Item 3.02 Unregistered Sales of Equity
Securities.
The Company is committed to improving the communities where our employees live and work and we operate. One of the ways we
do this is through our support of The Williams Companies Foundation, Inc. (the Foundation), an Oklahoma
not-for-profit
corporation. The Foundation is exempt
from U.S. federal income taxes under Section 501(c)(3) of the Internal Revenue Code, and is classified as a private foundation.
In
furtherance of that commitment, on July 13, 2018 (the Preferred Issuance Effective Date), through a wholly-owned subsidiary, the Company contributed an aggregate of 35,000 shares of Series B
Non-Voting
Perpetual Preferred Stock, par value $1.00 per share (the Series B Preferred Stock), to the Foundation for use in future charitable and
non-profit
causes. The shares of Series B Preferred Stock were issued by the Company to a wholly owned subsidiary for $1,000 per share in cash (with an aggregate value of $35,000,000) pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended
(the Securities Act), in a transaction not involving a public offering, which the subsidiary immediately contributed to the Foundation. The Series B Preferred Stock may not be
re-offered
or sold in
the United States absent an effective registration statement or an exemption from the registration requirements under applicable federal and state securities laws.
The following summary of the terms of the Series B Preferred Stock is qualified in its entirety by reference to the text of the Certificate of
Designations of Series B Preferred Stock of the Company (the Certificate of Designations) attached hereto as Exhibit 3.1 and incorporated herein by reference.
Dividends and Distributions
. Dividends on the shares of Series B Preferred Stock are not mandatory and will only be paid when, as and
if declared by the Board of Directors of the Company (the Board). Subject to the prior payment in full of the preferential amounts to which any Senior Securities (as defined below) are entitled with respect to dividends, for any Dividend
Period (as defined in the Certificate of Designations) with respect to which dividends on the Series B Preferred Stock are declared by the Board, holders of shares of Series B Preferred Stock will be entitled to receive on each share of Series B
Preferred Stock
non-cumulative
cash dividends with respect to such Dividend Period at a rate of 7.25% per annum on $1,000 per share of Series B Preferred Stock. Such dividends, when, as and only if declared by
the Board, will be payable quarterly in arrears on the 15
th
day of March, June, September and December, commencing with the first such quarterly dividend payment date to occur at least twenty
calendar days after July 13, 2018. Subject to certain exceptions described in the Certificate of Designations, as long as any shares of Series B Preferred Stock are outstanding, the Company will not declare, pay, or set aside for payment a
dividend on shares of the Companys common stock, par value $1.00 per share (the WMB Common Stock), or any other Junior Securities (as defined below) (other than dividends payable solely in shares of, or options, warrants or rights
to subscribe for or purchase, Junior Securities), and no WMB Common Stock or other Junior Securities or Parity Securities (as defined below) may be, directly or indirectly purchased, redeemed or otherwise acquired by the Company or any of its
subsidiaries, in each case, during any fiscal quarter, unless a dividend has been declared by the Board on the shares of Series B Preferred Stock during such fiscal quarter for the latest completed Dividend Period in accordance with the Certificate
of Designations and any such declared but unpaid dividend on the shares of Series B Preferred Stock is contemporaneously paid in full (or a sum sufficient for the payment thereof has been set aside).
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Conversion at the Option of the Holder
. On or after July 13, 2028, each share of
Series B Preferred Stock will be convertible, at any time and from time to time from and after such date, at the option of the holder thereof, into a number of shares of WMB Common Stock equal to the conversion ratio in effect on the applicable
conversion date;
provided
that no shares of Series B Preferred Stock may be converted into shares of WMB Common Stock at any time that any shares of Series B Preferred Stock are held by the Foundation. The conversion ratio for each share of
Series B Preferred Stock shall be equal to (i) $1,000 per share, plus the per share amount of any declared and unpaid dividends thereon as of the conversion date, divided by (ii) the greater of (a) the average volume weighted average price
per share of the WMB Common Stock during the ten trading days preceding the conversion date and (b) $27.17.
Redemption at the Option
of the Company
. At any time on or after July 13, 2028, the Company at its option may redeem the Series B Preferred Stock in whole (but not in part), at a price per share equal to $1,000, plus the per share amount of any declared and unpaid
dividends thereon, payable in cash out of funds legally available therefor;
provided
that if any shares of Series B Preferred Stock are held by the Foundation at the time of such redemption, the price for redemption of each share of Series B
Preferred Stock shall be the greater of (i) $1,000 per share, plus the per share amount of any declared and unpaid dividends thereon and (ii) the then-fair market value of a share of Series B Preferred Stock as determined by a third-party
appraiser selected by the Company, subject to the Foundations approval.
Transfer
. A holder of shares of Series B Preferred
Stock may only transfer such holders shares of Series B Preferred Stock (i) to the Company or any subsidiary of the Company or (ii) otherwise in a transaction pursuant to an effective registration statement under the Securities Act
or pursuant to an available exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in accordance with applicable state securities laws, subject to compliance with the other requirements of the
Certificate of Designations. The Certificate of Designations provides that a transfer may not be made if such transfer, or such transfer together with any other transfers, would result in the Company being required to register the Series B Preferred
Stock under Section 12 of the Securities Exchange Act of 1934, as amended (the Exchange Act) or would otherwise trigger or subject the Company, or any subsidiary or other affiliate of the Company, to the registration requirements of
the Exchange Act with respect to the Series B Preferred Stock.
Liquidation Preference
. Subject to the prior payment in full of the
preferential amounts to which any Senior Securities as to rights on liquidation,
winding-up
and dissolution of the Company are entitled, in the event the Company voluntarily or involuntarily liquidates,
dissolves, or winds up, holders of shares of Series B Preferred Stock will be entitled to receive, after all debts, liabilities, and obligations of the Company have been paid, satisfied or discharged or adequate provision for the payment and
discharge thereof shall otherwise be made, an amount in cash or
in-kind,
as determined by the Board, or a combination thereof, per share equal to $1,000 per share of Series B Preferred Stock, plus an amount
equal to any declared and unpaid dividends thereon, out of assets legally available for distribution to the Companys stockholders, which amounts shall be in preference to any amount payable to shares of junior securities, subject to certain
limitations. The Certificate of Designations provides that holders of shares of Series B Preferred Stock will not be entitled to other or further distribution of or participation in any remaining assets of the Company after receiving in full the
amount set forth in the preceding sentence.
No Voting Rights
. The holders of shares of Series B Preferred Stock will not have any
voting rights, including the right to elect directors, and their consent will not be required for taking any corporate action, in each case, except as required by applicable law;
provided
,
however
, that so long as any shares of Series
B Preferred Stock remain outstanding, the Company may not, directly or indirectly or through merger or consolidation with any other corporation or other entity, without the affirmative vote at a meeting or the written consent of the holders of a
majority of the shares of Series B Preferred Stock, (i) increase or decrease the aggregate number of authorized shares of Series B Preferred Stock or (ii) amend, alter or change any of the provisions of the Certificate of Designations or
the Companys Amended and Restated Certificate of Incorporation (Certificate of Incorporation), in either case, so as to affect adversely the powers, preferences, or special rights of the shares of Series B Preferred Stock.
No Preemptive Rights
. The shares of Series B Preferred Stock do not have any rights of preemption whatsoever as to any securities of
the Company.
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Rank
. The Series B Preferred Stock, with respect to dividend rights and rights on
liquidation,
winding-up
and dissolution, rank: (i) on a parity with each class or series of capital stock of the Company the terms of which expressly provide that such class or series will rank
pari
passu
with the Series B Preferred Stock as to dividend rights or rights on liquidation,
winding-up
and dissolution of the Company, as applicable (collectively referred to as Parity Securities),
(ii) senior to the WMB Common Stock and each other class or series of capital stock of the Company outstanding or established after the Preferred Issuance Effective Date by the Company the terms of which do not expressly provide that it ranks senior
to or
pari passu
with the Series B Preferred Stock as to dividend rights or as to rights on liquidation,
winding-up
and dissolution of the Company, as applicable (collectively referred to as
Junior Securities), and (iii) junior to each other class or series of capital stock outstanding or established after the Preferred Issuance Effective Date by the Company the terms of which expressly provide that it ranks senior to
the Series B Preferred Stock as to dividend rights or as to rights on liquidation,
winding-up,
and dissolution of the Company, as applicable (collectively referred to as Senior Securities).
Other Rights
. The shares of Series B Preferred Stock do not have any powers, designations, preferences, or relative, participating,
optional or other rights.