COURT OF CHANCERY OF THE S AM G LASSCOCK III

V ICE C HANCELLOR STATE OF DELAWARE C OURT OF C HANCERY C OURTHOUSE 34 T HE C IRCLE G EORGETOWN , D ELAWARE 19947 Date Submitted: March 19, 2018

Date Decided: April 16, 2018 Kenneth J. Nachbar, Esquire Susan W. Waesco, Esquire Matthew R. Clark, Esquire Zi-Xiang Shen, Esquire Morris, Nichols, Arsht & Tunnell LLP 1201 N. Market Street, P.O. Box 1347 Wilmington, DE 19899 Rolin P. Bissell, Esquire Tammy L. Mercer, Esquire James M. Yoch, Jr., Esquire Benjamin M. Potts, Esquire Young Conaway Stargatt & Taylor, LLP Rodney Square 100 North King Street Wilmington, DE 19801

Re: The Williams Companies, Inc. v. En ergy Transfer Equity, L.P., et al. , Cons. Civil Action Nos. 12168-VCG and 12337-VCG

Dear Counsel: The underlying action arose from a failed multi-billion-dollar merger between The Williams Companies, Inc. (“ Williams”) and Energy Transfer E quity, L.P. (“ETE”), both major participants in the energy pipeline busines s. That failure resulted in a number of legal actions, in this Court and elsewh ere. 1 I initially heard this matter when Williams sought injunctive relief to force con summation of the Merger, which ultimately failed. Both parties thereafter pursu ed claims against each

other in this action for contr actual damages under the Merger A greement. By

1 This Letter Opinion assumes f amiliarity with the facts outline d in the previous Opinions of both this Court and the Supreme Court and includes only those facts necessary to my decision here. All defined terms have the same meaning as those described in my mo st recent Memorandum Opinion. Williams Cos., Inc. v. Energy Transfer Equity , 2017 WL 5953513, at *1 ( Del. Ch. Dec. 1, 2017).2 Memorandum Opinion of December 1, 2017 (the “Memorandum Opinion ”), I dismissed a portion of a counterclaim by ETE by which ETE sough t a large breakup fee. I also dismissed ETE’s claim for fees and costs incurr ed in Texas litigation, as damages for breach of a forum selection clause of the Merger Agreement. ETE now seeks reargument of those decisions. The Merger Agreement required the Board to enact four board recommendations, together known as the Company Board Recommenda tion, that approved the Merger and declared t he Merger Agreement advisable to the

stockholders. These were the re solutions necessary to consumma te the Merger. The Board was forbidden to threaten or take action to withdraw, mod ify, or qualify the Company Board Recommendation in a way adverse to ETE. Any such action would lead to liquidated damages. I found that the Williams Board ha d not taken “formal” action―by which I meant action by the directors as a Board―comm itting any of the contractually forbidden actions. ETE’s primary ground for rearg ument is that I misapprehended the facts regardi ng the Board’s action, or misco nstrued the contractual prohibition in light of the facts. ETE’s second ground for reargument arises from my dismissal of a claim by ETE for expenses and fees incurred when Williams filed suit in Texas against a principal of ETE, allegedly breach ing a forum selection clause. I dismissed the claim based on language in the Merger A greement requiring all parties to bear their own3 fees and expenses in connection with the Agreement. ETE argues that my interpretation of this provision of the Merger Agreement is err oneous as a matter of

law. I find that I did not misapprehend the law or the facts and acc ordingly deny the Motion for Reargument. My reasoning follows. In addition, I adopt the reasoning stated in the Memorandum Opinion.

I. THE BREAK-UP FEE ETE’s Motion for Reargument of its liquidated damages claim hin ges on my interpretation of several provisions of the Merger Agreement. By way of brief background, according to ETE, ch anged economic conditions made the agreed-to union of Williams and ETE economically unattractive for both pa rties. Rather than renegotiate the Merge r terms, Williams—in ETE’s view—feigned fi delity to the Agreement, while working to unde rmine it, for the purpose of ex torting a walk-away payment from ETE. Part of Williams’ plan, presumably, was liti gation in this Court seeking specific performance of the Agreement, which ETE succes sfully defended by invoking failure of a conditi on precedent. Nonetheless, ETE here claims that it was Williams that materially breached the Merger Agreement, ent itling ETE to liquidated damages. In my Memo randum Opinion, I found this cla im untenable. Section 4.02(d) of the Merger Agreement provides that: Neither the Board of Directors of the Company nor any committee thereof shall (i)(A) withdraw (or modify or qualify in a manner adverse4 to Parent), or publicly propose to withdraw (or modify or quali fy in a manner adverse to Parent), the Company Board Recommendation or (B) recommend the approval or a doption of, or approve or adopt, declare advisable or publicly p ropose to recommend, approve, ad opt or declare advisable, any Compa ny Takeover Proposal (any action described in this clause (i) b eing referred to as a “Company Ad verse Recommendation Change”). 2 “Company Board Recommendation” is defined in Section 3.01(d)(i ): The Board of Directors of the Company duly and validly adopted resolutions (A) approving and declaring advisable this Agreement, the Merger and the other Transactions, (B) declaring that it is in the best interests of the stockholders of the Company that the Company e nter into this Agreement and consu mmate the Merger and the other Transactions on the terms and subject to the conditions set for th herein, (C) directing that the adoption of this Agreement be submitted to a vote at a meeting of the stockholde rs of the Company and (D) recommending that the stockholders of the Company adopt this Agreement ((A), (B), (C) and (D) being referred to herein as th e “Company Board Reco mmendation”), which resolutions , as of the date of this Agreement, have not been rescinded, modified or withdra wn in any way. 3 ETE contends that the remedy for a breach of Section 4.02(d) is liquidated damages of $1.48 billion. 4 By contrast, Section 5.01(b) requires that Williams “shall use reasonable best

efforts to obtain from its stoc kholders the Company Stockholder Approval in favor of the adoption of this Agreement.” 5 The remedy for a breach of this provision is

2 Merger Agreement § 4.02(d) (emphases added). 3 Id. § 3.01(d)(i) (emphases added). 4 Countercl. Compl. ¶¶ 8, 28, 51, 86. ETE cites to Sections 5.0 6(d)(iii) and 7.01(e) of the Merger Agreement as support for its interpretation that breach of Sect ion 4.02(d) triggers a $1.48 billion termination fee. 5 Merger Agreement § 5.01(b).5 actual damages arising from the breach itself. 6 ETE alleges that Williams violated Sections 4.02(d) and 3.01(d)(i) through several actions describ ed below. Williams denies any breach, and argues that ETE’s allegations, at most, implicate Section 5.01(b).

A. Alleged Actions ETE points to the following actions, individually and cumulativ ely, as breaches of Section 4.02(d):

1. Press Releases ETE argues that the Williams Board used press releases “as a we apon to extract a walk-away payment” despite splits in opinion among th e directors about the value of the Merger. 7 ETE tries to convert these facially positive statements into negative statements about the transaction by highlighting chang es through time, such

as: 8 January 15, 2016 press release April–May 2016 press releases

The [Williams Board] is unanimously committed to completing the transaction with Energy Transfer Equity, L.P. (NYSE: ETE) per the merger agreement executed on September 28, 2015 as expeditiously as possible and delivering the benefits of the transaction to Williams’ stockholders. The Williams Board is unanimously committed to enforcing its rights under the merger agreement entered into with ETE on September 28, 2015 and to delivering the benefits of the merger agreement to Williams’ stockholders.

6 Id. ; Nov. 30, 2016 Hr’g Tr. 14:9–17:5. 7 Countercl. Compl. ¶¶ 60–62. 8 Id.6 ETE argues that the press releas es from April to May 2016 viola ted Section 4.02(d) by omitting the “commit[ment] to complet[e] the transaction” la nguage of the January press release. Accordi ng to ETE, against a “backdrop” of internal director dissension, “the Williams Board’s public statements regarding u nanimity cannot be understood as anything but a litigation-driven attempt to obtai n a walk-away payment.” 9 ETE makes a similar argument for press releases issued by Wil liams regarding litigation in t his Court and in Texas. 10

2. Media Campaign ETE alleges that Williams engaged in a “media campaign” against the Merger. 11 Williams purportedly did this by “planting media reports disf avoring ETE” through its attorney and through interactions with the Wal l Street Journal by a Williams public relations employee. 12 ETE also contends that “Williams made a number of disparaging statements concerning ETE’s management te am in multiple public lawsuits and (upon informa tion and belief) through its p ublic relations firm,

Joele Frank.” 13 ETE argues that “Williams or its public relations consultant, Joele Frank, leaked confidential inform ation to the media in a furthe r effort to denigrate ETE and its managers.” 14 To the extent these media st atements disparaged Warren,

9 Id. ¶ 65. 10 Id. ¶ 75. 11 Id. ¶¶ 16, 22, 78. 12 Id. ¶ 78. 13 Id. ¶ 69. 14 Id. ¶ 79.7 ETE suggests they were especially egregious in light of the For m S-4 Williams filed regarding the Merger, which tout ed Warren’s anticipated leaders hip of the combined entity. 15 ETE makes the same argument with respect to disparaging state ments in various lawsuits, described below.

3. Lawsuits In response to an issuance of equity by ETE during the pendency of the Merger, Williams sued Warren in T exas state court (the “Texas a ction”). The complaint—which ETE avers was approved by Williams’ Board—descr ibed

Warren as a “‘malicious’ execu tive who has ‘exploited’ his lead ership position at

ETE.” 16 According to ETE, the litigation and its averments constitute a Company Adverse Recommendation Change. ETE makes a similar allegation regarding the Merger Actions filed in this Court, by which Williams sought to enforce the Merger Agreement, noting that filings by Williams accuse ETE of “sabot age,” “fabrication,” “illegitimate” avoidance of contractual obligations, and other unethical behavior. 17 ETE states that these “extreme and unnecessary descriptions are contrary to the Company Board Recommendation and inconsistent with Williams’ ob ligations under the Merger Agreement” and “violate[] Section[] 4.02 . . . of the Merger Agreement.” 18

15 Id. ¶¶ 18, 90–95. 16 Id. ¶ 16. 17 Id. ¶¶ 80–81. 18 Id. ¶¶ 81, 86.8 4. SEC Filings ETE alleges that certain of Williams’ Form S-4 filings independ ently

constitute modifications or withdr awals of the Company Board Re commendation. 19 In a May 4, 2016 amendment to the Form S-4, Williams explained that:

The WMB Board believes it is appropriate to continue to rely on the fairness opinions dated Septembe r 28, 2015 for purposes of its original decision to enter into the merger agreement. However, the WMB B oard acknowledges that [its] fairness opinions only address fairness of the consideration to be received by WMB stockholders as of Septembe r 28, 2015 and the WMB Board no longer believes that the projections underlying those fairness opinions a re valid. Accordingly, the WMB Board is not relying on those fairness opinions in evaluating i ts recommendation to Williams’ stockholders to adopt the merger agreement in light of the developments described in this sectio n. . . . The WMB Board believes it has, with the assistance of WMB management and the WMB Board’s fi nancial advisors, the necessar y expertise to evaluate the impact of changed economic conditions on the merits of the merger transaction. After carefully reviewing th e developments described in this section, including those noted a bove, the WMB Board has not changed its recommendation from its vote on September 28, 2015 that WMB stockholders adopt the merger agreement

. 20 This statement, in ETE’s view, is sufficient to trigger Section 4.02 and result in liquidated damages of $1.48 bill ion because “the Company Board Recommendation

19 Id. ¶¶ 23–34, 89–90; Defs.’ & Countercl. Pls.’ Br. in Opp’n to Pl. & Countercl. Def.’s Mot. to Dismiss & to Strike Defs. & Countercl. Pls.’ Second Am. & Suppl . Affirmative Defenses & Verified Countercl. (“Defs. ’ Ans. Br.”) 2–3, 12; Mar. 19, 2018 Oral Arg. Tr. 9:19–10:2. 20 Pl.’s Br. in Support of its Motion to Dismiss & to Strike Defs . & Countercl. Pls.’ Second Am. & Supp. Affirmative Defenses & Verified Countercl. Ex. E (Am’t No. 5 to Form S-4 Reg’n Statement, dated May 4, 2016) 24–25 (emphases added). I consid er the SEC filings referred to in the Complaint to be incorporated by reference. See, e.g. , Amalgamated Bank v. Yahoo! Inc. , 132 A.3d 752, 797 (Del. Ch. 2016).9 was weakened by the absence of a fairness opinion. If a disclo sure is weakened, it is modified or qualified.” 21 ETE argues that Williams also modified or qualified the Company Board Recommendation when the Form S-4 amendment stated that certain material factors previously re lied on were no longer reliable, such as projections for dividends, certain synergies, a nd an “ongoing presence in Tulsa , Oklahoma.” 22

B. Discussion “To prevail on a motion for reargument under Rule 59(f), the mo ving party

must demonstrate that the Court either overlooked a decision or principle of law that would have controlling effect or misapprehended the facts or th e law such that the

outcome of the decision would be different.” 23 ETE “bear[s] a heavy burden on a Rule 59 motion. Such motions are not a mechanism for litigants to relitigate claims already considered by the court.” 24 The Motion for Reargument addresses an underlying Motion to Dismi ss under Rule 12(b)(6). 25 When reviewing a motion to dismiss, (i) all well-pleaded factual allegations are accepted as true; (ii) even vague allegations are well-pleaded if they give the opposing pa rty notice of the claim; (iii) the Court must draw all reasonable i nferences in favor of the non-moving party; and (iv) dismissal is inappro priate

21 Countercl. Compl. ¶¶ 23–24, 90; see also Defs.’ Ans. Br. 2–3; Mar. 19, 2018 Oral Arg. Tr. 9:19– 10:2. 22 Defs.’ Ans. Br. 12–13; Countercl. Compl. ¶ 93. 23 In re Zale Corp. S’holders Litig. , 2015 WL 6551418, at *1 (Del. Ch. Oct. 29, 2015). 24 In re ML/EQ Real Estate P'ship Litig. , Consol. , 2000 WL 364188, at *1 (Del. Ch. Mar. 22, 2000). 25 Williams Cos., Inc. , 2017 WL 5953513, at *2.10 unless the plaintiff would not be entitled to recover under any reasonably conceivable set of c ircumstances susceptible of proo f. 26 “Dismissal of a claim based on contract interpretation is prope r if the defendants’ interpretation is the only reasonable construction as a matter of law.” 27 ETE contends that I misinterpreted the Merger Agreement when I found that Williams’ actions, adumbrated above , failed to state a claim un der Section 4.02(d) for liquidated damages. That is, ETE argues that my interpreta tion of the contract, holding that the actions alleged in the Complaint did not const itute the withdrawal, modification, or qualification of the Company Board Recommendat ion in favor of the Merger, was in error. Williams’ Board, via resolution, complied with the Company Boar d Recommendation requirement. The Board never explicitly withdre w, modified, or qualified this recommendation, or threatened to do so. Subsequ ently, Williams’ stockholders voted overwhelmingly in favor of the Merger. ETE’ s view, however, is that the Company Board Recommendation does not serve only to maintain board resolutions sufficient for closing. ETE argues that this claus e, together with Section 4.02(d), instead serves as an anti-disparagement clause. I not e that Section 5.01 is a separate best efforts provision t hat would also presumably proh ibit disparagement

26 Savor, Inc. v. FMR Corp. , 812 A.2d 894, 896–97 (Del. 2002) (footnotes and internal quot ation marks omitted). 27 Caspian Alpha Long Credit Fund, L.P. v. GS Mezzanine P’rs 2006, L.P. , 93 A.3d 1203, 1205 (Del. 2014) (internal quotation marks omitted).11 of the kind that ETE alleges. 28 Section 5.01 allows the counterparty, upon breach of the best efforts clause, to recover actual damages; by contrast , Sections 3.01(d)(i) and 4.02(d) provide liquidated damages where the Board threaten s or acts to withdraw, modify, or qualify the Company Board Recommendation. The latter two sections of the Merger Agreement are aimed at ma intaining a

resolution without which the Mer ger may not close. It is not r easonably conceivable, reading the contract as a whole, that the parties meant that ot her acts, which might reasonably be seen to disparage t he transaction or which might cool stockholder ardor for the Merger, should come under this liquidated damages clause relating to a requirement that the Board resolve those things necessary to the Merger. Section 4.02(d) refers to Section 3.01(d )(i), which requires certain re solutions by Williams’ Board; it then prohibits Board action undoing the resolutions. Williams’ Board explicitly took no such action; E TE argues that actions William s did take should be interpreted, practically , as incompatible with Williams’ undertaking in the Merger Agreement. But it is ETE’s construction that leads to an impra ctical result. Under ETE’s reading, where a board ena cted the required recommendatio n, but the company then disparaged the counterparty or its chairperson or amended certain assumptions about the merger thr ough SEC filings, after which t he company’s

stockholders nonetheless accepted the board’s favorable r ecommendation and voted

28 Merger Agreement § 5.01.12 to approve the merger, the company is liable for the full amoun t of liquidated damages as if the board had withdrawn its recommendation and to rpedoed the merger. In other words, actions by Williams that led to a cons ummated transaction leave it liable as though it had withdrawn from the transaction . This is a nonsensical reading of the language of the Me rger Agreement, and is not con sistent with the language the parties themselves chose. 29 ETE points out that the “safe harbor” provision in the Merger A greement at Section 4.02(f) allows Williams to make certain disclosures to stockholders— provided it reaffirms its recommendation in favor of the Merger contemporaneously—notwithstanding the prohibition against a Com pany Adverse Recommendation Change. Therefore , ETE argues, some statements or disclosures short of an explicit withdrawal or negative modification of the Company Board Recommendation are so inimical to the consummation of the Merge r that they would nonetheless amount to a breach of Section 4.02(d). Otherwise, the safe harbor reference would be surplusage. Assuming this is so, ETE has no t pled such

disclosures here

.

29 See, e.g. , Osborn ex rel. Osborn v. Kemp , 991 A.2d 1153, 1160–61 (Del. 2010) (rejecting “an absurd interpretation of [a] cont ract” and stating that “[a]n u nreasonable interpretation produces an absurd result or one that no reasonable person would have ac cepted when entering the contract”).13 The Merger Agreement required the Board to adopt the Company Bo ard Recommendation, without which a confirmatory vote by Williams’ stockholders could not take place. Withdrawal or adverse change to these re solutions, or a threat to do so, would trigger liquidated damages. By contrast, state ments by Williams adverse to the Merger would pres umably violate the best efforts clause, entitling the counterparty to actual damages, if any. The acts taken by Will iams (in some cases

in an effort to consummate the M erger), if actionable, fall in the second category,

not the first.

II. ETE’S PURSUIT OF FEES AND CO STS INCURRED IN THE TEXAS ACTION AS DAMAGES FOR BREAC H OF THE MERGER AGREEMENT During the pendency of the Merge r, Williams brought an action i n Texas against Warren, ETE’s principal, regarding ETE’s issuance of eq uity in ETE to

insiders. 30 The Texas Court—per ETE—dismissed the suit as in violation of the forum selection clause in Section 8.01(b) of the Merger Agreeme nt. 31 Accordingly,

ETE seeks the fees and costs it incurred in the Texas action as damages for violation of Section 8.01(b). 32 Section 5.06(a) of the Merger Agreement states that “all fees a nd expenses

incurred in connection with this Agreement and the Transactions shall be paid by

30 Williams Cos., Inc. , 2017 WL 5953513, at *8. 31 Id. at *2. 32 Id. at *8.14 the party incurring such fees or expenses.” 33 In the Memorandum Opinion, I found that the parties “waived any right to receive fees and expenses for a breach of the Agreement” in Section 5.06(a). 34 ETE argues that this finding is erroneous because Section 5.06(a) “says nothing a bout the recovery of damages for a breach of the Merger Agreement” 35 and posits that the parties woul d have used different language to achieve that result, such as: “in connection with . . . disp utes or controversies arising out of or relating to” the Agreement. 36 Williams, by contrast, points to case law stating that, with regard to a fee-shifting provision, the phrase “in connection with” is “paradigmatically bro ad” and “unquestionably broad.” 37 Williams argues that “[f]ees allegedly incurred as a result of a purported brea ch of the Merger Agreement are obviously a subset of all fees . . . incurred in connection with th[e Merger] Agreement.” 38 These arguments were presented to me and considered in the Memorandum Opinion. In ETE’s view, Section 5.06(a) is, at best, ambiguous, and in d ismissing its claim for fees and costs by relying on the plain language of Se ction 5.06(a), I have

33 Merger Agreement § 5.06(a). 34 Williams Cos., Inc. , 2017 WL 5953513, at *8. 35 Defs. & Countercl. Pls.’ Mot. for Reargument on Pl. & Counterc l. Def.’s Mot. to Dismiss or Strike (“Defs.’ Mot. for Reargument”) 10. 36 Id. ; see Wilcox & Fetzer, Ltd. v. Corbett & Wilcox , 2006 WL 2473665, at *3 (Del. Ch. Aug. 22, 2006) (determining the scope of “ in connection with” in the con text of an arbitration clause). 37 Pl.’s Opp’n to Defs.’ Mot. for Reargument 11–12 (quoting Lillis v. AT & T Corp. , 904 A.2d 325, 331 (Del. Ch. 2006)). 38 Id. at 11 (internal citations omitted).15 made an error of law. ETE’s di sagreement with my conclusion, h owever wellfounded, does not amount to a proper ground for reargument.

III. CONCLUSION Upon careful review of ETE’s arguments, I find that I did not m isapprehend the facts or the law in dismissing ETE’s claims for liquidated damages or for damages arising from breach of th e forum selection clause. The refore, the Motion for Reargument is DENIED. To the extent the foregoing requires an Order to take effect, IT IS SO ORDERED. Sincerely,

/s/ Sam Glasscock III

Sam Glasscock III