senior secured notes have been tendered pursuant to the
procedure for book-entry transfer described above, any notice of withdrawal must
specify the name and number of the account at DTC to be credited with the
withdrawn outstanding senior secured notes and otherwise comply with the
procedures of DTC.
We will determine all questions as to the validity, form, eligibility and
time of receipt of notice of withdrawal, and our determination shall be final
and binding on all parties. We will deem any outstanding senior secured notes so
withdrawn not to have been validly tendered for exchange for purposes of the
exchange offer.
Any outstanding senior secured notes that have been tendered for exchange
but that are not exchanged for any reason will be returned to their holder
without cost to the holder or, in the case of outstanding senior secured notes
tendered by book-entry transfer into the exchange agent's account at DTC
according to the procedures described above, such outstanding senior secured
notes will be credited to an account maintained with DTC for the outstanding
senior secured notes. This return or crediting will take place as soon as
practicable after withdrawal, rejection of tender or termination of the exchange
offer. You may retender properly withdrawn outstanding senior secured notes by
following one of the procedures described under "-- Procedures for Tendering
Outstanding Senior Secured Notes" at any time on or prior to the expiration
date.
CONDITIONS TO THE EXCHANGE OFFER
We will not be required to accept for exchange, or exchange any new notes
for, any outstanding senior secured notes tendered, and we may terminate, extend
or amend the exchange offer and may, subject to Rule 14e-1 under the Exchange
Act, which requires that an offeror pay the consideration offered or return the
securities deposited by or on behalf of the holders thereof promptly after the
termination or withdrawal of a tender offer, postpone the acceptance for
exchange of outstanding senior secured notes so tendered if, on or prior to the
expiration date of the exchange offer, the following shall have occurred:
- we have determined that the offering and sales under the registration
statement, the filing of such registration statement or the maintenance
of its effectiveness would require disclosure of or would interfere in
any material respect with any material financing, merger, offering or
other transaction
25
involving us or would otherwise require disclosure of nonpublic
information that could materially and adversely affect us;
- we have determined that the exchange offer would violate any applicable
law or interpretation of the staff of the SEC;
- any legal action has been instituted or threatened that would impair our
ability to proceed with the exchange offer; or
- any change, or any development involving a prospective change, has
occurred or been threatened in our business, financial condition,
operations or prospects that is or may be adverse to us, or we have
become aware of facts that have or may have an adverse impact on the
value of the outstanding senior secured notes or the new notes, which in
our reasonable judgment, in each case, makes it inadvisable to proceed
with the exchange offer.
The conditions to the exchange offer are for our sole benefit and may be
asserted by us in our sole discretion or may be waived by us, in whole or in
part, in our sole discretion, whether or not any other condition of the exchange
offer also is waived. We have not made a decision as to what circumstances would
lead us to waive any condition, and any waiver would depend on circumstances
prevailing at the time of that waiver. Any determination by us concerning the
events described in this section shall be final and binding upon all persons.
ALTHOUGH WE HAVE NO PRESENT PLANS OR ARRANGEMENTS TO DO SO, WE RESERVE THE
RIGHT TO AMEND, AT ANY TIME, THE TERMS OF THE EXCHANGE OFFER. WE WILL GIVE
HOLDERS NOTICE OF ANY AMENDMENTS IF REQUIRED BY APPLICABLE LAW.
CONSEQUENCES OF FAILURE TO EXCHANGE
If you do not exchange your senior secured notes for new notes in the
exchange offer, your senior secured notes will remain outstanding and will
continue to be subject to their existing terms. The senior secured notes will
continue to be senior secured limited recourse obligations of WCG Note Trust and
WCG Note Corp., Inc. In addition, interest on the senior secured notes will
continue to accrue at the annual rate of 8.25%. Moreover, the senior secured
notes will continue to be subject to restrictions on transfer:
- as set forth in the legend printed on the senior secured notes as a
consequence of the issuance of the outstanding senior secured notes
pursuant to the exemptions from, or in transactions not subject to, the
registration requirements of the Securities Act and applicable state
securities laws; and
- otherwise set forth in the offering memorandum distributed in connection
with the private offering of the outstanding senior secured notes.
In general, you may not offer or sell the outstanding senior secured notes
unless they are registered under the Securities Act, or if the offer or sale is
exempt from registration under the Securities Act and applicable state
securities laws.
The trading market for outstanding senior secured notes not exchanged in
the exchange offer may be significantly more limited than it is at present.
Therefore, if your senior secured notes are not tendered and accepted in the
exchange offer, it may become more difficult for you to sell or transfer your
unexchanged senior secured notes. See "Risk Factors -- Risks Arising from the
Exchange Offer."
In addition, as described below, you may be entitled to receive an extra
payment from us if you do not exchange your senior secured notes for new notes
in the exchange offer.
EXTRA PAYMENTS ON THE SENIOR SECURED NOTES
On March 5, 2002, we received the requisite approvals for our consent
solicitation to amend the terms relating to the senior secured notes. In
connection with our consent solicitation, we agreed that if we had not completed
an exchange offer or a similar transaction before specified dates, we would pay
holders of
26
the outstanding senior secured notes the amounts specified in the consent
solicitation statement. Since we expect to complete the exchange offer before
those specified dates and since the exchange offer is not conditioned upon any
minimum aggregate principal amount of outstanding senior secured notes being
tendered, we do not anticipate making these additional payments to holders of
the outstanding senior secured notes.
We also agreed that if we consummate the exchange offer by August 1, 2002,
but less than a majority in aggregate principal amount of outstanding senior
secured notes are tendered, then, on September 16, 2002, we will make an extra
payment of $18.33 in cash for each $1,000 principal amount of outstanding senior
secured notes to the registered holders of senior secured notes entitled to
receive the interest payment on the senior secured notes on September 16, 2002.
Holders of new notes will not be entitled to this extra payment from us.
EARLY REDEMPTION OF SENIOR SECURED NOTES
Prior to, simultaneously with or shortly after the consummation of the
exchange offer, we may exercise our rights to cause the trustee for the senior
secured notes to sell, at the highest reasonably available market price, the
$1.5 billion promissory note issued by Williams Communications, which is
currently held as security for the senior secured notes. Under the indenture
governing the senior secured notes, the proceeds of this sale would be applied
on a pro rata basis to cause an early redemption of a portion of the senior
secured notes. Such redemption would be at a price equal to:
- the accrued and unpaid interest on the senior secured notes redeemed to
the redemption date, plus
- the greater of (x) 100% of the outstanding aggregate principal amount of
the senior secured notes redeemed and (y) the sum of the present values
of the remaining scheduled payments of principal and interest to the
maturity date on the senior secured notes redeemed discounted to the
redemption date on a semi-annual basis (assuming a 360-day year
consisting of twelve 30-day months) at the applicable U.S. Treasury yield
plus 50 basis points.
The early redemption may occur before, after or simultaneously with the
completion of the exchange offer, or not at all. If the early redemption were to
occur prior to the completion of the exchange offer, holders of outstanding
senior secured notes would only have the opportunity to exchange those senior
secured notes that remained outstanding. If the early redemption were to occur
following the completion of the exchange offer, a portion of any outstanding
senior secured notes that were not tendered in the exchange offer would be
redeemed. In addition, if we consummate the exchange offer by August 1, 2002,
but are required to make the extra payment described above because less than a
majority in aggregate principal amount of outstanding senior secured notes were
tendered, holders of senior secured notes will only be entitled to receive the
extra payment with respect to the portion of their senior secured notes that
remain outstanding following any early redemption.
EXCHANGE AGENT
Bank One Trust Company, N.A., has been appointed as exchange agent for the
exchange offer. You should direct questions and requests for assistance,
requests for additional copies of this prospectus, the letter of transmittal or
any other documents to the exchange agent. You should send certificates for
outstanding senior secured notes, letters of transmittal and any other required
documents to the exchange agent addressed as follows:
Bank One Trust Company, N.A.
1 Bank One Plaza
Mail Code IL1-0134
Chicago, Illinois 60670-0134
Attention: Exchanges Floor
Global Corporate Trust Services
27
DEALER MANAGERS
We have retained Salomon Smith Barney Inc., Banc of America Securities LLC
and J.P. Morgan Securities Inc. to act as dealer managers in connection with the
exchange offer. We will pay a customary fee to the dealer managers for
soliciting the exchange of senior secured notes in the exchange offer. We will
also reimburse the dealer managers for their reasonable out-of-pocket expenses.
The obligation of the dealer managers to perform this function is subject to
customary conditions. We have agreed to indemnify the dealer managers against
certain liabilities, including liabilities under federal securities laws.
Questions regarding the terms of the exchange offer may be directed to the
dealer managers at the addresses and telephone numbers below:
Salomon Smith Barney Inc.
390 Greenwich Street
New York, New York 10013
Attn: Liability Management Group
(800) 558-3745 (call toll free)
Banc of America Securities LLC J.P. Morgan Securities Inc.
100 North Tryon Street 270 Park Avenue
8th Floor New York, New York 10017
Charlotte, North Carolina 28255 Attn.: Akis Psarris
Attn: Liability Management (866) 834-4666 (call toll free)
(866) 475-9886 (call toll free)
Salomon Smith Barney Inc. acted as our consent solicitation agent in
connection with the solicitation of consents to amend the terms of the indenture
governing the senior secured notes, in connection with which engagement it
received customary fees for its services. The dealer managers and their
respective affiliates have provided, or may from time to time be engaged to
provide, investment banking, financial advisory and/or commercial banking
services to us or our affiliates, for which services they have received or will
receive customary compensation.
In addition, at any given time, the dealer managers and their respective
affiliates may trade or hold, or may have traded or held, senior unsecured notes
or securities issued by us or our affiliates, for their own account or for the
accounts of customers, and, accordingly, may hold or may have held a long or
short position in the senior secured notes or such other securities.
FEES AND EXPENSES
Except for customary fees we have agreed to pay the dealer managers and the
exchange agent, we will not pay any fees or commissions to any broker, dealer or
other person for soliciting tenders of outstanding senior secured notes pursuant
to the exchange offer.
TRANSFER TAXES
We will pay all transfer taxes applicable to the transfer and exchange of
outstanding senior secured notes pursuant to the exchange offer. If, however:
- delivery of the new notes and/or certificates for outstanding senior
secured notes for principal amounts not exchanged, are to be made to any
person other than the record holder of the outstanding senior secured
notes tendered;
- tendered certificates for outstanding senior secured notes are recorded
in the name of any person other than the person signing any letter of
transmittal; or
- a transfer tax is imposed for any reason other than the transfer and
exchange of outstanding senior secured notes to us or our order,
then the amount of any such transfer taxes, whether imposed on the record holder
or any other person, will be payable by the tendering holder prior to the
issuance of the new notes.
28
DESCRIPTION OF THE NEW NOTES
We will issue the new notes under an indenture dated as of November 10,
1997, as amended by an eighth supplemental indenture between us and Bank One
Trust Company, N.A., as trustee.
The terms of the new notes include those set forth in the indenture and
those made a part of the indenture by reference to the Trust Indenture Act of
1939. The following description is a summary of the material provisions of the
new notes and the indenture. It does not restate the indenture in its entirety.
We urge you to read the indenture because it, and not this description, defines
your rights as holders of the new notes. Copies of the indenture and the eighth
supplemental indenture are available at the offices of the trustee and have been
filed or incorporated by reference as exhibits to the registration statement of
which this prospectus is a part.
TERMS AND CONDITIONS
The new notes will mature on March 15, 2004. The new notes will bear
interest from March 16, 2002, the day immediately following the date of the last
payment of interest on the outstanding senior secured notes, at the rate of
9.25% per year. Interest will be payable semi-annually on March 15 and September
15 of each year, beginning September 15, 2002, to the person in whose name the
new notes are registered at the close of business on the preceding March 1 and
September 1, respectively, subject to certain exceptions. Interest on the new
notes will be computed on the basis of a 360-day year consisting of twelve
30-day months.
The new notes will be our unsecured and unsubordinated obligations ranking
equally with our other outstanding unsecured and unsubordinated indebtedness.
The new notes will be redeemable, in whole or in part, at any time, at our
option, at a redemption price equal to the greater of:
- 100% of the principal amount of the new notes then outstanding to be
redeemed, or
- the sum of the present values of the remaining scheduled payments of
principal and interest thereon from the redemption date to the maturity
date computed by discounting such payments to the redemption date on a
semi-annual basis (assuming a 360-day year consisting of twelve 30-day
months) at a rate equal to the sum of 50 basis points plus the Adjusted
Treasury Rate, as defined below, on the third Business Day, as defined
below, prior to the redemption date, as calculated by an Independent
Investment Banker, as defined below.
We will mail notice of redemption at least 30 days but not more than 60
days before the applicable redemption date to each holder of the new notes to be
redeemed. If we elect to partially redeem the new notes, the trustee will select
in a fair and appropriate manner the new notes to be redeemed.
Upon the payment of the redemption price, plus accrued and unpaid interest,
if any, to the date of redemption, interest will cease to accrue on and after
the applicable redemption date on the new notes or portions thereof called for
redemption.
There will be no provision for a sinking fund applicable to the new notes.
We may, from time to time, without the consent of the existing holders of
the new notes, issue additional notes under the indenture having the same
ranking and the same interest rate, maturity and other terms as the new notes in
all respects except the issue date, the issue price and the initial interest
payment date. Any additional notes will, together with the new notes, constitute
a single series of notes under the indenture.
COVENANTS
Liens. The indenture refers to any of our instruments securing
indebtedness, such as a mortgage, pledge, lien, security interest or encumbrance
on any of our property, as a "mortgage." The indenture further provides that,
subject to certain exceptions, we will not, nor will we permit any subsidiary
to, issue,
29
assume or guarantee any indebtedness secured by a mortgage unless we provide
equal and proportionate security for the senior debt securities, including the
new notes, we issue under the indenture. Among these exceptions are:
- certain purchase money mortgages;
- certain preexisting mortgages on any property acquired or constructed by
us or a subsidiary;
- certain mortgages created within one year after completion of such
acquisition or construction;
- certain mortgages created on any contract for the sale of products or
services related to the operation or use of any property acquired or
constructed within one year after completion of such acquisition or
construction;
- mortgages on property of a subsidiary existing at the time it became our
subsidiary; and
- mortgages, other than as specifically excepted, in an aggregate amount
which, at the time of, and after giving effect to, the incurrence does
not exceed five percent of Consolidated Net Tangible Assets, as defined
below.
Consolidation, Merger, Conveyance of Assets. The indenture provides, in
general, that we will not consolidate with or merge into any other entity or
convey, transfer or lease our properties and assets substantially as an entirety
to any person, unless:
- the corporation, limited liability company, limited partnership, joint
stock company or trust formed by such consolidation or into which we are
merged or the person which acquires such assets expressly assumes our
obligations under the indenture and the debt securities issued under the
indenture; and
- immediately after giving effect to such transaction, no event of default,
and no event which, after notice or lapse of time or both, would become
an event of default, shall have happened and be continuing.
MODIFICATION OF THE INDENTURE
The indenture provides that we and the trustee may enter into supplemental
indentures which conform to the provisions of the Trust Indenture Act of 1939
without the consent of the holders to, in general:
- secure any debt securities;
- evidence the assumption by a successor person of our obligations;
- add further covenants for the protection of the holders;
- cure any ambiguity or correct any inconsistency in the indenture, so long
as such action will not adversely affect the interests of the holders;
- establish the form or terms of debt securities of any series; and
- evidence the acceptance of appointment by a successor trustee.
The indenture also permits us and the trustee to:
- add any provisions to the indenture;
- change in any manner the indenture;
- eliminate any of the provisions of the indenture; and
- modify in any way the rights of the holders of debt securities of each
series affected.
30
The above actions require the consent of the holders of at least a majority
in principal amount of debt securities of each series issued under the indenture
then outstanding and affected. These holders will vote as one class to approve
such changes. The new notes will constitute a new series under the indenture.
Such changes must, however, conform to the Trust Indenture Act of 1939 and
we and the trustee may not, without the consent of each holder of outstanding
debt securities affected thereby:
- extend the final maturity of the principal of any debt securities;
- reduce the principal amount of any debt securities;
- reduce the rate or extend the time of payment of interest on any debt
securities;
- reduce any amount payable on redemption of any debt securities;
- change the currency in which the principal, including any amount in
respect of original issue discount, or interest on any debt securities is
payable;
- reduce the amount of any original issue discount security payable upon
acceleration or provable in bankruptcy;
- alter certain provisions of the indenture relating to debt securities not
denominated in U.S. dollars or for which conversion to another currency
is required to satisfy the judgment of any court;
- impair the right to institute suit for the enforcement of any payment on
any debt securities when due; or
- reduce the percentage in principal amount of debt securities of any
series issued under the indenture, the consent of the holders of which is
required for any such modification.
EVENTS OF DEFAULT
In general, the indenture defines an event of default with respect to debt
securities of any series issued under the indenture as being:
(a) default in payment of any principal of the debt securities of such
series, either at maturity, upon any redemption, by declaration or
otherwise;
(b) default for 30 days in payment of any interest on any debt
securities of such series unless otherwise provided;
(c) default for 90 days after written notice in the observance or
performance of any covenant or warranty in the debt securities of such
series or the indenture other than
- default in or breach of a covenant which is dealt with otherwise
below, or
- if certain conditions are met, if the events of default described in
this clause (c) are the result of changes in generally accepted
accounting principles; or
(d) certain events of bankruptcy, insolvency or reorganization of us.
In general, the indenture provides that if an event of default described in
clauses (a), (b) or (c) above occurs and does not affect all series of debt
securities then outstanding, the trustee or the holders of debt securities may
then declare the following amounts to be due and payable immediately:
- the entire principal of all debt securities of each series affected by
the event of default; and
- the interest accrued on such principal.
Such a declaration by the holders requires the approval of at least 25
percent in principal amount of the debt securities of each series issued under
the indenture and then outstanding, treated as one class, which are affected by
the event of default.
31
The indenture also generally provides that if a default described in clause
(c) above which is applicable to all series of debt securities then outstanding
or certain events of bankruptcy, insolvency and reorganization of us occur and
are continuing, the trustee or the holders of debt securities may declare the
entire principal of all such debt securities and interest accrued thereon to be
due and payable immediately. This declaration by the holders requires the
approval of at least 25 percent in principal amount of all debt securities
issued under the indenture and then outstanding, treated as one class. Upon
certain conditions, the holders of a majority in aggregate principal amount of
the debt securities of all such affected series then outstanding may annul such
declarations and waive the past defaults. However, the majority holders may not
annul or waive a continuing default in payment of principal of, premium, if any,
or interest on such debt securities.
The indenture provides that the holders of debt securities issued under the
indenture, treated as one class, will indemnify the trustee before the trustee
exercises any of its rights or powers under the indenture. This indemnification
is subject to the trustee's duty to act with the required standard of care
during a default. The holders of a majority in aggregate principal amount of the
outstanding debt securities of each series affected, treated as one class,
issued under the indenture may direct the time, method and place of:
- conducting any proceeding for any remedy available to the trustee, or
- exercising any trust or power conferred on the trustee.
This right of the holders of debt securities is, however, subject to the
provisions in the indenture providing for the indemnification of the trustee and
other specified limitations.
In general, the indenture provides that holders of debt securities issued
under the indenture may only institute an action against us under the indenture
if the following four conditions are fulfilled:
- the holder previously has given to the trustee written notice of default
and the default continues;
- the holders of at least 25 percent in principal amount of the debt
securities of each affected series (treated as one class) issued under
the indenture and then outstanding have both (1) requested the trustee to
institute such action and (2) offered the trustee reasonable indemnity;
- the trustee has not instituted such action within 60 days of receipt of
such request; and
- the trustee has not received direction inconsistent with such written
request by the holders of a majority in principal amount of the debt
securities of each affected series (treated as one class) issued under
the indenture and then outstanding.
The above four conditions do not apply to actions by holders of the debt
securities under the indenture against us for payment of principal or interest
on or after the due date provided. The indenture contains a covenant that we
will file annually with the trustee a certificate of no default or a certificate
specifying any default that exists.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
We can discharge or defease our obligations under the indenture as set
forth below.
Under terms satisfactory to the trustee, we may discharge certain
obligations to holders of any series of debt securities issued under the
indenture which have not already been delivered to the trustee for cancellation.
Such debt securities must also:
- have become due and payable;
- be due and payable by their terms within one year; or
- be scheduled for redemption by their terms within one year.
We may discharge any series of debt securities by irrevocably depositing an
amount certified to be sufficient to pay at maturity or upon redemption the
principal of and interest on such debt securities. We
32
may make such deposit in cash or, in the case of debt securities payable only in
U.S. dollars, U.S. government obligations, as defined in the indenture.
We may also, upon satisfaction of the conditions listed below, discharge
certain obligations to holders of any series of debt securities issued under the
indenture at any time ("Defeasance"). Under terms satisfactory to the trustee,
we may be released with respect to any outstanding series of debt securities
issued under the indenture from the obligations imposed by sections 3.6 and 9.1
of the indenture. These sections contain the covenants described above limiting
liens and consolidations, mergers and conveyances of assets. Also, under terms
satisfactory to the trustee, we may avoid compliance with these sections without
creating an event of default ("Covenant Defeasance"). Defeasance or Covenant
Defeasance may be effected only if, among other things:
- we irrevocably deposit with the trustee cash or, in the case of debt
securities payable only in U.S. dollars, U.S. government obligations as
trust funds in an amount certified to be sufficient to pay at maturity or
upon redemption the principal of and interest on all outstanding debt
securities of such series issued under the indenture; and
- we deliver to the trustee an opinion of counsel to the effect that the
holders of this series of debt securities will not recognize income, gain
or loss for United States federal income tax purposes as a result of such
Defeasance or Covenant Defeasance. Such opinion must further state that
these holders will be subject to United States federal income tax on the
same amounts, in the same manner and at the same times as would have been
the case if Defeasance or Covenant Defeasance had not occurred. In the
case of a Defeasance, this opinion must be based on a ruling of the
Internal Revenue Service or a change in United States federal income tax
law occurring after the date of the indenture, since this result would
not occur under current tax law.
CONCERNING THE TRUSTEE
The trustee is one of a number of banks with which we and our subsidiaries
maintain ordinary banking relationships and with which we and our subsidiaries
maintain credit facilities.
GOVERNING LAW
The indenture and the new notes are governed by, and construed in
accordance with, the laws of the State of New York.
DEFINED TERMS
Set forth below are some of the definitions of the defined terms used in
this prospectus in describing the new notes.
"Adjusted Treasury Rate" means, with respect to any redemption date:
- the yield, under the heading which represents the average for the
immediately preceding week, appearing in the most recently published
statistical release designated "H.15(519)" or any successor publication
which is published weekly by the Board of Governors of the Federal
Reserve System and which establishes yields on actively traded U.S.
Treasury securities adjusted to constant maturity under the caption
"Treasury Constant Maturities," for the maturity corresponding to the
Optional Redemption Comparable Treasury Issue (if no maturity is within
three months before or after the remaining term of the new notes, yields
for the two published maturities most closely corresponding to the
Optional Redemption Comparable Treasury Issue will be determined and the
Adjusted Treasury Rate will be interpolated or extrapolated from such
yields on a straight line basis, rounding to the nearest month); or
- if such release (or any successor release) is not published during the
week preceding the calculation date or does not contain such yields, the
rate per year equal to the semi-annual equivalent yield to maturity of
the Optional Redemption Comparable Treasury Issue, calculated using a
price for the
33
Optional Redemption Comparable Treasury Issue (expressed as a percentage
of its principal amount) equal to the Optional Redemption Comparable
Treasury Price for such redemption date.
"Business Day" means any day other than a Saturday or Sunday or a day on
which banking institutions in New York City are authorized or obligated by law
or executive order to close.
"Consolidated Funded Indebtedness" means the aggregate of all of our
outstanding Funded Indebtedness and the outstanding Funded Indebtedness of our
consolidated Subsidiaries, determined on a consolidated basis in accordance with
generally accepted accounting principles.
"Consolidated Net Tangible Assets" means the total assets appearing on our
consolidated balance sheet less, in general:
- intangible assets;
- current and accrued liabilities (other than Consolidated Funded
Indebtedness and capitalized rentals or leases), deferred credits,
deferred gains and deferred income;
- reserves;
- advances to finance oil or natural gas exploration and development to the
extent that the indebtedness related thereto is excluded from Funded
Indebtedness;
- an amount equal to the amount excluded from Funded Indebtedness
representing the "production payment" financing of oil and gas
exploration and development; and
- minority stockholder interests.
"Funded Indebtedness" means any indebtedness which matures more than one
year after the date the amount of Funded Indebtedness is being determined, less
any such indebtedness as will be retired by any deposit or payment required to
be made within one year from such date under any prepayment provision, sinking
fund, purchase fund or otherwise. Funded Indebtedness does not, however, include
our indebtedness or the indebtedness of any of our subsidiaries incurred to
finance outstanding advances to others to finance oil or natural gas exploration
and development, to the extent that the latter are not in default in their
obligations to us or such subsidiary. Funded Indebtedness also does not include
our indebtedness or the indebtedness of any of our subsidiaries incurred to
finance oil or natural gas exploration and development through what is commonly
referred to as a "production payment" to the extent that we or any of our
subsidiaries have not guaranteed the repayment of the production payment.
"Independent Investment Banker" means Salomon Smith Barney Inc. and any
successor firm, or if any such firm is unwilling or unable to serve as such, an
independent investment banking institution of national standing appointed by us.
"Optional Redemption Reference Treasury Dealer" means each of up to five
dealers to be selected by us, and their respective successors; provided that if
any of the foregoing ceases to be, and has no affiliate that is, a U.S.
government securities dealer, we will substitute for it another U.S. government
securities dealer.
"Optional Redemption Comparable Treasury Issue" means the U.S. Treasury
security selected by an Independent Investment Banker as having a maturity
comparable to the remaining term of the new notes to be redeemed that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of the new notes or, if, in the reasonable
judgment of the Independent Investment Banker, there is no such security, then
the Optional Redemption Comparable Treasury Issue will mean the U.S. Treasury
security or securities selected by an Independent Investment Banker as having an
actual or interpolated maturity or maturities comparable to the remaining term
of the new notes.
"Optional Redemption Comparable Treasury Price" means (1) the average of
five Optional Redemption Reference Treasury Dealer Quotations for the redemption
date, after excluding the highest and lowest Optional Redemption Reference
Treasury Dealer Quotations, or (2) if the Independent
34
Investment Banker obtains fewer than five such Optional Redemption Reference
Treasury Dealer Quotations, the average of all such quotations.
"Optional Redemption Reference Treasury Dealer Quotations" means, with
respect to each Optional Redemption Reference Treasury Dealer and any redemption
date, the average, as determined by the Independent Investment Banker of the bid
and asked prices for the Optional Redemption Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Independent Investment Banker at 5:00 p.m., New York City time,
on the third Business Day preceding such redemption date.
"Subsidiary" means a corporation of which we, or any of our subsidiaries,
own at least a majority of the outstanding securities which have voting power.
BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
The new notes will be evidenced by one or more certificates in registered
global form, which will be deposited with, or on behalf of, The Depository Trust
Company (DTC) in New York, New York and registered in the name of Cede & Co.,
DTC's nominee. Except as set forth below, a global note may be transferred, in
whole or in part, only to another nominee of DTC or to a successor to DTC or its
nominee.
DEPOSITARY PROCEDURES
DTC has advised us that it is a:
- limited-purpose trust company organized under the laws of the State of
New York;
- banking organization within the meaning of the laws of the State of New
York;
- member of the Federal Reserve System;
- clearing corporation within the meaning of the New York Uniform
Commercial Code; and
- clearing agency registered pursuant to the provisions of Section 17A of
the Exchange Act.
DTC was created to hold securities of its participants and to facilitate
the clearance and settlement of securities transactions among its participants
through electronic book-entry changes in their accounts, thereby eliminating the
need for physical movement of securities certificates. DTC's participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and other organizations. Banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant also have access to DTC's book-entry system.
Holders of new notes may hold their beneficial interests in the securities
directly as a participant in DTC or indirectly through organizations that are
participants in DTC.
Upon deposit of the global notes with DTC, DTC will credit, on its
book-entry registration and transfer system, the accounts of those participants
designated by the Exchange Agent with the principal amounts of the global notes
held by or through the participants. The records of DTC will show ownership and
effect the transfer of ownership of the global notes by its participants. The
records of the participants will show ownership and effect the transfer of
ownership of the global notes by persons holding beneficial interests in the
global notes through them. In the case of beneficial interests held by or though
participants in Euroclear Bank S.A./N.V., as operator of the Euroclear System
and Clearstream Banking, societe anonyme, DTC will credit the accounts of their
respective depositaries with the principal amounts of the global notes
beneficially owned by or through Euroclear and Clearstream, respectively. These
records of DTC will show ownership and effect the transfer of ownership of the
global notes by the respective depositaries for Euroclear and Clearstream. The
records of these depositaries will show ownership and effect the transfer of
ownership of the global notes by Euroclear and Clearstream, respectively. The
records of Euroclear and Clearstream will show ownership and effect the transfer
of ownership of the global notes by their participants. The records of the
participants will show ownership or transfer of ownership of the global notes by
persons holding through them.
35
So long as DTC or its nominee is the registered owner of the global notes,
it will be considered the sole owner and holder of the securities for all
purposes under the indenture. Except as set forth below, if you own a beneficial
interest in global notes, you will not:
- be entitled to have the securities registered in your name;
- receive or be entitled to receive physical delivery of a certificate in
definitive form representing the securities; or
- be considered the owner or holder of the securities under the indenture
for any purpose, including with respect to the giving of any directions,
approvals or instructions to the trustee.
Therefore, if you are required by state law to take physical delivery of
the securities in definitive form, you may not be able to own, transfer or
pledge beneficial interests in the global notes. In addition, the lack of a
physical certificate evidencing your beneficial interests in the global notes
may limit your ability to pledge the interests to a person or entity that is not
a participant in DTC.
If you own beneficial interests in a global note, you will have to rely on
the procedures of DTC and, if you are not a participant in DTC, the procedures
of the participant through which you hold your beneficial interests, to exercise
your rights as a holder under the indenture. DTC has advised us that it will
take any action permitted to be taken by a holder of beneficial interests in the
global notes only at the direction of one or more of the participants to whose
accounts the interests are credited. We understand that, under existing industry
practice, when a beneficial owner of a global note wants to give any notice or
take any action that a registered holder is entitled to take, at our request or
under the indenture, DTC will authorize the participant to give the notice or
take the action, and the participant will authorize its beneficial owners to
give the notice or take the action. Accordingly, we and the trustee will treat
as a holder anyone designated as such in writing by DTC for purposes of
obtaining any consents or directions required under the indenture.
We will pay the principal of, and interest on, the global notes through the
trustee or paying agent to DTC or its nominee, as the registered holder of the
global notes, in immediately available funds. We expect DTC or its nominee, upon
receipt of any payments, to immediately credit each participant's account with
payments in amounts proportionate to that participant's beneficial interest as
shown on the records of DTC or its nominee. We also expect each participant to
pay each owner of beneficial interests in the global notes held through that
participant in accordance with standing customer instructions and customary
practices. These payments will be the sole responsibility of the participants.
We will not, and the trustee and paying agent will not, assume any
responsibility or liability for any aspect of the records relating to payments
made on account of or actions taken with respect to the beneficial ownership
interests in global notes, or for any other aspect of the relationship between
DTC and its participants, Euroclear or Clearstream and their participants, or
between the participants and the owners of beneficial interests. We, the trustee
and the paying agent may conclusively rely on instructions from DTC for all
purposes. We obtained the above information about DTC, Euroclear and Clearstream
and their book-entry systems from sources we believe are reliable, but we take
no responsibility for the accuracy of the information.
SETTLEMENT PROCEDURES
Secondary market trading between DTC participants will occur in the
ordinary way in accordance with DTC's rules and procedures and will be settled
in immediately available funds using DTC's Same-Day Funds Settlement System.
Secondary market trading between participants of Euroclear and/or
Clearstream will occur in the ordinary way in accordance with each of its rules
and procedures and will be settled using the procedures applicable to
conventional Eurobonds in immediately available funds. The respective
depositaries for Euroclear and Clearstream will effect transfers in global notes
between DTC participants, on the one hand, and Euroclear or Clearstream
participants, on the other hand, in accordance with DTC's procedures and
36
will settle them in same-day funds. These depositaries must deliver instructions
to Euroclear or Clearstream in accordance with Euroclear's or Clearstream's
procedures. If the transfer meets its settlement requirements, Euroclear or
Clearstream will instruct its respective depositary to effect final settlement
on its behalf by delivering or receiving interests in the global notes in its
accounts with DTC and making or receiving payment in accordance with normal
procedures of same-day funds settlement applicable to DTC. Participants in
Euroclear and Clearstream may not deliver instructions directly to the
depositaries for Euroclear and Clearstream.
Because of time zone differences, the accounts of Euroclear and Clearstream
participants purchasing beneficial interests in the global notes from DTC
participants will be credited with the securities purchased, and the crediting
will be reported to the Euroclear and Clearstream participants, on the
securities settlement processing day immediately following the DTC settlement
processing day. Likewise, the accounts of Euroclear and Clearstream participants
selling beneficial interests in the global notes to DTC participants will be
credited with the cash received on the DTC settlement processing day, but the
cash will not be available until the settlement processing day immediately
following the DTC settlement processing day.
Although DTC, Euroclear and Clearstream have agreed to the procedures to
facilitate transfers of interests in the global notes among participants in DTC,
Euroclear and Clearstream, they are under no obligation to perform or to
continue to perform these procedures. These procedures may be changed or
discontinued at any time. We take no responsibility for the performance by DTC,
Euroclear or Clearstream or their respective participants of their respective
obligations under the rules and procedures governing their operations.
EXCHANGE OF GLOBAL NOTES FOR CERTIFICATED NOTES
We will exchange beneficial interests in global notes for certificated
notes only if:
- DTC notifies us that it is unwilling or unable to continue as depositary
for the global notes;
- DTC ceases to be a clearing agency registered under the Exchange Act; or
- we decide at any time not to have the securities represented by global
notes and so notify the trustee.
If there is an exchange, we will issue certificated notes in authorized
denominations and registered in the names which DTC directs.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
In the opinion of White & Case LLP, special tax counsel to Williams, the
following correctly discusses the material U.S. federal income tax consequences
of the exchange offer that may be relevant to you if you are a beneficial owner
of senior secured notes that is a citizen or resident of the United States or a
domestic corporation or otherwise subject to U.S. federal income tax on a net
income basis in respect of the senior secured notes (a "U.S. Holder"). The
discussion is based on laws, regulations, rulings and decisions now in effect,
all of which are subject to change. The discussion does not deal with classes of
beneficial owners subject to special tax rates, and does not describe any tax
consequences arising out of the laws of any state or local or foreign
jurisdiction. The discussion assumes that the senior secured notes are held as
"capital assets" within the meaning of section 1221 of the Internal Revenue Code
of 1986, as amended ("IRC").
EFFECT OF EXCHANGE
Upon an exchange of senior secured notes for new notes, an exchanging U.S.
Holder generally will recognize capital gain or loss equal to the difference
between the fair market value of the new notes received in the exchange and the
U.S. Holder's basis in the senior secured notes. Any gain from an exchange of
senior secured notes will be treated as ordinary income, however, to the extent
of any accrued
37
market discount on the exchanged senior secured note. Market discount only
arises when a senior secured note is acquired after its original issue for an
amount less than the stated redemption price of the senior secured note. The
amount of accrued market discount that would be recognized on the exchange
equals the portion of the total market discount on a senior secured note that is
allocable to the period from the date that the U.S. Holder acquires the senior
secured note until the date such U.S. Holder exchanges the senior secured note
for a new note. In addition, the new notes may be treated as issued with
original issue discount ("OID"), if the "stated redemption price at maturity"
("SRPM") of the new notes is more than the "issue price" of the new notes. The
SRPM of a new note will equal its stated principal amount. The issue price of a
new note will be its fair market value on the date of the exchange. Subject to a
de minimis rule, such OID will be the amount equal to the excess of the SRPM
over the issue price. If the new notes are treated as issued with OID, a U.S.
Holder generally must include in gross income a portion of the total OID that
accrues on each day that the new notes are held, calculated under a constant
yield method, regardless of the U.S. Holder's method of accounting and without
regard to the timing of actual payments.
EFFECT OF NOT TENDERING SENIOR SECURED NOTES FOR EXCHANGE
Under general principles of federal income tax law, the modification of a
debt instrument creates a deemed exchange upon which gain or loss is realized (a
"Deemed Exchange") if the modified debt instrument differs materially either in
kind or in extent from the original debt instrument. A modification of a debt
instrument that is not a significant modification does not create a Deemed
Exchange.
If Williams has completed the exchange offer by August 1, 2002, but less
than a majority in aggregate principal amount of senior secured notes are
tendered therein, then on September 16, 2002, Williams will make an extra
payment of $18.33 in cash for each $1,000 principal amount of outstanding senior
secured notes to U.S. Holders entitled to receive the interest payment due on
the senior secured notes on September 16, 2002 (the "Extra Payment"). U.S.
Holders of the new notes will not be entitled to this extra payment.
The Extra Payment of $18.33 in cash for each $1,000 principal amount of
outstanding senior secured notes held by a U.S. Holder will cause a Deemed
Exchange of such outstanding senior secured notes because such payment will
constitute a significant modification to the terms of the senior secured notes
for U.S. federal income tax purposes as defined in Treasury Regulation section
1.1001-3 resulting in the Deemed Exchange of a new debt instrument (the "New
Debt Instrument") for each senior secured note. Accordingly, each U.S. Holder of
a senior secured note that receives the Extra Payment will recognize capital
gain or loss equal to the difference between the fair market value of the New
Debt Instrument (plus $18.33 in cash for each $1,000 principal amount of senior
secured notes held by the U.S. Holder on September 16, 2002) and the U.S.
Holder's basis in such senior secured notes (except to the extent of accrued
market discount, if any, which will be treated as ordinary income to the extent
of any gain that is recognized).
U.S. Holders should consult their tax advisors on the applicability of the
wash sale rules, which disallow certain losses, to any losses realized on a
Deemed Exchange.
In the event that a Deemed Exchange occurs, the resulting New Debt
Instrument may be treated as issued with OID. If a New Debt Instrument is
treated as issued with OID, a U.S. Holder generally must include in gross income
a portion of the total OID that accrues on each day the U.S. Holder holds the
Instrument, calculated under a constant yield method, regardless of such U.S.
Holder's method of accounting and without regard to the timing of actual
payments.
BACKUP WITHHOLDING
A U.S. Holder may be subject to backup withholding on the Extra Payment
unless such U.S. Holder (i) is a corporation or comes within certain other
exempt categories and demonstrates this fact, or (ii) provides a correct
taxpayer identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with applicable requirements of the backup
withholding rules. The
38
amount of any backup withholding from the Extra Payment will be allowed as a
credit against such U.S. Holder's federal income tax liability and may entitle
such U.S. Holder to a refund, provided that the required information is
furnished to the Internal Revenue Service.
FOREIGN HOLDERS
Beneficial owners of senior secured notes who are not "U.S. persons"
(within the meaning of section 7701(a)(30) of the IRC) are urged to consult
their own tax advisors regarding the application of U.S. federal income tax
withholding, including eligibility for a withholding tax exemption and refund
procedures.
FORWARD-LOOKING STATEMENTS
Certain matters discussed in this prospectus, excluding historical
information, include forward-looking statements -- statements that discuss our
expected future results based on current and pending business operations.
Forward-looking statements can be identified by words such as "anticipates,"
"believes," "expects," "planned," "scheduled" or similar expressions. Although
we believe these forward-looking statements are based on reasonable assumptions,
statements made regarding future results are subject to a number of assumptions,
uncertainties and risks that could cause future results to be materially
different from the results stated or implied in this prospectus. Additional
information about issues that could lead to material changes in performance is
contained in our Annual Report on Form 10-K/A for the year ended December 31,
2001 which is incorporated by reference in this prospectus.
LEGAL MATTERS
The validity of the new notes will be passed upon by William G. von Glahn,
Esq., Senior Vice President and General Counsel of Williams. As of March 31,
2002, Mr. von Glahn was the beneficial holder of 402,402 shares of Williams
common stock (including 268,010 shares subject to stock options exercisable
within 60 days, deferred stock awards and Williams' 401(k) retirement plan). Mr.
von Glahn is a participant in Williams' stock option plan and various other
employee benefit plans offered to employees of Williams. White & Case LLP,
Washington, D.C., special tax counsel for Williams, will pass upon certain
federal income tax consequences of the exchange offer.
EXPERTS
The consolidated financial statements and schedule of Williams at December
31, 2001 and 2000 and for each of the three years in the period ended December
31, 2001 appearing in Williams' Form 8-K filed with the Securities and Exchange
Commission on May 28, 2002, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and incorporated
herein by reference. Such consolidated financial statements and schedule are
incorporated herein by reference in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC under the Exchange Act. The registration statement of
which this prospectus forms a part and these reports, proxy statements and other
information can be inspected and copied at the public reference room maintained
by the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the SEC's regional offices at 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and at 233 Broadway, New York, New York 10005.
Copies of these materials may also be obtained from the SEC at prescribed rates
by writing to the public reference room maintained by the SEC at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain
information on the operation of the public reference room by calling the SEC at
1-800-SEC-0330.
39
We have filed with the SEC a registration statement on Form S-4 under the
Securities Act with respect to this offering. This prospectus, which forms a
part of the registration statement, does not contain all the information
included in the registration statement and the attached exhibits.
The SEC maintains a World Wide Web site on the Internet at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding us. The reports, proxy and information statements
and other information about us can be downloaded from the SEC's website and can
also be inspected and copied at the offices of the New York Stock Exchange,
Inc., 20 Broad Street, New York, New York 10005.
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" into this prospectus the
information we file with it, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus, and later
information that we file with the SEC will automatically update and supersede
this information. We incorporate by reference the documents listed below and any
future filings made with the SEC under section 13(a), 13(c), 14 or 15(d) of the
Exchange Act until the exchange offer is completed:
- our annual report on Form 10-K/A for the year ended December 31, 2001;
- our quarterly report on Form 10-Q for the quarter ended March 31, 2002;
- our current reports on Form 8-K filed January 4, 2002, January 23, 2002,
January 30, 2002, February 5, 2001, February 19, 2002, March 7, 2002 (two
filed on this date), March 8, 2002, March 13, 2002 (two filed on this
date), March 20, 2002, March 27, 2002, March 28, 2002 (two filed on this
date), April 1, 2002, April 15, 2002, April 25, 2002, April 26, 2002, May
3, 2002, May 22, 2002 (two filed on this date) and May 28, 2002 (two
filed on this date);
- our current report on Form 8-K/A filed March 20, 2002; and
- our definitive proxy statement on Schedule 14A filed March 29, 2002.
You may request a copy of these filings, at no cost, by writing or calling
us at the following address:
The Williams Companies, Inc.
One Williams Center
Tulsa, Oklahoma 74172
Attention: Corporate Secretary
Telephone: (918) 573-2000
ANY REQUEST FOR THESE FILINGS SHOULD BE MADE BY , 2002 TO ENSURE
TIMELY DELIVERY OF THE FILINGS PRIOR TO THE EXPIRATION DATE OF THE EXCHANGE
OFFER.
You should rely only on the information incorporated by reference or
provided in this prospectus. We have not authorized anyone else to provide you
with any information. You should not assume that the information in this
document is current as of any date other than the date on the front page of this
prospectus.
40
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Williams, a Delaware corporation, is empowered by Section 145 of the
General Corporation Law of the State of Delaware, subject to the procedures and
limitations stated therein, to indemnify any person against expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred by them in connection with any threatened, pending, or
completed action, suit, or proceeding in which such person is made party by
reason of their being or having been a director, officer, employee, or agent of
Williams. The statute provides that indemnification pursuant to its provisions
is not exclusive of other rights of indemnification to which a person may be
entitled under any by-law, agreement, vote of stockholders or disinterested
directors, or otherwise. The By-laws of Williams provide for indemnification by
Williams of its directors and officers to the fullest extent permitted by the
General Corporation Law of the State of Delaware. In addition, Williams has
entered into indemnity agreements with its directors and certain officers
providing for, among other things, the indemnification of and the advancing of
expenses to such individuals to the fullest extent permitted by law, and to the
extent insurance is maintained, for the continued coverage of such individuals.
Policies of insurance are maintained by Williams under which the directors
and officers of Williams are insured, within the limits and subject to the
limitations of the policies, against certain expenses in connection with the
defense of actions, suits, or proceedings, and certain liabilities which might
be imposed as a result of such actions, suits or proceedings, to which they are
parties by reason of being or having been such directors or officers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
The following instruments and documents are included as Exhibits to this
Registration Statement.
EXHIBIT
NUMBER EXHIBIT
------- -------
3.1 Restated Certificate of Incorporation, as supplemented
(filed as Exhibit 3.1 to the Registration Statement on Form
S-3 filed April 4, 2002, file number 333-85540).*
3.2 Restated Bylaws (filed as Exhibit 99.1 to Form 8-K filed
January 19, 2000).*
4.1 Form of Senior Debt Indenture between the registrant and
Bank One Trust Company, N.A. (formerly The First National
Bank of Chicago), as trustee (filed as Exhibit 4.1 to the
Registration Statement on Form S-3 filed September 8, 1997,
file number 333-35099).*
4.2 Form of Eighth Supplemental Indenture between the registrant
and Bank One Trust Company, N.A., as trustee.**
5.1 Opinion of William G. von Glahn, Esq., as to the validity of
the new notes.**
8.1 Opinion of White & Case LLP, as to certain tax matters.
12.1 Statement regarding Computation of Ratios of Earnings to
Combined Fixed Charges and Preferred Stock Dividend
Requirements (filed as Exhibit 12 to the Current Report on
Form 8-K filed May 28, 2002 and Exhibit 12 to the Quarterly
Report filed on Form 10-Q for the quarter ended March 31,
2002).*
21 Subsidiaries of the registrant (filed as Exhibit 21 to the
Annual Report on Form 10-K for the year ended December 31,
2001).*
23.1 Consent of Ernst & Young LLP.
23.2 Consent of William G. von Glahn, Esq. (contained in Exhibit
5.1).
23.3 Consent of White & Case LLP.
24.1 Power of Attorney.**
II-1
EXHIBIT
NUMBER EXHIBIT
------- -------
24.2 Certified copy of resolutions authorizing signatures
pursuant to Power of Attorney.**
25.1 Statement of Eligibility of Bank One Trust Company, N.A., as
trustee, on Form T-1 with respect to the issuance of 9.25%
Notes due March 15, 2004, by the registrant pursuant to the
Indenture between the registrant and Bank One Trust Company,
N.A., as trustee.**
99.1 Form of Letter of Transmittal.**
99.2 Form of Notice of Guaranteed Delivery.**
99.3 Form of Letter to Registered Holders and DTC Participants.**
99.4 Form of Letter to Clients.**
99.5 Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.**
---------------
* Indicates exhibits incorporated by reference as indicated.
**Previously filed.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
2. That, for the purpose 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.
3. To remove from registration by means of a post-effective amendment
any of the securities being registered that remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-2
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 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
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that 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.
(e) 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-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Tulsa
and State of Oklahoma on the 28th day of May, 2002.
THE WILLIAMS COMPANIES, INC.
By: /s/ SUZANNE H. COSTIN
------------------------------------
Name: Suzanne H. Costin
Title: Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ STEVEN J. MALCOLM* President, Chief Executive Officer May 28, 2002
----------------------------------------------- and Director (Principal Executive
Steven J. Malcolm Officer)
/s/ JACK D. MCCARTHY* Senior Vice President -- Finance May 28, 2002
----------------------------------------------- (Principal Financial Officer)
Jack D. McCarthy
/s/ GARY R. BELITZ* Controller (Principal Accounting May 28, 2002
----------------------------------------------- Officer)
Gary R. Belitz
/s/ HUGH M. CHAPMAN* Director May 28, 2002
-----------------------------------------------
Hugh M. Chapman
/s/ THOMAS H. CRUIKSHANK* Director May 28, 2002
-----------------------------------------------
Thomas H. Cruikshank
/s/ WILLIAM E. GREEN* Director May 28, 2002
-----------------------------------------------
William E. Green
/s/ IRA D. HALL* Director May 28, 2002
-----------------------------------------------
Ira D. Hall
/s/ W. R. HOWELL* Director May 28, 2002
-----------------------------------------------
W. R. Howell
/s/ JAMES C. LEWIS* Director May 28, 2002
-----------------------------------------------
James C. Lewis
II-4
SIGNATURE TITLE DATE
--------- ----- ----
/s/ CHARLES M. LILLIS* Director May 28, 2002
-----------------------------------------------
Charles M. Lillis
/s/ GEORGE A. LORCH* Director May 28, 2002
-----------------------------------------------
George A. Lorch
/s/ FRANK T. MACINNIS* Director May 28, 2002
-----------------------------------------------
Frank T. MacInnis
/s/ GORDON R. PARKER* Director May 28, 2002
-----------------------------------------------
Gordon R. Parker
/s/ JANICE D. STONEY* Director May 28, 2002
-----------------------------------------------
Janice D. Stoney
/s/ JOSEPH H. WILLIAMS* Director May 28, 2002
-----------------------------------------------
Joseph H. Williams
*By: /s/ SUZANNE H. COSTIN
---------------------------------------
Suzanne H. Costin
Attorney-in-Fact
Dated: May 28, 2002
II-5
INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT
------- -------
3.1 Restated Certificate of Incorporation, as supplemented
(filed as Exhibit 3.1 to the Registration Statement on Form
S-3 filed April 4, 2002, file number 333-85540).*
3.2 Restated Bylaws (filed as Exhibit 99.1 to Form 8-K filed
January 19, 2000).*
4.1 Form of Senior Debt Indenture between the registrant and
Bank One Trust Company, N.A. (formerly The First National
Bank of Chicago), as trustee (filed as Exhibit 4.1 to the
Registration Statement on Form S-3 filed September 8, 1997,
file number 333-35099).*
4.2 Form of Eighth Supplemental Indenture between the registrant
and Bank One Trust Company, N.A., as trustee.**
5.1 Opinion of William G. von Glahn, Esq., as to the validity of
the new notes.**
8.1 Opinion of White & Case LLP, as to certain tax matters.
12.1 Statement regarding Computation of Ratios of Earnings to
Combined Fixed Charges and Preferred Stock Dividend
Requirements (filed as Exhibit 12 to the Current Report on
Form 8-K filed May 28, 2002 and Exhibit 12 to the Quarterly
Report filed on Form 10-Q for the quarter ended March 31,
2002).*
21 Subsidiaries of the registrant (filed as Exhibit 21 to the
Annual Report on Form 10-K for the year ended December 31,
2001).*
23.1 Consent of Ernst & Young LLP.
23.2 Consent of William G. von Glahn, Esq. (contained in Exhibit
5.1).
23.3 Consent of White & Case LLP.
24.1 Power of Attorney.**
24.2 Certified copy of resolutions authorizing signatures
pursuant to Power of Attorney.**
25.1 Statement of Eligibility of Bank One Trust Company, N.A., as
trustee, on Form T-1 with respect to the issuance of 9.25%
Notes due March 15, 2004, by the registrant pursuant to the
Indenture between the registrant and Bank One Trust Company,
N.A., as trustee.**
99.1 Form of Letter of Transmittal.**
99.2 Form of Notice of Guaranteed Delivery.**
99.3 Form of Letter to Registered Holders and DTC Participants.**
99.4 Form of Letter to Clients.**
99.5 Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.**
---------------
* Indicates exhibits incorporated by reference as indicated.
**Previously filed.