The Williams Companies, Inc.
Severance Pay Plan
Effective October 28,
2003
THE WILLIAMS COMPANIES, INC.
SEVERANCE PAY PLAN
(As Amended and Restated Effective
as of October 28, 2003)
The following
capitalized words and phrases when used in the text of the Plan
shall have the meanings set forth below. Words in the masculine
gender shall connote the feminine gender as well.
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1.1
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“ Administrative
Committee ” means the committee administering this Plan
under Article 5.
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1.2
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“ Affiliate ”
means any Person that directly or indirectly, through one
(1) or more intermediaries, controls, is controlled by or is
under common control with the Company.
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1.3
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“ Aggregate
Compensation ” means Regular Wage Base and any annual
cash incentive awards from a Participating Company or Affiliate
annual incentive program.
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1.4
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“ Base Salary ”
means the amount a Participant is entitled to receive as wages or
salary on an annualized basis, including any salary deferral
contributions made to any defined contribution plan maintained by
the Participating Company and any amounts contributed by an
Employee to any cafeteria plan, flexible benefits plan or qualified
transportation plan maintained by the Participating Company in
accordance with Sections 125, 132 and related provisions of
the Code, but excluding all special pay, bonus, overtime, incentive
compensation, commissions, cost of living pay, housing pay,
relocation pay, other taxable fringe benefits and all extraordinary
compensation, payable by the Company or any of its Affiliates as
consideration for the Participant’s services, as determined
on the date immediately preceding termination of employment, except
that in the case of a termination of employment for Good Reason,
Base Salary shall be determined as of the date immediately
preceding the event which constitutes Good Reason.
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1.5
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“ Benefits Committee
” means the Company committee comprised of that group of
individuals appointed to act for the Company with respect to the
Plan.
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1.6
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“ Board of Directors
” means the board of directors of the Company.
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1.7
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“ Cause ” means
the occurrence of any one (1) or more of the following, as
determined in the good faith and reasonable judgment of the
Administrative Committee:
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(a) willful failure by an Employee to
substantially perform his duties (as they existed immediately prior
to a reduction in force, job elimination or Change in Control),
other
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than any such
failure resulting from a disability as defined in the Participating
Company or Affiliate disability program; or
(b) Employee’s conviction of or plea
of nolo contendere to a crime involving fraud, dishonesty or
any other act constituting a felony involving moral turpitude or
causing material harm, financial or otherwise, to the Company or an
Affiliate; or
(c) Employee’s willful or reckless
material misconduct in the performance of his duties which results
in an adverse effect on the Company or an Affiliate; or
(d) Employee’s willful or reckless
violation or disregard of the code of business conduct or other
published policy of the Company or an Affiliate; or
(e) Employee’s habitual or gross
neglect of duties.
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1.8
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“ Change Date ”
means the date on which a Change in Control first
occurs.
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1.9
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“ Change in Control
” means the occurrence of any one (1) or more of the
following:
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(a) any
person (as such term is used in Rule 13d-5 of the SEC under
the Exchange Act) or group (as such term is defined in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act), other than
a “Related Party”, becomes the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act) of
20 percent or more of the common stock of the Company or of
Voting Securities representing 20 percent or more of the
combined voting power of all Voting Securities of the Company,
except that no Change in Control shall be deemed to have occurred
solely by reason of such beneficial ownership by a Person with
respect to which both more than 75 percent of the common stock
of such Person and Voting Securities representing more than
75 percent of the combined voting power of the Voting
Securities of such Person are then owned, directly or indirectly,
by the persons who were the direct or indirect owners of the common
stock and Voting Securities of the Company immediately before such
acquisition, in substantially the same proportions as their
ownership, immediately before such acquisition, of the common stock
and Voting Securities of the Company, as the case may be;
or
(b) the
Company’s Incumbent Directors (determined using the Effective
Date as the baseline) cease for any reason to constitute at least a
majority of the directors of the Company then serving;
or
(c) a
Reorganization Transaction, other than a Reorganization Transaction
that results in the Persons who were the direct or indirect owners
of the outstanding common stock and Voting Securities of the
Company immediately before such Reorganization Transaction
becoming, immediately after the consummation of such Reorganization
Transaction, the direct or indirect owners, of both at least
65 percent of the then-outstanding common stock of the
Surviving Corporation and Voting Securities representing at least
65 percent of the combined voting power of the
then-outstanding Voting Securities of the Surviving Corporation, in
substantially the same respective
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proportions as
such Persons’ ownership of the common stock and Voting
Securities of the Company immediately before such Reorganization
Transaction; or
(d) approval by the stockholders of the
Company of a plan or agreement for the sale or other disposition of
all or substantially all of the consolidated assets of the Company
or a plan of complete liquidation of the Company, other than any
such transaction that would result in
(i) a
Related Party owning or acquiring more than 50 percent of the
assets owned by the Company immediately prior to the transaction
or
(ii) the
Persons who were the direct or indirect owners of the outstanding
common stock and Voting Securities of the Company immediately
before such transaction becoming, immediately after the
consummation of such transaction, the direct or indirect owners, of
more than 50 percent of the assets owned by the Company
immediately prior to the transaction.
Notwithstanding
the occurrence of any of the foregoing events, a Change in Control
shall not occur with respect to an Employee if, in advance of such
event, the Employee agrees in writing that such event shall not
constitute a Change in Control.
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1.10
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“ Code ” means
the Internal Revenue Code of 1986, as amended from time to time.
References to a particular section of the Code include references
to regulations and rulings thereunder and to successor
provisions.
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1.11
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“ Company ” means
The Williams Companies, Inc., a Delaware corporation and any
successor or successors thereto that continue this Plan pursuant to
Section 6.1 or otherwise.
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1.12
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“ Comparable Offer of
Employment ” means an offer of employment for a position
with the Company, any of its Affiliates, or any successor of the
Company or its Affiliates that provides for Regular Wage Base equal
to or greater than the Participant’s Regular Wage Base
immediately preceding the Participant’s termination date. A
successor of the Company or any of its Affiliates shall include,
but shall not be limited to, any entity (or its Affiliate) involved
in or in any way connected with a corporate rearrangement, total or
partial merger, acquisition, sale of stock, sale of assets or any
other transaction. A Comparable Offer of Employment includes,
without limitation, a position that requires the Employee to
transfer to a different work location, but only so long as the
Employee’s commuting distance to the new work location is no
longer than the greater of fifty (50) miles or such
Participant’s current commute if the commuting distance from
such Participant’s current residence to the original work
location is more than fifty (50) miles.
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1.13
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“ Effective Date
” means October 28, 2003, which is the effective date of
this amendment and restatement.
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1.14
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“ Employee ”
means any regular full-time or part-time employee in the service
and on the payroll of a Participating Company as a common law
employee. An Employee is
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4
considered as
part-time if he is regularly scheduled to work at least fifty
percent of the number of hours in the normal workweek established
by a Participating Company. A regular employee receiving benefits
under a Participating Company’s Short-Term Disability Program
or Long-Term Disability Program is an Employee for purposes of this
Plan. Employee shall not include:
(a) an
Employee who is a member of a group of Employees represented by a
collective bargaining representative, unless such agreement
expressly provides for coverage of bargaining unit employees under
the Plan;
(b) an
Employee who is not a resident of the United States and not a
citizen of the United States;
(d) a
weekly-paid employee employed at a retail petroleum convenience
store in any capacity other than a store manager;
(e) a
seasonal employee, temporary employee, leased employee, term
employee, or an employee not employed on a regularly scheduled
basis;
(f) a
person who has a written employment contract or other contract for
services, unless such contract expressly provides that such person
is an employee;
(g) a
person who is paid through the payroll of a temporary agency or
similar organization regardless of any subsequent reclassification
as a common law employee;
(h) a
person who is designated, compensated or otherwise treated as an
independent contractor by a Participating Company or its Affiliates
regardless of any subsequent reclassification as a common law
employee;
(i) a
person who has a written contract with a Participating Company or
its Affiliates which states either that such person is not an
employee or that such person is not entitled to receive employee
benefits from a Participating Company for services under such
contract;
(j) an
individual who is not contemporaneously classified as an Employee
for purposes of the Participating Company’s payroll system.
In the event any such individual is reclassified as an Employee for
any purpose, including, without limitation, as a common law or
statutory employee, by any action of any third party, including,
without limitation, any government agency, or as a result of any
private lawsuit, action or administrative proceeding, such
individual will, notwithstanding such reclassification, remain
ineligible for participation hereunder and will not be considered
an eligible Employee. In addition to and not in derogation of the
foregoing, the exclusive means for an individual who is not
contemporaneously classified as an Employee of the Participating
Company’s payroll system to become eligible to participate in
this Plan is
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through an
amendment to this Plan which specifically renders such individual
eligible for participation hereunder; or
(k) any
individual retained by a Participating Company or its Affiliates
directly or through an agency or other party to perform services
for an Employer (for either a definite or indefinite duration) in
the capacity of a fee-for-service worker or independent contractor
or any similar capacity including, without limitation, any such
individual employed by temporary help firms, technical help firms,
staffing firms, employee leasing firms, professional employer
organizations or other staffing firms, whether or not deemed to be
a “common law” employee.
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1.15
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“ ERISA ” means
the Employee Retirement Income Security Act of 1974, as amended
from time to time. References to a particular section of ERISA
include references to regulations and rulings thereunder and to
successor provisions.
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1.16
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“ Exchange Act ”
means the Securities Exchange Act of 1934, as amended from time to
time. References to a particular section of the Exchange Act
include references to successor provisions.
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1.17
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“ Good Reason ”
means the occurrence, within two (2) years following a Change
in Control (other than during a Merger of Equals Period) and
without a Participant’s prior written consent, of any one
(1) or more of the following:
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(a) a
material adverse reduction in the nature or scope of the
Participant’s duties from the most significant of those
assigned at any time in the 90-day period prior to a Change in
Control; or
(b) a
significant reduction in the authority and responsibility assigned
to the Participant; or
(c) any
reduction in or failure to pay Participant’s Base Salary;
or
(d) a
material reduction of Participant’s Aggregate Compensation
and/or aggregate benefits from the amounts and/or levels in effect
on the Change Date, unless such reduction is part of a policy
applicable to peer Participants of the Company and of any successor
entity; or
(e) a
requirement by the Company or any of its Affiliates that the
Participant’s principal duties be performed at a location
requiring a commuting distance equal to the greater of the
Participant’s current commuting distance or more than fifty
(50) miles commuting distance, without the Participant’s
consent (except for travel reasonably required in the performance
of the Participant’s duties).
Notwithstanding
anything in this Plan to the contrary, no act or omission shall
constitute grounds for “Good Reason”:
(a) Unless, at least thirty (30) days
prior to his termination, Participant gives a written notice to the
Company or the Affiliate that employs Participant of his intent to
terminate
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his employment
for Good Reason which describes the alleged act or omission giving
rise to Good Reason; and
(b) Unless
such notice is given within ninety (90) days of
Participant’s first actual knowledge of such act or omission,
or if such act or omission would not constitute Good Reason during
a Merger of Equals Period, unless Participant’s termination
date is within 90 days after the first date on which he first
obtained actual knowledge of the fact that the Merger of Equals
Period has ended; and
(c) Unless
the Company or the Affiliate that employs Participant fails to cure
such act or omission within the 30-day period after receiving such
notice.
Further, no act
or omission shall be “Good Reason” if Participant has
consented in writing to such act or omission.
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1.18
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“ Incumbent Directors
” means determined as of any date by reference to any
baseline date:
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(a) the
members of the Board of Directors on the date of such determination
who have been members of the Board of Directors since such baseline
date; and
(b) the
members of the Board of Directors on the date of such determination
who were appointed or elected after such baseline date and whose
election, or nomination for election by stockholders of the Company
or the Surviving Corporation, as applicable, was approved by a vote
or written consent of two-thirds (or by a simple majority for
purposes of subsection (b) of the definition of “Merger
of Equals”) of the directors comprising the Company’s
Incumbent Directors on the date of such vote or written consent,
but excluding each such member whose initial assumption of office
was in connection with:
(i) an
actual or threatened election contest, including a consent
solicitation, relating to the election or removal of one
(1) or more members of the Board of Directors,
(ii) a
“tender offer” (as such term is used in Section 14(d)
of the Exchange Act),
(iii) a
proposed Reorganization Transaction, or
(iv) a
request, nomination or suggestion of any beneficial owner of Voting
Securities representing 20 percent or more of the aggregate
voting power of the Voting Securities of the Company or the
Surviving Corporation, as applicable.
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1.19
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“ Leave of Absence
” means an absence, with or without compensation, authorized
on a non-discriminatory basis by the Company or any of its
Affiliates. For the purposes of this Plan, Leave of Absence
includes any leave of absence other than a Family and Medical Leave
of Absence or Military Leave of Absence.
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1.20
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“ Merger of Equals
” means, as of any date, a Reorganization Transaction that,
notwithstanding the fact that such transaction may also qualify as
a Change in Control, satisfies all of the conditions set forth in
subsections (a), (b) and (c) below:
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(a) less
than 65 percent, but not less than 50 percent, of the
common stock of the Surviving Corporation outstanding immediately
after the consummation of the Reorganization Transaction, together
with Voting Securities representing less than 65 percent, but
not less than 50 percent, of the combined voting power of all
Voting Securities of the Surviving Corporation outstanding
immediately after such consummation are owned, directly or
indirectly, by the persons who were the owners directly or
indirectly of the common stock and Voting Securities of the Company
immediately before such consummation in substantially the same
proportions as their respective direct or indirect ownership,
immediately before such consummation, of the common stock and
Voting Securities of the Company, respectively; and
(b) the
Company’s Incumbent Directors (determined using the date
immediately preceding the consummation date of the Reorganization
Transaction as the baseline date) shall, throughout the period
beginning on the date of such consummation and ending on the second
anniversary of such consummation date, continue to constitute not
less than 50 percent of the members of the Board of Directors;
and
(c) the
person who was the Chief Executive Officer immediately prior to the
consummation of the Reorganization Transaction shall serve as the
Chief Executive Officer of the Surviving Corporation at all times
during the period commencing on such consummation, and ending on
the first anniversary of the date of such consummation; provided,
however, that a Reorganization Transaction that qualifies as a
Change in Control and a Merger of Equals shall cease to qualify as
a Merger of Equals and shall instead qualify as a Change in Control
that is not a Merger of Equals from and after the first date within
the two-year period following the Change in Control (such date, the
“Merger of Equals Cessation Date”) as of which any one
(1) or more of the following shall occur for any
reason:
(i) any
condition of subsection (a) of this Section shall for any
reason not be satisfied immediately after the consummation of the
Reorganization Transaction; or
(ii) as of
the close of business on any date on or after the consummation of
the Reorganization Transaction and before the second anniversary of
the Change Date, any condition of subsections (a) and/or
(b) of this Section shall not be satisfied; or
(iii) on
any date prior to the first anniversary of the consummation of the
Reorganization Transaction, the Company shall make a filing with
the SEC, issue a press release, or make a public announcement to
the effect that the Chief Executive Officer has resigned or will
resign or be terminated, other than on account of a scheduled
retirement, or the Company is seeking or intends to seek a
replacement for the then-Chief Executive Officer, whether such
resignation,
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termination or
replacement is to become effective before or after such first
anniversary of the consummation of the Reorganization
Transaction.
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1.21
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“ Merger of Equals
Cessation Date ” shall be the meaning set forth in the
definition of “Merger of Equals”
Section 1.20.
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1.22
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“ Merger of Equals
Period ” means the period commencing on the date of a
Merger of Equals and ending the earlier of the Merger of Equals
Cessation Date or two (2) years following the Change
Date.
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1.23
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“ Participant ”
means an Employee participating in the Plan as provided in
Article 2.
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1.24
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“ Participating Company
” means the Company and any Affiliate of the Company, which
has adopted this Plan in accordance with
Section 6.11.
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1.25
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“ Person ” means
any individual, sole proprietorship, partnership, joint venture,
limited liability company, trust, unincorporated organization,
association, corporation, institution, public benefit corporate,
entity or government instrumentality, division, agency, body or
department.
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1.26
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“ Plan ” means
The Willia
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