-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S8fomxIL7jF8nKf582zCoBc7oIPS9ryC2ytl0aZsKCZgpVy9ZyjsiprV9rmtbcIK a42nbs0RL9lysmzyDSn9wA== 0000950123-98-000371.txt : 19980119 0000950123-98-000371.hdr.sgml : 19980119 ACCESSION NUMBER: 0000950123-98-000371 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 5 REFERENCES 429: 333-04385 REFERENCES 429: 333-40869 FILED AS OF DATE: 19980116 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: K N ENERGY INC CENTRAL INDEX KEY: 0000054502 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS TRANSMISSION & DISTRIBUTION [4923] IRS NUMBER: 480290000 STATE OF INCORPORATION: KS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-44421 FILM NUMBER: 98508587 BUSINESS ADDRESS: STREET 1: 370 VAN GORDON ST STREET 2: PO BOX 281304 CITY: LAKEWOOD STATE: CO ZIP: 80228-8304 BUSINESS PHONE: 3039891740 MAIL ADDRESS: STREET 1: 370 VAN GORDON STREET STREET 2: P O BOX 281304 CITY: LAKEWOOD STATE: CO ZIP: 80228-8304 FORMER COMPANY: FORMER CONFORMED NAME: KN ENERGY INC DATE OF NAME CHANGE: 19920430 FORMER COMPANY: FORMER CONFORMED NAME: KANSAS NEBRASKA NATURAL GAS CO INC DATE OF NAME CHANGE: 19830403 FILER: COMPANY DATA: COMPANY CONFORMED NAME: K N CAPITAL TRUST III CENTRAL INDEX KEY: 0001053061 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS TRANSMISSION & DISTRIBUTION [4923] STATE OF INCORPORATION: KS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-44421-01 FILM NUMBER: 98508588 BUSINESS ADDRESS: STREET 1: 370 VAN GORDON ST STREET 2: PO BOX 281304 CITY: LAKEWOOD STATE: CO ZIP: 80228-8304 BUSINESS PHONE: 3039891740 MAIL ADDRESS: STREET 1: 370 VAN GORDON STREET STREET 2: P O BOX 281304 CITY: LAKEWOOD STATE: CO ZIP: 80228-8304 S-3 1 FORM S-3: K N ENERGY, INC./ K N CAPITAL TRUST III 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 16, 1998 REGISTRATION NO. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ K N ENERGY, INC. K N CAPITAL TRUST III (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) 48-0290000 52-6886681 (I.R.S. EMPLOYER IDENTIFICATION NUMBER) (I.R.S. EMPLOYER IDENTIFICATION NUMBER) KANSAS DELAWARE (STATE OF INCORPORATION) (STATE OF INCORPORATION) C/O K N ENERGY, INC. 370 VAN GORDON STREET 370 VAN GORDON STREET P.O. BOX 281304 P.O. BOX 281304 LAKEWOOD, COLORADO 80228-8304 LAKEWOOD, COLORADO 80228-8304 (303) 989-1740 (303) 989-1740 (ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING (ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE, OR REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE) NEW CODE, OR REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
MARTHA B. WYRSCH, ESQ. VICE PRESIDENT, GENERAL COUNSEL & SECRETARY 370 VAN GORDON STREET, P.O. BOX 281304 LAKEWOOD, COLORADO 80228-8304 (303) 989-1740 (NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------ COPIES TO: VINCENT PAGANO, JR. ESQ. C. MICHAEL HARRINGTON, ESQ. SIMPSON THACHER & BARTLETT VINSON & ELKINS L.L.P. 425 LEXINGTON AVENUE 2300 FIRST CITY TOWER NEW YORK, NEW YORK 10017 1001 FANIN (212) 455-2000 HOUSTON, TEXAS 77002-6760 (713) 758-2148
------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As promptly as practicable after this registration statement becomes effective. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, please check the following box. [X] 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 earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) 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 delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] ------------------------ CALCULATION OF REGISTRATION FEE
==================================================================================================================== PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION SECURITIES TO BE REGISTERED REGISTERED SECURITY PRICE(1) FEE - -------------------------------------------------------------------------------------------------------------------- Debt Securities(2).......................... -- -- -- -- - -------------------------------------------------------------------------------------------------------------------- Common Stock, par value $5.00 per share(3).................................. -- -- -- -- - -------------------------------------------------------------------------------------------------------------------- Stock Purchase Units of K N Energy, Inc.(4)................................... -- -- -- -- - -------------------------------------------------------------------------------------------------------------------- Preferred Securities of K N Capital Trust III(4).................................... -- -- -- -- - -------------------------------------------------------------------------------------------------------------------- Stock Purchase Contracts of K N Energy, Inc.(3)(4)(5)............................. -- -- -- -- - -------------------------------------------------------------------------------------------------------------------- Common Stock, par value $5.00 per share, issuable pursuant to the Stock Purchase Contracts(3)(4)(5)........................ -- -- -- -- - -------------------------------------------------------------------------------------------------------------------- Trust Debentures(6)......................... -- -- -- -- - -------------------------------------------------------------------------------------------------------------------- Guarantees of Preferred Securities of K N Capital Trust III by K N Energy, Inc.(7)................................... -- -- -- -- - -------------------------------------------------------------------------------------------------------------------- Total....................................... $3,500,000,000 -- $3,500,000,000 $1,032,500 ====================================================================================================================
(continued on next page) ================================================================================ 2 (1) Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended. There are being registered an indeterminate number of Debt Securities, Common Stock, Stock Purchase Units, Stock Purchase Contracts, Trust Debentures and Guarantee of K N Energy, Inc. and Preferred Securities of K N Capital Trust III. The aggregate public offering prices of the Debt Securities, Common Stock, Stock Purchase Units, Stock Purchase Contracts, Trust Debentures and Guarantee of K N Energy, Inc. and Preferred Securities of K N Capital Trust III registered hereby will not exceed $3,500,000,000. (2) The Debt Securities registered hereby include such additional amount as may be necessary so that, if Debt Securities are issued with an original issue discount, the aggregate initial offering prices of all Debt Securities will equal no more than $3,500,000,000. (3) The shares of Common Stock registered hereby include preferred share purchase rights (the "Rights"). The Rights are associated with and trade with the Common Stock. The value, if any, attributable to the Rights is reflected in the market price of the Common Stock. There are also being registered hereunder an indeterminate number of shares of Common Stock as shall be issuable upon conversion of the Debt Securities registered hereby. (4) Each Stock Purchase Unit of K N Energy, Inc. is a unit that consists of (i) a Stock Purchase Contract of K N Energy, Inc. under which the holder, upon settlement of such Stock Purchase Contract, will purchase an indeterminate number of shares of Common Stock to be issuable by K N Energy, Inc. and (ii) initially a beneficial interest in Preferred Securities of K N Capital Trust III or debt obligations of third parties, including U.S. Treasury securities, purchased with the proceeds from the sale of the Stock Purchase Unit and pledged to secure the obligation of such holder to purchase such shares of Common Stock. No separate consideration will be received for the Stock Purchase Contracts. (5) Consists of such indeterminate number of shares of Common Stock to be issuable by K N Energy, Inc. upon settlement of the Stock Purchase Contracts of K N Energy, Inc., including shares of such Common Stock issuable upon settlement of Deferred Contract Adjustment Payments as further described in the Registration Statement. (6) The Trust Debentures of K N Energy, Inc. will be purchased by K N Capital Trust III with the proceeds from the sale of the Preferred Securities of K N Capital Trust III. (7) No separate consideration will be received for the Guarantee or back-up undertakings of K N Energy, Inc. Includes the rights of holders of the Preferred Securities under such Guarantee and back-up undertakings, consisting of obligations of K N Energy, Inc. as set forth in the Declaration of Trust of K N Capital Trust III (including the obligation to pay expenses of K N Capital Trust III) and the Indenture governing the Trust Debentures of K N Energy, Inc., in each case as further described in the Registration Statement. ------------------------ Pursuant to Rule 429 under the Securities Act of 1933, the first prospectus contained in this Registration Statement relates to the remaining securities unsold in a Primary Offering having a maximum aggregate offering price of $405,308,750, such remaining unsold securities having been previously registered pursuant to the Form S-3 Registration Statement No. 333-40869. Such prospectus contained in this Registration Statement also relates to the remaining securities unsold in a Primary Offering having a maximum aggregate offering price of $94,691,250, such remaining unsold securities having been previously registered pursuant to the Form S-3 Registration Statement No. 333-04385. The second prospectus contained in this Registration Statement relates to 792,232 shares of Common Stock of K N Energy, Inc. remaining unsold in a Secondary Offering, such shares having previously been registered pursuant to the Form S-3 Registration Statement Nos. 333-40869 and 333-04385. This Registration Statement also constitutes Post-Effective Amendment No. 1 to Registration Statement No. 333-40869 and Post-Effective Amendment No. 2 to Registration Statement No. 333-04385, and upon effectiveness of such Post-Effective Amendments, this Registration Statement and Registration Statement No. 333-40869 and Registration Statement No. 333-04385 will relate to an aggregate of $4,000,000,000 of K N Energy's stock purchase contracts, stock purchase units, trust debentures, debt securities and common stock and K N Capital Trust III's preferred securities and K N's guarantee thereof to be sold in a Primary Offering and 792,232 shares of Common Stock of K N Energy, Inc. to be sold in a Secondary Offering. THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. 3 EXPLANATORY NOTE This Registration Statement consists of two separate Prospectuses, covering registration of: (1) Debt Securities, Common Stock, Stock Purchase Units, Stock Purchase Contracts, Trust Debentures and a Guarantee of K N Energy, Inc. and Preferred Securities of K N Capital Trust III. (2) Common Stock of K N Energy, Inc. to be sold in one or more secondary offerings by Cabot Specialty Chemicals, Inc. 4 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE OR JURISDICTION. PROSPECTUS (Subject to completion) Issued January 16, 1998 $4,000,000,000 K N Energy, Inc. STOCK PURCHASE CONTRACTS STOCK PURCHASE UNITS TRUST DEBENTURES DEBT SECURITIES COMMON STOCK K N Capital Trust III PREFERRED SECURITIES Guaranteed as set forth herein by K N Energy, Inc. ------------------------ K N Energy, Inc. ("K N", "K N Energy" or the "Company") may offer and sell from time to time, together or separately: (i) Stock Purchase Contracts ("Stock Purchase Contracts") to purchase shares of common stock, par value $5.00 per share ("Common Stock"), of the Company; (ii) Stock Purchase Units ("Stock Purchase Units"), each representing ownership of a Stock Purchase Contract and Preferred Securities (as defined below) or debt obligations of third parties, including U.S. Treasury securities, securing the holder's obligation to purchase Common Stock under the Stock Purchase Contracts; (iii) its debentures (the "Trust Debentures") to be purchased with the proceeds from the sale of preferred securities representing preferred undivided beneficial ownership interests in the assets of K N Capital Trust III ("Preferred Securities"), a statutory business trust created under the laws of the State of Delaware (the "Trust"); (iv) in addition to the Trust Debentures, its debentures, notes and other debt securities in one or more series, which may be either senior debt securities or subordinated debt securities ("Debt Securities"); and (v) Common Stock. In addition the Trust may offer its Preferred Securities. The aggregate initial offering price of all of the Securities (as defined below) which may be sold pursuant to this Prospectus will not exceed $4,000,000,000 or, if applicable, the equivalent thereof in any other currency or currency unit. The Securities will be offered in amounts, at prices and on terms to be determined in light of market conditions at the time of sale and set forth in a supplement to this Prospectus (a "Prospectus Supplement"). The Stock Purchase Contracts, Stock Purchase Units, Trust Debentures, Debt Securities, Common Stock and Preferred Securities are collectively called the "Securities." (continued on next page) ------------------------ The Securities may be sold directly by the Company, or in the case of the Preferred Securities, the Trust, to investors, through agents designated from time to time or to or through underwriters or dealers. See "Plan of Distribution." If any agents of the Company or, in the case of the Preferred Securities, the Trust, or any underwriters are involved in the sale of any Securities in respect of which this Prospectus is being delivered, the names of such agents or underwriters and any applicable commissions or discounts will be set forth in a Prospectus Supplement. The net proceeds to the Company from such sale also will be set forth in a Prospectus Supplement. See "Use of Proceeds." ------------------------ The Common Stock is traded on the New York Stock Exchange (the "NYSE") under the symbol "KNE." Any Common Stock sold pursuant to a Prospectus Supplement will be listed on such exchange, subject to official notice of issuance. The Prospectus Supplement will state whether any Securities offered thereby will be listed on any national securities exchange. If such Securities are not listed on any national securities exchange, there can be no assurance that there will be a secondary market for any such Securities. ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------ THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF THE SECURITIES UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT. ------------------------ , 1998 5 (continued from previous page) Certain specific terms of the particular Securities in respect of which this Prospectus is being delivered will be set forth in an applicable Prospectus Supplement, including, where applicable, (i) in the case of Stock Purchase Contracts, the number of shares of Common Stock issuable thereunder, the purchase price of the Common Stock, the date or dates on which the Common Stock is required to be purchased by the holders of the Stock Purchase Contracts, any periodic payments required to be made by the Company to the holders of the Stock Purchase Contracts or vice versa, and the terms of the offering and sale thereof, (ii) in the case of Stock Purchase Units, the specific terms of the Stock Purchase Contracts and any Preferred Securities or debt obligations of third parties securing the holder's obligation to purchase the Common Stock under the Stock Purchase Contracts, and the terms of the offering and sale thereof, (iii) in the case of Trust Debentures or Debt Securities, the specific designation, aggregate principal amount, authorized denominations, ranking as senior or subordinated, maturity, interest payment dates, interest rate (which may be fixed or variable) or method of calculating interest, if any, applicable Extension Period (as defined below) or interest deferral terms, if any, place or places where principal, premium, if any, and interest, if any, will be payable, any terms for mandatory or optional redemption, any sinking fund provisions, terms for any conversion or exchange into other securities, initial offering or purchase price, methods of distribution and any other special terms, and (iv) in the case of Preferred Securities, the specific title, aggregate amount, stated liquidation preference, number of securities, the rate of payment of periodic cash distributions ("distributions" or "Distributions") or method of calculating such rate, applicable Extension Period or distribution deferral terms, if any, place or places where distributions will be payable, any terms of redemption, initial offering or purchase price, methods of distribution and any other special terms. If so specified in the applicable Prospectus Supplement, the Securities offered thereby may be issued in whole or in part in the form of one or more temporary or permanent global securities ("Global Securities"). Unless otherwise set forth in the applicable Prospectus Supplement, the Trust Debentures will be senior unsecured obligations of the Company and will rank pari passu in right of payment with all of the Company's other senior unsecured obligations. If provided in an accompanying Prospectus Supplement, the Company will have the right to defer payments of interest on the Trust Debentures by extending the interest payment period thereon at any applicable time or from time to time for such number of consecutive interest payment periods (which shall not extend beyond the stated maturity (the "Stated Maturity") of the Trust Debentures) with respect to each deferral period as may be specified in such Prospectus Supplement (each, an "Extension Period"). See "Description of the Trust Debentures -- Option to Extend Interest Payment Period." The Company will be the owner of the common securities (the "Common Securities," and, together with the Preferred Securities, the "Trust Securities") of the Trust. The payment of distributions with respect to the Preferred Securities and payments on liquidation or redemption with respect to the Preferred Securities, in each case out of funds held by the Trust, will be irrevocably guaranteed by the Company to the extent described herein (the "Guarantee"). Certain payments in respect of the Common Securities may also be guaranteed by the Company. See "Description of the Guarantee." Unless otherwise set forth in the applicable Prospectus Supplement, the obligations of the Company under the Guarantee will be senior unsecured obligations of the Company and will rank pari passu with all of the Company's other senior unsecured obligations. Concurrently with the issuance by the Trust of the Preferred Securities, the Trust will invest the proceeds thereof and any contributions made in respect of the Common Securities in the Trust Debentures, which will have terms corresponding to the terms of 2 6 (continued from previous page) the Preferred Securities. The Trust Debentures will be the sole assets of the Trust, and payments under the Trust Debentures and those made by the Company in respect of fees and expenses incurred by the Trust will be the only revenue of the Trust. Upon the occurrence of certain events as are described herein and in the accompanying Prospectus Supplement, the Company may redeem the Trust Debentures and cause the redemption of the Trust Securities. In addition, if provided in the applicable Prospectus Supplement, the Company may dissolve the Trust at any time and, after satisfaction of the liabilities to creditors of the Trust as provided by applicable law, cause the Trust Debentures to be distributed to the holders of the Trust Securities in liquidation of their interest in the Trust. Taken together, the Company's obligations under the Trust Debentures, the Debenture Indenture (as defined herein), the Declaration (as defined herein) and the Guarantee, in the aggregate, have the effect of providing a full, irrevocable and unconditional guarantee of payments of distributions and other amounts due on the Preferred Securities. See "Relationship Among the Preferred Securities, the Trust Debentures and the Guarantee." ------------------------ AVAILABLE INFORMATION The Company is subject to the information requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements, and other information filed by the Company with the Commission can be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the following Regional Offices of the Commission: Chicago Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and New York Regional Office, Seven World Trade Center, 13th Floor, New York, New York 10048. Copies of such material can be obtained from the Public Reference Section of the Commission, Washington, D.C. 20549 at prescribed rates. The Commission maintains a Website that contains reports, proxy and information statements and other materials that are filed through the Commission's Electronic Data Gathering Analysis and Retrieval System. The Website can be accessed at http://www.sec.gov. In addition, reports, proxy statements and other information concerning the Company can be inspected at the New York Stock Exchange, 20 Broad Street, New York, New York 10005, on which exchange the Common Stock is listed. This Prospectus constitutes a part of three Registration Statements on Form S-3 (together with all amendments and exhibits thereto, the "Registration Statement") filed by the Company and the Trust with the Commission under the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus omits certain of the information contained in the Registration Statement, and reference is hereby made to the Registration Statement for further information with respect to the Company and the securities offered hereby. Any 3 7 statements contained herein concerning the provisions of any document filed as an exhibit to the Registration Statement or otherwise filed with the Commission are not necessarily complete, and in each instance reference is made to the copy of such document so filed. Each such statement is qualified in its entirety by such reference. No separate financial statements of the Trust have been included herein. The Company and the Trust do not consider that such financial statements would be material to holders of the Preferred Securities because the Trust is a newly formed special purpose entity, has no operating history or independent operations and is not engaged in and does not propose to engage in any activity other than its holding as trust assets the Trust Debentures and the issuance of the Trust Securities. See "The Trust," "Description of the Trust Debentures," "Description of the Preferred Securities" and "Description of the Guarantee." The Trust is currently not subject to the information reporting requirements of the Exchange Act. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by the Company with the Commission (File No. 1-6446) pursuant to the Exchange Act are incorporated by reference and made a part hereof: (a) the Company's Annual Report on Form 10-K for the year ended December 31, 1996, as amended by Amendment No. 1 thereto; (b) the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30, and September 30, 1997; (c) the Company's Current Reports on Form 8-K dated January 23 and 28 and October 27, 1997 and January 5 and 16, 1998; and (d) the description of the Preferred Share Purchase Rights and the Common Stock contained in the Company's Registration Statements on Form 8-A. All documents subsequently filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, after the date of this Prospectus and prior to the termination of the offering of the Securities pursuant hereto, shall be deemed to be incorporated by reference herein and to be a part hereof from the date of filing of such document. Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide without charge to any person, including any beneficial owner of Securities, to whom this Prospectus is delivered, upon written or oral request of such person, a copy of any and all of the documents referred to above which have been incorporated by reference in this Prospectus (other than exhibits to such documents, unless such exhibits are specifically incorporated by reference into such documents). Such requests should be directed to the office of the Vice President and Treasurer, K N Energy, Inc., 370 Van Gordon Street, P.O. Box 281304, Lakewood, Colorado 80228-8304, telephone number (303) 989-1740. K N ENERGY, INC. K N Energy is an integrated energy services provider whose operations include the transportation, storage, gathering, processing, and marketing of natural gas and natural gas liquids. In addition, the Company is engaged in energy commodity sales of natural gas and other products. The Company also markets innovative products and services, such as the Simple Choice(sm) menu of products and call center services designed for residential consumers, utilities, and small businesses through its 50% owned en-able LLC affiliate. 4 8 RECENT DEVELOPMENTS On December 18, 1997, K N Energy announced that it had entered into a definitive agreement to acquire (the "Acquisition") all of the capital stock of MidCon Corp. ("MidCon") from Occidental Petroleum Corporation for $3.49 billion, consisting of $2.1 billion in cash and the assumption of $1.39 billion in short- term debt which will be required to be collateralized at closing by U.S. government securities or one or more letters of credit, or a combination thereof. The transaction is expected to close in the first quarter of 1998 at which time MidCon will become a wholly-owned subsidiary of K N Energy. K N was incorporated under the laws of the State of Kansas in 1927. The address of its principal executive offices is 370 Van Gordon Street, P. O. Box 281304, Lakewood, Colorado 80228-8304 and its telephone number is (303) 989-1740. Additional information concerning the Company and its subsidiaries is included in the Company reports and other documents incorporated by reference in this Prospectus. See "Available Information" and "Incorporation of Certain Documents by Reference." THE TRUST The Trust is a statutory business trust created under Delaware law pursuant to (i) a declaration of trust, dated as of January 15, 1998, and entered into by the Company, as sponsor (the "Sponsor") and the trustee named herein and (ii) the filing of a certificate of trust with the Secretary of State of the State of Delaware on January 15, 1998. The declaration will be amended and restated in its entirety (as so amended and restated, the "Declaration"), substantially in the form filed as an exhibit to the Registration Statement of which this Prospectus forms a part, as of the date the Preferred Securities of such Trust are initially issued. The Declaration will be qualified under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). Upon issuance of the Preferred Securities, the purchasers thereof will own all of the Preferred Securities. K N Energy will directly or indirectly acquire all of the Common Securities, which will have an aggregate liquidation amount equal to 3% of the total capital of the Trust. The Preferred Securities rank pari passu, and payments will be made thereon on a pro rata basis, with the Common Securities, except that upon the occurrence and during the continuance of a Declaration Event of Default, the rights of the holders of the Common Securities to receive payments of periodic distributions and payments upon liquidation, redemption and otherwise will be subordinated to the rights of the holders of the Preferred Securities. The Trust exists for the exclusive purposes of (i) issuing the Trust Securities representing undivided beneficial interests in the assets of the Trust, (ii) investing the gross proceeds of the Trust Securities in the Trust Debentures and (iii) engaging in only those other activities necessary or incidental thereto. The Trust's business and affairs will be conducted by the KN Trustees (as defined below) and the administrators ("Administrators"), as set forth in the Declaration. Pursuant to the Declaration, the number of KN Trustees will initially be two. One trustee will be a financial institution that maintains its principal place of business in the State of Delaware (the "Delaware Trustee"). The other trustee (the "Institutional Trustee" and, together with the Delaware Trustee, the "KN Trustees") will be a financial institution that is unaffiliated with K N Energy and will serve as institutional trustee under the Declaration and as indenture trustee for the purposes of compliance with the provisions of the Trust Indenture Act. Initially, Wilmington Trust Company, a Delaware banking corporation, will be both the Delaware Trustee and the Institutional Trustee until removed or replaced by the holder of the Common Securities (or in certain circumstances the holders of a majority in liquidation amount of the Preferred Securities). Wilmington Trust Company will act as trustee (the "Guarantee Trustee") under the Guarantee and as Debenture Trustee (as defined herein) under the Debenture Indenture (as defined herein). The Administrators will be three individuals who are employees or officers of or affiliated with K N Energy and will act as administrators with respect to the Trust. The Administrators will be selected by the holders of a majority in liquidation amount of the Common Securities. The Administrators will have only those ministerial duties set forth in the Declaration with respect to accomplishing the purposes of the Trust and are not intended to be trustees or fiduciaries with respect to the Trust or the holders of Preferred Securities. 5 9 The Institutional Trustee will hold title to the Trust Debentures for the benefit of the holders of the Trust Securities, and the Institutional Trustee will have the power to exercise all rights, powers and privileges under the Debenture Indenture as the holder of the Trust Debentures. In addition, the Institutional Trustee will maintain exclusive control of a segregated non-interest bearing bank account (the "Property Account") to hold all payments made in respect of the Trust Debentures for the benefit of the holders of the Trust Securities. The Institutional Trustee will make payments of distributions and payments on liquidation, redemption and otherwise to the holders of the Trust Securities out of funds from the Property Account. The Guarantee Trustee will hold the Guarantee for the benefit of the holders of the Preferred Securities. K N Energy, as the direct or indirect holder of all the Common Securities, will have the right to appoint, remove or replace any Administrator and to increase or decrease the number of Administrators. Holders of the Common Securities will have the right to replace the Institutional Trustee (or, upon the occurrence and continuance of an event of default under the Declaration, the holders of a majority in liquidation amount of the Preferred Securities), provided that the successor Institutional Trustee shall be a corporation with trust powers organized under the laws of the United States or any State thereof with a combined capital and surplus of at least $500 million. Pursuant to the Debenture Indenture, K N Energy, as borrower, will pay all fees and expenses related to the Trust and the offering of the Trust Securities. See "Description of the Trust Debentures -- Miscellaneous." The rights of the holders of the Preferred Securities, including economic rights, rights to information and voting rights, are set forth in the Declaration and the Delaware Business Trust Act (the "Trust Act"). The principal place of business of the Trust is c/o K N Energy, Inc., 370 Van Gordon Street, P.O. Box 281304, Lakewood, Colorado 80228-8304, and its telephone number is (303) 989-1740. USE OF PROCEEDS Except as may otherwise be described in the Prospectus Supplement relating to an offering of Securities, the net proceeds from the sale of the Securities (including Trust Debentures issued to the Trust in connection with the investment by the Trust of all of the proceeds from the sale of the Preferred Securities) offered pursuant to this Prospectus and such Prospectus Supplement (the "Offered Securities") will be used by the Company to refinance indebtedness incurred in connection with the Acquisition. The remainder of the net proceeds will be used for general corporate purposes. Any specific allocation of the net proceeds of an offering of Securities by the Company to a specific purpose will be determined at the time of such offering and will be described in the related Prospectus Supplement. RATIOS OF EARNINGS TO FIXED CHARGES The following table sets forth the Company's consolidated ratios of earnings to fixed charges for the periods shown.
NINE MONTHS ENDED SEPTEMBER 30, YEARS ENDED DECEMBER 31, - ------------- ---------------------------------------- 1997 1996 1996 1995 1994 1993 1992 - ---- ---- ---- ---- ---- ---- ---- 2.40 2.88 3.21 3.07 1.69 2.41 2.61
The ratios of earnings to fixed charges were computed by dividing earnings by fixed charges. For this purpose, earnings are the sum of net income, taxes and fixed charges. Fixed charges are interest, amortization of debt discount, premium and expense, preferred stock dividends of a subsidiary, and the estimated interest portion of rental charges. The allowance for borrowed funds used during construction recognized for gas utility operations has been added to fixed charges and is included in earnings. 6 10 DESCRIPTION OF THE PREFERRED SECURITIES The Trust may issue only one series of Preferred Securities having terms described in the Prospectus Supplement relating thereto. The Declaration authorizes the Administrators of the Trust to issue on behalf of the Trust one series of Preferred Securities. The Declaration will be qualified as an indenture under the Trust Indenture Act. The Preferred Securities will have such terms, including distributions, redemption, voting, liquidation rights and such other preferred, deferred or other special rights or such restrictions as shall be set forth in the Declaration or made part of the Declaration Indenture by the Trust Indenture Act or the Trust Act. Reference is made to any Prospectus Supplement relating to the Preferred Securities of the Trust for specific terms, including (i) the specific designation of the Preferred Securities, (ii) the number of Preferred Securities, (iii) the annual distribution rate (or method of calculation thereof) for Preferred Securities, the date or dates upon which such distributions shall be payable and the record date or dates for the payment of such distributions, (iv) whether distributions of Preferred Securities shall be cumulative, and, in the case of Preferred Securities having such cumulative distribution rights, the date or dates or method of determining the date or dates from which distributions of Preferred Securities shall be cumulative, (v) the amount or amounts which shall be paid out of the assets of the Trust to the holders of Preferred Securities upon voluntary or involuntary dissolution, winding-up or termination of the Trust, (vi) the obligation or right, if any, of the Trust to purchase or redeem Preferred Securities and the price or prices at which, the period or periods within which and the terms and conditions upon which Preferred Securities shall or may be purchased or redeemed, in whole or in part, pursuant to such obligation or right, (vii) the voting rights, if any, of Preferred Securities in addition to those required by law, including the number of votes per Preferred Security and any requirement for the approval by the holders of Preferred Securities, as a condition to specified actions or amendments to the Declaration, (viii) the terms and conditions, if any, upon which Preferred Securities issued by the Trust may be converted into Common Stock of the Company, including the conversion price per share and the circumstances, if any, under which such conversion right will expire, (ix) the terms and conditions, if any, upon which the Trust Debentures may be distributed to holders of Trust Securities, (x) if applicable, any securities exchange upon which the Preferred Securities shall be listed, and (xi) any other relevant rights, preferences, privileges, limitations or restrictions of Preferred Securities issued by the Trust consistent with the Declaration or with applicable law. All Preferred Securities offered hereby will be guaranteed by the Company as and to the extent set forth below under "Description of the Guarantee." Certain United States federal income tax considerations applicable to the offering of the Preferred Securities will be described in the Prospectus Supplement relating thereto. In connection with the issuance of the Preferred Securities, the Trust will issue Common Securities. The Declaration authorizes the Administrators of the Trust to issue on behalf of the Trust the Common Securities having such terms including distributions, redemption, voting, liquidation rights or such restrictions as shall be set forth therein. The terms of the Common Securities issued by the Trust will be substantially identical to the terms of the Preferred Securities issued by the Trust and the Common Securities will rank pari passu, and payments will be made thereon on a pro rata basis with the Preferred Securities except that if an event of default under the Declaration (a "Declaration Event of Default") occurs and is continuing, the rights of the holders of the Common Securities to payments in respect of distributions and payments upon liquidation, redemption and maturity will be subordinated to the rights of the holders of the Preferred Securities. Except in certain limited circumstances, the Common Securities issued by the Trust will also carry the right to vote and to appoint, remove or replace any of the KN Trustees of the Trust. All of the Common Securities of the Trust will be directly or indirectly owned by the Company. DESCRIPTION OF THE TRUST DEBENTURES The Trust Debentures are to be issued under an indenture, as supplemented or amended from time to time (as so supplemented or amended, the "Debenture Indenture"), between the Company and Wilmington Trust Company, as trustee (the "Debenture Trustee"). This summary of certain terms and provisions of the Trust Debentures and the Debenture Indenture is not necessarily complete, and reference is hereby made to the copy of the form of the Debenture Indenture which is filed as an exhibit to the Registration Statement of which this Prospectus forms a part, and to the Trust Indenture Act. Whenever particular defined terms of the 7 11 Debenture Indenture are referred to in this Section or in a Prospectus Supplement, such defined terms are incorporated herein or therein by reference. The Company's Debt Securities are separately described in this Prospectus under the caption "Description of the Debt Securities." GENERAL Unless otherwise specified in the applicable Prospectus Supplement, the Trust Debentures will be issued as unsecured debt under the Debenture Indenture and will rank pari passu in right of payment with all of the Company's other senior unsecured obligations. Except as otherwise provided in the applicable Prospectus Supplement, the Debenture Indenture does not limit the incurrence or issuance of other secured or unsecured debt of the Company, whether under the Debenture Indenture, any other indenture that the Company may enter into in the future or otherwise. The Trust Debentures will be issuable in one series pursuant to an indenture supplemental to the Debenture Indenture or a resolution of the Company's Board of Directors or a committee thereof. The obligations of K N Energy under the Trust Debentures are senior to its 8.56% Series B Junior Subordinated Deferrable Interest Trust Debentures due April 15, 2027 (the "1997 Subordinated Trust Debentures"), which were issued in October 1997 in the aggregate principal amount of $103,100,000. The obligations of K N Energy under the Guarantee are senior to its guarantee (the "1997 Guarantee") in relation to the 8.56% Series B Capital Trust Pass-through Securities of K N Capital Trust I (the "1997 Capital Securities"), which were issued in October 1997 in the aggregate liquidation amount of $100,000,000. The Trust Debentures may be distributed pro rata to the holders of such Trust Securities in connection with the dissolution of the Trust upon the occurrence of certain events described herein or in the Prospectus Supplement relating to the Trust Securities. Only one series of Trust Debentures will be issued to the Trust or a K N Trustee of such Trust in connection with the issuance of Trust Securities by the Trust. The applicable Prospectus Supplement will describe the following terms of the Trust Debentures: (i) the title of the Trust Debentures; (ii) any limit upon the aggregate principal amount of the Trust Debentures; (iii) the date on which the principal of the Trust Debentures is payable or the method of determination thereof; or the right, if any, of the Company to defer payment of principal; (iv) the rate, if any, at which the Trust Debentures shall bear interest (including reset rates, if any, and the method by which any such rate will be determined), the Interest Payment Dates on which any such interest shall be payable, the right, if any, of the Company to defer or extend an Interest Payment Date and the Regular Record Date for any interest payable on any Interest Payment Date or the method by which any of the foregoing shall be determined; (v) the place where the principal of and premium, if any, and interest, if any, on the Trust Debentures will be payable and where, subject to the terms of the Debenture Indenture as described below under "-- Denominations, Registration and Transfer," the Trust Debentures may be presented for registration of transfer or exchange and the place or places where notices and demands to or upon the Company in respect of the Trust Debentures and the Debenture Indenture may be made ("Place of Payment"); (vi) any period or periods within, or date or dates on which, the price or prices at which and the terms and conditions upon which Trust Debentures may be redeemed, in whole or in part, at the option of the Company or a holder thereof; (vii) the obligation or the right, if any, of the Company or a holder thereof to redeem, purchase or repay the Trust Debentures and the period or periods within which, the price or prices at which, the currency or currencies (including currency unit or units) in which and the other terms and conditions upon which the Trust Debentures shall be redeemed, repaid or purchased, in whole or in part, pursuant to such obligation; (viii) the denominations in which any Trust Debentures shall be issuable if other than denominations of $1,000 and any integral multiple thereof; (ix) if other than in U.S. Dollars, the currency or currencies (including currency unit or units) in which the principal of (and premium, if any) and interest, if any, on the Trust Debentures shall be payable, or in which the Trust Debentures shall be denominated; (x) any additions, modifications or deletions in the Events of Default or covenants of the Company specified in the Debenture Indenture with respect to the Trust Debentures; (xi) if other than the principal amount thereof, the portion of the principal amount of Trust Debentures that shall be payable upon declaration of acceleration of the maturity thereof; 8 12 (xii) any additions or changes to the Debenture Indenture with respect to a series of Trust Debentures as shall be necessary to permit or facilitate the issuance of such series in bearer form, registrable or not registrable as to principal, and with or without interest coupons; (xiii) any index or indices used to determine the amount of payments of principal of and premium, if any, on the Trust Debentures and the manner in which such amounts will be determined; (xiv) the terms and conditions relating to the issuance of a temporary Global Security representing all of the Trust Debentures of such series and exchange of such temporary Global Security for definitive Trust Debentures of such series; (xv) whether the Trust Debentures of the series shall be issued in whole or in part in the form of one or more Global Securities and, in such case, the depositary for such Global Securities; (xvi) the appointment of any trustee, registrar, paying agent or agents; (xvii) the terms and conditions of any obligation or right of the Company or a holder to convert or exchange Trust Debentures into Preferred Securities or other securities; (xviii) the relative degree, if any, to which such Trust Debentures of the series shall be senior to or be subordinated to other series of such Trust Debentures or other indebtedness of the Company in right of payment, whether such other series of Trust Debentures or other indebtedness are outstanding or not; and (xix) any other terms of the Trust Debentures not inconsistent with the provisions of the Debenture Indenture. Unless otherwise indicated in the applicable Prospectus Supplement, the Trust Debentures will not be subject to any sinking fund. Trust Debentures may be sold at a substantial discount below their stated principal amount, bearing no interest or interest at a rate which at the time of issuance is below market rates. Certain material U.S. federal income tax consequences and special considerations applicable to any such Trust Debentures will be described in the applicable Prospectus Supplement. If the purchase price of any of the Trust Debentures is payable in one or more foreign currencies or currency units or if any Trust Debentures are denominated in one or more foreign currencies or currency units or if the principal of, premium, if any, or interest, if any, on any Trust Debentures is payable in one or more foreign currencies or currency units, the restrictions, elections, certain material U.S. federal income tax considerations, specific terms and other information with respect to such issue of Trust Debentures and such foreign currency or currency units will be set forth in the applicable Prospectus Supplement. If any index is used to determine the amount of payments of principal, premium, if any, or interest on any series of Trust Debentures, certain material U.S. federal income tax, accounting and other considerations applicable thereto will be described in the applicable Prospectus Supplement. DENOMINATIONS, REGISTRATION AND TRANSFER Unless otherwise specified in the applicable Prospectus Supplement, the Trust Debentures will be issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. Trust Debentures will be exchangeable for other Trust Debentures of the same issue, of any authorized denominations of a like aggregate principal amount, the same original issue date ("Original Issue Date"), the same Stated Maturity and bearing the same interest rate. Trust Debentures may be presented for exchange as provided above, and may be presented for registration of transfer (with the form of transfer endorsed thereon, or a satisfactory written instrument of transfer, duly executed), at the office of the appropriate Securities Registrar or at the office of any transfer agent designated by the Company for such purpose with respect to any series of Trust Debentures and referred to in the applicable Prospectus Supplement, without service charge and upon payment of any taxes and other governmental charges as described in the Debenture Indenture. The Company will appoint the Debenture Trustee as Securities Registrar under the Debenture Indenture. Such transfer or exchange will be effected upon the Security Registrar or such transfer agent, as the case may be, being satisfied with the documents of title and the identity of the person making the request. If the applicable Prospectus Supplement refers to any transfer agents (in addition to the Securities Registrar) initially designated by the Company with respect to the Trust Debentures, the Company may at any time rescind the designation of any such transfer agent or approve a change in the location through which any such transfer agent acts, provided that the Company maintains a transfer agent in each Place of Payment for the Trust Debentures. The Company may at any time designate additional transfer agents with respect to the Trust Debentures. 9 13 In the event of any redemption, neither the Company nor the Debenture Trustee shall be required to (i) issue, register the transfer of or exchange of the Trust Debentures during a period beginning at the opening of business 15 days before the day of selection for redemption of the Trust Debentures, and ending at the close of business on the day of mailing of the relevant notice of redemption or (ii) transfer or exchange any Trust Debentures so selected for redemption, except, in the case of any Trust Debentures being redeemed in part, any portion thereof not to be redeemed. OPTION TO EXTEND INTEREST PAYMENT PERIOD Unless otherwise set forth in the applicable Prospectus Supplement, the Company shall have the right, at any time and from time to time during the term of the Trust Debentures, to defer the payment of interest for such number of consecutive interest payment periods as may be specified in the applicable Prospectus Supplement, subject to the terms, conditions and covenants, if any, specified in such Prospectus Supplement, provided that such Extension Period may not extend beyond the Stated Maturity of the final installment of principal of the Trust Debentures. Certain material U.S. federal income tax consequences and special considerations applicable to the Trust Debentures will be described in the applicable Prospectus Supplement. CERTAIN COVENANTS The Debenture Indenture contains certain covenants regarding, among other matters, corporate existence, payment of taxes and reports to holders of the Trust Debentures. If and to the extent indicated in the applicable Prospectus Supplement, these covenants may be removed or additional covenants added with respect to the Trust Debentures. DEBENTURE INDENTURE EVENTS OF DEFAULT The Debenture Indenture provides that any one or more of the following described events, which has occurred and is continuing, constitutes a "Debenture Indenture Event of Default" with respect to the Trust Debentures: (i) failure for 30 days to pay interest on the Trust Debentures, including any compound interest, in respect thereof or, any additional interest, if any, when due; provided that a valid extension of an interest payment period will not constitute a default in the payment of interest for this purpose; (ii) failure to pay principal of or premium, if any, on the Trust Debentures when due whether at maturity, upon redemption, by declaration or otherwise; (iii) failure to observe or perform any other covenant contained in the Debenture Indenture for 90 days after notice to K N Energy by the Debenture Trustee or by the holders of not less than 25% in aggregate outstanding principal amount of the Trust Debentures; (iv) the dissolution, winding up or termination of the Trust, except in connection with the distribution of Trust Debentures to the holders of Preferred Securities in liquidation of the Trust upon the redemption of all outstanding Preferred Securities or in connection with certain mergers, consolidations or amalgamations permitted by the Declaration; or (v) certain events in bankruptcy, insolvency or reorganization of K N Energy. If any Debenture Indenture Event of Default shall occur and be continuing, the Debenture Trustee or the holders of not less than 25% in aggregate principal amount of the outstanding Trust Debentures may declare the principal of and interest on the Trust Debentures due and payable immediately; provided, that, after such acceleration, but before a judgment or decree based on acceleration, the holders of a majority in aggregate principal amount of outstanding Trust Debentures may, under certain circumstances, rescind and annul such acceleration if all Debenture Indenture Events of Default, other than the nonpayment of accelerated principal, have been cured or waived as provided in the Debenture Indenture. A default under any other indebtedness of K N Energy would not constitute a Debenture Indenture Event of Default under the Trust Debentures. Subject to the provisions of the Debenture Indenture relating to the duties of the Debenture Trustee in case a Debenture Indenture Event of Default occurs and is continuing, the Debenture Trustee will be under no obligation to exercise any of its rights or powers under the Debenture Indenture at the request or direction of any holders of Trust Debentures, unless such holders shall have offered to the Debenture Trustee reasonable indemnity. Subject to such provisions for the indemnification of the Debenture Trustee, the holders of a 10 14 majority in aggregate principal amount of the outstanding Trust Debentures will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee, or exercising any trust or power conferred on the Debenture Trustee. No holder of any Trust Debentures will have any right to institute any proceeding with respect to the Debenture Indenture or for any remedy thereunder, unless such holder shall have previously given to the Debenture Trustee written notice of a continuing Debenture Indenture Event of Default and, if the Institutional Trustee is not the sole holder of Trust Debentures, unless the holders of at least 25% in aggregate principal amount of the outstanding Trust Debentures shall also have made written request, and offered reasonable indemnity, to the Debenture Trustee to institute such proceeding as Debenture Trustee, and the Debenture Trustee shall not have received from the holders of a majority in aggregate principal amount of the outstanding Trust Debentures a direction inconsistent with such request. However, such limitations do not apply to a suit instituted by a holder of a Trust Debenture for enforcement of payment of the principal of or interest on such Trust Debenture on or after the respective due dates expressed in such Trust Debenture. The Debenture Indenture contains provisions permitting the holders of a majority in aggregate principal amount of the Trust Debentures, on behalf of all of the holders of the Trust Debentures, to waive any past default in the performance of any of the covenants contained in the Debenture Indenture, except a default in the payment of principal or interest on any of the Trust Debentures. MODIFICATIONS AND AMENDMENTS OF THE DEBENTURE INDENTURE The Debenture Indenture contains provisions permitting K N Energy and the Debenture Trustee, with the consent of the holders of not less than a majority in aggregate principal amount of the outstanding Trust Debentures, to modify the Debenture Indenture or the rights of the holders of Trust Debentures; provided, however, that no such modification may, without the consent of the holder of each outstanding Trust Debenture affected thereby, (i) extend the Stated Maturity of the Trust Debentures or reduce the principal amount thereof, or reduce the rate or extend the time for payment of interest thereon, or reduce any premium payable upon the redemption thereof, or adversely affect the subordination provisions of the Debenture Indenture, or (ii) reduce the percentage in aggregate principal amount of outstanding Trust Debentures, the holders of which are required to consent to any such supplemental indenture. In addition, K N Energy and the Debenture Trustee may execute, without the consent of any holder of Trust Debentures, any supplemental indenture (i) to cure any ambiguities, (ii) to comply with the Trust Indenture Act and (iii) for certain other customary purposes. SATISFACTION AND DISCHARGE; DEFEASANCE Unless otherwise specified in the applicable Prospectus Supplement, when, among other things, all Trust Debentures not previously delivered to the Debenture Trustee for cancellation (i) have become due and payable or (ii) will become due and payable at their Stated Maturity within one year, and the Company deposits or causes to be deposited with the Debenture Trustee, as trust funds in trust for the purpose, an amount in the currency or currencies in which the Trust Debentures are payable sufficient to pay and discharge the entire indebtedness on the Trust Debentures not previously delivered to the Debenture Trustee for cancellation, for the principal (and premium, if any) and interest to the date of the deposit or to the Stated Maturity, as the case may be, then the Debenture Indenture will cease to be of further effect (except as to the Company's obligations to pay all other sums due pursuant to the Debenture Indenture and to provide the officers' certificates and opinions of counsel described therein), and the Company will be deemed to have satisfied and discharged the Debenture Indenture. Unless otherwise specified in the applicable Prospectus Supplement, the Company may elect either (a) to terminate (and be deemed to have satisfied) all its obligations with respect to any series of Trust Debentures (except for the obligations to register the transfer or exchange of such Trust Debentures, to replace mutilated, destroyed, lost or stolen Trust Debentures, to maintain an office or agency in respect of the Trust Debentures, to compensate and indemnify the Debenture Trustee ("defeasance")) or (b) to be released from its obligations with respect to certain covenants, ("covenant defeasance"), upon the deposit with the 11 15 Debenture Trustee, in trust for such purpose, of money and/or U.S. Government Obligations (as defined in the Debenture Indenture) which through the payment of principal and interest in accordance with their terms will provide money, in an amount sufficient (in the opinion of a nationally recognized firm of independent public accountants) to pay principal of, interest on and any other amounts payable in respect of the outstanding Trust Debentures. Such a trust may be established only if, among other things, the Company has delivered to the Debenture Trustee an opinion of counsel (as specified in the Debenture Indenture) with regard to certain matters, including an opinion to the effect that the holders of such Trust Debentures will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and discharge and will be subject to federal income tax on the same amounts and in the same manner and at the same times as would have been the case if such deposit and defeasance or covenant defeasance, as the case may be, had not occurred. INFORMATION CONCERNING THE DEBENTURE TRUSTEE The Debenture Trustee, prior to default, undertakes to perform only such duties as are specifically set forth in the Debenture Indenture and, after default, shall exercise the same degree of care as a prudent individual would exercise in the conduct of his or her own affairs. Subject to such provision, the Debenture Trustee is under no obligation to exercise any of the powers vested in it by the Debenture Indenture at the request of any holder of Trust Debentures, unless offered reasonable indemnity by such holder against the costs, expenses and liabilities that might be incurred thereby. The Debenture Trustee is not required to expend or risk its own funds or otherwise incur personal financial liability in the performance of its duties if the Debenture Trustee reasonably believes that repayment or adequate indemnity is not reasonably assured to it. The Debenture Indenture also contains limitations on the right of the Debenture Trustee, as a creditor of K N Energy, to obtain payment of claims in certain cases or to realize on certain property received in respect of any such claim as security or otherwise. In addition, the Debenture Trustee may be deemed to have a conflicting interest and may be required to resign as Debenture Trustee if at the time of a default under the Debenture Indenture it is a creditor of K N Energy. K N Energy may from time to time maintain deposit accounts and conduct its banking transactions with the Debenture Trustee in the ordinary course of business. Wilmington Trust Company is also the trustee under the indenture relating to the 1997 Subordinated Trust Debentures. Pursuant to the Trust Indenture Act, should a default occur with respect to either the 1997 Trust Subordinated Debentures or the Trust Debentures, then Wilmington Trust Company would be required to resign as trustee under one of the indentures within 90 days of such default, unless such default were cured, duly waived or otherwise eliminated. GOVERNING LAW The Debenture Indenture and the Trust Debentures will be governed by, and construed in accordance with, the laws of the State of New York. MISCELLANEOUS The Debenture Indenture will provide that K N Energy will pay all fees and expenses related to (i) the offering of the Trust Securities and the Trust Debentures, (ii) the organization, maintenance and dissolution of the Trust, (iii) the retention of the K N Trustees and Administrators and (iv) the enforcement by the Institutional Trustee of the rights of the holders of the Preferred Securities. K N Energy will have the right at all times to assign any of its respective rights or obligations under the Debenture Indenture to a direct or indirect wholly-owned subsidiary of K N Energy; provided, that, in the event of any such assignment, K N Energy will remain liable for all of their respective obligations. Subject to the foregoing, the Debenture Indenture will be binding upon and inure to the benefit of the parties thereto and their respective successors and assigns. The Debenture Indenture provides that it may not otherwise be assigned by the parties thereto. 12 16 DESCRIPTION OF THE GUARANTEE Set forth below is a summary of information concerning the Guarantee, which will be executed and delivered by K N Energy for the benefit of the holders from time to time of Preferred Securities. The Guarantee will be qualified under the Trust Indenture Act. Wilmington Trust Company, as the Guarantee Trustee, will hold the Guarantee for the benefit of the holders of the Preferred Securities. The following summary is not necessarily complete, and reference is hereby made to the copy of the form of the Guarantee (including the definitions therein of certain terms), which is filed as an exhibit to the Registration Statement of which this Prospectus forms a part, and to the Trust Indenture Act. Whenever particular defined terms of the Guarantee are referred to in this Prospectus, such defined terms are incorporated herein by reference. GENERAL Pursuant to and to the extent set forth in the Guarantee, unless otherwise specified in the applicable Prospectus Supplement, K N Energy will agree to pay in full to the holders of the Preferred Securities (except to the extent paid by the Trust), as and when due, regardless of any defense, right of set off or counterclaim that the Trust may have or assert, the following payments (the "Guarantee Payments"), without duplication: (i) any accumulated and unpaid distributions that are required to be paid on the Preferred Securities to the extent the Trust has funds available therefor, (ii) the Redemption Price, plus accumulated and unpaid distributions, with respect to any Preferred Securities called for redemption by the Trust, to the extent the Trust has funds available therefor and (iii) upon a voluntary or involuntary liquidation, dissolution, winding-up or termination of the Trust (other than in connection with the distribution of Trust Debentures to the holders of Trust Securities or the redemption of all the Preferred Securities), the lesser of (a) the aggregate of the liquidation amount and all accumulated and unpaid distributions on the Preferred Securities to the date of payment to the extent the Trust has funds available therefor and (b) the amount of assets of the Trust remaining available for distribution to holders of Preferred Securities upon the liquidation of the Trust. The holders of a majority in liquidation amount of the Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee or to direct the exercise of any trust or power conferred upon the Guarantee Trustee under the Guarantee. If the Guarantee Trustee fails to enforce the Guarantee, any holder of Preferred Securities may directly institute a legal proceeding against K N Energy to enforce the obligations of K N Energy under the Guarantee without first instituting a legal proceeding against the Trust, the Guarantee Trustee or any other person or entity. If K N Energy were to default on its obligation to pay amounts payable on the Trust Debentures, the Trust would lack available funds for the payment of distributions or amounts payable on redemption of the Preferred Securities or otherwise, and in such event holders of the Preferred Securities would not be able to rely upon the Guarantee for payment of such amounts. Instead, a holder of the Preferred Securities would be required to rely on the enforcement (1) by the Institutional Trustee of its rights, as registered holder of the Trust Debentures, against K N Energy pursuant to the terms of the Trust Debentures or (2) by such holder of Preferred Securities of its right against K N Energy to enforce payment on the Trust Debentures. See "Description of the Trust Debentures." The Declaration provides that each holder of Preferred Securities, by acceptance thereof, if any, agrees to the provisions of the Guarantee, including the subordination provisions thereof, if any, and the Debenture Indenture. The Guarantee will not apply to any payment of distributions or Redemption Price, or to payments upon the dissolution, winding-up or termination of the Trust, except to the extent the Trust shall have funds available therefor. If K N Energy does not make interest payments on the Trust Debentures, the Trust will not pay distributions on the Preferred Securities and will not have funds available therefor. See "Description of the Trust Debentures." Unless otherwise set forth in the applicable Prospectus Supplement, the Guarantee, when taken together with K N Energy's obligations under the Trust Debentures, the Debenture Indenture and the Declaration, including its obligations under the Debenture Indenture to pay costs, expenses, debts and liabilities of the Trust (other than with respect to the Trust Securities) will provide a full and unconditional guarantee on a senior unsecured basis by K N Energy of payments due on the Preferred Securities. K N Energy has also agreed separately to irrevocably and unconditionally guarantee the obligations of the Trust with respect to the Common Securities (the "Common Securities Guarantee") to the same extent as 13 17 the Guarantee, except that upon the occurrence and during the continuation of a Declaration Event of Default, holders of Preferred Securities shall have priority over holders of Common Securities with respect to distributions and payments on liquidation, redemption or otherwise. CERTAIN COVENANTS OF K N ENERGY In the Guarantee, K N Energy will covenant that, so long as any Preferred Securities remain outstanding, if (i) K N Energy has exercised its option to defer interest payments on the Trust Debentures by extending the interest payment period and such extension shall be continuing, (ii) K N Energy shall be in default with respect to its payment or other obligations under the Guarantee or (iii) there shall have occurred and be continuing any event that, with the giving of notice, would constitute a Declaration Event of Default, then K N Energy (a) shall not declare or pay dividends on, make distributions with respect to, or redeem, purchase or acquire, or make a liquidation payment with respect to, any of its capital stock (other than (1) purchases or acquisitions of shares of K N Energy Common Stock in connection with satisfaction by K N Energy or any of its subsidiaries of their respective obligations under any shares of, or options, warrants or rights to subscribe for the purchase of shares of benefit plans for directors, officers, agents or employees or the Company's dividend reinvestment or director, officer, agent or employee stock purchase plans, (2) as a result of a reclassification of K N Energy's capital stock or the exchange or conversion of one class or series of K N Energy's capital stock for another class or series of capital stock, (3) the purchase of fractional interests in shares of K N Energy's capital stock pursuant to the conversion or exchange provisions of such K N Energy capital stock or the security being convened or exchanged for K N Energy capital stock, (4) dividends and distributions in shares of, or options, warrants or rights to subscribe for the purchase of shares of capital stock of the Company and (5) any declaration of a dividend in connection with the implementation or extension of a stockholders' rights plan, or the issuance of stock under any such plan (including the existing such plan) in the future, or the redemption or repurchase of any such rights pursuant thereto)), (b) shall not make any payment of interest, principal or premium, if any, on, or repay, repurchase or redeem, any debt securities issued by K N Energy that rank pari passu with or junior to the Trust Debentures and (c) shall not make any guarantee payments with respect to the foregoing (other than payments pursuant to the 1997 Guarantee (as defined herein) or the Guarantee or other guarantees of similarly situated trusts or other financing vehicles of the Company). AMENDMENTS AND ASSIGNMENT Except with respect to any changes that do not materially adversely affect the rights of holders of Preferred Securities (in which case no vote will be required) the Guarantee may be amended only with the prior approval of the holders of at least a majority in liquidation amount of all the outstanding Preferred Securities. The manner of obtaining any such approval of holders of the Preferred Securities will be as set forth in the applicable Prospectus Supplement. All guarantees and agreements contained in the Guarantee shall bind the successors, assigns, receivers, trustees and representatives of K N Energy and shall inure to the benefit of the holders of the Preferred Securities then outstanding. Except in certain circumstances, K N Energy may not assign its rights or delegate its obligations under the Guarantee without the prior approval of the holders of at least a majority in liquidation amount of the Preferred Securities then outstanding. TERMINATION OF THE GUARANTEE The Guarantee will terminate as to each holder of Preferred Securities upon (i) full payment of the Redemption Price and accumulated and unpaid distributions with respect to all Preferred Securities, (ii) upon distribution of the Trust Debentures held by the Trust to the holders of the Preferred Securities or (iii) upon liquidation of the Trust and will terminate completely upon full payment of the amounts payable in accordance with the Declaration. EVENTS OF DEFAULT An event of default under the Guarantee will occur upon the failure of K N Energy to perform any of its payment or other obligations thereunder. 14 18 The holders of a majority in liquidation amount of Preferred Securities relating to the Guarantee have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee in respect of the Guarantee or to direct the exercise of any trust or power conferred upon the Guarantee Trustee under the Preferred Securities. If the Guarantee Trustee fails to enforce the Guarantee, any holder of Preferred Securities relating to such Guarantee may institute a legal proceeding directly against K N Energy to enforce the Guarantee Trustee's rights under the Guarantee, without first instituting a legal proceeding against the Trust, the Guarantee Trustee or any other person or entity. Notwithstanding the foregoing, if K N Energy has failed to make a guarantee payment, a holder of Preferred Securities may directly institute a proceeding against K N Energy for enforcement of the Guarantee for such payment. K N Energy waives any right or remedy to require that any action be brought first against the Trust or any other person or entity before proceeding directly against K N Energy. STATUS OF THE GUARANTEE Unless otherwise set forth in the applicable Prospectus Supplement, the Guarantee will constitute an unsecured obligation of K N Energy and will rank (i) pari passu in right of payment to all other senior unsecured obligations of K N Energy, (ii) senior to the most senior preferred or preference stock now or hereafter issued by K N Energy and with any guarantee now or hereafter entered into by K N Energy in respect of any preferred or preference stock of any affiliate of K N Energy, and (iii) senior to K N Energy Common Stock and the 1997 Guarantee (as defined herein). The terms of the Preferred Securities provide that each holder of Preferred Securities issued by the Trust by acceptance thereof agrees to the other terms of the Guarantee relating thereto. The Guarantee will constitute a guarantee of payment and not of collection (that is, the guaranteed party may institute a legal proceeding directly against the guarantor to enforce its rights under the guarantee without instituting a legal proceeding against any other person or entity). INFORMATION CONCERNING THE GUARANTEE TRUSTEE The Guarantee Trustee, prior to the occurrence of a default with respect to the Guarantee, undertakes to perform only such duties as are specifically set forth in the Guarantee and, after default with respect to the Guarantee, shall exercise the same degree of care as a prudent man would exercise in the conduct of his own affairs. Subject to such provision, the Guarantee Trustee is under no obligation to exercise any of the powers vested in it by the Guarantee at the request of any holder of Preferred Securities unless it is offered reasonable indemnity against the costs, expenses and liabilities that might be incurred thereby. Wilmington Trust Company is also the trustee under the 1997 Guarantee. Pursuant to the Trust Indenture Act, should a default occur with respect to either the 1997 Guarantee, or the Guarantee, then Wilmington Trust Company would be required to resign as trustee under one of the guarantees within 90 days of such default, unless such default were cured, duly waived or otherwise eliminated. GOVERNING LAW The Guarantee will be governed by, and construed in accordance with, the laws of the State of New York. RELATIONSHIP AMONG THE PREFERRED SECURITIES, THE TRUST DEBENTURES AND THE GUARANTEE As set forth in the Declaration, the sole purpose of the Trust is to issue the Trust Securities evidencing undivided beneficial ownership interests in the assets of the Trust, and to invest the proceeds from such issuance and sale in the Trust Debentures. As long as payments of interest and other payments are made when due on the Trust Debentures, such payments will be sufficient to cover distributions and payments due on the Trust Securities because of the following factors: (i) the aggregate principal amount of Trust Debentures will be equal to the sum of the aggregate stated liquidation amount of the Trust Securities; (ii) the interest rate and the interest and other 15 19 payment dates on the Trust Debentures will match the distribution rate and distribution and other payment dates for the Preferred Securities; (iii) pursuant to the Debenture Indenture, K N Energy, as borrower, shall pay, and the Trust shall not be obligated to pay, directly or indirectly, all costs, expenses, debts and obligations of the Trust (other than with respect to the Trust Securities); and (iv) the Declaration further provides that the K N Trustees shall not take or cause or permit the Trust to, among other things, engage in any activity that is not consistent with the purposes of the Trust. Payments of distributions (to the extent funds therefor are available) and other payments due on the Preferred Securities (to the extent funds therefor are available) are guaranteed by K N Energy as and to the extent set forth under "Description of the Guarantee." If K N Energy does not make interest payments on the Trust Debentures purchased by the Trust, it is expected that the Trust will not have sufficient funds to pay distributions on the Preferred Securities. The Guarantee is a full guarantee on a subordinated basis with respect to the Preferred Securities issued by the Trust from the time of its issuance but does not apply to any payment of distributions unless and until the Trust has sufficient funds for the payment of such distributions. The Guarantee covers the payment of distributions and other payments on the Preferred Securities only if and to the extent that K N Energy has made a payment of interest or principal on the Trust Debentures held by the Trust as its sole asset. The Guarantee, when taken together with K N Energy's obligations under the Trust Debentures, the Debenture Indenture and the Declaration, including its obligations to pay costs, expenses, debts and liabilities of the Trust (other than with respect to the Trust Securities), provides a full and unconditional guarantee on a subordinated basis of amounts payable on the Preferred Securities. Notwithstanding anything to the contrary in the Debenture Indenture, the Company has the right to set-off any payment it is otherwise required to make thereunder with and to the extent the Company has theretofore made, or is concurrently on the date of such payment making, a payment under the Guarantee. If the Guarantee Trustee fails to enforce the Guarantee, a holder of any Preferred Security may institute a legal proceeding directly against the Company to enforce its rights under the Guarantee without first instituting a legal proceeding against the Guarantee Trustee, the Trust or any other person or entity. The Trust's Preferred Securities evidence undivided beneficial ownership interests in the assets of the Trust, and the Trust exists for the sole purpose of issuing the Preferred Securities and Common Securities and investing the proceeds thereof in Trust Debentures. A principal difference between the rights of a holder of a Preferred Security and a holder of a Trust Debenture is that a holder of a Trust Debenture will accrue, and (subject to the permissible extension of the interest period) is entitled to receive, interest on the principal amount of Trust Debentures held, while a holder of Preferred Securities is only entitled to receive distributions if and to the extent the Trust has funds available for the payment of such distributions. Upon any voluntary or involuntary dissolution of the Trust involving the liquidation of the Trust Debentures, the holders of Preferred Securities of the Trust will be entitled to receive, out of assets held by the Trust, the Liquidation Distribution in cash. See "Description of the Preferred Securities." Upon any voluntary or involuntary liquidation or bankruptcy of the Company, the Institutional Trustee as holder of the Trust Debentures would be entitled to receive payment in full of principal and interest, before any stockholders of the Company receive payments or distributions. DESCRIPTION OF THE DEBT SECURITIES The Debt Securities will constitute either senior or subordinated debt of the Company and will be issued, in the case of Debt Securities that will be senior debt ("Senior Debt Securities"), under an Indenture dated as of November 20, 1993 (the "Senior Debt Indenture"), between the Company and First Trust National Association, as successor trustee, and, in the case of Debt Securities that will be subordinated debt ("Subordinated Debt Securities"), under a Subordinated Indenture dated as of May 15, 1996 (the "Subordinated Debt Indenture"), between the Company and First Trust National Association, as trustee. The Senior Debt Indenture and the Subordinated Debt Indenture are sometimes hereinafter referred to individually as the "Debt Indenture" and collectively as the "Debt Indentures." First Trust National Association (and any successor thereto as trustee under the Debt Indentures) is hereinafter referred to as the "Debt Trustee." 16 20 The Debt Indentures are incorporated by reference in the Registration Statement. The following summaries of certain provisions of the Debt Indentures and the Debt Securities do not purport to be complete and such summaries are subject to the detailed provisions of the applicable Debt Indenture to which reference is hereby made for a full description of such provisions, including the definition of certain terms used herein. Section references in parentheses below are to sections in both Debt Indentures unless otherwise indicated. Wherever particular sections or defined terms of the applicable Debt Indenture are referred to, such sections or defined terms are incorporated herein by reference as part of the statement made, and the statement is qualified in its entirety by such reference. The Debt Indentures are substantially identical, except for certain covenants of the Company and provisions relating to subordination and conversion. The Debt Securities may be issued from time to time in one or more series. The following description of the Debt Securities sets forth certain general terms and provisions of the Debt Securities of all series. The particular terms of each series of Debt Securities offered by any Prospectus Supplement (the "Offered Debt Securities") will be described therein. The Company's Trust Debentures are separately described in this Prospectus under the caption "Description of the Trust Debentures." PROVISIONS APPLICABLE TO BOTH SENIOR AND SUBORDINATED DEBT SECURITIES General. The Debt Securities will be unsecured senior or subordinated obligations of the Company and may be issued from time to time in one or more series. The Debt Indentures do not limit the amount of Debt Securities, debentures, notes or other types of indebtedness that may be issued by the Company or any of its subsidiaries nor do they restrict transactions between the Company and its affiliates or the payment of dividends or other distributions by the Company to its stockholders. The rights of the Company's creditors, including holders of Debt Securities, will be limited to the assets of the Company and will not be an obligation of any of its Subsidiaries. In addition, other than as may be set forth in any Prospectus Supplement, the Debt Indentures do not and the Debt Securities will not contain any covenants or other provisions that are intended to afford holders of the Debt Securities special protection in the event of either a change of control of the Company or a highly leveraged transaction by the Company. Reference is made to the Prospectus Supplement for the following terms of and information relating to the Offered Debt Securities (to the extent such terms are applicable to such Offered Debt Securities): (i) the title of the Offered Debt Securities; (ii) classification as either Senior Debt Securities or Subordinated Debt Securities; (iii) whether the Offered Debt Securities that constitute Subordinated Debt Securities are convertible into Common Stock and, if so, the terms and conditions upon which such conversion will be effected including the initial conversion price or conversion rate and any adjustments thereto in addition to or different from those described herein, the conversion period and other conversion provisions in addition to or in lieu of those described herein; (iv) any limit on the aggregate principal amount of the Offered Debt Securities; (v) whether the Offered Debt Securities are to be issuable as Registered Securities or Bearer Securities or both, whether any of the Offered Debt Securities are to be issuable initially in temporary global form and whether any of the Offered Debt Securities are to be in permanent global form; (vi) the price or prices (expressed as a percentage of the aggregate principal amount thereof) at which the Offered Debt Securities will be issued; (vii) the date or dates on which the Offered Debt Securities will mature; (viii) the rate or rates per annum (or the method by which such will be determined) at which the Offered Debt Securities will bear interest, if any, and the date from which any such interest will accrue; (ix) the Interest Payment Dates on which any such interest on the Offered Debt Securities will be payable, the Regular Record Date for any interest payable on any Offered Debt Securities which are Registered Securities on any Interest Payment Date and the extent to which, or the manner in which, any interest payable on a temporary global Offered Debt Security on an Interest Payment Date will be paid; (x) any mandatory or optional sinking fund or analogous provisions; (xi) each office or agency where, subject to the terms of the Debt Indentures as described below under "Payment and Paying Agents", the principal of and any premium and interest on the Offered Debt Securities will be payable and each office or agency where, subject to the terms of the Debt Indentures as described below under "-- Form, Exchange, Registration and Transfer", the Offered Debt Securities may be presented for registration of transfer or exchange; (xii) the right of the Company to redeem the Offered Debt 17 21 Securities at its option and the period or periods, if any, within which and the price or prices at which the Offered Debt Securities may, pursuant to any optional or mandatory redemption provisions, be redeemed, in whole or in part, and the other detailed terms and provisions of any such optional or mandatory redemption; (xiii) the denominations in which any Offered Debt Securities which are Registered Securities will be issuable, if other than denominations of $1,000 and any integral multiple thereof, and the denomination or denominations in which any Offered Debt Securities which are Bearer Securities will be issuable, if other than the denomination of $5,000; (xiv) the currency or currencies (including composite currencies) in which payment of principal of and any premium and interest on the Offered Debt Securities is payable; (xv) any index used to determine the amount of payments of principal of and any premium and interest on the Offered Debt Securities; (xvi) information with respect to book-entry procedures, if any; (xvii) any applicable United States federal income tax consequences; and (xviii) any other terms of the Offered Debt Securities not inconsistent with the provisions of the Debt Indentures. (Section 301) Any such Prospectus Supplement will also describe any special provisions for the payment of additional amounts with respect to the Offered Debt Securities. Debt Securities may be issued as Original Issue Discount Securities. An Original Issue Discount Security is a Debt Security, including any Zero-Coupon Security, which is issued at a price lower than the amount payable upon the Stated Maturity thereof and which provides that upon redemption or acceleration of the maturity thereof an amount less than the amount payable upon the Stated Maturity thereof and determined in accordance with the terms of such Debt Security shall become due and payable. Special United States federal income tax considerations applicable to Debt Securities issued at an original issue discount, including Original Issue Discount Securities, and special United States tax considerations and other terms and restrictions applicable to any Debt Securities which are issued in bearer form, offered exclusively to United States Aliens or denominated in other than United States dollars, will be set forth in a Prospectus Supplement relating thereto. Form, Exchange, Registration and Transfer. Debt Securities of a series may be issuable in definitive form solely as Registered Securities, solely as Bearer Securities or as both Registered Securities and Bearer Securities. Unless otherwise indicated in an applicable Prospectus Supplement, Bearer Securities will have interest coupons attached. (Section 201) The Debt Indentures also provide that Debt Securities of a series may be issuable in temporary or permanent global form. (Section 201) Registered Securities of any series will be exchangeable for other Registered Securities of the same series of any authorized denominations and of a like aggregate principal amount and tenor. In addition, if Debt Securities of any series are issuable as both Registered Securities and Bearer Securities, at the option of the Holder, and subject to the terms of the applicable Debt Indenture, Bearer Securities (with all unmatured coupons, except as provided below, and all matured coupons in default) of such series will be exchangeable for Registered Securities of the same series of any authorized denominations and of a like aggregate principal amount and tenor. Bearer Securities surrendered in exchange for Registered Securities between a Regular Record Date or a Special Record Date and the relevant date for payment of interest shall be surrendered without the coupon relating to such date for payment of interest, and interest accrued as of such date will not be payable in respect of the Registered Security issued in exchange for such Bearer Security, but will be payable only to the Holder of such coupon when due in accordance with the terms of the applicable Debt Indenture. Bearer Securities will not be issued in exchange for Registered Securities. (Section 305) Debt Securities may be presented for exchange as provided above, and Registered Securities may be presented for registration of transfer (with the form of transfer endorsed thereon duly executed), at the office of the Security Registrar or at the office of any transfer agent designated by the Company for such purpose with respect to any series of Debt Securities and referred to in an applicable Prospectus Supplement, without service charge and upon payment of any taxes and other governmental charges as described in the Debt Indentures. Such transfer or exchange will be effected upon the Security Registrar or such transfer agent, as the case may be, being satisfied with the documents of title and identity of the person making the request. The Debt Trustee will serve initially as Security Registrar. (Section 305) If a Prospectus Supplement refers to any transfer agents (in addition to the Security Registrar) initially designated by the Company with respect to any series of Debt Securities, the Company may at any time rescind the designation of any such transfer agent or 18 22 approve a change in the location through which any such transfer agent acts, except that, if Debt Securities of a series are issuable solely as Registered Securities, the Company will be required to maintain a transfer agent in each Place of Payment for such series and, if Debt Securities of a series are also issuable as Bearer Securities, the Company will be required to maintain (in addition to the Security Registrar) a transfer agent in a Place of Payment for such series located outside the United States. The Company may at any time designate additional transfer agents with respect to any series of Debt Securities. (Section 1002) In the event of any redemption in part, the Company shall not be required to (i) issue, register the transfer of or exchange Debt Securities of any series during a period beginning at the opening of business 15 days prior to the selection of Debt Securities of that series for redemption and ending on the close of business on (A) if Debt Securities of the series are issuable only as Registered Securities, the day of mailing of the relevant notice of redemption and (B) if Debt Securities of the series are issuable as Bearer Securities, the date of the first publication of the relevant notice of redemption or, if Securities of the series are also issuable as Registered Securities and there is no publication, the mailing of the relevant notice of redemption; (ii) register the transfer of or exchange any Registered Security, or portion thereof, called for redemption, except the unredeemed portion of any Registered Security being redeemed in part; or (iii) exchange any Bearer Security called for redemption, except to exchange such Bearer Security for a Registered Security of that series and like tenor which is immediately surrendered for redemption. (Section 305) Payment and Paying Agents. Unless otherwise indicated in an applicable Prospectus Supplement, payment of principal of and any premium and interest on Bearer Securities will be payable, subject to any applicable laws and regulations, at the offices of such Paying Agents outside the United States as the Company may designate from time to time, in the manner indicated in such Prospectus Supplement. (Section 1002) Unless otherwise indicated in an applicable Prospectus Supplement, payment of interest on Bearer Securities on any Interest Payment Date will be made only against surrender to the Paying Agent of the coupon relating to such Interest Payment Date. (Section 1001) No payment with respect to any Bearer Security will be made at any office or agency of the Company in the United States or by check mailed to any address in the United States or by transfer to any account maintained with a bank located in the United States. Notwithstanding the foregoing, payments of principal of and any premium and interest on Bearer Securities denominated and payable in U.S. dollars will be made at the office of the Company's Paying Agent in the Borough of Manhattan, The City of New York, if (but only if) payment of the full amount thereof in U.S. dollars at all offices or agencies outside the United States is illegal or effectively precluded by exchange controls or other similar restrictions. (Section 1002) Unless otherwise indicated in an applicable Prospectus Supplement, payment of principal of and any premium and interest on Registered Securities will be made at the office of such Paying Agent or Paying Agents as the Company may designate from time to time, except that at the option of the Company payment of any interest may be made by check mailed on or before the due date to the address of the Person entitled thereto as such address shall appear in the Security Register. (Sections 307, 1002) Unless otherwise indicated in an applicable Prospectus Supplement, payment of any installment of interest on Registered Securities will be made to the Person in whose name such Registered Security is registered at the close of business on the Regular Record Date for such interest. (Section 307) Unless otherwise indicated in an applicable Prospectus Supplement, the Debt Trustee, at its corporate trust office in Chicago, Illinois, will act as Paying Agent for payments with respect to Debt Securities which are issuable solely as Registered Securities and the Company will maintain a Paying Agent outside the United States for payments with respect to Debt Securities (subject to limitations described above in the case of Bearer Securities) which are issuable solely as Bearer Securities or as both Registered Securities and Bearer Securities. Any Paying Agents outside the United States and any other Paying Agents in the United States initially designated by Company for the Debt Securities will be named in an applicable Prospectus Supplement. The Company may at any time designate additional Paying Agents or rescind the designation of any Paying Agent or approve a change in the office through which any Paying Agent acts, except that, if Debt Securities of a series are issuable solely as Registered Securities, the Company will be required to maintain a Paying Agent in each Place of Payment for such series and, if Debt Securities of a series are issuable as Bearer Securities, the Company will be required to maintain (i) a Paying Agent in the Borough of Manhattan, The 19 23 City of New York for principal payments with respect to any Registered Securities of the series (and for payments with respect to Bearer Securities of the series in the circumstances described above, but not otherwise), and (ii) a Paying Agent in a Place of Payment located outside the United States where Debt Securities of such series and any coupons appertaining thereto may be presented and surrendered for payment. (Section 1002) All monies paid by the Company to a Paying Agent for the payment of principal of and any premium or interest on any Debt Security which remain unclaimed at the end of two years after such principal, premium or interest shall have become due and payable will (subject to applicable escheat laws) be repaid to the Company, and the Holder of such Debt Security or any coupon will thereafter look only to the Company for payment thereof. (Section 1003) Global Debt Securities. Debt Securities of a series may be issued in whole or in part in the form of one or more global Debt Securities that will be deposited with, or on behalf of, a depository identified in the Prospectus Supplement relating to such series. Global Debt Securities may be issued in either registered or bearer form and in either temporary or permanent form. (Section 203) Unless and until it is exchanged in whole or in part for the individual Debt Securities represented thereby, a global Debt Security may not be transferred except as a whole by the depository for such global Debt Security to a nominee of such depository or by a nominee of such depository to such depository or another nominee of such depository or by the depository or any nominee to a successor depository or any nominee of such successor. The specific terms of the depository arrangement with respect to a series of Debt Securities and certain limitations and restrictions relating to a series of Bearer Securities in the form of one or more global Debt Securities will be described in the Prospectus Supplement relating to such series. Events of Default. Any one of the following events constitutes an Event of Default under each Debt Indenture with respect to Debt Securities of any series: (a) failure to pay any interest on any Debt Security of that series when due, continued for 30 days; (b) failure to pay principal of or any premium on any Debt Security of that series when due; (c) failure to deposit any sinking fund payment, when due, in respect of any Debt Security of that series; (d) failure to perform any other covenant of the Company in such Debt Indenture (other than a covenant included in such Debt Indenture solely for the benefit of series of any Debt Securities other than that series), continued for 90 days after written notice as provided in such Debt Indenture; (e) certain events in bankruptcy, insolvency or reorganization involving the Company; and (f) any other Event of Default provided with respect to Debt Securities of that series. (Section 501) If an Event of Default with respect to Debt Securities of any series at the time Outstanding occurs and is continuing, either the Debt Trustee or the Holders of at least 25% in aggregate principal amount of the Outstanding Securities of that series by notice as provided in the applicable Debt Indenture may declare the principal amount (or, if the Debt Securities of that series are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of that series) of all the Debt Securities of that series to be due and payable immediately. At any time after a declaration of acceleration with respect to Debt Securities of any series has been made, but before a judgment or decree for payment of money has been obtained by the Debt Trustee, the Holders of a majority in aggregate principal amount of the Outstanding Securities of that series may, under certain circumstances, rescind and annul such acceleration. (Section 502) Each Debt Indenture provides that, subject to the duty of the Debt Trustee during default to act with the required standard of care, the Debt Trustee is under no obligation to exercise any of its rights or powers under such Debt Indenture at the request or direction of any of the Holders, unless such Holders shall have offered to the Debt Trustee reasonable indemnity. (Sections 601, 603) Subject to such provisions for the indemnification of the Debt Trustee, the Holders of a majority in aggregate principal amount of the Outstanding Securities of any series have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Debt Trustee, or exercising any trust or power conferred on the Debt Trustee, with respect to the Debt Securities of that series; provided, however, that the Debt Trustee is not obligated to take any action unduly prejudicial to Holders not joining in such direction or involving the Debt Trustee in personal liability. (Section 512) 20 24 The Company is required to furnish to the Debt Trustee annually a statement as to the performance by the Company of its obligations under each Debt Indenture and as to any default in such performance. (Section 1007) Defeasance. If so specified with respect to any particular series of Debt Securities issued under an Debt Indenture, the Company may discharge its indebtedness and its obligations or certain of its obligations under such Debt Indenture with respect to such series by depositing funds or obligations issued or guaranteed by the United States of America with the Debt Trustee. (Sections 1301-1303) Defeasance and Discharge. Each Debt Indenture provides that, if so specified with respect to the Debt Securities of any series issued under such Debt Indenture (other than convertible Subordinated Debt Securities), the Company will be discharged from any and all obligations in respect of the Debt Securities of such series (except for certain obligations relating to temporary Debt Securities and exchange of Debt Securities, registration of transfer or exchange of Debt Securities of such series, replacement of stolen, lost or mutilated Debt Securities of such series, maintenance of paying agencies to hold moneys for payment in trust and payment of additional amounts, if any, required in consequence of United States withholding taxes imposed on payments to non-United States persons) upon the deposit with the Trustee, in trust, of money and/or U.S. Government Obligations which through the payment of interest and principal in respect thereof in accordance with their terms will provide money in an amount sufficient to pay the principal of (and premium, if any), and each installment of interest on, the Debt Securities of such series on the Stated Maturity of such payments in accordance with the terms of such Debt Indenture and the Debt Securities of such series. (Sections 1302, 1304) Such a trust may only be established if, among other things, the Company has delivered to the Debt Trustee an Opinion of Counsel to the effect that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (ii) since the date of such Debt Indenture there has been a change in applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of such series will not recognize income, gain or loss for United States federal income tax purposes as a result of such deposit, defeasance and discharge, and will be subject to United States federal income tax on the same amounts and in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred. (Section 1304) In the event of any such defeasance and discharge of Debt Securities of such series, Holders of such series would be entitled to look only to such trust fund for payment of principal of and any premium and any interest on their Debt Securities until Maturity. Covenant Defeasance. Each Debt Indenture also provides that, if so specified with respect to the Debt Securities of any series issued thereunder, the Company may omit to comply with certain restrictive covenants, including (in the case of the Senior Debt Indenture) the covenant described under "Limitation on Liens" below, but excluding (in the case of the Subordinated Debt Indenture) any applicable obligation of the Company respecting the conversion of Debt Securities of such series into Common Stock, and any such omission shall not be an Event of Default with respect to the Debt Securities of such series, upon the deposit with the Debt Trustee, in trust, of money and/or U.S. Government Obligations which through the payment of interest and principal in respect thereof in accordance with their terms will provide money in an amount sufficient to pay the principal of (and premium, if any), and each installment of interest on, the Debt Securities of such series on the Stated Maturity of such payments in accordance with the terms of such Debt Indenture and the Debt Securities of such series. The obligations of the Company under such Debt Indenture and the Debt Securities of such series other than with respect to such covenants shall remain in full force and effect. (Section 1303) Such a trust may be established only if, among other things, the Company has delivered to the Debt Trustee an Opinion of Counsel to the effect that the Holders of such series will not recognize income, gain or loss for United States federal income tax purposes as a result of such deposit and defeasance of certain obligations and will be subject to United States federal income tax on the same amounts and in the same manner and at the same time as would have been the case if such deposit and defeasance had not occurred. (Section 1304) Although the amount of money and U.S. Government Obligations on deposit with the Debt Trustee would be intended to be sufficient to pay amounts due on the Debt Securities of such series at the time of their Stated Maturity, in the event the Company exercises its option to omit compliance with the covenants 21 25 defeased with respect to the Debt Securities of any series as described above, and the Debt Securities of such series are declared due and payable because of the occurrence of any Event of Default, such amount may not be sufficient to pay amounts due on the Debt Securities of such series at the time of the acceleration resulting from such Event of Default. The Company shall in any event remain liable for such payments as provided in the applicable Debt Indenture. Federal Income Tax Consequences Relating to Defeasance and Covenant Defeasance. Under current United States federal income tax law, defeasance and discharge would likely be treated as a taxable exchange of Debt Securities to be defeased for an interest in the defeasance trust. As a consequence, a holder would recognize gain or loss equal to the difference between the holder's cost or other tax basis for such Debt Securities and the value of the holder's interest in the defeasance trust, and thereafter would be required to include in income the holder's share of the income, gain or loss of the defeasance trust. Under current United States federal income tax law, covenant defeasance would ordinarily not be treated as a taxable exchange of such Debt Securities. Meetings, Modification and Waiver. Modifications and amendments of either Debt Indenture may be made by the Company and the Debt Trustee with the consent of the Holders of a majority in aggregate principal amount of the Outstanding Securities of each series affected by such modification or amendment; provided, however, that no such modification or amendment may, without consent of the Holder of each Outstanding Security affected thereby, (a) change the Stated Maturity of the principal of, or any installment of principal of or interest on, any Debt Security, (b) change the Redemption Date with respect to any Debt Security, (c) reduce the principal amount of, or premium or interest on, any Debt Security, (d) change any obligation of the Company to pay additional amounts, (e) reduce the amount of principal of an Original Issue Discount Security payable upon acceleration of the Maturity thereof, (f) change the coin or currency in which any Debt Security or any premium or interest thereon is payable, (g) change the redemption right of any Holder, (h) impair the right to institute suit for the enforcement of any payment on or with respect to any Debt Security or any conversion right with respect thereto, (i) reduce the percentage in principal amount of Outstanding Securities of any series, the consent of whose Holders is required for modification or amendment of such Debt Indenture or for waiver of compliance with certain provisions of such Debt Indenture or for waiver of certain defaults, (j) reduce the requirements contained in such Debt Indenture for quorum or voting, (k) change any obligation of the Company to maintain an office or agency in the places and for the purposes required by such Debt Indenture, (l) adversely affect the right to convert Subordinated Debt Securities, if applicable, or (m) modify any of the above provisions. (Section 902) The Subordinated Debt Indenture may not be amended to alter the subordination of any outstanding Subordinated Debt Securities without the consent of each holder of Senior Indebtedness (as defined below under "-- Provisions Applicable Solely to Subordinated Debt Securities") then outstanding that would be adversely affected thereby. (Section 907 of the Subordinated Debt Indenture) The Holders of a majority in aggregate principal amount of the Outstanding Securities of each series may, on behalf of all Holders of that series, waive, insofar as that series is concerned, compliance by the Company with certain restrictive provisions of the Debt Indenture under which such series has been issued. (Section 1008) The Holders of a majority in aggregate principal amount of the Outstanding Securities of each series may, on behalf of all Holders of that series, waive any past default under the applicable Debt Indenture with respect to any Debt Securities of that series, except a default (a) in the payment of principal of, or premium, if any, or any interest on any Debt Security of such series or (b) in respect of a covenant or provision of such Debt Indenture which cannot be modified or amended without the consent of the Holder of each Outstanding Security of such series affected. (Section 513) Each Debt Indenture provides that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver thereunder or are present at a meeting of the Holders for quorum purposes, (i) the principal amount of an Original Issue Discount Security that is deemed to be Outstanding will be the amount of the principal that would be due and payable as of the date of such determination upon acceleration of the Maturity thereof, and (ii) the principal amount of a Debt Security denominated in a foreign currency or currency units will be the 22 26 U.S. dollar equivalent, determined on the date of original issuance of such Debt Security, of the principal amount of such Debt Security or, in the case of an Original Issue Discount Security, the U.S. dollar equivalent, determined on the date of original issuance of such Security, of the amount determined as provided in (i) above. (Section 101) Each Debt Indenture contains provisions for convening meetings of the Holders of a series if Debt Securities of that series are issuable as Bearer Securities. (Section 1401) A meeting may be called at any time by the Trustee, and also, upon request, by the Company or the Holders of at least 10% in aggregate principal amount of the Outstanding Securities of such series, in any such case upon notice given in accordance with "-- Notices" below. (Section 1402) Except for any consent which must be given by the Holder of each Outstanding Security affected thereby, as described above, any resolution presented at a meeting (or adjourned meeting at which a quorum is present) may be adopted by the affirmative vote of the Holders of a majority in aggregate principal amount of the Outstanding Securities of that series; provided, however, that any resolution with respect to any request, demand, authorization, direction, notice, consent, waiver or other action which may be made, given or taken by the Holders of a specified percentage, which is less than a majority, in aggregate principal amount of the Outstanding Securities of a series may be adopted at a meeting (or adjourned meeting duly reconvened at which a quorum is present) by the affirmative vote of the Holders of such specified percentage in aggregate principal amount of the Outstanding Securities of that series. Any resolution passed or decision taken at any meeting of Holders of any series duly held in accordance with the applicable Debt Indenture will be binding on all Holders of that series and related coupons. The quorum at any meeting, and at any reconvened meeting, will be Persons holding or representing a majority in aggregate principal amount of the Outstanding Securities of a series. (Section 1404) Consolidation, Merger and Sale of Assets. The Company, without the consent of the Holders of any of the outstanding Debt Securities under either Debt Indenture, may consolidate with or merge into, or convey, transfer or lease its assets substantially as an entirety to, any Person which is a corporation, partnership or trust organized and validly existing under the laws of any domestic jurisdiction, provided that any successor Person assumes the Company's obligations on the Securities and under such Debt Indenture, that after giving effect to the transaction no Event of Default, and no event which, after notice or lapse of time, would become an Event of Default, shall have occurred and be continuing, and that certain other conditions are met. (Section 801) Notices. Except as otherwise provided in the Debt Indentures, notices to Holders of Bearer Securities will be given by publication at least twice in a daily newspaper in The City of New York and in such other city or cities as may be specified in such Bearer Securities. Notices to Holders of Registered Securities will be given by mail to the addresses of such Holders as they appear in the Security Register. (Section 106) Title. Title to any Bearer Securities (including Bearer Securities in permanent global form) and any coupons appertaining thereto will pass by delivery. The Company, the Debt Trustee and any agent of the Company or the Trustee may treat the bearer of any Bearer Security and the bearer of any coupon and the registered owner of any Registered Security as the owner thereof (whether or not such Debt Security or coupon shall be overdue and notwithstanding any notice to the contrary) for the purpose of making payment and for all other purposes. (Section 308) Replacement of Securities and Coupons. Any mutilated Debt Security or a Debt Security with a mutilated coupon appertaining thereto will be replaced by the Company at the expense of the Holder upon surrender of such Debt Security to the Debt Trustee. Debt Securities or coupons that became destroyed, stolen or lost will be replaced by the Company at the expense of the Holder upon delivery to the Debt Trustee of the Debt Security and coupons or evidence of destruction, loss or theft thereof satisfactory to the Company and the Debt Trustee; in the case of any coupon which becomes destroyed, stolen or lost, such coupon will be replaced by issuance of a new Debt Security in exchange for the Debt Security to which such coupon appertains. In the case of a destroyed, lost or stolen Debt Security or coupon, an indemnity satisfactory to the Debt Trustee and the Company may be required at the expense of the Holder of such Debt Security or coupon before a replacement Debt Security will be issued. (Section 306) 23 27 Governing Law. The Debt Indentures, the Debt Securities and coupons will be governed by, and construed in accordance with, the laws of the State of New York. (Section 113) Regarding the Trustee. First Trust National Association, the Debt Trustee under each Debt Indenture, is also trustee under another indenture under which several issues of the Company's debt securities are outstanding. Each Debt Indenture contains certain limitations on the right of the Debt Trustee, should it become a creditor of the Company, to obtain payment of claims in certain cases, or to realize for its own account on certain property received in respect of any such claim as security or otherwise. (Section 613) The Debt Trustee is permitted to engage in certain other transactions; however, if it acquires any conflicting interest (as described in the Debt Indentures), it must eliminate such conflict or resign. (Section 608) Pursuant to the Trust Indenture Act, should a default occur with respect to either the Senior Debt Securities or the Subordinated Debt Securities, First Trust National Association would be required to resign as Debt Trustee under one of the Debt Indentures within 90 days of such default unless such default were cured, duly waived or otherwise eliminated. PROVISIONS APPLICABLE SOLELY TO SENIOR DEBT SECURITIES General. Senior Debt Securities will be issued under the Senior Debt Indenture, and each series will rank pari passu as to the right of payment of principal and any premium and interest with each other series issued thereunder and will rank senior to all series of Subordinated Debt Securities that may be issued. Certain Definitions. For purposes of the following discussion, the following definitions are applicable (Section 101 of the Senior Debt Indenture): "Net Tangible Assets" means the total amount of assets appearing on a consolidated balance sheet of the Company and its Subsidiaries less, without duplication: (a) all current liabilities (excluding any thereof which are extendible or renewable by their terms or replaceable or refundable pursuant to enforceable commitments at the option of the obligor thereon without requiring the consent of the obligee to a time more than 12 months after the time as of which the amount thereof is being computed and excluding current maturities of long-term debt and preferred stock); (b) all reserves for depreciation and other asset valuation reserves but excluding reserves for deferred federal income taxes arising from accelerated depreciation or otherwise; (c) all goodwill, trademarks, trade names, patents and unamortized debt discount and expense and other like intangible assets carried as an asset and (d) all appropriate adjustments on account of minority interests of other Persons holding common stock in any Subsidiary. "Person" means any individual, corporation, partnership, joint venture, trust, unincorporated organization or government or any agency or political subdivision thereof. "Principal Property" means any natural gas pipeline, natural gas distribution system, natural gas gathering system or natural gas storage facility located in the United States, except any such property that in the opinion of the Board of Directors is not of material importance to the business conducted by the Company and its consolidated Subsidiaries taken as a whole. "Principal Subsidiary" means any Subsidiary which owns a Principal Property. "Subsidiary" means a corporation more than 50% of the outstanding stock of which is owned, directly or indirectly, by the Company or by one or more Subsidiaries, or by the Company and one or more other Subsidiaries. For the purposes of this definition, "voting stock" means stock which ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. Limitation on Liens. The Company covenants in the Senior Debt Indenture that it will not, nor will it permit any Subsidiary to, issue, assume or guarantee any debt for money borrowed ("Debt") if such Debt is secured by a mortgage, pledge, security interest or lien (a "mortgage" or "mortgages") upon any Principal Property of the Company or any Principal Subsidiary or upon any shares of stock or indebtedness of any 24 28 Principal Subsidiary (whether such Principal Property, shares or indebtedness was owned on the date of the Senior Debt Indenture or thereafter acquired) without in any such case effectively providing that the Senior Debt Securities shall be secured equally and ratably with (or prior to) such Debt, except that the foregoing restrictions shall not apply to: (a) mortgages on any property acquired, constructed or improved by the Company or any Principal Subsidiary after the date of the Senior Debt Indenture which are created within 180 days after such acquisition (or in the case of property constructed or improved, after the completion and commencement of commercial operation of such property, whichever is later) to secure or provide for the payment of the purchase price or cost thereof, provided that in the case of such construction or improvement the mortgages shall not apply to any property theretofore owned by the Company or any Subsidiary other than theretofore unimproved real property; (b) existing mortgages on property acquired (including mortgages on any property acquired from a Person which is consolidated with or merged with or into the Company or a Subsidiary) or mortgages outstanding at the time any corporation becomes a Subsidiary; (c) mortgages in favor of domestic or foreign governmental bodies to secure advances or other payments pursuant to any contract or statute or to secure indebtedness incurred to finance the purchase price or cost of constructing or improving the property subject to such mortgages, including mortgages to secure Debt of the pollution control or industrial revenue bond type; (d) mortgages in favor of the Company or any Principal Subsidiary; or (e) any extension, renewal or replacement (or successive extensions, renewals or replacements), in whole or in part, of any mortgage referred to in any of the foregoing clauses (a)-(d). (Section 1006 of the Senior Debt Indenture) Notwithstanding the foregoing, the Company and any Subsidiary may, without securing the Senior Debt Securities, issue, assume or guarantee secured Debt (which would otherwise be subject to the foregoing restrictions) in an aggregate amount which, together with all other such Debt, does not exceed 10% of the Net Tangible Assets, as shown on a consolidated balance sheet as of a date not more than 90 days prior to the proposed transaction prepared by the Company in accordance with generally accepted accounting principles. (Section 1006 of the Senior Debt Indenture) PROVISIONS APPLICABLE SOLELY TO SUBORDINATED DEBT SECURITIES Subordination. The Subordinated Debt Securities will be subordinate and junior in right of payment, to the extent set forth in the Subordinated Debt Indenture, to all Senior Indebtedness (as defined below) of the Company. If the Company should default in the payment of any principal of or premium or interest on any Senior Indebtedness when the same becomes due and payable, whether at Stated Maturity or a date fixed for prepayment or by declaration of acceleration or otherwise, then, upon written notice of such default to the Company by the holders of such Senior Indebtedness or any trustee therefor and subject to certain rights of the Company to dispute such default and subject to proper notification of the Trustee, unless and until such default has been cured or waived or ceases to exist, no direct or indirect payment (in cash, property, securities, by set-off or otherwise) will be made or agreed to be made for principal of, premium, if any, or interest, if any, on the Subordinated Debt Securities, or in respect of any redemption, retirement, purchase or other acquisition of the Subordinated Debt Securities other than those made in capital stock of the Company (or cash in lieu of fractional shares thereof) pursuant to any conversion right of the Subordinated Debt Securities or otherwise made in capital stock of the Company. (Sections 1601, 1604 and 1605 of the Subordinated Debt Indenture) "Senior Indebtedness" is defined in Section 101 of the Subordinated Debt Indenture as Indebtedness (as defined below) of the Company outstanding at any time except (a) any Indebtedness as to which, by the terms of the instrument creating or evidencing the same, it is provided that such Indebtedness is not senior in right of payment to the Subordinated Debt Securities, (b) the Subordinated Debt Securities, (c) any Indebtedness of the Company to a wholly-owned Subsidiary of the Company, (d) interest accruing after the filing of a petition initiating certain bankruptcy or insolvency proceedings unless such interest is an allowed claim enforceable against the Company in a proceeding under federal or state bankruptcy laws and (e) trade accounts payable. "Indebtedness" is defined in Section 101 of the Subordinated Debt Indenture as, with respect to any Person, (a) (i) the principal of and premium and interest, if any, on indebtedness for money borrowed of such Person evidenced by bonds, notes, debentures or similar obligations, including any guaranty 25 29 by such Person of any indebtedness for money borrowed of any other Person, whether any such indebtedness or guaranty is outstanding on the date of the Subordinated Debt Indenture or is thereafter created, assumed or incurred, (ii) the principal of and premium and interest, if any, on indebtedness for money borrowed, incurred, assumed or guaranteed by such Person in connection with the acquisition by it or any of its subsidiaries of any other business, properties or other assets and (iii) lease obligations which such Person capitalizes in accordance with Statement of Financial Accounting Standards No. 13 promulgated by the Financial Accounting Standards Board or such other generally accepted accounting principles as may be from time to time in effect, (b) any other indebtedness of such Person, including any indebtedness representing the balance deferred and unpaid of the purchase price of any property or interest therein, including any such balance that constitutes a trade account payable, and any guaranty, endorsement or other contingent obligation of such Person in respect of any indebtedness of another, which is outstanding on the date of the Subordinated Debt Indenture or is thereafter created, assumed or incurred by such Person and (c) any amendments, modifications, refundings, renewals or extensions of any indebtedness or obligation described as Indebtedness in clause (a) or (b) above. If (i) without the consent of the Company a court shall enter (A) an order for relief with respect to the Company under the United States federal bankruptcy laws, (B) a judgment, order or decree adjudging the Company a bankrupt or insolvent, or (C) an order for relief for reorganization, arrangement, adjustment or composition of or in respect of the Company under the United States federal bankruptcy laws or state insolvency laws or (ii) the Company shall institute proceedings for the entry of an order for relief with respect to the Company under the United States federal bankruptcy laws or for an adjudication of insolvency, or shall consent to the institution of bankruptcy or insolvency proceedings against it, or shall file a petition seeking, or seek or consent to reorganization, arrangement, composition or similar relief under any applicable law, or shall consent to the filing of such petition or to the appointment of a receiver, custodian, liquidator, assignee, trustee, sequestrator or similar official in respect of the Company or of substantially all of its property, or the Company shall make a general assignment for the benefit of creditors, then all Senior Indebtedness (including any interest thereon accruing after the commencement of any such proceedings) will first be paid in full before any payment or distribution, whether in cash, securities or other property, is made on account of the principal of, premium, if any, or interest, if any, on the Subordinated Debt Securities. In such event, any payment or distribution on account of the principal of, premium, if any, or interest, if any, on the Subordinated Debt Securities, whether in cash, securities or other property (other than securities of the Company or any other corporation provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in the subordination provisions with respect to the Subordinated Debt Securities, to the payment of all Senior Indebtedness then outstanding and to any securities issued in respect thereof under any such plan of reorganization or readjustment), which would otherwise (but for the subordination provisions) be payable or deliverable in respect of the Subordinated Debt Securities will be paid or delivered directly to the holders of Senior Indebtedness in accordance with the priorities then existing among such holders until all Senior Indebtedness (including any interest thereon accruing after the commencement of any such proceedings) has been paid in full. If any payment or distribution on account of the principal of, premium, if any, or interest, if any, on the Subordinated Debt Securities of any character, whether in cash, securities or other property (other than securities of the Company or any other corporation provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in the subordination provisions with respect to the Subordinated Debt Securities, to the payment of all Senior Indebtedness then outstanding and to any securities issued in respect thereof under any such plan of reorganization or readjustment), shall be received by the Debt Trustee or any Holder of any Subordinated Debt Securities in contravention of any of the terms of the Subordinated Debt Indenture, such payment or distribution will be received in trust for the benefit of, and will be paid over or delivered and transferred to, the holders of the Senior Indebtedness then outstanding in accordance with the priorities then existing among such holders for application to the payment of all Senior Indebtedness remaining unpaid, to the extent necessary to pay all such Senior Indebtedness in full. In the event of any such proceeding, after payment in full of all sums owing with respect to Senior Indebtedness, the Holders of Subordinated Debt Securities, together with the holders of any other obligations of the Company ranking on a parity with the Subordinated Debt Securities, will be entitled to be repaid from the remaining assets of the Company the amounts at that time 26 30 due and owing on account of unpaid principal of or any premium or interest on the Subordinated Debt Securities and such other obligations before any payment or other distribution, whether in cash, property or otherwise, shall be made on account of any capital stock or obligations of the Company ranking junior to the Subordinated Debt Securities and such other obligations. (Section 1601 of the Subordinated Debt Indenture) The Prospectus Supplement respecting any series of Subordinated Debt Securities will set forth any subordination provisions applicable to such series in addition to or different from those described above. By reason of such subordination, in the event of the insolvency of the Company, Holders of Senior Indebtedness and holders of other obligations of the Company that are not subordinated to Senior Indebtedness may receive more, ratably, than Holders of the Subordinated Debt Securities. Such subordination will not prevent the occurrence of an Event of Default or limit the right of acceleration in respect of the Subordinated Debt Securities. Conversion. The Subordinated Debt Indenture may provide for a right of conversion of Subordinated Debt Securities into Common Stock (or cash in lieu thereof). (Sections 301 and 1501 of the Subordinated Debt Indenture) The following provisions will apply to Debt Securities that are convertible Subordinated Debt Securities unless otherwise provided in the Prospectus Supplement for such Debt Securities. The Holder of any convertible Subordinated Debt Securities will have the right exercisable at any time set forth in the Prospectus Supplement, unless previously redeemed or otherwise purchased by the Company, to convert such Subordinated Debt Securities into shares of Common Stock at the conversion price or conversion rate set forth in the Prospectus Supplement, subject to adjustment. (Section 1502 of the Subordinated Debt Indenture) The holder of convertible Subordinated Debt Securities may convert any portion thereof which is $1,000 in principal amount or any integral multiple thereof. (Section 1502 of the Subordinated Debt Indenture) In certain events, the conversion price or conversion rate will be subject to adjustment as set forth in the Subordinated Debt Indenture. Such events include the issuance of shares of Common Stock of the Company as a dividend or distribution on the Common Stock; subdivisions, combinations and reclassifications of the Common Stock; the issuance to all holders of Common Stock of rights or warrants entitling the holders thereof (for a period not exceeding 45 days) to subscribe for or purchase shares of Common Stock at a price per share less than the then current market price per share of Common Stock (as determined pursuant to the Subordinated Debt Indenture); and the distribution to substantially all holders of Common Stock of evidences of indebtedness, equity securities (including equity interests in the Company's Subsidiaries) other than Common Stock, or other assets (excluding cash dividends paid from surplus) or subscription rights or warrants (other than those referred to above). No adjustment of the conversion price or conversion rate will be required unless an adjustment would require a cumulative increase or decrease of at least 1% in such price or rate. (Section 1504 of the Subordinated Debt Indenture) Certain adjustments in the conversion price or conversion rate in accordance with the foregoing provisions may result in constructive distributions to either holders of the Subordinated Debt Securities or holders of Common Stock which would be taxable pursuant to Treasury Regulations issued under section 305 of the Internal Revenue Code of 1986, as amended. The amount of any such taxable constructive distribution would be the fair market value of the Common Stock which is treated as having been constructively received, such value being determined as of the time the adjustment resulting in the constructive distribution is made. Fractional shares of Common Stock will not be issued upon conversion, but, in lieu thereof, the Company will pay a cash adjustment based on the then current market price for the Common Stock. (Section 1503 of the Subordinated Debt Indenture) Upon conversion, no adjustments will be made for accrued interest or dividends, and therefore convertible Subordinated Debt Securities surrendered for conversion between the record date for an interest payment and the Interest Payment Date (except convertible Subordinated Debt Securities called for redemption on a redemption date during such period) must be accompanied by payment of an amount equal to the interest thereon which the registered holder is to receive. (Sections 1504 and 1502 of the Subordinated Debt Indenture) 27 31 In the case of any consolidation or merger of the Company (with certain exceptions) or any conveyance, transfer or lease of the properties and assets of the Company substantially as an entirety to any Person, each Holder of convertible Subordinated Debt Securities, after the consolidation, merger, conveyance, transfer or lease, will have the right to convert such convertible Subordinated Debt Securities only into the kind and amount of securities, cash and other property which the Holder would have been entitled to receive upon or in connection with such consolidation, merger, conveyance, transfer or lease, if the Holder had held the Common Stock issuable upon conversion of such convertible Subordinated Debt Securities immediately prior to such consolidation, merger, conveyance, transfer or lease. (Section 1505 of the Subordinated Debt Indenture) 28 32 DESCRIPTION OF CAPITAL STOCK GENERAL K N is currently authorized by its Restated Articles of Incorporation, as amended (the "K N Charter") to issue 50,000,000 shares of Common Stock, of which 32,024,557 were outstanding on December 31, 1997; 200,000 shares of Class A Preferred Stock, no par value ("Class A Preferred Stock"), of which 70,000 shares were outstanding as Class A $5.00 Cumulative Preferred Stock on such date; and 2,000,000 shares of Class B Preferred Stock, no par value ("Class B Preferred Stock"), none of which were outstanding on such date. The Board of Directors of K N is authorized by the K N Charter to provide, without further stockholder action, for the issuance of one or more series of Class A Preferred Stock and Class B Preferred Stock. The Board of Directors has the power to fix various terms with respect to each such series, including voting power, designations, preferences, dividend rates, conversion and exchange provisions, redemption provisions and, in the case of the Class B Preferred Stock, the amounts which holders are entitled to receive upon any liquidation, dissolution or winding up of K N. Class A Preferred Stock and Class B Preferred Stock will rank prior to the Common Stock with respect to both dividends and distribution of assets on liquidation, dissolution or winding up of K N. In the event of any liquidation, dissolution or winding up of K N, whether voluntary or involuntary, the holders of shares of Class A Preferred Stock of each series shall be entitled to receive in full out of the assets of K N the sum of $100 per share of Class A Preferred Stock, plus any arrearages in dividends thereon to the date fixed for the payment in liquidation, before any distribution shall be made to the holders of shares of any stock junior to the Class A Preferred Stock. K N may, at the option of the Board of Directors, redeem the whole or any part of the Class A Preferred Stock, or of any series thereof at any time or from time to time within the period during which such stock is, according to the K N Charter, or the resolutions of the Board of Directors providing for the issue thereof, redeemable, by paying the redemption price thereof, including any arrearages in dividends thereon to the date fixed for redemption. The Class A $5.00 Cumulative Preferred Stock is redeemable, in whole or in part, at the option of K N at any time, or from time to time, at the price of $105 per share plus accrued and unpaid dividends. This series has no sinking fund requirements. Holders of shares of Class A $5.00 Cumulative Preferred Stock are entitled to receive, when and as declared by the Board of Directors of K N, cumulative preferential cash dividends at the annual rate of $5.00 per share prior to the payment of any dividends or other distributions on (or purchase or redemption of) the Class B Preferred Stock or the Common Stock. In the event of any liquidation, dissolution or winding up of K N, whether voluntary or involuntary, the holders of shares of Class B Preferred Stock of each series shall be entitled to receive, subject to the prior rights of the holders of shares of Class A Preferred Stock, the full preferential amount fixed by the K N Charter, or by the resolutions of the Board of Directors providing for the issue thereof, including any arrearages in dividends thereon to the date fixed for the payment in liquidation, before any distribution shall be made to the holders of shares of any stock junior to the Class B Preferred Stock. Dividends may not be declared or paid or set apart for payment on any series of Class B Preferred Stock, unless there shall be no arrearages in dividends on any series of Class A Preferred Stock entitled to cumulative dividends for any past dividend period and dividends in full for the current dividend period have been paid or declared or set aside for payment on all Class A Preferred Stock. In addition, the holders of the Class A Preferred Stock then outstanding have the right to vote separately as a class with respect to (i) certain amendments to the K N Charter or the By-Laws of K N which adversely affect the voting powers, rights or preferences of the holders of shares of Class A Preferred Stock, (ii) the creation of any class of stock or any security convertible into or exchangeable for or evidencing the right to purchase any stock ranking prior to or on a parity with, either as to dividends or upon liquidation, the Class A Preferred Stock, or (iii) certain mergers or consolidations of K N with or into any other corporation. For such actions to be taken by K N, including increasing the authorized amount of any class of stock ranking prior to the Class A Preferred Stock, the affirmative vote of the holders of at least 50% of the shares of the Class A Preferred Stock then outstanding would be required. The affirmative vote of at least 50% of the shares of any 29 33 series of Class A Preferred Stock then outstanding is required for K N to amend the K N Charter or resolutions of the Board of Directors of K N providing for the issue of such series of Class A Preferred Stock so as to affect adversely the powers, preferences or rights of holders of Class A Preferred Stock of such series. The holders of Class B Preferred Stock then outstanding also have the right to a separate vote regarding (a) the events described in the first sentence of this paragraph with regard to such Class B Preferred Stock, requiring the affirmative vote of at least 50% of the shares of Class B Preferred Stock then outstanding, and (b) amendments to the K N Charter, or to resolutions of K N's Board of Directors providing for the issue of any series of Class B Preferred Stock so as to affect adversely the powers, preferences or rights of the holders of such series, requiring the affirmative vote of at least 50% of the shares of such series then outstanding. If dividends are in arrears on the shares of any series of Class A Preferred Stock to which the following provisions are made applicable pursuant to the K N Charter or resolutions of K N's Board of Directors providing for the issue of any such series (i) in an aggregate amount equal to three but less than six full quarterly dividends, then the holders of the shares of all such series of Class A Preferred Stock have the exclusive right, voting separately as a class and without regard to series, to elect directors constituting one-third of K N's Board of Directors or (ii) in an aggregate amount equal to six full quarterly dividends, then such holders have the exclusive right, voting separately as a class and without regard to series, to elect directors constituting one-half of K N's Board of Directors plus one additional director, in each case until all arrearages in dividends and dividends in full for the current quarterly period have been paid on or declared and set aside for payment on the shares of such series. These provisions are applicable to the Class A $5.00 Cumulative Preferred Stock. The holders of any outstanding Class B Preferred Stock would have the right to elect directors of K N similar to the Class A $5.00 Cumulative Preferred Stock in the event of nondeclaration of dividends, for the periods described above, on the Class B Preferred Stock if the holders of the Class A $5.00 Cumulative Preferred Stock are not then entitled to elect directors as described above. All outstanding shares of Common Stock are, and any shares of Common Stock newly issued under any Prospectus Supplement will be, validly issued, fully paid and nonassessable. Holders of K N Common Stock and Class A $5.00 Cumulative Preferred Stock are entitled to one vote for each share on all matters voted on by stockholders. Holders of Common Stock, Class A Preferred Stock and Class B Preferred Stock have no preemptive rights to subscribe for or purchase any additional securities issued by K N. Subject to the preferential rights of the holders of the Class A Preferred Stock and Class B Preferred Stock, the holders of Common Stock are entitled to receive any dividends which may be declared by the Board of Directors out of funds legally available therefor and to share pro rata in the net assets of K N upon liquidation, dissolution or winding up. Shares of Common Stock have no cumulative voting rights or redemption, sinking fund or conversion privileges. ANTI-TAKEOVER MATTERS Charter and Bylaws. Certain provisions of the K N Charter and the By-Laws of K N could have the effect of preventing a change in control of K N in certain situations. These provisions generally provide for (a) the classification of the Board of Directors of K N into three classes of as nearly an equal number as possible, having staggered terms of three years each; (b) the removal of directors only for cause or by unanimous vote of the remaining members of the Board of Directors; (c) the filling of any vacancy on the Board of Directors by the remaining directors then in office; (d) the limitation of the number of directors to a minimum of nine and a maximum of 15, with the exact number to be determined by the Board of Directors; (e) increasing the stockholder vote required to amend, repeal or adopt any provision inconsistent with the foregoing provisions under (a), (b) and (d) above to two-thirds of the outstanding voting securities of K N; (f) the requirement that certain business combinations or transactions involving K N and any beneficial owner of more than 5% of the outstanding voting securities of K N be approved by holders of at least twothirds of the outstanding voting securities of K N, including those held by such beneficial owner, unless the business combination or transaction is (I) approved by the Board of Directors before such beneficial owner became a holder of more than 5% of K N's outstanding voting securities or (II) approved by sufficient members of the Board of Directors to constitute a majority of the members of the full Board of Directors in office prior to the time such beneficial owner became a holder of more than 5% of K N's voting securities, or (III) with an entity 30 34 of which a majority of the outstanding shares of voting securities is owned by K N and its subsidiaries; (g) increasing the stockholder vote required to amend, repeal or adopt any provision inconsistent with the foregoing provision under (f) above to two-thirds or more of the then outstanding shares of voting securities of K N; (h) the requirement that certain business combinations or transactions involving K N and any beneficial owner of 10% or more of the outstanding voting securities of K N be approved by holders of at least 80% of the outstanding voting securities of K N, including those held by such beneficial owner, unless (I) the business combination or transaction is approved by three-fourths of the Board of Directors then in office who are not associated with or related to anyone who beneficially owns, and do not themselves own, 10% or more of K N's voting securities or (II) certain conditions relating generally to the fairness of the price to be received by stockholders of K N in such business combination or transaction are satisfied; (i) increasing the stockholder vote required to amend, repeal or adopt any provision inconsistent with the foregoing provision under (h) above to 80% or more of the outstanding voting securities of K N unless approved by an affirmative vote of three-fourths of the Board of Directors then in office who are not associated with or related to anyone who beneficially owns, and do not themselves own, 10% or more of K N's voting securities; (j) certain procedural requirements for stockholder nominations to the Board of Directors; and (k) the requirement that special meetings of stockholders may only be called by stockholders owning 51% or more of the outstanding voting securities of K N, by a majority of the Board of Directors, the Chairman of the Board of Directors or the President of K N. Shareholder Rights Plan. On August 17, 1995, the Board of Directors of K N declared a dividend of one preferred share purchase right (a "Right") with respect to each outstanding share of Common Stock held of record on September 15, 1995 or issued thereafter and prior to the date the Rights become exercisable. Until the Rights become exercisable, they will be evidenced by certificates for shares of Common Stock and will automatically trade with the Common Stock. If and when the Rights become exercisable, Rights certificates will be distributed and the Rights will become separately tradable. The full terms of the Rights are set forth in the Rights Agreement, dated as of August 21, 1995 (the "Rights Agreement"), between the Company and The Bank of New York, as Rights Agent. A copy of the Rights Agreement is filed as an exhibit to the Registration Statement. Each Right entitles the holder thereof to purchase from the Company one one-thousandth of a share of Class B Junior Participating Series Preferred Stock, without par value (the "Preferred Shares"), for a price of $80 per one onethousandth of a Preferred Share (the "Purchase Price"), subject to adjustment. The Rights become exercisable upon the earlier of (i) ten business days following a public announcement that a person or group of affiliated or associated persons has acquired beneficial ownership of 20% or more of the outstanding voting shares of the Company or (ii) ten business days following the commencement or announcement of an intention to commence a tender or exchange offer the consummation of which would result in the beneficial ownership by a person or group of 20% or more of the outstanding voting shares of the Company. The Rights will expire on the later of September 15, 2005 or the third anniversary of the date on which the Rights became exercisable (the "Final Expiration Date"), unless the Final Expiration Date is extended or the Rights are earlier redeemed or exchanged by the Company as described below. If a person or group were to acquire 20% or more of the voting shares of the Company, each Right then outstanding (other than Rights beneficially owned by the acquiring person, which would become null and void) would become a right to buy that number of shares of Common Stock (or, under certain circumstances, the equivalent number of one onethousandths of a Preferred Share) that at the time of such acquisition would have a market value of two times the Purchase Price of the Right. If the Company were acquired in a merger or other business combination transaction or more than 50% of its consolidated assets or earning power were sold, proper provision will be made so that holder of a Right will thereafter have the right to receive, upon the exercise thereof at the then current Purchase Price of the Right, that number of shares of common stock of the acquiring company which at the time of such transaction would have a market value of two times the Purchase Price of the Right. At any time after the acquisition by a person or group of beneficial ownership of 20% or more of the outstanding voting shares of the Company and before the acquisition by a person or group of 50% or more of the outstanding voting shares of the Company, the Board of Directors may, at its option, issue shares of 31 35 Common Stock (or Preferred Shares) in mandatory redemption of, and in exchange for, all or part of the then outstanding and exercisable Rights (other than Rights owned by such person or group, which would become null and void) at an exchange ratio of one share of Common Stock (or one one-thousandth of a Preferred Share) for each Right, subject to adjustment. In addition, the Company is entitled to redeem all of the outstanding Rights at a price of $0.01 per Right at any time prior to the first public announcement that a person or group has become the beneficial owner of 20% or more of the outstanding voting shares of the Company. Until a Right is exercised, the holder thereof, as such, has no rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends. KANSAS BUSINESS COMBINATION ACT K N is subject to Sections 17-12,100 et seq. of the Kansas Statutes Annotated (the "K.S.A."), which imposes a three-year moratorium on business combinations between a Kansas corporation and an "interested stockholder" (in general, a stockholder owning 15% or more of a corporation's outstanding voting stock) or an affiliate or associate thereof unless (a) prior to an interested stockholder becoming such, the board of directors of the corporation has approved either the business combination or the transaction by which the interested stockholder became such; (b) upon consummation of the transaction resulting in an interested stockholder becoming such, the interested stockholder owns 85% of the voting stock that was outstanding at the time the transaction commenced (excluding, from the calculation of outstanding shares, shares beneficially owned by management, directors and certain employees stock plans); or (c) on or after the date an interested stockholder becomes such, the business combination is approved by (i) the Board of Directors and (ii) the affirmative vote of the holders of at least 66 2/3% of the outstanding shares (other than those shares beneficially owned by the interested stockholder) at a meeting of stockholders. KANSAS CONTROL SHARE ACQUISITIONS ACT K N is also subject to Sections 17-1286 et seq. of the K.S.A. (the "Kansas Control Share Acquisitions Act"), which applies to public corporations incorporated in Kansas that have certain other connections with the state. The Kansas Control Share Acquisitions Act relates principally to the acquisition of "control shares" in such a corporation. Under the Kansas Control Share Acquisitions Act, a control share acquisition is one that, except for the operation of the Act, would raise the acquiring person's voting power in the election of directors of the subject corporation to or above any of three thresholds: one-fifth or more but less than one-third of all voting power; one-third or more but less than a majority of all voting power; and at least a majority of all voting power. Whenever a control share acquisition occurs, the acquiring person has no voting rights with respect to those shares unless both a majority of all outstanding shares and a majority of all such shares excluding all "interested shares" (in general, shares beneficially controlled by the acquiring person or any officer or inside director of the subject corporation) approve the acquisition. If the control shares are accorded voting rights, then dissenters' rights are available under the Kansas Control Share Acquisitions Act to stockholders who did not vote in favor of the control share acquisition and who comply with certain prescribed procedures. If the stockholders vote not to accord voting rights to the control shares, however, then the issuing corporation has a 60-day option to redeem all such shares at market value. OTHER MATTERS The Bank of New York serves as registrar and transfer agent for the Common Stock and for the Class A $5.00 Cumulative Preferred Stock. DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS The Company may issue Stock Purchase Contracts, including contracts obligating holders to purchase from the Company, and the Company to sell to the holders, a specified number of shares of Common Stock at a future date or dates. The consideration per share of Common Stock may be fixed at the time the Stock Purchase Contracts are issued or may be determined by reference to a specific formula set forth in the Stock 32 36 Purchase Contracts. The Stock Purchase Contracts may be issued separately or as Stock Purchase Units consisting of a Stock Purchase Contract and Debt Securities, Preferred Securities or debt obligations of third parties, including U.S. Treasury securities, securing the holders' obligations to purchase the Common Stock under the Stock Purchase Contracts. The Stock Purchase Contracts may require the Company to make periodic payments to the holders of the Stock Purchase Units or vice versa, and such payments may be unsecured or prefunded on some basis. The Stock Purchase Contracts may require holders to secure their obligations thereunder in a specified manner. The applicable Prospectus Supplement will describe the terms of any Stock Purchase Contracts or Stock Purchase Units. The description in the Prospectus Supplement will not necessarily be complete, and reference will be made to the Stock Purchase Contracts, and, if applicable, collateral arrangements and depositary arrangements, relating to such Stock Purchase Contracts or Stock Purchase Units. Certain material United States federal income tax considerations applicable to the Stock Purchase Units and the Stock Purchase Contracts will be discussed in the Prospectus Supplement relating thereto. BOOK-ENTRY ISSUANCE Unless otherwise specified in the applicable Prospectus Supplement, The Depositary Trust Company ("DTC") will act as depositary for Securities issued in the form of Global Securities. Such Securities will be issued only as fully-registered securities registered in the name of Cede & Co. (DTC's nominee). One or more fully-registered Global Securities will be issued for such Securities representing in the aggregate the total number of such Securities, and will be deposited with or on behalf of DTC. DTC is a limited purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds securities that its Participants deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations ("Direct Participants"). DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain custodial relationships with Direct Participants, either directly or indirectly ("Indirect Participants"). The rules applicable to DTC and its Participants are on file with the Commission. Purchases of Securities within the DTC system must be made by or through Direct Participants, which will receive a credit for such Securities on DTC's records. The ownership interest of each actual purchaser of each Security ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchases, but Beneficial Owners are expected to receive written confirmations providing details of the transactions, as well as periodic statements of their holdings, from the Direct or Indirect Participants through which the Beneficial Owners purchased Securities. Transfers of ownership interests in Securities issued in the form of Global Securities are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in such Securities, except in the event that use of the book-entry system for such Securities is discontinued. DTC has no knowledge of the actual Beneficial Owners of the Securities issued in the form of Global Securities; DTC's records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. 33 37 Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to Cede & Co. as the registered holder of Securities issued in the form of Global Securities. If less than all of a series of such Securities are being redeemed, DTC's current practice is to determine by lot the amount of the interest of each Direct Participant to be redeemed. Although voting with respect to Securities issued in the form of Global Securities is limited to the holders of record of such Securities, in those instances in which a vote is required, neither DTC nor Cede & Co. will itself consent or vote with respect to such Securities. Under its usual procedures, DTC would mail an omnibus proxy (the "Omnibus Proxy") to the issuer of such Securities as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts such Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). Payments in respect of Securities issued in the form of Global Securities will be made by the issuer of such Securities to DTC. DTC's practice is to credit Direct Participants' accounts on the relevant payment date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payments on such payment date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices and will be the responsibility of such Participant and not of DTC, the Institutional Trustee, either Trust or the Company, subject to any statutory or regulatory requirements as may be in effect from time to time. Payments to DTC are the responsibility of the issuer of the applicable Securities, disbursement of such payments to Direct Participants is the responsibility of DTC, and disbursements of such payments to the Beneficial Owners is the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depositary with respect to any Securities at any time by giving reasonable notice to the issuer of such Securities. In the event that a successor depositary is not obtained, individual Security certificates representing such Securities are required to be printed and delivered. The Company, at its option, may decide to discontinue use of the system of book-entry transfers through DTC (or a successor depositary). The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the Trust and the Company believe to be accurate, but the Trust and the Company assume no responsibility for the accuracy thereof. Neither the Trust nor the Company has any responsibility for the performance by DTC or its Participants of their respective obligations as described herein or under the rules and procedures governing their respective operations. PLAN OF DISTRIBUTION Any of the Securities being offered hereby may be sold in any one or more of the following ways from time to time: (i) through agents; (ii) to or through underwriters; (iii) through dealers; and (iv) directly by the Company or, in the case of Preferred Securities, by the Trust to purchasers. The distribution of the Securities may be effected from time to time in one or more transactions at a fixed price or prices, which may be changed, at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. Offers to purchase Securities may be solicited by agents designated by the Company from time to time. Any such agent involved in the offer or sale of the Securities in respect of which this Prospectus is delivered will be named, and any commissions payable by the Company or the Trust to such agent will be set forth, in the applicable Prospectus Supplement. Unless otherwise indicated in such Prospectus Supplement, any such agent will be acting on a reasonable best efforts basis for the period of its appointment. Any such agent may be 34 38 deemed to be an underwriter, as that term is defined in the Securities Act, of the Securities so offered and sold. If Securities are sold by means of an underwritten offering, the Company and, in the case of an offering of Preferred Securities, the Trust will execute an underwriting agreement with an underwriter or underwriters at the time an agreement for such sale is reached, and the names of the specific managing underwriter or underwriters, as well as any other underwriters, the respective amounts underwritten and the terms of the transaction, including commissions, discounts and any other compensation of the underwriters and dealers, if any, will be set forth in the applicable Prospectus Supplement which will be used by the underwriters to make resales of the Securities in respect of which this Prospectus is being delivered to the public. If underwriters are utilized in the sale of any Securities in respect of which this Prospectus is being delivered, such Securities will be acquired by the underwriters for their own account and may be resold from time to time in one or more transactions, including negotiated transactions, at fixed public offering prices or at varying prices determined by the underwriters at the time of sale. Securities may be offered to the public either through underwriting syndicates represented by managing underwriters or directly by one or more underwriters. If any underwriter or underwriters are utilized in the sale of Securities, unless otherwise indicated in the applicable Prospectus Supplement, the underwriting agreement will provide that the obligations of the underwriters are subject to certain conditions precedent and that the underwriters with respect to a sale of such Securities will be obligated to purchase all such Securities if any are purchased. The Company or the Trust, as applicable, may grant to the underwriters options to purchase additional Securities, to cover over-allotments, if any, at the initial public offering price (with additional underwriting commissions or discounts), as may be set forth in the Prospectus Supplement relating thereto. If the Company or the Trust, as applicable, grants any over-allotment option, the terms of such over-allotment option will be set forth in the Prospectus Supplement for such Securities. If a dealer is utilized in the sale of the Securities in respect of which this Prospectus is delivered, the Company or the Trust, as applicable, will sell such Securities to the dealer as principal. The dealer may then resell such Securities to the public at varying prices to be determined by such dealer at the time of resale. Any such dealer may be deemed to be an underwriter, as such term is defined in the Securities Act, of the Securities so offered and sold. The name of the dealer and the terms of the transaction will be set forth in the Prospectus Supplement relating thereto. Offers to purchase Securities may be solicited directly by the Company or the Trust, as applicable, and the sale thereof may be made by the Company or the Trust directly to institutional investors or others, who may be deemed to be underwriters within the meaning of the Securities Act with respect to any resale thereof. The terms of any such sales will be described in the Prospectus Supplement relating thereto. Securities may also be offered and sold, if so indicated in the applicable Prospectus Supplement, in connection with a remarketing upon their purchase, in accordance with a redemption or repayment pursuant to their terms, or otherwise, by one or more firms ("remarketing firms"), acting as principals for their own accounts or as agents for the Company or the Trust, as applicable. Any remarketing firm will be identified and the terms of its agreement, if any, with the Company or the Trust and its compensation will be described in the applicable Prospectus Supplement. Remarketing firms may be deemed to be underwriters, as that term is defined in the Securities Act, in connection with the Securities remarketed thereby. If so indicated in the applicable Prospectus Supplement, the Company or the Trust, as applicable, may authorize agents and underwriters to solicit offers by certain institutions to purchase Securities from the Company or the Trust at the public offering price set forth in the applicable Prospectus Supplement pursuant to delayed delivery contracts providing for payment and delivery on the date or dates stated in the applicable Prospectus Supplement. Such delayed delivery contracts will be subject to only those conditions set forth in the applicable Prospectus Supplement. A commission indicated in the applicable Prospectus supplement will be paid to underwriters and agents soliciting purchases of Securities pursuant to delayed delivery contracts accepted by the Company or the Trust, as applicable. 35 39 Agents, underwriters, dealers and remarketing firms may be entitled under relevant agreements with the Company or the Trust, as applicable, to indemnification by the Company or the Trust against certain liabilities, including liabilities under the Securities Act, or to contribution with respect to payments which such agents, underwriters, dealers and remarketing firms may be required to make in respect thereof. Each series of Securities will be a new issue and, other than the Common Stock, which is listed on the New York Stock Exchange, will have no established trading market. The Company may elect to list any series of Securities on an exchange, and in the case of the Common Stock, on any additional exchange, but, unless otherwise specified in the applicable Prospectus Supplement, the Company shall not be obligated to do so. No assurance can be given as to the liquidity of the trading market for any of the Securities. Agents, underwriters, dealers and remarketing firms may be customers of, engage in transactions with, or perform services for, the Company and its subsidiaries in the ordinary course of business. LEGAL MATTERS The validity of the Preferred Securities will be passed upon on behalf of K N Energy and the Trust by Richards, Layton & Finger P.A., special Delaware counsel to K N Energy and the Trust. The validity of the Trust Debentures, the Guarantee and the Debt Securities and certain matters relating thereto will be passed upon for K N Energy and the Trust by Simpson Thacher & Bartlett (a partnership which includes professional corporations), New York, New York. The validity of the Common Stock will be passed upon by Posinelli, White, Vardeman & Shalton. Simpson Thacher & Bartlett will rely on Richards, Layton & Finger P.A. as to matters of Delaware law and Polsinelli, White, Vardeman & Shalton as to matters of Kansas law. The validity of the Offered Securities will be passed upon for any agents, dealers or underwriters by counsel named in the applicable Prospectus Supplement. EXPERTS The consolidated financial statements of K N Energy, Inc. and subsidiaries as of December 31, 1996 and 1995, and for each of the three years in the period ended December 31, 1996, incorporated in this Prospectus and elsewhere in the Registration Statement by reference to its Annual Report on Form 10-K for the year ended December 31, 1996, as amended, have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in accounting and auditing in giving said report. The consolidated financial statements of MidCon Corp. and subsidiaries as of December 31, 1996 and 1995, and for each of the three years in the period ended December 31, 1996, incorporated in this Prospectus and elsewhere in the Registration Statement by reference to the Current Report on Form 8-K filed with the Commission on January 16, 1998, have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in accounting and auditing in giving said report. 36 40 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE OR JURISDICTION. PROSPECTUS (Subject to completion) Issued January 16, 1998 792,232 Shares K N Energy, Inc. COMMON STOCK ------------------------ This Prospectus relates to an aggregate of 792,232 shares of common stock, par value $5.00 per share (the "Common Stock"), of K N Energy, Inc. ("K N" or the "Company") held by its largest stockholder, Cabot Specialty Chemicals, Inc. (the "Selling Stockholder"). See information under the heading "Selling Stockholder." The Common Stock will be offered in amounts, at prices and on terms to be determined in light of market conditions at the time of sale and set forth in a supplement to this Prospectus (a "Prospectus Supplement"). The Common Stock may be sold directly by the Selling Stockholder to investors, through agents designated from time to time or to or through underwriters or dealers. See "Plan of Distribution". If any agents of the Selling Stockholder or any underwriters are involved in the sale of any Common Stock in respect of which this Prospectus is being delivered, the names of such agents or underwriters and any applicable commissions or discounts will be set forth in a Prospectus Supplement. The Company will not receive any of the proceeds from the sale of any Common Stock by the Selling Stockholder. See "Use of Proceeds." (including the shares of Common Stock to be sold pursuant to a Prospectus Supplement) ------------------------ The Common Stock is traded on the New York Stock Exchange (the "NYSE") under the symbol "KNE." ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------ THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF THE COMMON STOCK UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT. , 1998 41 AVAILABLE INFORMATION The Company is subject to the information requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements, and other information filed by the Company with the Commission can be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the following Regional Offices of the Commission: Chicago Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and New York Regional Office, Seven World Trade Center, 13th Floor, New York, New York 10048. Copies of such material can be obtained from the Public Reference Section of the Commission, Washington, D.C. 20549 at prescribed rates. The Commission maintains a Web site that contains reports, proxy and information statements and other materials that are filed through the Commission's Electronic Data Gathering Analysis and Retrieval System. The Web site can be accessed at http://www.sec.gov. In addition, reports, proxy statements and other information concerning the Company can be inspected at the New York Stock Exchange, 20 Broad Street, New York, New York 10005, on which exchange the Common Stock is listed. This Prospectus constitutes a part of three Registration Statement on Form S-3 (together with all amendments and exhibits thereto, the "Registration Statement") filed by the Company with the Commission under the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus omits certain of the information contained in the Registration Statement, and reference is hereby made to the Registration Statement for further information with respect to the Company and the securities offered hereby. Any statements contained herein concerning the provisions of any document filed as an exhibit to the Registration Statement or otherwise filed with the Commission are not necessarily complete, and in each instance reference is made to the copy of such document so filed. Each such statement is qualified in its entirety by such reference. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by the Company with the Commission (File No. 1-6446) pursuant to the Exchange Act are incorporated by reference and made a part hereof: (a) the Company's Annual Report on Form 10-K for the year ended December 31, 1996, as amended by Amendment No. 1 thereto; (b) the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30, and September 30, 1997; (c) the Company's Current Reports on Form 8-K dated January 23 and 28, and October 27, 1997 and January 5 and 16, 1998; and (d) the description of the shares of Preferred Share Purchase Rights and Common Stock contained in the Company's Registration Statements on Form 8-A. All documents subsequently filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, after the date of this Prospectus and prior to the termination of the offering of the Securities pursuant hereto, shall be deemed to be incorporated by reference herein and to be a part hereof from the date of filing of such document. Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide without charge to any person, including any beneficial owner of Securities, to whom this Prospectus is delivered, upon written or oral request of such person, a copy of any and all of the documents referred to above which have been incorporated by reference in this Prospectus (other than 2 42 exhibits to such documents, unless such exhibits are specifically incorporated by reference into such documents). Such requests should be directed to the office of the Vice President and Treasurer, K N Energy, Inc., 370 Van Gordon Street, P.O. Box 281304, Lakewood, Colorado 80228-8304, telephone number (303) 989-1740. K N ENERGY, INC. K N Energy is an integrated energy services provider whose operations include the transportation, storage, gathering, processing, and marketing of natural gas and natural gas liquids. In addition, the Company is engaged in energy commodity sales of natural gas and other products. The Company also markets innovative products and services, such as the Simple Choice(sm) menu of products and call center services designed for residential consumers, utilities, and small businesses through its 50% owned en-able LLC affiliate. RECENT DEVELOPMENTS On December 18, 1997, K N Energy announced that it had entered into a definitive agreement to acquire all of the capital stock of MidCon Corp. ("MidCon") from Occidental Petroleum Corporation for $3.49 billion, consisting of $2.1 billion in cash and the assumption of $1.39 billion in short-term debt which will be required to be collateralized at closing by U.S. government securities or one or more letters of credit, or a combination thereof. The transaction is expected to close in the first quarter of 1998 at which time MidCon will become a wholly-owned subsidiary of K N Energy. K N was incorporated under the laws of the State of Kansas in 1927. The address of its principal executive offices is 370 Van Gordon Street, P. O. Box 281304, Lakewood, Colorado 80228-8304 and its telephone number is (303) 989-1740. Additional information concerning the Company and its subsidiaries is included in the Company reports and other documents incorporated by reference in this Prospectus. See "Available Information" and "Incorporation of Certain Documents by Reference." USE OF PROCEEDS The Company will not receive any proceeds from the sale of any Common Stock by the Selling Stockholder. 3 43 DESCRIPTION OF CAPITAL STOCK GENERAL K N is currently authorized by its Restated Articles of Incorporation, as amended (the "K N Charter") to issue 50,000,000 shares of Common Stock, of which 32,024,557 were outstanding on December 31, 1997; 200,000 shares of Class A Preferred Stock, no par value ("Class A Preferred Stock"), of which 70,000 shares were outstanding as Class A $5.00 Cumulative Preferred Stock on such date; and 2,000,000 shares of Class B Preferred Stock, no par value ("Class B Preferred Stock"), none of which were outstanding on such date. The Board of Directors of K N is authorized by the K N Charter to provide, without further stockholder action, for the issuance of one or more series of Class A Preferred Stock and Class B Preferred Stock. The Board of Directors has the power to fix various terms with respect to each such series, including voting power, designations, preferences, dividend rates, conversion and exchange provisions, redemption provisions and, in the case of the Class B Preferred Stock, the amounts which holders are entitled to receive upon any liquidation, dissolution or winding up of K N. Class A Preferred Stock and Class B Preferred Stock will rank prior to the Common Stock with respect to both dividends and distribution of assets on liquidation, dissolution or winding up of K N. In the event of any liquidation, dissolution or winding up of K N, whether voluntary or involuntary, the holders of shares of Class A Preferred Stock of each series shall be entitled to receive in full out of the assets of K N the sum of $100 per share of Class A Preferred Stock, plus any arrearages in dividends thereon to the date fixed for the payment in liquidation, before any distribution shall be made to the holders of shares of any stock junior to the Class A Preferred Stock. K N may, at the option of the Board of Directors, redeem the whole or any part of the Class A Preferred Stock, or of any series thereof at any time or from time to time within the period during which such stock is, according to the K N Charter, or the resolutions of the Board of Directors providing for the issue thereof, redeemable, by paying the redemption price thereof, including any arrearages in dividends thereon to the date fixed for redemption. The Class A $5.00 Cumulative Preferred Stock is redeemable, in whole or in part, at the option of K N at any time, or from time to time, at the price of $105 per share plus accrued and unpaid dividends. This series has no sinking fund requirements. Holders of shares of Class A $5.00 Cumulative Preferred Stock are entitled to receive, when and as declared by the Board of Directors of K N, cumulative preferential cash dividends at the annual rate of $5.00 per share prior to the payment of any dividends or other distributions on (or purchase or redemption of) the Class B Preferred Stock or the Common Stock. In the event of any liquidation, dissolution or winding up of K N, whether voluntary or involuntary, the holders of shares of Class B Preferred Stock of each series shall be entitled to receive, subject to the prior rights of the holders of shares of Class A Preferred Stock, the full preferential amount fixed by the K N Charter, or the resolutions of the Board of Directors providing for the issue thereof, including any arrearages in dividends thereon to the date fixed for the payment in liquidation, before any distribution shall be made to the holders of shares of any stock junior to the Class B Preferred Stock. Dividends may not be declared or paid or set apart for payment on any series of Class B Preferred Stock, unless there shall be no arrearages in dividends on any series of Class A Preferred Stock entitled to cumulative dividends for any past dividend period and dividends in full for the current dividend period have been paid or declared or set aside for payment on all Class A Preferred Stock. In addition, the holders of the Class A Preferred Stock then outstanding have the right to vote separately as a class with respect to (i) certain amendments to the K N Charter or the By-Laws of K N which adversely affect the voting powers, rights or preferences of the holders of shares of Class A Preferred Stock, (ii) the creation of any class of stock or any security convertible into or exchangeable for or evidencing the right to purchase any stock ranking prior to or on a parity with, either as to dividends or upon liquidation, the Class A Preferred Stock, or (iii) certain mergers or consolidations of K N with or into any other corporation. For such actions to be taken by K N, including increasing the authorized amount of any class of stock ranking prior to the Class A Preferred Stock, the affirmative vote of the holders of at least 50% of the shares of the Class A Preferred Stock then outstanding would be required. The affirmative vote of at least 50% of the shares of any 4 44 series of Class A Preferred Stock then outstanding is required for K N to amend the K N Charter or resolutions of the Board of Directors of K N providing for the issue of such series of Class A Preferred Stock so as to affect adversely the powers, preferences or rights of holders of Class A Preferred Stock of such series. The holders of Class B Preferred Stock then outstanding also have the right to a separate vote regarding (a) the events described in the first sentence of this paragraph with regard to such Class B Preferred Stock, requiring the affirmative vote of at least 50% of the shares of Class B Preferred Stock then outstanding, and (b) amendments to the K N Charter, or to resolutions of K N's Board of Directors providing for the issue of any series of Class B Preferred Stock so as to affect adversely the powers, preferences or rights of the holders of such series, requiring the affirmative vote of at least 50% of the shares of such series then outstanding. If dividends are in arrears on the shares of any series of Class A Preferred Stock to which the following provisions are made applicable pursuant to the K N Charter or resolutions of K N's Board of Directors providing for the issue of any such series (i) in an aggregate amount equal to three but less than six full quarterly dividends, then the holders of the shares of all such series of Class A Preferred Stock have the exclusive right, voting separately as a class and without regard to series, to elect directors constituting one-third of K N's Board of Directors or (ii) in an aggregate amount equal to six full quarterly dividends, then such holders have the exclusive right, voting separately as a class and without regard to series, to elect directors constituting one-half of K N's Board of Directors plus one additional director, in each case until all arrearages in dividends and dividends in full for the current quarterly period have been paid on or declared and set aside for payment on the shares of such series. These provisions are applicable to the Class A $5.00 Cumulative Preferred Stock. The holders of any outstanding Class B Preferred Stock would have the right to elect directors of K N similar to the Class A $5.00 Cumulative Preferred Stock in the event of nondeclaration of dividends, for the periods described above, on the Class B Preferred Stock if the holders of the Class A $5.00 Cumulative Preferred Stock are not then entitled to elect directors as described above. All outstanding shares of Common Stock are, and any shares of Common Stock newly issued under any Prospectus Supplement will be, validly issued, fully paid and nonassessable. Holders of K N Common Stock and Class A $5.00 Cumulative Preferred Stock are entitled to one vote for each share on all matters voted on by stockholders. Holders of Common Stock, Class A Preferred Stock and Class B Preferred Stock have no preemptive rights to subscribe for or purchase any additional securities issued by K N. Subject to the preferential rights of the holders of the Class A Preferred Stock and Class B Preferred Stock, the holders of Common Stock are entitled to receive any dividends which may be declared by the Board of Directors out of funds legally available therefor and to share pro rata in the net assets of K N upon liquidation, dissolution or winding up. Shares of Common Stock have no cumulative voting rights or redemption, sinking fund or conversion privileges. ANTI-TAKEOVER MATTERS Charter and By-laws. Certain provisions of the K N Charter and the By-Laws of K N could have the effect of preventing a change in control of K N in certain situations. These provisions generally provide for (a) the classification of the Board of Directors of K N into three classes of as nearly an equal number as possible, having staggered terms of three years each; (b) the removal of directors only for cause or by unanimous vote of the remaining members of the Board of Directors; (c) the filling of any vacancy on the Board of Directors by the remaining directors then in office; (d) the limitation of the number of directors to a minimum of nine and a maximum of 15, with the exact number to be determined by the Board of Directors; (e) increasing the stockholder vote required to amend, repeal or adopt any provision inconsistent with the foregoing provisions under (a), (b) and (d) above to two-thirds of the outstanding voting securities of K N; (f) the requirement that certain business combinations or transactions involving K N and any beneficial owner of more than 5% of the outstanding voting securities of K N be approved by holders of at least two-thirds of the outstanding voting securities of K N, including those held by such beneficial owner, unless the business combination or transaction is (I) approved by the Board of Directors before such beneficial owner became a holder of more than 5% of K N's outstanding voting securities or (II) approved by sufficient members of the Board of Directors to constitute a majority of the members of the full Board of Directors in office prior to the time such beneficial owner became a holder of more than 5% of K N's voting securities, or (III) with an entity 5 45 of which a majority of the outstanding shares of voting securities is owned by K N and its subsidiaries; (g) increasing the stockholder vote required to amend, repeal or adopt any provision inconsistent with the foregoing provision under (f) above to two-thirds or more of the then outstanding shares of voting securities of K N; (h) the requirement that certain business combinations or transactions involving K N and any beneficial owner of 10% or more of the outstanding voting securities of K N be approved by holders of at least 80% of the outstanding voting securities of K N, including those held by such beneficial owner, unless (I) the business combination or transaction is approved by three-fourths of the Board of Directors then in office who are not associated with or related to anyone who beneficially owns, and do not themselves own, 10 percent or more of K N's voting securities or (II) certain conditions relating generally to the fairness of the price to be received by stockholders of K N in such business combination or transaction are satisfied; (i) increasing the stockholder vote required to amend, repeal or adopt any provision inconsistent with the foregoing provision under (h) above to 80% or more of the outstanding voting securities of K N unless approved by an affirmative vote of three-fourths of the Board of Directors then in office who are not associated with or related to anyone who beneficially owns, and do not themselves own, 10% or more of K N's voting securities; (j) certain procedural requirements for stockholder nominations to the Board of Directors; and (k) the requirement that special meetings of stockholders may only be called by stockholders owning 51% or more of the outstanding voting securities of K N, by a majority of the Board of Directors, the Chairman of the Board of Directors or the President of K N. Shareholder Rights Plan. On August 17, 1995, the Board of Directors of K N declared a dividend of one preferred share purchase right (a "Right") with respect to each outstanding share of Common Stock held of record on September 15, 1995 or issued thereafter and prior to the date the Rights become exercisable. Until the Rights become exercisable, they will be evidenced by certificates for shares of Common Stock and will automatically trade with the Common Stock. If and when the Rights become exercisable, Rights certificates will be distributed and the Rights will become separately tradable. The full terms of the Rights are set forth in the Rights Agreement dated as of August 21, 1995 (the "Rights Agreement"), between the Company and The Bank of New York, as Rights Agent, a copy of which is filed as an exhibit to the Registration Statement. Each Right entitles the holder thereof to purchase from the Company one one-thousandth of a share of Class B Junior Participating Series Preferred Stock, without par value (the "Preferred Shares"), for a price of $80 per one one-thousandth of a Preferred Share (the "Purchase Price"), subject to adjustment. The Rights become exercisable upon the earlier of (i) ten business days following a public announcement that a person or group of affiliated or associated persons has acquired beneficial ownership of 20% or more of the outstanding voting shares of the Company or (ii) ten business days following the commencement or announcement of an intention to commence a tender or exchange offer the consummation of which would result in the beneficial ownership by a person or group of 20% or more of the outstanding voting shares of the Company. The Rights will expire on the later of September 15, 2005 or the third anniversary of the date on which the Rights became exercisable (the "Final Expiration Date"), unless the Final Expiration Date is extended or the Rights are earlier redeemed or exchanged by the Company as described below. If a person or group were to acquire 20% or more of the voting shares of the Company, each Right then outstanding (other than Rights beneficially owned by the acquiring person, which would become null and void) would become a right to buy that number of shares of Common Stock (or, under certain circumstances, the equivalent number of one one-thousandths of a Preferred Share) that at the time of such acquisition would have a market value of two times the Purchase Price of the Right. If the Company were acquired in a merger or other business combination transaction or more than 50% of its consolidated assets or earning power were sold, proper provision will be made so that holder of a Right will thereafter have the right to receive, upon the exercise thereof at the then current Purchase Price of the Right, that number of shares of common stock of the acquiring company which at the time of such transaction would have a market value of two times the Purchase Price of the Right. At any time after the acquisition by a person or group of beneficial ownership of 20% or more of the outstanding voting shares of the Company and before the acquisition by a person or group of 50% or more of the outstanding voting shares of the Company, the Board of Directors may, at its option, issue shares of 6 46 Common Stock (or Preferred Shares) in mandatory redemption of, and in exchange for, all or part of the then outstanding and exercisable Rights (other than Rights owned by such person or group, which would become null and void) at an exchange ratio of one share of Common Stock (or one one-thousandth of a Preferred Share) for each Right, subject to adjustment. In addition, the Company is entitled to redeem all of the outstanding Rights at a price of $0.01 per Right at any time prior to the first public announcement that a person or group has become the beneficial owner of 20% or more of the outstanding voting shares of the Company. Until a Right is exercised, the holder thereof, as such, has no rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends. KANSAS BUSINESS COMBINATION ACT K N is subject to Sections 17-12,100 et seq. of the Kansas Statutes Annotated (the "K.S.A."), which imposes a three-year moratorium on business combinations between a Kansas corporation and an "interested stockholder" (in general, a stockholder owning 15% or more of a corporation's outstanding voting stock) or an affiliate or associate thereof unless (a) prior to an interested stockholder becoming such, the board of directors of the corporation has approved either the business combination or the transaction by which the interested stockholder became such; (b) upon consummation of the transaction resulting in an interested stockholder becoming such, the interested stockholder owns 85% of the voting stock that was outstanding at the time the transaction commenced (excluding, from the calculation of outstanding shares, shares beneficially owned by management, directors and certain employees stock plans); or (c) on or after the date an interested stockholder becomes such, the business combination is approved by (i) the Board of Directors and (ii) the affirmative vote of the holders of at least 66 2/3% of the outstanding shares (other than those shares beneficially owned by the interested stockholder) at a meeting of stockholders. KANSAS CONTROL SHARE ACQUISITIONS ACT K N is also subject to Sections 17-1286 et seq. of the K.S.A. (the "Kansas Control Share Acquisitions Act"), which applies to public corporations incorporated in Kansas that have certain other connections with the state. The Kansas Control Share Acquisitions Act relates principally to the acquisition of "control shares" in such a corporation. Under the Kansas Control Share Acquisitions Act, a control share acquisition is one that, except for the operation of the Act, would raise the acquiring person's voting power in the election of directors of the subject corporation to or above any of three thresholds: one-fifth or more but less than one-third of all voting power; one-third or more but less than a majority of all voting power; and at least a majority of all voting power. Whenever a control share acquisition occurs, the acquiring person has no voting rights with respect to those shares unless both a majority of all outstanding shares and a majority of all such shares excluding all "interested shares" (in general, shares beneficially controlled by the acquiring person or any officer or inside director of the subject corporation) approve the acquisition. If the control shares are accorded voting rights, then dissenters' rights are available under the Kansas Control Share Acquisitions Act to stockholders who did not vote in favor of the control share acquisition and who comply with certain prescribed procedures. If the stockholders vote not to accord voting rights to the control shares, however, then the issuing corporation has a 60-day option to redeem all such shares at market value. OTHER MATTERS The Bank of New York serves as registrar and transfer agent for the Common Stock and for the Class A $5.00 Cumulative Preferred Stock. SELLING STOCKHOLDER The Selling Stockholder is a Delaware corporation wholly owned by Cabot Corporation ("Cabot") having its principal office in Boston, Massachusetts. On July 13, 1994, K N acquired American Oil and Gas Corporation ("AOG") in a stock-for-stock merger (the "Merger") accounted for as a pooling of interests. Cabot was the largest stockholder of AOG prior to the Merger, owning approximately 34.4% of the 7 47 outstanding shares of common stock of AOG at the time of the Merger plus warrants to purchase approximately an additional 5.3% of such shares. Beginning in June 1997, Cabot made capital contributions of all of its shares of Common Stock to the Selling Stockholder. Cabot acquired its interest in AOG in 1989 when it sold its Texas gas pipeline business to AOG. In connection with that transaction, Cabot and AOG entered into a Standstill and Registration Rights Agreement, which, among other things, entitled Cabot to three representatives on the board of directors of AOG. At the time of the Merger, two nominees of Cabot were among AOG's eight directors. Such Standstill and Registration Rights Agreement ceased to have effect upon consummation of the Merger. Also in connection with the 1989 transaction, Cabot and AOG agreed to a liability sharing arrangement primarily covering certain contingent liabilities and potential gas contract losses of the acquired business. Pursuant to this liability sharing arrangement, Cabot and AOG agreed to bear an equal amount of such liabilities up to $20 million each; Cabot agreed to be solely responsible for these liabilities above that amount. All matters pertaining to the liability sharing arrangement with Cabot were settled in April 1997, and all final payments required thereby have been made. The Company's final liability under the liability sharing arrangement with Cabot was $5.6 million, which was previously recorded in connection with the acquisition of AOG. AOG has asserted certain claims related to environmental matters against Cabot under acquisition agreements related to assets previously owned by Cabot or one or more of its subsidiaries (including assets acquired by AOG in the 1989 transaction referred to above and assets acquired by AOG from another company which had previously purchased them from Cabot or one or more of its subsidiaries). In January 1998, K N and Cabot agreed to submit such claims to binding arbitration. Before its acquisition of AOG, K N had no material relationship with Cabot or the Selling Stockholder. Pursuant to its merger agreement with AOG, at the time of the Merger K N elected a designee of Cabot, John G. L. Cabot, as a non-voting advisory director of K N, and agreed that for so long as Cabot continued to own beneficially at least 10% of K N's voting Securities, Cabot would have the right to designate one such advisory director. In addition, it was agreed that if Cabot's beneficial ownership in K N was reduced below 10% but continued over 5%, then the Board of Directors of K N would appoint Cabot's advisory director as a full director with voting rights, and Cabot will be entitled to have one designee for election to the Board of Directors of K N. In April 1996, R. Gordon Shearer replaced John G. L. Cabot as Cabot's advisory director, and in August 1996, when Cabot's beneficial ownership of K N voting stock fell below 10%, Mr. Shearer was elected a director of K N. Mr. Shearer resigned as a director in December 1997. The following table sets forth the number of shares of Common Stock owned by the Selling Stockholder, the number of such shares being offered for sale by it, the number of such shares to be owned by the Selling Stockholder after such sale and the percentage of ownership of the outstanding shares of Common Stock as of December 31, 1997 represented by the holdings of the Selling Stockholder after such sale:
PERCENT OF SHARES TO CLASS TO BE SHARES SHARES BE OWNED OWNED OWNED BEING SOLD AFTER SALE AFTER SALE - --------- ---------- ----------- ----------- 2,990,186 792,232 2,197,954 6.9%
The Prospectus Supplement relating to any Securities being offered by the Selling Stockholder sets forth the number of shares of Common Stock being offered for its account as well as the number of such shares and the percentage of the outstanding Common Stock to be owned by the Selling Stockholder after completion of the offering. The Company will bear all of the expenses allocable to any Securities sold for the Selling Stockholder's account, excluding any selling discounts or commissions allocable to such Securities, fees and disbursements of counsel for the Selling Stockholder and any stock transfer taxes payable by reason of any such sale. This Prospectus is not the exclusive means for resale of any Common Stock of the Selling Stockholder registered hereunder. For example, the Selling Stockholder may also sell Common Stock owned by it pursuant to Rule 144 under the Securities Act. There can be no assurance that the Selling Stockholder will sell any or all of its Common Stock offered hereunder. 8 48 PLAN OF DISTRIBUTION GENERAL The Selling Stockholder may sell Common Stock to or through underwriters or dealers, and also may sell Common Stock directly to other purchasers or through agents. The distribution of the Common Stock may be effected from time to time in one or more transactions at a fixed price or prices, which may be changed, or at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. If so indicated in the Prospectus Supplement, the Selling Stockholder may sell Common Stock on the NYSE or in the over-the-counter market, by methods that include block trades, exchange or secondary distributions in accordance with NYSE rules and ordinary brokerage transactions. In connection with the sale of Common Stock, underwriters may receive compensation from the Selling Stockholder or purchasers of Common Stock for whom they may act as agents in the form of discounts, concessions or commissions. Underwriters, dealers and agents that participate in the distribution of Common Stock may be deemed to be underwriters, and any discounts or commissions received by them from the Selling Stockholder and any profit on the resale of Common Stock by them may be deemed to be underwriting discounts and commissions under the Securities Act. Any such person who may be deemed to be an underwriter will be identified, and any such compensation received from the Selling Stockholder, as the case may be, will be described, in the Prospectus Supplement. Under agreements which may be entered into by the Company or the Selling Stockholder, underwriters, dealers and agents who participate in the distribution of Common Stock may be entitled to indemnification by the Company or the Selling Stockholder, as the case may be, against or contribution toward certain liabilities, including liabilities under the Securities Act. LEGAL MATTERS The validity of the Common Stock will be passed upon for the Company by Simpson Thacher & Bartlett (a partnership which includes professional corporations), who may rely on the opinion of Polsinelli, White, Vardeman & Shalton, Kansas City, Missouri, as to matters of Kansas law, and will be passed upon for any agents, dealers or underwriters by counsel named in the applicable Prospectus Supplement. Certain legal matters will be passed upon for the Selling Stockholder by counsel named in the applicable Prospectus Supplement. EXPERTS The consolidated financial statements of K N Energy, Inc. and subsidiaries as of December 31, 1996 and 1995, and for each of the three years in the period ended December 31, 1996, incorporated in this Prospectus and elsewhere in the Registration Statement by reference to its Annual Report on Form 10-K for the year ended December 31, 1996, as amended, have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in accounting and auditing in giving said report. The consolidated financial statements of MidCon Corp. and subsidiaries as of December 31, 1996 and 1995, and for each of the three years in the period ended December 31, 1996, incorporated in this Prospectus and elsewhere in the Registration Statement by reference to the Current Report on Form 8-K filed with the Commission on January 16, 1998, have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in accounting and auditing in giving said report. 9 49 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth all expenses payable by the Company in connection with the issuance and distribution of the Securities, other than underwriting discounts and commissions. The Company will bear all of such expenses. All the amounts shown are estimates, except the registration fee. Registration Fee................................................................. $1,032,500 Fees and expenses of accountants................................................. * Fees and expenses of counsel to the Company...................................... * Fees and expenses of Trustees and counsel........................................ * Printing and engraving........................................................... * Blue Sky fees and expenses (including counsel)................................... * Rating agency fees............................................................... * Miscellaneous.................................................................... * Total....................................................................... $ *
- --------------- * To be completed by amendment. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 17-6305 of the Kansas General Corporation Law provides that a Kansas corporation shall have power to indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action or suit (including an action by or in the right of the corporation to procure a judgment in its favor) or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit by or in the right of the corporation, including attorney fees, and against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, including attorney fees, if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation; and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person's conduct was unlawful. Article Ninth of the articles of incorporation of the Company requires the Company to provide substantially the same indemnification of its directors and officers as that authorized by the Kansas General Corporation Law. The Company has insurance policies which, among other things, include liability insurance coverage for directors and officers, with a $200,000 corporate reimbursement deductible clause, under which directors and officers are covered against "loss" arising from any claim or claims which may be made against a director or officer by reason of any "wrongful act" in their respective capacities as directors and officers. "Loss" is defined so as to exclude, among other things, fines or penalties, as well as matters deemed uninsurable under the law pursuant to which the policy is to be construed. "Wrongful act" is defined to include any actual or alleged breach of duty, neglect, error, misstatement, misleading statement or omission done or wrongfully attempted. The policy also contains other specific definitions and exclusions and provides an aggregate of $20,000,000 of insurance coverage. II-1 50 ITEM 16. EXHIBITS. The following documents are filed as exhibits to this Registration Statement, including those exhibits incorporated herein by reference to a prior filing of the Company under the Securities Act or the Exchange Act as indicated in parentheses:
EXHIBIT NUMBER EXHIBITS - ------------ --------------------------------------------------------------------------- (1.1) -- Form of Purchase Agreement (including form of Delayed Delivery Contract) relating to Debt Securities (incorporated herein by reference to Exhibit 1.1 to the Company's Current Report on Form 8-K filed with the Commission on October 27, 1997). *(1.2) -- Form of Underwriting Agreement relating to Common Stock. ***(2.1) -- Stock Purchase Agreement, dated December 18, 1997, between the Company and Occidental Petroleum, Corp. (4.1) -- Form of Indenture, dated as of November 20, 1993, between K N Energy, Inc. and First Trust National Association, as successor Trustee to Continental Bank, National Association (incorporated by reference to Exhibit 4.1 to the Company's S-3 Registration Statement No. 33-51115). (4.2) -- Form of Subordinated Indenture dated as of May 15, 1996 between the Company and First Trust National Association f/k/a First Trust of Illinois, National Association, as Trustee (incorporated by reference to Exhibit 4.2 to the Company's S-3 Registration Statement No. 333-04385). **(4.3) -- Forms of Debt Securities. (4.4) -- Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3(a) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). (4.5) -- By-Laws of the Company, as amended to August 20, 1996 (incorporated by reference to Exhibit 3(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 1996). (4.6) -- Rights Agreement dated as of August 21, 1995 between the Company and The Bank of New York, as Rights Agent (incorporated by reference to Exhibit 1 to the Company's Form 8-A Registration Statement dated August 21, 1995). ****(4.7) -- Certificate of Trust of K N Capital Trust III. ****(4.8) -- Declaration of Trust of K N Capital Trust III. ****(4.9) -- Form of Amended and Restated Declaration of Trust of K N Capital Trust III. ****(4.10) -- Form of Trust Preferred Security Certificate for K N Capital Trust III. ****(4.11) -- Form of Indenture between K N Energy, Inc. and Wilmington Trust Company, as Trustee. ****(4.12) -- Form of Trust Debentures of K N Energy, Inc. ****(4.13) -- Form of Guarantee in respect of K N Capital Trust III, with respect to the Preferred Securities. ****(5.1) -- Opinion of Simpson Thacher & Bartlett, as to the legality of the Trust Debentures, Guarantee, Debt Securities, Stock Purchase Units and Stock Purchase Contracts being registered. ****(5.2) -- Opinion of Richards, Layton & Finger P.A., as to the validity of the Preferred Securities. ****(5.3) -- Opinion of Polsinelli, White, Vardeman & Shalton, as to the validity of the Common Stock. (12) -- Computation of ratios of earnings to fixed charges (incorporated by reference to Exhibit 12 to the Company's Form S-3 Registration Statement No. 333-40869). ***(23.1) -- Consent of Independent Public Accountants. ***(23.2) -- Consent of Independent Public Accountants. ****(23.3) -- Consent of Simpson Thacher & Bartlett (included in Exhibit (5.1)). ****(23.4) -- Consent of Richards, Layton & Finger P.A. (included in Exhibit (5.2)). ****(23.5) -- Consent of Posinelli, White, Vardeman & Shalton (included in Exhibit (5.3)).
II-2 51
EXHIBIT NUMBER EXHIBITS - ------------ --------------------------------------------------------------------------- ***(24) -- Powers of Attorney. ****(25.1) -- Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 on Form T-1 of First Trust National Association respecting the Senior Debt Securities. ****(25.2) -- Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 on Form T-1 of First Trust National Association respecting the Subordinated Debt Securities. ****25.3 -- Form T-1 Statement of Eligibility of Wilmington Trust Company, as Debenture Trustee under the Debenture Indenture for K N Capital Trust III. ****25.4 -- Form T-1 Statement of Eligibility of Wilmington Trust Company, as Institutional Trustee under the Declaration. ****25.5 -- Form T-1 Statement of Eligibility of Wilmington Trust Company, as Guarantee Trustee under the Guarantee for K N Capital Trust III.
- --------------- * The Company will file any underwriting agreement relating to Common Stock that it may enter into as an exhibit to a Current Report on Form 8-K which is incorporated by reference into this Registration Statement. ** The Company will file any form of Debt Securities not previously so filed as an exhibit to a Current Report on Form 8-K which is incorporated by reference into this Registration Statement. *** Filed herewith. **** To be filed by amendment. ITEM 17. UNDERTAKINGS. (a) The Company 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; (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 a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (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; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the registration statement is on Form S-3, Form S-8 or Form F-3, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the Company pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered II-3 52 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 which remain unsold at the termination of the offering. (4) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (5) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus 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. (b) The Company hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the Company's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act 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. (c) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to any charter provision, by-law, contract, arrangement, statute, or otherwise, the Company has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer or controlling person of the Company in the successful defense of any action, suit or proceeding) is asserted against the Company by such director, officer or controlling person in connection with the securities being registered, the Company will, unless in the opinion of counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. II-4 53 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, K N Energy, Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Lakewood, State of Colorado on the 13th day of January, 1998. K N ENERGY, INC. By: /s/ LARRY D. HALL ------------------------------------ Chairman of the Board, President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on January 13, 1998.
SIGNATURE TITLE - ----------------------------------------------- -------------------------------------------- i) Principal executive officer: /s/ LARRY D. HALL Chairman of the Board, President and Chief - ----------------------------------------------- Executive Officer (Larry D. Hall) ii) Principal financial and accounting officer: * Vice President and Chief Financial Officer - ----------------------------------------------- (Clyde E. McKenzie) iii) Directors: * - ----------------------------------------------- (Edward H. Austin, Jr.) * - ----------------------------------------------- (Charles W. Battey) * - ----------------------------------------------- (Stewart A. Bliss) * - ----------------------------------------------- (David W. Burkholder) * - ----------------------------------------------- (David M. Carmichael) * - ----------------------------------------------- (Robert H. Chitwood) * - ----------------------------------------------- (Howard P. Coghlan) * - ----------------------------------------------- (Jordan L. Haines)
II-5 54
SIGNATURE TITLE - ----------------------------------------------- -------------------------------------------- * - ----------------------------------------------- (Larry D. Hall) * - ----------------------------------------------- (William J. Hybl) * - ----------------------------------------------- (Edward Randall, III) * - ----------------------------------------------- (James C. Taylor) * - ----------------------------------------------- (H. A. True, III) *By: /s/ LARRY D. HALL - ----------------------------------------------- (Larry D. Hall, Attorney-in-Fact)
II-6 55 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, K N Capital Trust III certifies that it has reasonable grounds to believe that it meets all the requirements for filing on Form S-3 and has duly caused this Registration Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Lakewood, State of Colorado, on the 16th day of January, 1998. K N CAPITAL TRUST III By: K N ENERGY, INC., as Depositor By: /s/ CLYDE E. MCKENZIE ------------------------------------ Clyde E. McKenzie Vice President and Chief Financial Officer II-7 56 INDEX TO EXHIBITS
EXHIBIT NUMBER EXHIBITS - ----------- ------------------------------------------------------------------------------ (1.1) -- Form of Purchase Agreement (including form of Delayed Delivery Contract) relating to Debt Securities (incorporated herein by reference to Exhibit 1.1 to the Company's Current Report on Form 8-K filed with the Commission on October 27, 1997). *(1.2) -- Form of Underwriting Agreement relating to Common Stock. ***(2.1) -- Stock Purchase Agreement, dated December 18, 1997 between K N Energy, Inc. and Occidental Petroleum, Corp. (4.1) -- Form of Indenture, dated as of November 20, 1993, between K N Energy, Inc. and First Trust National Association, as successor Trustee to Continental Bank, National Association (incorporated by reference to Exhibit 4.1 to the Company's S-3 Registration Statement No. 33-51115). (4.2) -- Form of Subordinated Indenture dated as of May 15, 1996 between the Company and First Trust National Association f/k/a First Trust of Illinois, National Association, as Trustee (incorporated by reference to Exhibit 4.2 to the Company's S-3 Registration Statement No. 333-04385). **(4.3) -- Forms of Debt Securities. (4.4) -- Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3(a) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). (4.5) -- By-Laws of the Company, as amended to August 20, 1996 (incorporated by reference to Exhibit 3(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 1996). (4.6) -- Rights Agreement dated as of August 21, 1995 between the Company and The Bank of New York, as Rights Agent (incorporated by reference to Exhibit 1 to the Company's Form 8-A Registration Statement dated August 21, 1995). ****(4.9) -- Certificate of Trust of K N Capital Trust III. ****(4.10) -- Declaration of Trust of K N Capital Trust III. ****(4.11) -- Form of Amended and Restated Declaration of Trust of K N Capital Trust III. ****(4.12) -- Form of Preferred Security Certificate for K N Capital Trust III. ****(4.13) -- Form of Indenture between K N Energy, Inc., as Trustee. ****(4.14) -- Form of Debenture of K N Energy, Inc. ****(4.15) -- Form of Guarantee Agreement. ****(5.1) -- Opinion of Simpson Thacher & Bartlett as to the legality of the Guarantee, Debt Securities, Trust Debentures, Stock Purchase Units, and Stock Purchase Contracts being registered. ****(5.2) -- Opinion of Richards, Layton & Finger P.A., as to the validity of the Preferred Securities. ****(5.3) -- Opinion of Posinelli, White, Vardeman & Shalton, as to the validity of the Common Stock. (12) -- Computation of ratios of earnings to fixed charges (incorporated by reference to Exhibit K to the Company's Form S-3 Registration Statement No. 333-40869). ***(23.1) -- Consent of Independent Public Accountants. ***(23.2) -- Consent of Independant Public Accountants. ****(23.3) -- Consent of Simpson Thacher & Bartlett (included in Exhibit (5.1)). ****(23.4) -- Consent of Richards, Layton & Finger P.A. (included in Exhibit (5.2)). ****(23.5) -- Consent of Posinelli, White, Vardeman & Shalton (included in Exhibit (5.3)). ***(24) -- Powers of Attorney. ****(25.1) -- Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 on Form T-1 of First Trust National Association respecting the Senior Debt Securities.
57
EXHIBIT NUMBER EXHIBITS - ----------- ------------------------------------------------------------------------------ ****(25.2) -- Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 on Form T-1 of First Trust National Association respecting the Subordinated Debt Securities. ****25.3 -- Form T-1 Statement of Eligibility of Wilmington Trust Company, as Debenture Trustee under the Debenture Indenture. ****25.4 -- Form T-1 Statement of Eligibility of Wilmington Trust Company, as Institutional Trustee under the Declaration. ****25.5 -- Form T-1 Statement of Eligibility of Wilmington Trust Company, as Guaranteed Trustee under the Guarantee for K N Capital Trust III.
- --------------- * The Company will file any underwriting agreement relating to Common Stock that it may enter into as an exhibit to a Current Report on Form 8-K which is incorporated by reference into this Registration Statement. ** The Company will file any form of Debt Securities not previously so filed as an exhibit to a Current Report on Form 8-K which is incorporated by reference into this Registration Statement. *** Filed herewith. **** To be filed by amendment. EX-2.1 2 STOCK PURCHASE AGREEMENT 1 STOCK PURCHASE AGREEMENT DATED DECEMBER 18, 1997 BY AND BETWEEN OCCIDENTAL PETROLEUM CORPORATION, AS SELLER AND KN ENERGY, INC. AS BUYER 2 TABLE OF CONTENTS ARTICLE I PURCHASE AND SALE OF SHARES.................................. 2 1.1 Sale and Purchase of Shares.................................. 2 1.2 Purchase Price............................................... 2 ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLER................. 2 2.1 Organization and Qualification............................... 2 2.2 Authority.................................................... 3 2.3 Noncontravention............................................. 3 2.4 MidCon's Capitalization...................................... 5 2.5 Utility Status............................................... 5 2.6 Waiver by the MidCon ESOP Trust.............................. 5 2.7 Finders and Brokers.......................................... 6 2.8 Investment Purpose........................................... 6 2.9 MidCon Significant Subsidiaries.............................. 6 2.10 Financial Statements......................................... 7 2.11 Seller's SEC Reports......................................... 8 2.12 Absence of Certain Changes or Events......................... 8 2.13 Litigation................................................... 8 2.14 Compliance with Law.......................................... 9 2.15 Employees and Employee Benefit Matters....................... 9 2.16 Contracts.................................................... 9 2.17 No Undisclosed Liabilities................................... 11 2.18 Tax Matters.................................................. 11 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE BUYER.................. 12 3.1 Organization and Qualification............................... 12 3.2 Authority.................................................... 12 3.3 Noncontravention............................................. 13 3.4 Utility Status............................................... 14 3.5 Finders and Brokers.......................................... 14 3.6 Investment Purpose........................................... 15 ARTICLE IV THE CLOSING.................................................. 15 4.1 Time and Place of the Closing................................ 15 4.2 Conditions Precedent to the Obligations of the Buyer......... 15 4.3 Conditions Precedent to the Obligation of the Seller......... 18 4.4 Conditions of Both Parties................................... 19 i 3 ARTICLE V COVENANTS.................................................... 20 5.1 Covenants by the Seller...................................... 20 5.2 Covenants by the Buyer....................................... 27 5.3 Covenants of Both Parties.................................... 35 ARTICLE VI TAXES........................................................ 43 6.1 Section 338(h)(10) Election.................................. 43 6.2 Tax Sharing Agreement........................................ 43 6.3 Federal Income Tax Returns and Combined State Income Tax Returns for Periods Through the Closing Date................. 43 6.4 No Adjustment of MidCon Tax Liability for the Taxable Year Ending December 31, 1997..................................... 44 6.5 Liability of MidCon and its Subsidiaries for Federal and Combined State Income Tax.................................... 45 6.6 Separate State, Local, Foreign Income Tax Returns............ 45 6.7 Sales and Property Taxes..................................... 46 6.8 State Franchise Taxes........................................ 46 6.9 Adjustment Upon Leaving Consolidation........................ 47 6.10 Sales and Transfer Taxes with Respect to this Transaction.... 47 6.11 Cooperation.................................................. 47 6.12 Tax Proceedings.............................................. 48 6.13 Carrybacks................................................... 48 6.14 Prior Year Tax Returns....................................... 49 6.15 Retention of Carryovers...................................... 49 6.16 Indemnification for Post-Closing Transactions................ 49 ARTICLE VII TERMINATION.................................................. 50 7.1 Termination.................................................. 50 7.2 Effects of Termination....................................... 50 ARTICLE VIII SURVIVAL & INDEMNITY......................................... 51 8.1 Survival of Representations and Warranties; Limitations on Liability.................................................... 51 8.2 Indemnification by the Buyer................................. 52 8.3 Indemnification by the Seller................................ 53 8.4 Interpretation............................................... 55 8.5 Exclusive Remedy............................................. 58 ARTICLE IX DEFINITIONS.................................................. 58 9.1 Affiliate.................................................... 58 9.2 Affiliated Group............................................. 59 9.3 Agreement.................................................... 59 ii 4 9.4 B Facility Loan.............................................. 59 9.5 Business..................................................... 59 9.6 Business Day................................................. 59 9.7 Buyer........................................................ 59 9.8 Buyer Benefit Plans.......................................... 59 9.9 Buyer Indemnitees............................................ 59 9.10 Buyer's Pipeline Lease Guaranty.............................. 59 9.11 C Facility Loan.............................................. 59 9.12 Cash Management Agreement.................................... 60 9.13 Certificate of Designations.................................. 60 9.14 Claim Notice................................................. 60 9.15 Closing...................................................... 60 9.16 Closing Date................................................. 60 9.17 CMIC Preferred Stock......................................... 60 9.18 Code......................................................... 60 9.19 Commitments.................................................. 60 9.20 Common Stock................................................. 60 9.21 Consents..................................................... 60 9.22 Control...................................................... 60 9.23 Current Assets............................................... 61 9.24 Current Liabilities.......................................... 61 9.25 Damages...................................................... 61 9.26 Dividend Note................................................ 61 9.27 Employee Plans and Agreements................................ 61 9.28 Employees.................................................... 62 9.29 Employee Welfare Benefit Plan................................ 62 9.30 Encumbrance.................................................. 62 9.31 ERISA........................................................ 62 9.32 ESOP Note.................................................... 62 9.33 Facilities................................................... 62 9.34 FERC......................................................... 62 9.35 Financial Statements......................................... 62 9.36 Former Salaried Employees.................................... 63 9.37 Former Union Employees....................................... 63 9.38 GAAP......................................................... 63 9.39 Governmental Entity.......................................... 63 9.40 Government Securities........................................ 63 9.41 HSR Act...................................................... 63 9.42 Indemnified Person........................................... 64 9.43 Insurance Novation Agreement................................. 64 9.44 Insurance Release Agreement.................................. 64 9.45 Intercompany Agreements...................................... 64 9.46 Knowledge.................................................... 64 9.47 LIBO Business Day............................................ 64 9.48 LIBO Rate.................................................... 64 iii 5 9.49 Material Adverse Effect...................................... 65 9.50 MidCon....................................................... 65 9.51 MidCon ESOP.................................................. 65 9.52 MidCon ESOP Agreements....................................... 65 9.53 MidCon ESOP Trustee.......................................... 66 9.54 MidCon Indemnitees........................................... 66 9.55 MidCon Loans................................................. 66 9.56 MidCon Restructuring Agreements.............................. 66 9.57 1997 Financial Statements.................................... 66 9.58 Notified Party............................................... 66 9.59 Notifying Party.............................................. 66 9.60 OPC Loans.................................................... 66 9.61 Originator Receivables Sale Agreement........................ 66 9.62 Party........................................................ 67 9.63 Person....................................................... 67 9.64 Pipeline Lease............................................... 67 9.65 Pipeline Lease Guaranty...................................... 67 9.66 Pipeline Lessee.............................................. 67 9.67 Pipeline Lessor.............................................. 67 9.68 PUHCA........................................................ 67 9.69 Purchase Price............................................... 67 9.70 Reference Rate............................................... 68 9.71 Related Agreements........................................... 68 9.72 Salaried Employees........................................... 68 9.73 SEC.......................................................... 68 9.74 SEC Reports.................................................. 68 9.75 Securities Act............................................... 68 9.76 Securities Exchange Act...................................... 68 9.77 Seller....................................................... 68 9.78 Seller Indemnitees........................................... 69 9.79 Services Agreement........................................... 69 9.80 Shares....................................................... 69 9.81 Significant Subsidiary....................................... 69 9.82 Subsidiary................................................... 69 9.83 Substitute Note.............................................. 69 9.84 Tax.......................................................... 70 9.85 Tax Return................................................... 70 9.86 Tax Sharing Agreement........................................ 70 9.87 Term Loan Agreement.......................................... 70 9.88 Term Loan Assignment Agreement............................... 71 9.89 Termination Allowance Plan................................... 71 9.90 Termination Date............................................. 71 9.91 Union........................................................ 71 9.92 Union Contract............................................... 71 9.93 Union Employees.............................................. 71 iv 6 ARTICLE X MISCELLANEOUS................................................ 72 10.1 Further Assurances........................................... 72 10.2 Preservation of Books and Records............................ 72 10.3 Confidentiality.............................................. 73 10.4 Notices...................................................... 73 10.5 Public Announcements......................................... 74 10.6 Successors and Assigns....................................... 74 10.7 Expenses..................................................... 75 10.8 Severability................................................. 75 10.9 Construction; Interpretation................................. 76 10.10 Entire Agreement; Third Party Beneficiaries.................. 77 10.11 Amendment and Modification................................... 77 10.12 Governing Law................................................ 77 10.13 Waiver of Jury Trial......................................... 77 10.14 Consent to Jurisdiction and Forum Selection.................. 78 10.15 Counterparts................................................. 78 SCHEDULES AND EXHIBITS NUMBER TITLE - -------------------------------------------------------------------------------- Schedule 2.3 Non-Contravention of the Seller and MidCon and Encumbrances on the Shares Schedule 2.9 MidCon Significant Subsidiaries (i) Name And Jurisdiction Of Organization (ii) Number Of Shares Of Authorized Capital Stock (iii) Number Of Issued And Outstanding Shares (iv) Name Of Holders Of Shares Of Each Class (v) Number Of Shares Held In Treasury Schedule 2.10 Financial Statements of MidCon Schedule 2.12 Absence of Certain Changes or Events to MidCon Schedule 2.13 Litigation of MidCon Schedule 2.14 Compliance with Law by MidCon Schedule 2.16 Contracts of MidCon 2.16.1 Agreements related to Indebtedness for Borrowed Money in excess of $10,000,000 v 7 2.16.2 Agreements relating to Future Acquisitions or Dispositions in Excess of $10,000,000 2.16.3 Affiliate Contracts 2.16.4 Contracts Relating to Ownership of Joint Ventures, Etc. 2.16.5 Any Contract Involving Payments to or from in Excess of $50,000,000 Schedule 2.17 Undisclosed Liabilities Schedule 2.18 Tax Matters Schedule 3.3 Non-Contravention of the Buyer Schedule 5.1.1 Exceptions to the Seller's Operations Covenant Schedule 5.2.3 Seller Employee Obligations Schedule 5.2.5 Commitments of MidCon Exhibit 4.2.3 Opinion of Counsel to the Seller Exhibit 4.3.4 Opinion of Counsel to the Buyer Exhibit 5.1.5(a) Insurance Release Agreement Exhibit 5.1.5(b) Insurance Novation Agreement Exhibit 9.83 Form of Substitute Promissory Note Exhibit 9.88 Form of Term Loan Assignment Agreement vi 8 STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT, dated as of December 18, 1997, by and between Occidental Petroleum Corporation, a Delaware corporation (the "Seller"), and KN Energy, Inc., a Kansas corporation (the "Buyer"). Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed thereto in Article IX of this Agreement. WITNESSETH: WHEREAS, the Seller owns all of the issued and outstanding Common Stock of MidCon; and WHEREAS, the Seller desires to sell and the Buyer desires to purchase the Shares upon the terms and subject to the conditions set forth in this Agreement; and WHEREAS, the Boards of Directors of the Seller and the Buyer have approved the acquisition of MidCon by the Buyer; and NOW, THEREFORE, in consideration of, and subject to, the mutual covenants, agreements, terms and conditions herein contained, the Parties agree as follows: 1 9 ARTICLE I PURCHASE AND SALE OF SHARES 1.1 Sale and Purchase of Shares. Subject to and upon the terms and conditions set forth in this Agreement, including the Buyer's delivery of the Substitute Note, at the Closing, the Seller shall sell, assign, transfer and convey to the Buyer, and the Buyer shall purchase and acquire from the Seller, all of the Shares. 1.2 Purchase Price. The purchase price for the Shares (the "Purchase Price") shall be $2,103,974,390 to be paid by the Buyer to the Seller at the Closing by wire transfer of immediately available funds to the bank account of the Seller which shall be designated by the Seller to the Buyer in writing not later than three (3) Business Days prior to the Closing Date. ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLER The Seller hereby represents and warrants to the Buyer as follows: 2.1 Organization and Qualification. 2.1.1 The Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. 2.1.2 MidCon is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. MidCon has all requisite corporate power to own, use or lease its properties and to carry on its business as it is now being conducted. 2 10 MidCon is duly qualified as a foreign corporation to do business, and is in good standing, in each jurisdiction where both (a) the character of its properties owned or held under lease or the nature of its activities makes such qualification necessary and (b) the failure to qualify would have a Material Adverse Effect on MidCon and its Subsidiaries, taken as a whole. The Seller has delivered to the Buyer a complete and correct copy of the Certificate of Incorporation and By-laws of MidCon, each as in effect on the date hereof. 2.2 Authority. The Seller has full corporate power to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby on the part of the Seller have been duly and validly authorized by the Seller's Board of Directors, and no other corporate proceedings on the part of the Seller are necessary, as a matter of law or otherwise, for the consummation of the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Seller and is a valid and binding agreement of the Seller, enforceable against it in accordance with its terms. 2.3 Noncontravention. Except as provided on Schedule 2.3, the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the performance by the Seller of its obligations hereunder will not: (a) conflict with or result in any breach of any provision of the Certificate of Incorporation or By-laws of the Seller, MidCon or any Significant Subsidiary; 3 11 (b) require any consent, approval, order, authorization or permit of, or registration, filing with or notification to, any Governmental Entity or any private third party, except for filings, consents, approvals, orders, authorizations or permits which (i) are required under the HSR Act; (ii) are required by the FERC; (iii) are required by the Texas Railroad Commission; (iv) are required by the Kansas Corporation Commission; (v) will not result in a Material Adverse Effect on MidCon and its Subsidiaries, taken as a whole; or (vi) will not prevent the consummation of the transactions contemplated hereby, if not made or acquired; (c) result in any violation or breach of, or constitute a default under (or give rise to any right of termination, cancellation or acceleration or guaranteed payments under or to a loss of a material benefit or result in the creation or imposition of a lien under), any of the terms, conditions or provisions of any note, lease, mortgage, indenture, license, agreement or other instrument or obligation to which the Seller is a party or by which the properties or assets of the Seller may be bound, or, to the Seller's Knowledge, to which MidCon or any of its Significant Subsidiaries is a party or by which the properties or assets of MidCon or its Significant Subsidiaries may be bound, except for such violations, breaches, defaults, or rights of termination, cancellation or acceleration, or losses which would not result in a Material Adverse Effect on MidCon and its Subsidiaries, taken as a whole; (d) violate the provisions of any order, writ, injunction, judgment, decree, statute, rule or regulation applicable to the Seller, or to the Seller's Knowledge, to MidCon or any of its Significant Subsidiaries, that would result in a Material Adverse Effect on MidCon and its Subsidiaries, taken as a whole; or 4 12 (e) result in the creation of any Encumbrance upon the Shares under any agreement or instrument to which the Seller is a party or by which the Seller is bound, or, to Seller's Knowledge, upon any of the properties or assets of MidCon or any of its Significant Subsidiaries under any agreement or instrument to which MidCon or its Significant Subsidiaries is a party or by which MidCon or its Significant Subsidiaries is bound. 2.4 MidCon's Capitalization. MidCon has an authorized capitalization consisting solely of 1,400,000 shares of common stock, par value $.01 per share ("Common Stock"). There are 1,400,000 shares of Common Stock issued and outstanding, all of which are owned, beneficially and of record, by the Seller (the "Shares") free and clear of all Encumbrances except as set forth on Schedule 2.3. The Shares have been validly issued, are fully paid and nonassessable. No agreement or other document grants or imposes on any Shares any right, preference, privilege or restriction with respect to the transaction contemplated hereby (including, without limitation, any right of first refusal). 2.5 Utility Status. Neither the Seller, MidCon nor any of its Significant Subsidiaries is a "Holding Company" or a "Public Utility Company" or a "Gas Utility Company" as those terms are defined in the PUHCA. 2.6 Waiver by the MidCon ESOP Trust. The Seller has obtained a written waiver by the MidCon ESOP Trust of all its rights to exchange the CMIC Preferred Stock for, or to cause a third party to acquire, the Shares pursuant to the MidCon ESOP Agreements. 5 13 2.7 Finders and Brokers. No broker, finder or investment banker is entitled to any brokerage, finder's or other similar fee or commission in connection with the transactions contemplated by this Agreement as a result of arrangements made by or on behalf of the Seller or MidCon other than (a) Merrill Lynch & Co. and Credit Suisse First Boston Corporation, the fees of whom will be paid by the Seller and (b) the agreements with the MidCon ESOP Trustee and its advisors, which fees and expenses will be paid by MidCon. 2.8 Investment Purpose. The Seller is acquiring the Substitute Note for its own account and not with a view to any sale or distribution thereof in violation of any securities laws. The Seller has no present intention of selling, distributing or otherwise disposing of any portion of the Substitute Note in violation of any such laws. The Seller acknowledges that the Substitute Note has not been registered or qualified under the Securities Act or any state securities laws and may not be sold, assigned, pledged or otherwise disposed of in the absence of such registration unless an exemption from such registration is available. 2.9 MidCon Significant Subsidiaries. Schedule 2.9 sets forth for each Significant Subsidiary (i) its name and jurisdiction of organization, (ii) the number of shares of authorized capital stock of each class of its capital stock, (iii) the number of issued and outstanding shares of each class of its capital stock, (iv) the names of the holders of shares of each class of stock and the number of shares held by such holder, and (v) the number of shares of its capital stock held in treasury. Each of the Significant Subsidiaries is a corporation, validly existing and in good standing under the laws of its jurisdiction of incorporation, is qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which the character of such 6 14 Subsidiary's properties or the nature of its business makes such qualification necessary, except in jurisdictions, if any, where the failure to be so qualified would not result in a Material Adverse Effect on MidCon and its Subsidiaries, taken as a whole. Each of the Significant Subsidiaries has the requisite corporate power to own, use or lease its properties and to carry on its business as it is now being conducted. All the issued and outstanding shares of capital stock of each Significant Subsidiary have been duly authorized and are validly issued, fully paid and nonassessable; and except as set forth on Schedule 2.9, there are no outstanding or authorized rights of any Person that could require any Significant Subsidiary to issue, sell or otherwise cause to become outstanding any of its capital stock. 2.10 Financial Statements. Schedule 2.10 sets forth the audited consolidated financial statements of MidCon and its consolidated Subsidiaries (including any related notes and schedules) for each of the three years ended December 31, 1994, 1995 and 1996 and for the ten months ended October 31, 1997 (collectively, the "Financial Statements"). The Financial Statements have been prepared in accordance with GAAP applied on a consistent basis and present fairly in all material respects the consolidated financial position of MidCon and its consolidated Subsidiaries as of the date thereof, and the consolidated results of operations and cash flows of MidCon and its consolidated Subsidiaries for the periods presented therein (except as may be indicated in the notes thereto and subject, in the case of financial statements for the ten-month period ended October 31, 1997, to normal and recurring year-end adjustments and the absence of amounts for the comparable period in 1996). 7 15 2.11 Seller's SEC Reports. The Seller files reports, statements and schedules with the SEC pursuant to the Securities Exchange Act (collectively, the "SEC Reports"). None of the SEC Reports, to the extent they refer to MidCon and its Subsidiaries, contain, as of their respective dates, any untrue statement of a material fact, or omit, as of their respective dates, to state a fact required to be stated therein or necessary in order to make the statements made therein, in each case, as it relates to MidCon and its Subsidiaries, in light of the circumstances under which they were made, not misleading. 2.12 Absence of Certain Changes or Events. Except as contemplated by this Agreement, or as disclosed in the Financial Statements or Schedule 2.12, to the Seller's Knowledge, since October 31, 1997, (a) MidCon and its Significant Subsidiaries have conducted their respective businesses only in the ordinary course, consistent with past practice during the immediately preceding twelve month period, and (b) as of the date hereof there has not occurred or arisen any event that has had or, insofar as reasonably can be foreseen, is likely in the future to have, a Material Adverse Effect on MidCon and its Subsidiaries, taken as a whole, other than events or developments generally affecting the industry in which MidCon and its Subsidiaries operate. 2.13 Litigation. Except as recorded or disclosed in the Financial Statements or Schedule 2.13, to the Seller's Knowledge, as of the date hereof, no actions, suits, arbitration proceedings or governmental proceedings are pending or threatened against MidCon or any of its Significant Subsidiaries which would have a Material Adverse Effect on MidCon and its Subsidiaries, taken as a whole. 8 16 2.14 Compliance with Law. Except as recorded or disclosed in the Financial Statements or Schedule 2.14, to the Seller's Knowledge, neither MidCon nor any of its Significant Subsidiaries is in violation of any federal, state, local or foreign law, ordinance, regulation, judgment, order or decree, the violation of which would have a Material Adverse Effect on MidCon and its Subsidiaries, taken as a whole. 2.15 Employees and Employee Benefit Matters. To the Seller's Knowledge, (i) each "employee benefit plan", as defined in Section 3(3) of ERISA, maintained by MidCon or its Significant Subsidiaries complies in all material respects with all applicable requirements of ERISA and of the Code, and other applicable laws; and (ii) neither MidCon nor any of its Significant Subsidiaries, nor any of their respective directors, officers, employees or agents has, with respect to any employee benefit plan maintained by MidCon or its Significant Subsidiaries, engaged in any "prohibited transaction," as such term is defined in Section 4975 of the Code or Section 406 of ERISA, which would result in any taxes or penalties on prohibited transactions under Section 4975 of the Code or under Section 502(i) of ERISA, which would have a Material Adverse Effect on MidCon and its Subsidiaries, taken as a whole. 2.16 Contracts. Schedule 2.16 sets forth a true and complete list of each of the following contracts that are currently in effect and to which MidCon or any of its Significant Subsidiaries is a party, or by which any of their assets or properties is bound: 2.16.1 each contract which provides for (i) the borrowing of money by MidCon or any of the Significant Subsidiaries or (ii) the direct or indirect guarantee by MidCon or any 9 17 of the Significant Subsidiaries of any obligation of any other Person for borrowed money that, in either case, exceeds $10,000,000. 2.16.2 each contract which provides for the future disposition or acquisition by MidCon or any of the Significant Subsidiaries of any assets or properties of any Person or of any interest in any business enterprise (other than the disposition or acquisition of investments in the ordinary course of business and consistent with past practice) that involves consideration in excess of $10,000,000. 2.16.3 each contract to which the Seller or any Affiliate of the Seller (other than MidCon and its Subsidiaries) is a party (including those relating to allocations of expenses, personnel, services, or facilities); 2.16.4 each contract to which MidCon or any of the Significant Subsidiaries is a party relating to its ownership in a joint venture or similar arrangement involving an investment by MidCon of $5 million or more; 2.16.5 each contract not disclosed pursuant to the foregoing clauses 2.16.1 through 2.16.4 that involves a contractual commitment for the payment, pursuant to the terms of such contract, by or to MidCon or any of the Significant Subsidiaries of more than $50,000,000. To the Knowledge of the Seller, neither MidCon nor any of the Significant Subsidiaries nor any other Party to any such contract is currently in violation, breach or default under any such contract or, with or without notice or lapse of time or both, would be in violation or breach of 10 18 or default under any such contract, except such as would not have a Material Adverse Effect on MidCon and its Subsidiaries, taken as a whole. 2.17 No Undisclosed Liabilities. Except as set forth in Schedule 2.17, to the Seller's Knowledge, MidCon and its consolidated Subsidiaries have no liabilities or obligations that would be required to be recorded or disclosed in a consolidated balance sheet of MidCon and its consolidated Subsidiaries, or footnotes thereto, prepared as of the date that this representation is made, in accordance with GAAP, other than liabilities and obligations recorded or disclosed in the balance sheet included in or in footnotes to the Financial Statements, or incurred in the ordinary course of business since October 31, 1997. 2.18 Tax Matters. Except as provided on Schedule 2.18: (i) the Seller has filed, or has caused MidCon and its Subsidiaries to have timely filed, all Tax Returns the due date of which is on or prior to the Closing Date; (ii) MidCon and its Subsidiaries, or the Seller on their behalf, have timely paid all Taxes shown as due and payable on such Tax Returns; (iii) adequate accruals or provisions including current Tax liabilities, all in accordance with GAAP applied on a consistent basis for all Taxes due with respect to any period ending on or prior to December 31, 1997 will have been made in the 1997 Financial Statements; (iv) no assessment of Tax has been proposed in writing against MidCon or its Subsidiaries or any of their assets or properties; (v) neither MidCon nor any of its Subsidiaries has an outstanding agreement, waiver or arrangement extending any statute of limitations in respect of Taxes or has agreed to any extension of time with respect to a Tax assessment or deficiency except in all cases which would not have a Material Adverse Effect on MidCon and its Subsidiaries, taken 11 19 as a whole. The statute of limitations in respect of federal Taxes has expired through the period set forth on Schedule 2.18. Schedule 2.18 lists all federal Tax Returns that are currently the subject of audit. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE BUYER The Buyer hereby represents and warrants to the Seller as follows: 3.1 Organization and Qualification. The Buyer is a corporation duly organized, validly existing and in good standing under the laws of the state of Kansas. The Buyer has all requisite corporate power to own, use or lease its properties and to carry on its business as it is now being conducted. The Buyer is duly qualified as a foreign corporation to do business, and is in good standing, in each jurisdiction where both the character of its properties owned or held under lease or the nature of its activities makes such qualification necessary and the failure to qualify would have a Material Adverse Effect on the Buyer and its Subsidiaries taken as a whole. 3.2 Authority. The Buyer has full corporate power to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby on the part of the Buyer have been duly and validly authorized by the Buyer's Board of Directors, and no other corporate proceedings on the part of the Buyer are necessary, as a matter of law or otherwise, for the consummation of the transactions contemplated hereby. This Agreement 12 20 has been duly and validly executed and delivered by the Buyer and is a valid and binding agreement of the Buyer, enforceable against it in accordance with its terms. 3.3 Noncontravention. Except as provided on Schedule 3.3, the execution and delivery of this Agreement, the consummation of the transactions contemplated by this Agreement and the performance by the Buyer of its obligations hereunder will not: (a) conflict with or result in any breach of any provision of the Buyer's Articles of Incorporation or By-laws; (b) require any consent, approval, order, authorization or permit of, or registration, filing with or notification to, any Governmental Entity or any private third party, except for filings, consents, approvals, orders, authorizations or permits which (i) are required under the HSR Act; (ii) are required by the FERC; (iii) are required by the Texas Railroad Commission; (iv) are required by the Kansas Corporation Commission; (v) will not result in a Material Adverse Effect on the Buyer and its Subsidiaries, taken as a whole; or (vi) will not prevent the consummation of the transactions contemplated hereby, if not made or acquired. (c) result in any violation of or the breach of or constitute a default under (or give rise to any right of termination, cancellation or acceleration or guaranteed payments under or to a loss of a material benefit or result in the creation or imposition of a lien under) any of the terms, conditions or provisions of any note, lease, mortgage, indenture, license, agreement or other instrument or obligation to which the Buyer or one of the Buyer's Subsidiaries is a party or by which the Buyer, any of the Buyer's Subsidiaries or any of their respective properties or 13 21 assets may be bound, except for such violations, breaches, defaults, or rights of termination, cancellation or acceleration, or losses which requisite waivers or consents have been obtained or which would not result in a Material Adverse Effect on the Buyer and its Subsidiaries taken as a whole; (d) violate the provisions of any order, writ, injunction, judgment, decree, statute, rule or regulation applicable to the Buyer, that would result in a Material Adverse Effect on the Buyer and its Subsidiaries taken as a whole; or (e) result in the creation of any Encumbrance upon any shares of capital stock, properties or assets of the Buyer or the Buyer's Subsidiaries under any agreement or instrument to which the Buyer or the Buyer's Subsidiaries is a party or by which the Buyer or the Buyer's Subsidiaries is bound. 3.4 Utility Status. Neither the Buyer nor any of its Subsidiaries is a "Holding Company" or a "Public Utility Company" or a "Gas Utility Company" as those terms are defined in the PUHCA. 3.5 Finders and Brokers. No broker, finder or investment banker is entitled to any brokerage, finder's or other similar fee or commission in connection with the transactions contemplated by this Agreement as a result of arrangements made by or on behalf of the Buyer other than Morgan Stanley & Co. Incorporated, Petrie Parkman & Co., Inc. and Salomon Brothers Inc, the fees of whom will be paid by the Buyer. 14 22 3.6 Investment Purpose. The Buyer is acquiring the Shares and the ESOP Note for its own account and not with a view to any sale or distribution thereof in violation of any securities laws. The Buyer has no present intention of selling, distributing or otherwise disposing of any portion of the Shares or the ESOP Note in violation of any such laws. The Buyer acknowledges that the Shares and the ESOP Note have not been registered or qualified under the Securities Act or any state securities laws and may be sold, assigned, pledged or otherwise disposed of in the absence of such registration only pursuant to an exemption from such registration and in accordance with this Agreement. ARTICLE IV THE CLOSING 4.1 Time and Place of the Closing. Subject to the satisfaction or waiver of the conditions precedent set forth herein, the closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of the Seller, 10889 Wilshire Boulevard, Los Angeles, California, at 10:00 a.m. Los Angeles time on February 27, 1998, or at such later Business Day, place and time as the Seller shall specify, but no later than June 30, 1998. 4.2 Conditions Precedent to the Obligations of the Buyer. The obligation of the Buyer to consummate the transactions contemplated hereby shall be subject to satisfaction or waiver, at or prior to the Closing, of the conditions set forth in this Section 4.2. 15 23 4.2.1 Resolutions of the Board of Directors. The Seller shall have furnished the Buyer at the Closing with certified copies of resolutions duly adopted by the Board of Directors of the Seller, or a committee thereof, which resolutions shall authorize the execution, delivery and performance of this Agreement by the Seller. 4.2.2 Representations and Warranties to be True and Correct. The representations and warranties of the Seller contained in Article II (as amended or updated pursuant to Section 5.3.3) shall be true and accurate in all material respects (if not qualified as to materiality) and true and accurate (if so qualified) as of the Closing Date with the same force and effect as though made at and as of the Closing Date (except to the extent a representation or warranty speaks specifically as of an earlier date or except as contemplated by this Agreement). The Seller shall have furnished the Buyer at the Closing with certificates dated as of the Closing Date of two officers of the Seller, to the effect set forth above, and of two officers of MidCon, to the effect set forth above but only to the extent that the representations and warranties relate to MidCon or its Subsidiaries. 4.2.3 Opinion of Counsel to the Seller. The Buyer shall have received an opinion from counsel employed by the Seller, dated as of the Closing Date, to the effect set forth on Exhibit 4.2.3, subject only to customary qualifications and exceptions reasonably acceptable to the Buyer. 4.2.4 Obligations of the Seller to be Fulfilled. The Seller shall have performed and complied in all material respects with the covenants required by this Agreement to be performed and complied with by the Seller at or prior to the Closing. The Seller shall have 16 24 furnished the Buyer at the Closing with a certificate dated as of the Closing Date of two officers of the Seller to the effect set forth above. 4.2.5 Resignation of the Directors. All directors of MidCon and its Subsidiaries shall have tendered their written resignations, effective as of the Closing Date, or their term shall have expired prior thereto. 4.2.6 Transfer of Shares. The Seller shall have delivered to the Buyer the certificates which represent all the Shares, together with stock powers or other transfer documents duly endorsed in the name of the Buyer or its permitted assigns. 4.2.7 Intercompany Agreements. The Seller shall have taken or shall have caused its Subsidiaries to have taken the following actions with regard to the Intercompany Agreements: (a) Contribution of Net Balance. The assignment, immediately prior to the Closing, of the right to receive all payments of principal of and interest on the Dividend Note other than the amount of interest accruing from December 31, 1997 through the Closing Date pursuant to the Dividend Note as a contribution to the capital of MidCon, which assignment shall occur before any distribution occurs pursuant to Section 5.1.2(a)(i); (b) Services Agreement. The Services Agreement shall have been terminated as provided more fully in Section 5.3.5; (c) Tax Sharing Agreement. The Tax Sharing Agreement shall have been terminated as provided more fully in Section 6.2. 17 25 4.3 Conditions Precedent to the Obligation of the Seller. The obligation of the Seller to consummate the transactions contemplated hereby shall be subject to satisfaction or waiver, at or prior to the Closing of the conditions set forth in this Section 4.3. 4.3.1 Resolutions of the Board of Directors. The Buyer shall have furnished the Seller at the Closing with certified copies of resolutions duly adopted by the Board of Directors of the Buyer, which resolutions shall authorize the execution, delivery and performance by the Buyer of this Agreement, the Substitute Note, and the Term Loan Assignment Agreement, the Buyer's Pipeline Lease Guaranty and related commitments to be provided pursuant to Section 5.3.6 and the Insurance Novation Agreement. 4.3.2 Representations and Warranties to be True and Correct. The representations and warranties of the Buyer contained in Article III (as amended or updated pursuant to Section 5.3.3) shall be true and accurate in all material respects (if not qualified as to materiality) and true and accurate (if so qualified) as of the Closing Date with the same force and effect as though made at and as of the Closing Date (except to the extent a representation or warranty speaks specifically as of an earlier date or except as contemplated by this Agreement). The Buyer shall have furnished the Seller at the Closing with a certificate of two of its officers to the effect set forth in this Section 4.3.2. 4.3.3 Obligations of the Buyer to be Fulfilled. The Buyer shall have performed and complied in all material respects with the covenants required by this Agreement to be performed and complied with by the Buyer at or prior to the Closing. The Buyer shall 18 26 have furnished the Seller at the Closing with a certificate of two of its officers to the effect set forth in this Section 4.3.3. 4.3.4 Opinion of Counsel to the Buyer. The Seller shall have received from counsel employed by the Buyer, an opinion, dated as of the Closing Date, to the effect set forth on Exhibit 4.3.4, subject only to customary qualifications and exceptions reasonably acceptable to the Seller. 4.3.5 Delivery of the Purchase Price. The Buyer shall have delivered the Purchase Price to the Seller at the Closing. 4.4 Conditions of Both Parties. The obligations of both Parties to consummate the transactions contemplated hereby shall be subject to satisfaction or waiver, at or prior to the Closing of the conditions set forth in this Section 4.4. 4.4.1 Consents. All Consents shall have been filed, occurred or been obtained and shall be in effect immediately prior to and as of the Closing, except where the failure to obtain such Consents will not result in a Material Adverse Effect on MidCon and its Subsidiaries, taken as a whole, will not materially impair the ability of either Party to perform its obligations under this Agreement and will not prevent the consummation of any of the transactions contemplated by this Agreement. Any applicable waiting period imposed by a Governmental Entity, including that imposed under the HSR Act, shall have expired or been terminated. 19 27 4.4.2 Litigation. No temporary restraining order, preliminary injunction or permanent injunction or other order precluding, restraining, enjoining, preventing or prohibiting the consummation of the Agreement and the transactions contemplated by this Agreement shall have been issued by any federal, state or foreign court or other Governmental Entity and remain in effect. 4.4.3 Statutory Requirements. No federal, state, local or foreign statute, rule or regulation shall have been enacted which prohibits the consummation of the transactions contemplated by this Agreement or would make the consummation of such transactions illegal. ARTICLE V COVENANTS 5.1 Covenants by the Seller. 5.1.1 Operation of Business. During the period from the date of this Agreement to the Closing Date, except as otherwise contemplated by this Agreement, after consultation with the Buyer if so provided below or consented to by the Buyer (which consent shall not be unreasonably withheld), the Seller will cause each of MidCon and its Significant Subsidiaries to: (a) carry on its business only in the ordinary course consistent with past practice during the immediately preceding twelve-month period; (b) not amend its Certificate of Incorporation or By-laws; 20 28 (c) not acquire by merging or consolidating with, or purchasing substantially all the assets of, or otherwise acquiring any business or any corporation, partnership, association or other business organization or division thereof which would be material, individually or in the aggregate, to the business, financial condition or results of operations of MidCon and its Subsidiaries taken as a whole; (d) not, except in the ordinary course of business, sell, lease, or otherwise dispose of, nor voluntarily encumber, any of its assets (except as listed on Schedule 5.1.1) which are material, individually or in the aggregate, to the business or financial condition or results of operations of MidCon and its Subsidiaries taken as a whole; (e) not declare, set aside, make or pay any dividend or other distribution (except as listed on Schedule 5.1.1), in respect of its capital stock (other than dividends and distributions payable to MidCon or its Subsidiaries) or purchase or redeem, directly or indirectly, any shares of its capital stock (other than for cash); (f) not issue or sell any shares of its capital stock of any class (other than to MidCon or its Subsidiaries); (g) not incur any indebtedness for borrowed money (other than from the Seller), or issue or sell any debt securities, other than in the ordinary course of business consistent with past practice during the immediately preceding twelve-month period or as described on Schedule 5.1.1; 21 29 (h) not (i) grant to any officer or director any increase in any compensation in any form, other than as is consistent with prior practice, or in any severance or termination pay, or (ii) enter into or amend any employment agreement with an officer, or (iii) amend the terms of any Employee Benefit Plans and Agreements (other than as may be required by applicable law or Governmental Entity) or (iv) adopt any new employee benefit plan or arrangement in each case for which MidCon or its Subsidiaries will be obligated after the Closing unless listed on Schedule 5.1.1; (i) not, except for the transactions contemplated by this Agreement, directly or indirectly solicit proposals or offers from any person or initiate or participate in any discussions with any person relating to any acquisition or purchase of all or a material amount of the assets of, or any securities of, MidCon or any of its Significant Subsidiaries unless listed on Schedule 5.1.1; (j) without prior consultation with the Buyer, not enter into any other contract or commitment having a value in excess of $50 million; (k) without prior consultation with the Buyer, (i) not enter into any fixed price purchases or sales of natural gas unless they are hedged nor (ii) enter into any commodity futures contracts, options or swaps unless the transactions are a hedge as defined in the Financial Accounting Standard Board Statement of Financial Accounting Standards No. 80 or unless the volume in aggregate at any time does not exceed two billion cubic feet. 22 30 (l) without prior consultation with the Buyer, (i) not enter into any fixed price purchases or sales of electricity unless they are hedged nor (ii) enter into any commodity futures contract, options or swaps unless the transactions are a hedge as defined in the Financial Accounting Standard Board Statement of Financial Accounting Standards No. 80 or unless the volume in aggregate at any time does not exceed 16,800 MWhs. Notwithstanding the foregoing or any other provisions of this Agreement, the Seller and MidCon may amend, modify, terminate or release any of the MidCon ESOP Agreements or obligations thereunder; provided, however, that the amount of outstanding principal of, and interest on, the ESOP Note will not be modified. 5.1.2 The Cash Management Agreement. (a) Pre-closing Adjustment. The Seller shall, and shall cause MidCon to, adjust the MidCon Loan and the OPC Loan balances immediately prior to the Closing as follows: (i) An amount equal to the net amount, if any, by which the Current Assets of MidCon exceed the sum of (A) the Current Liabilities of MidCon plus (B) twenty million dollars ($20 million) each as of December 31, 1997 as shown on the 1997 Financial Statements, shall be added to the balance of the C Facility Loans under the Cash Management Agreement thereby constituting a distribution by MidCon to the Seller evidenced as a payable by MidCon. 23 31 (ii) An amount equal to the net amount, if any, by which the sum of (A) the Current Liabilities of MidCon plus (B) twenty million dollars ($20 million) exceed the Current Assets of MidCon each as at December 31, 1997 as shown on the 1997 Financial Statements, shall be added to the balance of the B Facility Loans under the Cash Management Agreement, thereby constituting a contribution to MidCon by the Seller evidenced as a receivable of MidCon. In connection with determining Current Assets and Current Liabilities as of December 31, 1997, any and all adjustments in accordance with GAAP to reflect the consequences of the transactions pursuant to this Agreement shall be excluded; provided, however, the Current Liabilities at December 31, 1997 shall include all amounts payable by MidCon to the MidCon ESOP Trustee arising from the sale of the Shares and shall exclude the principal on the ESOP Note payable after December 31, 1997. (b) Loan Balances at Closing. The balance of each of the OPC Loans and the MidCon Loans as at Closing shall be calculated by including all amounts accrued but not yet payable for the period elapsed up to the Closing Date, which amounts will include (i) the accrued interest on the Dividend Note although due after the Closing, (ii) the payment by, or on behalf of, MidCon to the MidCon ESOP Trustee and its advisors, and (iii) the amount of Taxes of all sorts accrued pursuant to Article VI. (c) Payment for Loan Balances. Within 30 days after the Closing, the Seller shall pay the amount, if any, by which the OPC Loans outstanding as of the Closing exceed the MidCon Loans outstanding at such date (each determined in accordance with 24 32 Section 5.1.2(b)), plus accrued interest in accordance with the provisions of the Cash Management Agreement (subject to the modifications pursuant to the following) to the date of payment, as if a "Mandatory Prepayment" existed pursuant to Section 5.6 of the Cash Management Agreement. The Seller shall, and shall cause MidCon to, enter into an agreement that, except as provided in the preceding sentence, (i) shall, at the Closing, terminate each of the respective Facilities, all management of cash pursuant thereto and the covenants thereunder, and (ii) shall terminate the Cash Management Agreement fully upon completion of the foregoing payment so that it no longer governs the payment of any amounts payable after the Closing pursuant to the contracts, agreements or arrangements outstanding after the Closing Date by and between MidCon and its Subsidiaries on the one hand and the Seller and its Subsidiaries (other than MidCon and its Subsidiary) on the other hand and such amounts shall be payable as provided in the contract, agreement or arrangement governing such payment. 5.1.3 Intercompany Agreements. The Seller shall, and shall cause its Subsidiaries to, perform the Intercompany Agreements, as amended, which continue in effect after the Closing. 5.1.4 Originator Receivables Sales Agreement. Immediately prior to the Closing, the Seller shall cause its Subsidiaries to terminate the Originator Receivables Sales Agreement as to MidCon and its Subsidiaries and shall cause MidCon and its Subsidiaries to repurchase all of the receivables previously sold by MidCon and its Subsidiaries to Occidental Receivables, Inc. that have not been collected prior to the date of such repurchase. 25 33 5.1.5 Insurance. The Seller, at the Closing, shall cause MidCon and its Subsidiaries to enter into a release substantially in the form of Exhibit 5.1.5(a) (the "Insurance Release Agreement") with the Seller and its Subsidiary, OPCAL Insurance, Inc. ("OPCAL"), for the release of the Seller and OPCAL from any and all liability under policies underwritten by OPCAL and its predecessor, Piper Indemnity, as more fully described in the Insurance Release Agreement. At the Closing, the Seller, OPCAL and the insurance companies to be parties thereto shall enter into a novation agreement substantially in the form of Exhibit 5.1.5(b) (the "Insurance Novation Agreement") substituting the Buyer for the Seller as indemnitor of the insurance companies with regard to the specified fronting policies previously issued for MidCon and its Subsidiaries. Except as provided in the preceding two sentences, the Seller shall cause each of MidCon and its Subsidiaries to continue to have rights as an insured under the Seller's insurance policies, subject, however, to the terms and conditions set forth in each applicable insurance policy. MidCon and its Subsidiaries shall no longer be an insured under the Seller's insurance for any occurrence after the Closing. 5.1.6 1997 Financial Statements. The Seller shall cause MidCon to provide the Buyer with the audited consolidated financial statements of MidCon and its consolidated Subsidiaries (including any related notes and schedules) for the year ended December 31, 1997 (the "1997 Financial Statements") on or before February 15, 1998. The 1997 Financial Statements shall be prepared in accordance with GAAP applied on a consistent basis and present fairly in all material respects the consolidated financial position of MidCon and its consolidated Subsidiaries as at December 31, 1997, and the consolidated results of operations 26 34 and cash flow of MidCon and its consolidated Subsidiaries for the periods presented therein (except as may be indicated in the notes thereto). 5.2 Covenants by the Buyer. 5.2.1 Payment of the Loan Balance. Within 30 days after the Closing, the Buyer shall cause MidCon to pay the amount, if any, by which the MidCon Loans outstanding as of the Closing exceed the OPC Loans outstanding at such date (each determined in accordance with Section 5.1.2(b)), plus accrued interest in accordance with the provisions of the Cash Management Agreement (subject to the modification described in Section 5.1.2(c)) to the date of payment to be prepaid as if a "Mandatory Prepayment" existed pursuant to Section 5.6 of the Cash Management Agreement. 5.2.2 ESOP Note and MidCon ESOP Plan. The Buyer agrees that it shall not demand repayment of, otherwise discharge, or permit any payment in respect of, the ESOP Note until a date after the Closing Date and thereafter shall cooperate with the Seller in the resolution of the MidCon ESOP Plan, including furnishing records necessary in its administration. 5.2.3 Employees and Employee Benefit Plans. (a) Effective as of the Closing Date, the Buyer shall cause MidCon or its Subsidiaries to continue to compensate each Salaried Employee who remains an employee of the Buyer or its Subsidiaries at salaries or hourly rates, as the case may be, no lower than the lesser of (i) the salaries or hourly rates of MidCon or its Subsidiaries in effect immediately 27 35 prior to the Closing Date or (ii) the salaries or hourly rates payable to the Buyer's employees in either case in similar jobs and locations. (b) Notwithstanding subpart (a), if the Buyer or any of its Subsidiaries terminates any Salaried Employee within three months of the Closing, the Buyer or its Subsidiaries shall pay the terminated Salaried Employee severance benefits no less than those provided under the Termination Allowance Plan in effect on the date of this Agreement, provided, however, that such severance benefits shall only be payable to the extent that such benefits would have been payable under such Termination Allowance Plan. After a three month period subsequent to the Closing, a Salaried Employee who is terminated shall be entitled to severance benefits not less than those provided to employees of the Buyer or its Subsidiaries with like job status and service. (c) Except as provided in subsection (b) to this Section 5.2.3, as of the Closing Date, the Buyer shall provide to each Salaried Employee and each Former Salaried Employee with "Buyer Benefit Plans", which shall mean the benefit plans and programs under (i) Employee Plans and Agreements effective immediately prior to the Closing Date, (ii) the Buyer's benefit plans and programs applicable to employees of the Buyer in similar jobs, or (iii) a combination of Employee Plans and Agreements and the Buyer's plans and programs, the determination of which shall be at the sole discretion of the Buyer, provided however, that such combination of Employee Plans and Agreements and the Buyer's plans and programs shall be, at a minimum, comparable in type and aggregate value to those plans and programs provided by the Buyer's benefit plans and programs applicable to employees of the Buyer in 28 36 similar jobs. In addition, the Buyer shall cause such Buyer Benefit Plans to comply in form and operation in all material respects with the requirements of ERISA and the Code. (d) From and after the Closing, each Salaried Employee and each Former Salaried Employee shall be eligible to participate in the Buyer Benefit Plans in accordance with the terms and conditions thereof. Under such Buyer Benefit Plans, which are Employee Welfare Benefit Plans, Salaried Employees and Former Salaried Employees and their eligible dependents, if a participant in any health, long term disability or life insurance plans, as applicable, of the Seller or its Subsidiaries immediately prior to the Closing (i) shall participate in such Buyer Benefit Plans as of the Closing Date, and (ii) shall be deemed to satisfy any pre-existing condition limitations under group medical, dental, life insurance or disability plans that shall be provided after the Closing Date. In addition, amounts paid by such Salaried Employees and Former Salaried Employees towards deductibles and copayment limitations under the health plans of the Seller or its Subsidiaries shall be counted toward meeting any similar deductible and copayment limitations under the health plans that shall be provided under the Buyer Benefit Plans. (e) The Buyer and its Subsidiaries shall recognize all service credited for each of the Salaried Employees and Former Salaried Employees on the records of the Seller or its Subsidiaries for purposes of eligibility for benefits and vesting under the Buyer Benefit Plans and the level of benefits under the Buyer Benefit Plans, but specifically excluding any benefit accrual under any Buyer Benefit Plan that is a defined benefit pension plan. 29 37 (f) From and after the Closing, Salaried Employees shall be entitled to retain and take any vacation time accrued on MidCon's records as payable to any Salaried Employee for which vacation time has not been taken prior to the Closing Date. (g) From and after the Closing, the Buyer shall, or shall cause MidCon or its Subsidiaries, as applicable, to, comply with all the terms, conditions, obligations, and benefits set forth in the Union Contract. (h) From and after the Closing Date, MidCon and its Subsidiaries shall cease participation in any and all Employee Plans and Agreements sponsored or maintained by the Seller or its Subsidiaries. Except as set forth on Schedule 5.2.3, the Buyer agrees that it shall cause MidCon and its Subsidiaries, (i) to be solely responsible and to pay for, and (ii) to indemnify and hold the Seller and its Subsidiaries harmless from, any and all costs, damages, losses, expenses or other liabilities arising out of or relating to any and all claims for welfare benefits (including health care continuation coverage and retiree welfare benefits) under any of the Employee Plans and Agreements or otherwise by any Employee, Former Salaried Employee, Former Union Employee or dependent or beneficiary thereof, irrespective of when such claims were incurred. (i) Representatives of the Buyer shall be entitled to meet with the Employees at mutually agreeable times prior to the Closing to explain and answer questions about the conditions, policies and benefits of employment by the Buyer or its Subsidiaries after the Closing. The Seller shall cooperate with the Buyer until Closing in communicating to such Employees any additional information concerning employment after the Closing which such 30 38 Employees may seek, or which the Buyer may desire to provide, and during normal business hours shall allow additional meetings by representatives of the Buyer with such Employees upon the reasonable requests of the Buyer. In addition, after the Closing, the Seller and the Buyer agree to furnish each other with appropriate records for each of the Employees as may be necessary to assist in proper benefit administration. (j) The Buyer hereby assumes all liability for any alleged failure to give, or to cause MidCon or any of its Subsidiaries to give, all notices required by the U.S. Worker Adjustment and Retraining Notification Act of 1988, as amended (the "WARN Act"), and any similar state law or regulation by reason of events occurring after the Closing. The Buyer shall indemnify and hold harmless the Seller and its Affiliates with respect to any and all claims asserted under the WARN Act or any similar law or regulation because of a "plant closing" or "mass layoff" with respect to MidCon or any of its Subsidiaries occurring after the Closing. For purposes of this Agreement, the Closing Date shall be the "effective date" for purposes of the WARN Act. 5.2.4 Intercompany Agreements. After the Closing, the Buyer shall cause MidCon and its Subsidiaries to perform their obligations under any Intercompany Agreements which continue in effect after the Closing. 5.2.5 Substitution of Undertakings. At the Closing, the Buyer shall execute and deliver the Insurance Novation Agreement as more fully described in Section 5.1.5. 31 39 The Buyer will use all commercially reasonable efforts to cause to be terminated, released and discharged, on or prior to the Closing Date, in a manner reasonably satisfactory to the Seller, any commitments, guarantees and indemnities (including letters of credit, bonds, promissory notes, commitments, or obligations of whatsoever nature to any Governmental Entity or any other Person) of the Seller and each of its Affiliates for the direct and indirect benefit of MidCon or any of its Subsidiaries as set forth on Schedule 5.2.5 and all such other commitments, guarantees and indemnities provided by Seller in accordance with the Cash Management Agreement (collectively "Commitments"). For any Commitments for which the Buyer does not obtain a termination, discharge or obtain a release of Seller and its Affiliates at or prior to the Closing, the Buyer shall after the Closing cause MidCon to pay to the Seller the following (for purposes of this Section 5.2.5 initial capitalized terms not defined in this Agreement and "Letter of Credit" shall have the meaning set forth in the Cash Management Agreement): (a) A fee in an amount equal to 0.5% per annum on the Average Balance of each outstanding Letter of Credit; (b) A fee equal to 0.5% per annum on the Average Balance of each Guarantee; (c) All costs and expenses incurred by the Seller under any Letters of Credit for MidCon Consol; and 32 40 (d) The amount of payments made by the Seller to or on behalf of MidCon Consol under any Guarantee or Letter of Credit. Payments pursuant to clauses (a) through (c) shall be made within 10 days after the last day of the month in which such costs and expenses were paid or fees incurred and payments pursuant to clause (d) shall be made at the time such payment is made by the Seller. The Buyer shall continue to use all commercially reasonable efforts to obtain, in a manner satisfactory to the Seller, all terminations, releases and discharges of any remaining Commitments as soon as practicable after the Closing. The Seller shall have no obligation to extend or replace any of the Commitments. The Buyer agrees to cause MidCon to indemnify and hold harmless the Seller after the Closing from and against any and all claims, damages, losses, liabilities, costs or expenses (including, without limitation, attorneys' fees and costs) which the Seller may incur (or which may be claimed against the Seller by any Person whomsoever) by reason of or in connection with the guarantee, delivery or transfer of or payment under any Commitment, including any claims, damages, losses, liabilities, costs or expenses which the Seller may incur by reason of or in connection with the failure of any bank issuing any such Letter of Credit to fulfill or to comply with its obligations under any such Letter of Credit. 5.2.6 Indemnification. (a) The Buyer agrees that all rights to indemnification or exculpation now existing in favor of the directors, officers, employees and agents of MidCon and each of 33 41 its Subsidiaries as provided in their respective Certificates or Articles of Incorporation or By-laws or otherwise, in each case, in effect as of the date hereof with respect to matters occurring prior to the Closing Date shall survive the Closing and shall continue in full force and effect. After the Closing Date, the Buyer shall cause MidCon to indemnify, defend and hold harmless the present and former officers, directors, employees and agents of MidCon and its Subsidiaries (each a "MidCon Indemnitee") against all losses, claims, damages, liabilities, fees and expenses (including reasonable fees and disbursements of counsel) and judgments, fines, losses, claims, liabilities and amounts paid in settlement (provided that any such settlement is effected with the prior written consent of the Buyer) arising out of actions or omissions occurring at or prior to the Closing Date to the full extent permitted by law, or MidCon's and each of its Subsidiaries Certificate or Articles of Incorporation or By-laws, in each case as in effect at the date hereof, including provisions therein relating to the advancement of expenses incurred in the defense of any action or suit; provided, that nothing herein shall impair any rights or obligations of any present or former directors or officers of MidCon or any of its Subsidiaries. (b) The Buyer shall, or shall cause MidCon to, pay all expenses (including reasonable attorneys' fees), that may reasonably be incurred by the MidCon Indemnitees in successfully enforcing the rights to which the MidCon Indemnitees are entitled under this Agreement or MidCon's Certificate of Incorporation or By-laws or is otherwise entitled. 34 42 (c) In the event MidCon, the Buyer or any of their successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any Person, then, and in each such case, proper provisions shall be made so that the successors and assigns of MidCon or the Buyer, as the case may be, shall assume the obligations of MidCon and the Buyer set forth in this Section 5.2.6. (d) The provisions of this Section 5.2.6 are intended to be for the benefit of, and shall be enforceable by, each MidCon Indemnitee, his or her heirs and representatives. 5.3 Covenants of Both Parties. 5.3.1 Access and Information. The Seller shall afford to the Buyer, and to the Buyer's accountants, counsel and other representatives, full access, during normal business hours during the period prior to the Closing Date, to all of MidCon's and its Subsidiaries' properties, books, contracts, commitments and records and, during such period, Seller shall furnish promptly to the Buyer (a) a copy of each report, schedule and other document filed or received by MidCon or its Subsidiaries during such period pursuant to the requirements of the FERC, and (b) all other information concerning the business, properties and personnel of MidCon and its Subsidiaries as the Buyer may reasonably request; provided, however, that such access shall be subject to the terms of any confidentiality agreements applicable to MidCon and its Subsidiaries. 35 43 5.3.2 Further Action, Reasonable Efforts; Consents and Approvals. Upon the terms and subject to the conditions hereof, each of the Parties hereto shall use its commercially reasonable efforts to take, or cause to be taken, all appropriate action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to cause the conditions set forth in Section 4.2, Section 4.3 and Section 4.4 to be satisfied and to consummate and make effective the transactions contemplated hereby, including, without limitation, using commercially reasonable efforts to obtain all licenses, permits, orders, declarations, consents, approvals, authorizations, certificates, qualifications and orders of, and make all filings and required submissions with, all Governmental Entities, and all shareholders, lenders and partners of, and parties to contracts with, any of the Seller, the Buyer, MidCon or any other Persons, in each case, as are necessary or desirable for the consummation of the transactions contemplated hereby (collectively "Consents"). The Seller shall, as soon as possible after the date hereof, but in any event prior to the Closing, deliver to the Buyer copies of all Consents obtained by the Seller. The Buyer shall, as soon as possible prior to the Closing, deliver to the Seller copies of all Consents obtained by the Buyer. In case at any time after the Closing Date any further action is necessary or desirable to carry out the purposes of this Agreement, the Buyer and the Seller shall use their commercially reasonable efforts to take all such action. Prior to the Closing, each Party shall use its best efforts not to take any action, or enter into any transaction, that would cause any of its representations or warranties contained in this Agreement to be untrue. 5.3.3 Notice of Revisions. A Party (the "Notifying Party") may elect at any time prior to the Closing to notify the other Party (the "Notified Party") of any revisions to 36 44 such Party's representations or warranties or a Schedule referred to therein. If the Notified Party does not terminate this Agreement pursuant to Section 7.1 within five (5) Business Days after receipt of such notice, such written notice will be deemed to qualify the representations and warranties, or amend the Schedules, contained in Article II or III, as applicable, and to have cured any misrepresentation or breach of representation, warranty or covenant that otherwise might have existed hereunder by reason of the matter covered by such revision. Notwithstanding the foregoing, if the Notifying Party delivers a notice of revision pursuant to this Section less than five (5) Business Days prior to the Closing Date, then the Closing Date automatically shall be extended to the date which is five (5) Business Days from the date of the notice of revision or if not a Business Day, then the Business Day immediately following that date. 5.3.4 Substitute Note. At the Closing, the Seller shall assign to the Buyer (a) the ESOP Note, and (b) by execution and delivery to the Buyer of the Term Loan Assignment Agreement, all of the Seller's rights and obligations under the Term Loan Agreement and, in exchange therefor, at the Closing the Buyer shall execute and deliver to the Seller the Term Loan Assignment Agreement and shall issue to the Seller either (i) a Substitute Note, the prompt and complete payment and performance in full of which shall be secured by Government Securities maturing as to principal and interest in such amounts and at such times as are sufficient (without consideration of any reinvestment of such interest and after payment of all Taxes or other charges or assessments in respect of such Government Securities payable by the Buyer) to provide U.S. legal tender to pay the principal of, and each installment of interest on, such Substitute Note at least one day before the date on which any such payment is 37 45 due and payable in accordance with the terms of such Substitute Note, (ii) a Substitute Note, the payment of all interest and principal of which is secured by one or more letters of credit, in form and substance satisfactory to the Seller, issued by a bank or group of banks with each such bank either (a) having an investment grade credit rating by either Standard & Poor's Corporation or Moody's Investors Service, Inc., so long as neither of the above rating agencies has provided a credit rating below investment grade, (b) having been agreed to by the Seller or (c) if a bank is not such an investment grade credit, its portion of the letter of credit can be fronted by a bank having such investment grade credit or (iii) any combination of the foregoing, as the Buyer may elect, provided that the aggregate original principal amount of all such Substitute Notes is equal to the sum of (x) the outstanding unpaid principal balance of the ESOP Note as of the Closing Date and (y) all accrued and unpaid interest on the ESOP Note to and including the Closing Date. If the Buyer elects to deliver a Substitute Note at the Closing that is secured by Government Securities, at the Closing, the Buyer shall execute and deliver to the Seller a security agreement and a control agreement, each in form and substance satisfactory to the Seller, which provide the Seller with a valid, perfected, first priority security interest in such Government Securities. 5.3.5 Interim Services Agreement. The Seller and MidCon shall terminate the Services Agreement effective as of the Closing with amounts due thereunder accrued up to the Closing as provided in Section 5.1.2(b). The Seller and the Buyer shall negotiate to the extent desired by the Buyer an interim services agreement by and between the Seller and MidCon for the continuation of any of the services provided by the Seller to MidCon under the Service 38 46 Agreement upon terms and conditions which must be mutually acceptable to the Seller and to the Buyer, in their respective sole discretion. 5.3.6 Pipeline Lease and the Buyer's Pipeline Lease Guaranty. At the Closing, the Buyer shall execute and deliver to the Seller a written guaranty (the "Buyer's Pipeline Lease Guaranty"), pursuant to which the Buyer shall irrevocably and unconditionally guarantee to the Pipeline Lessor the full and timely performance, payment and discharge by the Pipeline Lessee of all obligations and liabilities of the Pipeline Lessee under the Pipeline Lease. The Buyer's Pipeline Lease Guaranty shall be substantially in the form of the Pipeline Lease Guaranty, with the Buyer as guarantor; provided, however that Section 11 thereof shall be of no force or effect as long as the Pipeline Lease Guaranty is in full force and effect. At the request of the Buyer, the Seller shall cause the Pipeline Lessor to agree to a termination of the Pipeline Lease Guaranty if, concurrently therewith, the Buyer's Pipeline Lease Guaranty is amended to include the Buyer's Pipeline Covenants for the benefit of the Pipeline Lessor. At or prior to the Closing, the Seller shall cause the Pipeline Lessor and the Pipeline Lessee to amend the Pipeline Lease to: (a) provide the Pipeline Lessee with an option to purchase the Leased Property at a price equal to its fair market value upon termination of the Pipeline Lease, and on other terms and conditions reasonably satisfactory to the Buyer and the Seller and set forth in such amendment. The fair market value of the Leased Property shall be determined by agreement between the Pipeline Lessor and the Pipeline Lessee or if the Pipeline Lessor and the Pipeline Lessee can not agree within a specific period before the date on which the Pipeline Lease is to 39 47 terminate, then by a team of three independent appraisers each having appropriate industry experience to make such a valuation, with one appraiser to be selected by each of the Pipeline Lessor and the Pipeline Lessee, and the third to be selected by the first two appraisers. The determination of the fair market value shall be the value agreed by at least two of the appraisers; (b) permit assignment of the Pipeline Lease by the Pipeline Lessee if (i) no event of default under the Pipeline Lease, and no event that, with the giving of notice or the lapse of time or both, would be such an event of default, shall have occurred and be continuing, (ii) the Pipeline Lessee pays the costs and expenses of the Pipeline Lessor in reviewing such proposed assignment, and (iii) the Person to whom the Pipeline Lessee assigns its rights under the Pipeline Lease (the "Assignee") satisfies the following criteria: (x) fifty percent (50%) or more of the Assignee's outstanding equity and voting interests is owned, directly or indirectly, by the Pipeline Lessee or the Buyer; or (y) (1) the Assignee is not affiliated with the Pipeline Lessee or the Buyer, (2) the Assignee, or an entity that absolutely and unconditionally guarantees the Assignee's obligations under the Pipeline Lease (the "Assignee's Guarantor"), has a tangible net worth of not less than $100,000,000, and either has an Above Investment Grade Credit Rating or, in the reasonable opinion of the Pipeline Lessor, satisfies the minimum financial criteria then in effect for an Above Investment Grade Credit Rating; (c) provide that the Pipeline Lessee and the Buyer shall be fully discharged from their obligations under the Pipeline Lease and the Buyer's Pipeline Lease Guaranty, respectively, with respect to events and obligations occurring after the date of an assignment in 40 48 accordance with the foregoing clause (b) upon delivery to the Pipeline Lessor of an assumption agreement, in form and substance reasonably satisfactory to the Pipeline Lessor, pursuant to which the Assignee assumes all of the Pipeline Lessee's liabilities and obligations under the Pipeline Lease including, without limitation, all liability for the payment of any rent, termination values and any other amounts owing by the Pipeline Lessee under the Pipeline Lease, which assumption agreement shall include the Buyer's Pipeline Covenants for the benefit of the Pipeline Lessor unless the Assignee's Guarantor delivers to the Pipeline Lessor a written guaranty, in form and substance reasonably satisfactory to the Pipeline Lessor, that includes the Buyer's Pipeline Covenants for the benefit of the Pipeline Lessor. "Buyer's Pipeline Covenants" shall mean financial covenants that are at least as restrictive as those contained in any indenture, bond, promissory note, loan or credit agreement or other evidence of indebtedness of the Buyer from time to time outstanding. "Leased Property" shall have the meaning set forth in the Pipeline Lease. "Investment Grade Credit Rating" means, with respect to any Person, that the credit rating assigned to such Person's senior unsubordinated long term indebtedness by at least two Rating Agencies is at least BBB- (or its equivalent) or better. "Above Investment Grade Credit Rating" means, with respect to any Person, that the credit rating assigned to such Person's senior unsubordinated long term indebtedness by at least two Rating Agencies is at least Baa2 (or its equivalent) or better. 41 49 "Rating Agencies" shall mean any of Standard & Poor's Ratings Group, Duff & Phelps Credit Rating Co. and Moody's Investors Service. Upon the incorporation by reference of covenants referred to in the preceding sentence, the Seller shall cause MidCon to be fully discharged from its obligations under the Pipeline Lease Guaranty. 5.3.7 MidCon Power Services Corp. Unless the Seller and the Buyer shall enter into mutually satisfactory arrangements with regard to the operations and contracts of MidCon Power Services Corp. on or before the Closing, the Seller shall cause (a) MidCon Gas Services Corp. to declare a dividend of, and transfer immediately prior to the Closing, all of the outstanding capital stock of MidCon Power Services Corp. to MidCon and (b) MidCon to declare a dividend of, and transfer immediately prior to the Closing, all of the outstanding capital stock of MidCon Power Services Corp. to the Seller after transferring all employees, any tangible assets and any cash of that corporation to MidCon Management Corp. The Seller and the Buyer hereby agree to transfer to the Buyer the capital stock so transferred to the Seller upon receipt of the FERC approval of the transfer of such capital stock ownership to the Buyer. As a result of any such transfer, MidCon Power Services Corp. shall be deleted from Schedule 2.9 and the Seller can amend the remaining Schedules to reflect the transactions between MidCon and its Subsidiaries and MidCon Power Services Corp. In the event, in the Seller's reasonable judgment FERC approval of any of the transactions contemplated by this Section 5.3.7 is necessary, which determination shall be made no later than December 31, 1997, the Seller shall advise the Buyer of such conclusion together with supporting basis therefor and the Parties agree to use their best efforts to agree whether such conclusion is 42 50 correct. If such approval is required the Parties agree to file the documents which are required to be filed with FERC as quickly as possible. ARTICLE VI TAXES 6.1 Section 338(h)(10) Election. There will be no election under Section 338(h)(10) of the Code with respect to the purchase and sale of the Shares. 6.2 Tax Sharing Agreement. The Seller shall cause the Tax Sharing Agreement between the Seller and MidCon to be terminated as of the Closing Date; provided, however, that notwithstanding such termination of the Tax Sharing Agreement, its provisions will remain in effect with respect to any period of time during the taxable year in which the termination occurs, for which period the income of MidCon and its Subsidiaries must be included in the federal Tax Returns or any state Tax Returns of the Seller. With respect to any matters covered by this Article VI, the provisions and conditions set forth in this Agreement shall control over any conflicting or contradicting provision or condition in the Tax Sharing Agreement. 6.3 Federal Income Tax Returns and Combined State Income Tax Returns for Periods Through the Closing Date. The Seller will include the income of MidCon and its Subsidiaries (including any deferred income triggered into income by Reg. Sec. 1.1502-13 and Reg. Sec. 1.1502-14 and any excess loss accounts taken into income under Reg. Sec. 1.1502-19) on the Seller's consolidated federal income Tax Return and each combined state income 43 51 Tax Returns for all periods through the Closing Date and pay any federal and state income Taxes attributable to such income. The allocation of such Tax liability between the Seller, on one hand, and MidCon and its Subsidiaries, on the other hand, will be governed by the provisions of the Tax Sharing Agreement. MidCon and its Subsidiaries will furnish Tax information to the Seller for inclusion in the Seller's federal consolidated income Tax Return and each combined state income Tax Return for the period which ends on the Closing Date in accordance with MidCon's past custom and practice, and the Buyer will bear the cost of complying with this provision. The income of MidCon and its Subsidiaries will be allocated between the period up to and including the Closing Date and the period after the Closing Date by closing the books of MidCon and its Subsidiaries as of the end of the Closing Date. 6.4 No Adjustment of MidCon Tax Liability for the Taxable Year Ending December 31, 1997. The liability of MidCon and its Subsidiaries for consolidated federal and combined state income Taxes with respect to the Taxable Year ending December 31, 1997, as recorded on the 1997 Financial Statements, shall not be adjusted to reflect the actual Tax liability reported on the applicable Tax Returns as filed, and the provisions of Section V of the Tax Sharing Agreement to the contrary shall not apply. For purposes of calculating the Tax liability of MidCon and its Subsidiaries under the Tax Sharing Agreement for any Tax year for which the Tax Sharing Agreement remains in effect under Section 6.2 of this Agreement, tax attributes which carry forward from the Tax year ending December 31, 1997, shall not be adjusted to reflect amounts reported on the applicable Tax Returns as filed. 44 52 6.5 Liability of MidCon and its Subsidiaries for Federal and Combined State Income Tax. Within sixty (60) days after the Closing Date, the Buyer shall cause MidCon and its Subsidiaries to pay to the Seller a contribution toward the payment of Tax due on the consolidated or combined Tax Return of the Seller Affiliated Group for the taxable period ending on the Closing Date, including any portion of deferred income triggered into income by Reg. Sec. 1.1502-13 and Reg. Sec. 1.1502-14 and excess loss accounts taken into income under Reg. Sec. 1.1502-19 to be borne by MidCon and its Subsidiaries, with such amount to be determined by applying the provisions of the Tax Sharing Agreement. 6.6 Separate State, Local, Foreign Income Tax Returns. The Seller shall file, or cause to be filed, all separate state, local and foreign income Tax Returns for MidCon and its Subsidiaries for which the Tax year ends on the Closing Date. The Buyer will file, or cause to be filed, all separate state, local and foreign income Tax Returns for MidCon and its Subsidiaries for which the Tax year begins before and ends after the Closing Date. The amount of any liability for taxes on or measured by net income required to be reported on any state, local or foreign Tax Return required to be filed by any of MidCon and its Subsidiaries after the Closing Date which includes tax items for a period which begins before and ends after the Closing shall be allocated between the portion of such period ending on the Closing Date and the portion of such period beginning on the date after the Closing Date on the basis of the taxable income or loss of MidCon and its Subsidiaries as determined from the books and records of the relevant entity for such partial period. 45 53 6.7 Sales and Property Taxes. The amount of any liability for real and personal property taxes, business license taxes, ad valorem taxes or any similar taxes based on the ownership of property payable with respect to assets of the Business for a period which begins before and ends after the Closing Date shall be allocated between the portion of such period ending on the Closing Date and the portion beginning on the day after the Closing Date on a per diem basis. The amount of any liability for sales taxes, gross receipts taxes, ad valorem taxes, transfer taxes or other similar taxes based on the proceeds of identifiable transactions or units of production payable by any of MidCon and its Subsidiaries after the Closing Date for a period which begins before and ends after the Closing Date shall be apportioned between the portion of such period ending on the Closing Date and the portion of such period beginning on the day after the Closing Date on the basis of the actual activities of MidCon and its Subsidiaries as determined from the books and records of the relevant entity for such partial period. 6.8 State Franchise Taxes. The Buyer shall file, or cause to be filed, all separate state franchise Tax Returns for MidCon and its Subsidiaries for which the franchise tax measurement period begins before and ends after the Closing Date. The Seller shall be responsible for any liability attributable to that portion of such measurement period ending on the Closing Date. The Buyer shall be responsible for any franchise tax liability attributable to that portion of such measurement period commencing on the day immediately following the Closing Date and ending on the last day of such measurement period. 46 54 6.9 Adjustment Upon Leaving Consolidation. Section VII of the Tax Sharing Agreement is incorporated by reference and any payments thereunder shall be made within sixty (60) days after the filing of the applicable federal and state Tax Returns. Adjustments to or additional payments shall be made, as needed, by reason of amended returns, claims for refund or audits by a taxing authority with respect to any Tax year for which the Tax Sharing Agreement remains in effect after the Closing Date. 6.10 Sales and Transfer Taxes with Respect to this Transaction. All sales, gross receipts, or other similar transfer taxes, if any (including all stock transfer taxes, if any) incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the Buyer. The Buyer shall at its expense file all necessary tax returns and other documentation in respect to any such taxes. 6.11 Cooperation. The Seller and the Buyer shall (i) each provide the other, and the Buyer shall cause MidCon and its Subsidiaries to provide the Seller, with such assistance as may reasonably be requested by any of them in connection with the preparation of any Tax Return, audit or other examination by any taxing authority or judicial or administrative proceedings relating to liability for Taxes, (ii) each retain and provide the other with any material records or information which may be relevant to such Tax Return, audit or examination, proceeding or determination, and (iii) each provide the other with any amount required to be shown on any Tax Return of the other for any period. The Party requesting assistance hereunder shall reimburse the other for reasonable out-of-pocket expenses incurred in providing such assistance to the extent such expenses exceed an aggregate amount of 47 55 $50,000. Without limiting the generality of the foregoing, the Buyer shall retain, and shall cause MidCon and its Subsidiaries to retain until the applicable statutes of limitations (including any extensions) have expired, copies of all Tax Returns, supporting work schedules and other records or information in its possession which may be relevant to such returns for all taxable periods from January 1, 1990 to the Closing Date, inclusive, and shall not destroy or otherwise dispose of any such records without first providing the Seller with an opportunity to review and copy the same. Following the Closing Date, the Seller shall forward to the Buyer all Tax statements received by the Seller with respect to the assets of the Business for any period that begins before and ends after the Closing Date within thirty (30) days after its receipt thereof. 6.12 Tax Proceedings. Following the Closing Date, the Seller shall control the conduct of all stages of any audit or other administrative or judicial proceeding with respect to Taxes reported on any Tax Return filed by the Seller or any Affiliate of the Seller or on any Tax Return filed by MidCon and its Subsidiaries for any taxable period ending on or prior to the Closing Date. The Buyer shall control the conduct of all other audits or administrative or judicial proceedings with respect to the Tax liability of any of MidCon and its Subsidiaries. 6.13 Carrybacks. Except for carrybacks into the Seller's consolidated Tax Return for the annual tax period ending December 31, 1997, the Seller shall within 30 days pay to the Buyer any Tax refund resulting from a carryback of a post-acquisition Tax attribute of any of MidCon and Subsidiaries into the Seller consolidated Tax Return in all cases where MidCon and Subsidiaries cannot elect to waive a carryback. Such Tax attributes will be considered to 48 56 produce a refund (or reduce Tax liability) only after all Tax attributes of the Seller and other members of the Seller Affiliated Group have been used or deemed used. The Seller shall cooperate with MidCon and its Subsidiaries in obtaining such refunds, including through the filing of amended Tax Returns or refund claims. The Buyer agrees to indemnify the Seller for any Taxes resulting from the disallowance of such post-acquisition Tax attribute on audit or otherwise. 6.14 Prior Year Tax Returns. The Seller shall not amend or restate prior year tax returns which have been filed prior to the date hereof as they relate specifically to MidCon without prior consultation with the Buyer. 6.15 Retention of Carryovers. The Seller will not retain any net operating loss carryovers or capital loss carryovers of MidCon and its Subsidiaries under Reg. Sec. 1.1502-20(g). 6.16 Indemnification for Post-Closing Transactions. The Buyer agrees to indemnify the Seller for any additional Tax owed by the Seller (including Tax owed by the Seller due to this indemnification payment) resulting from any transaction not in the ordinary course of business occurring on the Closing Date after the Buyer's purchase of the Shares. 49 57 ARTICLE VII TERMINATION 7.1 Termination. The Parties may terminate this Agreement before the Closing as follows: (a) The Buyer and the Seller may terminate this Agreement by mutual written consent. (b) Subject to the provisions of Section 7.2, (i) by the Seller if one or more of the conditions set forth in Section 4.3 or Section 4.4 shall not have been satisfied or waived by the Termination Date and (ii) by the Buyer if one or more of the conditions set forth in Section 4.2 or Section 4.4 shall not have been satisfied or waived by the Termination Date. 7.2 Effects of Termination. If this Agreement is terminated pursuant to Section 7.1, all further obligations of the Parties under this Agreement will terminate, except that the obligations in Section 10.3 and Section 10.7 will survive. If this Agreement is terminated by a Party because of a breach of the Agreement by the other Party or because one or more of the conditions to the terminating Party's obligations under this Agreement is not satisfied as a result of the other Party's breach of a representation or warranty or failure to comply with its obligations under this Agreement, the terminating Party's right to pursue all legal remedies will survive such termination unimpaired; provided, however, that (i) if this Agreement is terminated by the Seller because of the Buyer's failure to perform or comply with any covenant, or satisfy any condition, which is to be 50 58 performed or complied with or satisfied at or prior to the Closing, (including the failure to obtain any Consent from a Governmental Entity pursuant to the HSR Act), the Buyer shall pay the Seller the amount of $100 million which the Parties agree reflects compensation for the Seller's loss of opportunity to sell the Shares to another person in a timely manner, and (ii) if this Agreement is terminated by the Buyer because of the Seller's failure to perform or comply with any covenant, or satisfy any condition, which is to be performed or complied with or satisfied at or prior to the Closing (which shall not include the failure to obtain any necessary Consent from a Governmental Entity pursuant to the HSR Act or by the FERC), the Seller shall pay the Buyer the amount of $50 million which the Parties agree reflects compensation for the Buyer's loss of opportunity to purchase the Shares in a timely manner. Each Party's right of termination under Section 7.1 is in addition to any other rights it may have under this Agreement or otherwise, and the exercise of a right of termination will not be an election of remedies except if the Party shall receive the compensation provided in the preceding sentence. ARTICLE VIII SURVIVAL & INDEMNITY 8.1 Survival of Representations and Warranties; Limitations on Liability. (a) The respective representations and warranties of the Parties set forth in this Agreement (except those in Section 2.18) shall survive up to and including the first 51 59 anniversary of the Closing; the representations and warranties of the Seller in Section 2.18 shall survive up to and including the second anniversary of the Closing; and after which respective survival periods, such representations and warranties shall terminate and be of no further force or effect. (b) In the case of any claim arising out of or based upon any breach of any representation or warranty of a Party set forth in this Agreement, no claim may be made thereunder unless the other Party delivers a Claim Notice within the survival period under Section 8.1(a). If a Party delivers a Claim Notice as provided in Section 8.4.2 prior to the expiration of the survival period, then the survival period with respect to the matter or matters described in such Claim Notice shall be tolled until all such matters shall have been finally resolved and any remedial action required in connection therewith shall have been effected. 8.2 Indemnification by the Buyer. The Buyer shall indemnify, defend and hold harmless the Seller Indemnitees against and from, and shall reimburse the Seller Indemnitees for, any loss, claim, liability, damage, cost or expense incurred or suffered by any of the Seller Indemnitees, (a) caused by, arising out of, or based upon, any breach of any representation and warranty by the Buyer on its own behalf contained in this Agreement or any of the Related Agreements (to the extent that the Buyer, MidCon or its Subsidiaries are a party thereto), and (b) caused by, arising out of, based upon or relating to, any breach of any covenant or agreement by the Buyer on its own behalf or on behalf of MidCon or its Subsidiaries contained in this Agreement or any of the Related Agreements (to the extent that the Buyer, MidCon or its Subsidiaries is a party thereto), in each case, if and to the extent arising from or related to 52 60 occurrences or events that occurred after the Closing and, in each case, together with interest at a rate per annum equal to the Reference Rate from the date upon which such loss, claim, liability, damage, cost or expense was incurred or suffered to the date of payment. 8.3 Indemnification by the Seller. 8.3.1 The Seller shall indemnify, defend and hold harmless the Buyer Indemnitees against and from, and shall reimburse the Buyer Indemnitees for: (a) any loss, claim, liability, damage, cost or expense incurred or suffered by any of the Buyer Indemnitees (i) caused by, arising out of, or based upon, any breach of any representation or warranty by the Seller contained in this Agreement or any of the Related Agreements, or (ii) caused by, arising out of, or based upon, any breach of any covenant or agreement (other than a representation or warranty) by the Seller contained in this Agreement or any Related Agreement; (b) any loss, claim, damage, liability, cost or expense arising out of the obligations of MidCon or its Subsidiaries in respect of the MidCon ESOP Agreements (other than any liability or obligation to pay principal or interest arising under or pursuant to the ESOP Note, the Term Loan Agreement or the Term Loan Assignment Agreement), in each case, together with interest at a rate per annum equal to the Reference Rate from the date upon which such loss, claim, liability, damage, cost or expense was incurred or suffered to the date of payment; 53 61 (c) any Taxes with respect to any Tax year or portion thereof ending on or before the Closing Date (or for any Tax year beginning before and ending after the Closing Date to the extent allocable (determined in a manner consistent with Sections 6.3, 6.6, 6.7 and 6.8 of this Agreement) to the portion of such period beginning before and ending on the Closing Date), other than Taxes with respect to the taxable year in which Closing occurs to which the provisions of the Tax Sharing Agreement remain in effect after the Closing, consistent with Section 6.2 of this Agreement; provided, however, that Seller's obligation pursuant to this sentence shall not include any liability to indemnify and hold harmless the Buyer Indemnitee for Tax liabilities (i) to the extent such Taxes are included in or covered by any reserve for Tax liability recorded on the 1997 Financial Statements and (ii) unless the amount of a particular Tax liability shall exceed $100,000 and then only to the extent the aggregate of all such Tax liabilities (exceeding $100,000) shall exceed ten million dollars ($10,000,000); and (d) any loss, claim, damage, liability, cost or expense arising out of or relating to any claims by Persons which own interests in the assets assigned by MidCon Gas Services Corp. ("MGS") to MC Panhandle Inc. ("MCP") pursuant to the Assignment and Assumption Agreement dated December 31, 1996 by and between MGS and MCP, including those cases referred to on Schedule 2.13 but only to the extent such losses, claims, damages, liabilities, costs and expenses (i) relate to the liability of MidCon or its Subsidiaries in such matter and (ii) exceed $10 million; provided, however, the Seller shall be entitled to defend, as more fully provided in Section 8.4.5, all actions, suits, proceedings or claims subject to this clause (d). 54 62 8.3.2 The Seller shall indemnify, defend and hold harmless MidCon and its Subsidiaries (collectively, the "Tax Indemnitees" and individually, a "Tax Indemnitee") against and from and shall reimburse the Tax Indemnitees from any liability that any of the Tax Indemnitees may suffer resulting from, arising out of, relating to, in the nature of, or caused by any increase in Tax liability arising out of or with respect to the ownership or disposition of, or investment in, Great Plains Gasifications Associates and MCN Coal Gasification Company. 8.4 Interpretation. The provisions of each of the foregoing Sections of this Article VIII shall be interpreted as follows: 8.4.1 The indemnity provided for by each of such Sections shall extend to, and the amount of any actual loss, liability, damage, cost or expense incurred or suffered by any Indemnified Person (whether a Seller Indemnitee or a Buyer Indemnitee) shall include, all losses, liabilities, damages, costs and expenses of such Indemnified Person, as the case may be, including amounts paid in settlement, costs of investigation and reasonable fees and expenses of attorneys, accountants or other agents and experts reasonably incident to matters indemnified against and the enforcement of such indemnity; provided, however, that neither Buyer Indemnitees nor Seller Indemnitees shall be entitled to indemnification hereunder for any loss of profits or other consequential damages. The losses, liabilities, damages, costs and expenses included in the indemnity provided for by each of the foregoing Sections of this Article VIII are herein collectively called "Damages". 55 63 8.4.2 The amount claimed by an Indemnified Person to be owing as described in each such Section, together with a list identifying to the extent reasonably possible each separate item of loss, liability, damage, cost or expense for which payment is so claimed, shall be set forth by such Person in a statement delivered to the indemnifying Party setting forth the details of and the basis for such claim ("Claim Notice") and shall be paid by such indemnifying Party, as and to the extent required herein, within 30 days after receipt of such Claim Notice or, if the indemnifying Party raises reasonable objection thereto within such 30 days, then whenever a determination as to whether the Indemnified Person is entitled to indemnification hereunder shall have occurred or shall have been mutually agreed to. 8.4.3 No payment on account of any actual loss, liability, damage, cost or expense pursuant to the provisions of Section 8.3.1(a) or Section 8.3.1(b) shall be required to be made by the Seller unless the Buyer Indemnitees shall have delivered to the Seller a Claim Notice therefor prior to the first anniversary of the Closing Date. No payment on account of any actual loss, liability, damage, cost or expense pursuant to the provisions of Section 8.3.1(c), Section 8.3.1(d) or Section 8.3.2 shall be required to be made by the Seller unless the Buyer Indemnitees or the Tax Indemnitees, respectively, shall have delivered to the Seller a Claim Notice therefor prior to the second anniversary of the Closing Date. No payment on account of any actual loss, liability, damage, cost or expense pursuant to the provisions of Section 8.2 (except for payments for breach of Buyer's covenants in Section 5.2 and Section 5.3 and Article VI) shall be required to be made by the Buyer unless the Seller's Indemnitee shall have delivered to the Buyer a Claim Notice therefor prior to the first anniversary of the Closing Date. 56 64 8.4.4 If any of the Buyer Indemnitees, the Tax Indemnitees, or Seller Indemnitees shall deliver a Claim Notice as provided in Section 8.4.3 prior to the applicable anniversary of the Closing Date, then the survival period with respect to each matter described in detail in such Claim Notice shall be tolled until such matter shall have been finally resolved and any remedial action required in connection therewith shall have been effected. 8.4.5 In the event that any action, suit or proceeding shall be brought against any Indemnified Person by any third party, which action, suit or proceeding, if determined adversely to the interests of such Indemnified Person, would entitle such Indemnified Person to indemnity pursuant to the provisions of Section 8.2 or Section 8.3, if the Claim Notice has been timely given pursuant to Section 8.4.3, such Indemnified Person shall reasonably promptly notify the indemnifying Party of the same in writing, but any failure to so notify shall not relieve the applicable indemnifying Party from any liability which it may have to such Indemnified Person under such Section 8.2 or Section 8.3 unless such failure would prejudice materially the rights of the Party entitled to receive such notification. The Person seeking indemnification pursuant to the provisions of this Article VIII shall have the right, at its sole cost and expense, to participate in any legal action for which indemnification shall be sought. However, the Party from whom indemnification shall be sought shall have the right to assume the defense thereof with counsel reasonably acceptable to the Person seeking indemnification and shall have the sole right to settle or otherwise dispose of such legal action in any manner it deems appropriate. The Person seeking indemnification shall make, at its sole cost and expense, personnel and records available to the indemnifying Party for the defense of claims or legal actions, as may be reasonably requested by the indemnifying Party, and shall take such 57 65 reasonable actions as may be necessary to mitigate its damages, which cost of mitigation shall be covered by the indemnity in this Article VIII. 8.5 Exclusive Remedy. The sole and exclusive liability of the Seller to the Buyer Indemnitees or the Tax Indemnitees, and of the Buyer to the Seller Indemnitees, for Damages under or in connection with this Agreement or the transactions contemplated hereby (including without limitation, for any breach or inaccuracy of any representation or warranty or for any breach of any covenant required to be performed hereunder) and the sole and exclusive remedy of the Buyer Indemnitees or the Tax Indemnitees and the Seller Indemnitees with respect to any of the foregoing, shall be as expressly set forth in this Article VIII and the Seller and the Buyer hereby waive, release and agree not to assert any other remedy for Damages, including, without limitation, common law and statutory rights. ARTICLE IX DEFINITIONS 9.1 "Affiliate" shall mean, with respect to any Person, any other Person that directly, or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with such Person. 9.2 "Affiliated Group" means any affiliated group within the meaning of Code Section 1504(a) or any similar group defined under a similar provision of state, local or foreign law. 58 66 9.3 "Agreement" shall mean this Stock Purchase Agreement, including its Exhibits and Schedules, as the same may be amended in writing from time to time in accordance with their respective terms. 9.4 "B Facility Loan" shall mean a loan by MidCon to the Seller as more fully set forth in the Cash Management Agreement. 9.5 "Business" shall mean the business and operations conducted by MidCon and its Subsidiaries as of the date hereof. 9.6 "Business Day" shall mean any day on which national banks in the City of New York, State of New York, are open for business. 9.7 "Buyer" shall mean KN Energy, Inc., a Kansas corporation. 9.8 "Buyer Benefit Plans" shall have the meaning set forth in Section 5.2.3(c). 9.9 "Buyer Indemnitees" shall mean the Buyer and each of its Affiliates and their respective officers, directors, employees and agents. 9.10 "Buyer's Pipeline Lease Guaranty" shall have the meaning set forth in Section 5.3.6. 9.11 "C Facility Loan" shall mean a loan by the Seller to MidCon as more fully set forth in the Cash Management Agreement. 59 67 9.12 "Cash Management Agreement" shall mean the Intercompany Cash Management Agreement, dated as of November 20, 1996, by and between the Seller and MidCon. 9.13 "Certificate of Designations" shall mean the Certificate of Designations of the CMIC Preferred Stock, as filed with the Secretary of State of the State of Delaware on November 20, 1996. 9.14 "Claim Notice" shall have the meaning set forth in Section 8.4.2. 9.15 "Closing" shall have the meaning set forth in Section 4.1. 9.16 "Closing Date" shall mean the Business Day on which the Closing shall occur. 9.17 "CMIC Preferred Stock" shall mean the Cumulative MidCon-Indexed Convertible Preferred Stock (Par Value $1.00 Per Share) of the Seller. 9.18 "Code" shall mean the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder. 9.19 "Commitments" shall have the meaning set forth in Section 5.2.5. 9.20 "Common Stock" shall have the meaning set forth in Section 2.4. 9.21 "Consents" shall have the meaning set forth in Section 5.3.2. 9.22 "Control" (and its derivative terms "Controlled", "Controls" etc.) shall mean the power and right to direct the management and policies of another Person, whether by 60 68 ownership of voting securities, the ability to elect a majority of the board of directors or other managing board or committee, by management contract, or otherwise. 9.23 "Current Assets" shall mean assets that are reasonably expected to be realized in cash or sold or consumed within one year or less, determined in accordance with GAAP on a consistent basis. 9.24 "Current Liabilities" shall mean liabilities, indebtedness and obligations that are reasonably expected to be payable within one year or less, determined in accordance with GAAP on a consistent basis. 9.25 "Damages" shall have the meaning set forth in Section 8.4.1. 9.26 "Dividend Note" shall mean that certain Dividend Note, dated November 20, 1996, in the original principal amount of $1,600,000,000, issued by MidCon to the Seller. 9.27 "Employee Plans and Agreements" shall mean each bonus, deferred compensation, incentive compensation, stock purchase, stock option, employment, consulting, severance or termination pay, hospitalization or other medical, life or other insurance, supplemental unemployment benefits, profit-sharing, pension or retirement plan, program, agreement or arrangement, and each other "employee benefit plan" (within the meaning of section 3(2) of ERISA), program, agreement or arrangement, whether formal or informal, written or oral, and whether legally binding or not, sponsored, maintained or contributed to or required to be contributed to by the Seller or MidCon or any of their Subsidiaries for the 61 69 benefit of any employee, former employee, consultant, officer, or director of MidCon or any of its Subsidiaries. 9.28 "Employees" shall mean collectively the Salaried Employees and the Union Employees. 9.29 "Employee Welfare Benefit Plan" shall have the meaning set forth in Section 3(1) of ERISA. 9.30 "Encumbrance" shall mean any lien, charge, encumbrance, conditional sale agreement, option, right of purchase, warrant, title retention agreement, pledge, restriction on transfer, voting trust, security interest or other adverse claim, whether arising by contract or law. 9.31 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder. 9.32 "ESOP Note" shall mean that certain Non-Recourse Promissory Note, dated November 20, 1996, in the amount of $1,398,600,000, issued by the MidCon ESOP Trust to the Seller. 9.33 "Facilities" shall have the meaning set forth in the Cash Management Agreement. 9.34 "FERC" shall mean the Federal Energy Regulatory Commission. 9.35 "Financial Statements" shall have the meaning set forth in Section 2.10. 62 70 9.36 "Former Salaried Employees" shall mean the former nonunion employees of MidCon or any of its Subsidiaries (i) who retired, died, became disabled or otherwise terminated employment prior to the Closing Date and (ii) who are not immediately after the Closing in the active employment of the Seller or any of its Subsidiaries. 9.37 "Former Union Employees" shall mean the former employees of MidCon or any of its Subsidiaries who were represented by a collective bargaining unit represented by the Union, including such employees who, on the Closing Date and pursuant to the terms of the union contract in effect as of the date of such employee terminated from service, retired, died, became disabled or otherwise terminated employment prior to the Closing Date. 9.38 "GAAP" shall mean United States generally accepted accounting principles. GAAP relating to the Seller or MidCon shall be that applied on a basis consistent with the preparation of the Financial Statements. 9.39 "Governmental Entity" shall mean any federal, state, local or foreign governmental or regulatory authority or agency. 9.40 "Government Securities" means direct non-callable obligations of, or non-callable obligations timely payments of which are guaranteed by, the United States of America, for the payment of which guarantee or obligations the full faith and credit of the United States of America is pledged. 9.41 "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. 63 71 9.42 "Indemnified Person" shall mean one of the Seller Indemnitees or the Buyer Indemnitees as the case may be. 9.43 "Insurance Novation Agreement" shall mean the agreement substantially in the form of Exhibit 5.1.5(b). 9.44 "Insurance Release Agreement" shall mean the agreement substantially in the form of Exhibit 5.1.5(a). 9.45 "Intercompany Agreements" shall mean (i) the Services Agreement, (ii) the Cash Management Agreement, (iii) the Tax Sharing Agreement, (iv) the MidCon Restructuring Agreements, (v) the Dividend Note, (vi) the Pipeline Lease, (vii) the Pipeline Lease Guaranty and (viii) the Originator Receivable Sales Agreement. 9.46 "Knowledge" shall mean, with respect to any Party, the actual conscious awareness of factual information, without independent investigation, of officers of such Party. 9.47 "LIBO Business Day" shall mean any day not a Saturday, Sunday or legal holiday in the State of New York and on which banks and the Federal Reserve Bank of New York are open for business in New York City; provided, however, that the term "LIBO Business Day" shall also exclude any day on which banks are not open for dealings in Dollar deposits in the London Interbank Market. 9.48 "LIBO Rate" shall mean, for any interest period, the interest rate per annum reflected in the Wall Street Journal under MONEY RATES London Interbank Offered Rates (LIBOR), or such independent source as shall be agreed by the Seller and the Buyer, for three 64 72 months, or such shorter period as may be applicable to the interest period, for the date that is two LIBO Business Days prior to the beginning of such interest period. 9.49 "Material Adverse Effect," with respect to any Person, shall mean an adverse effect, circumstance, condition, development or occurrence having (a) the effect in each individual case of a loss, liability, obligation or damages of more than twenty-five million dollars or (b) the effect in the aggregate of all losses, liability, obligation or damages of more than fifty million dollars, net in each case of any benefit arising from the event, liability, obligation, claim, litigation or violation giving rise to the adverse effect. 9.50 "MidCon" shall mean MidCon Corp., a Delaware corporation. 9.51 "MidCon ESOP" shall mean the MidCon Corp. Employee Stock Ownership Plan established by the Seller, effective as of November 20, 1996. 9.52 "MidCon ESOP Agreements" shall mean (i) the MidCon Corp. ESOP Trust Agreement by and between the Seller and U.S. Trust Company of California, N.A., as trustee, effective November 20, 1996, (ii) the MidCon ESOP, (iii) the Funding Agreement, dated November 20, 1996, by and between the Seller and U.S. Trust Company of California, N.A., in its capacity as trustee of the MidCon ESOP Trust; (iv) the Stock Purchase Agreement, dated November 20, 1996, by and between the Seller and the MidCon ESOP Trust; (v) the Pledge Agreement dated as of November 20, 1996, by and among the Seller, in its capacity as collateral agent, the Seller, in its individual capacity, MidCon and the MidCon ESOP Trust; (vi) the Stockholders' Agreement dated November 20, 1996 by and between the Seller and the 65 73 MidCon ESOP Trust, (vii) the Certificate of Designations; (viii) the ESOP Note and (ix) the Term Loan Agreement. 9.53 "MidCon ESOP Trustee" shall have the same meaning as "Trustee" in the MidCon ESOP. The MidCon ESOP Trustee is the U.S. Trust Company of California, N.A. as of the date of this Agreement. 9.54 "MidCon Indemnitees" shall have the meaning set forth in Section 5.2.6. 9.55 "MidCon Loans" shall mean loans made by the Seller to MidCon as more fully set forth in the Cash Management Agreement. 9.56 "MidCon Restructuring Agreements" shall mean all the agreements referred to in the definition of "MidCon Restructuring" in the Certificate of Designations. 9.57 "1997 Financial Statements" shall have the meaning set forth in Section 5.1.6. 9.58 "Notified Party" shall have the meaning set forth in Section 5.3.3. 9.59 "Notifying Party" shall have the meaning set forth in Section 5.3.3. 9.60 "OPC Loans" shall mean loans made by MidCon to the Seller as more fully set forth in the Cash Management Agreement. 9.61 "Originator Receivables Sale Agreement" shall mean the Originator Receivables Sale Agreement, dated as of October 29, 1992, by and among Occidental Receivables, Inc., 66 74 Occidental Chemical Corporation and the MidCon subsidiaries listed as originators on the signature pages thereto, as amended. 9.62 "Party" or "Parties" shall mean the Seller or the Buyer, or both, as the case may be. 9.63 "Person" shall mean an individual, corporation, partnership, limited liability company, association, trust, unincorporated organization, business, government or political subdivision thereof, governmental agency or other entity. 9.64 "Pipeline Lease" shall mean the Intrastate Pipeline System Lease, dated as of December 31, 1996, by and between the Pipeline Lessor and the Pipeline Lessee. 9.65 "Pipeline Lease Guaranty" shall mean the Guaranty and Agreement, dated December 31, 1996, by MidCon in favor of the Pipeline Lessor with regard to the guaranty of the obligations in favor of the Pipeline Lessee. 9.66 "Pipeline Lessee" shall mean MidCon Texas Pipeline Operator, Inc., a Delaware corporation, and its successors and assigns. 9.67 "Pipeline Lessor" shall mean MidCon Texas Pipeline, L.P., a Delaware limited partnership, and its successors and assigns. 9.68 "PUHCA" shall mean the Public Utility Holding Company Act of 1935, as amended. 9.69 "Purchase Price" shall have the meaning set forth in Section 1.2. 67 75 9.70 "Reference Rate" shall mean the rate of interest announced from time to time by The Chase Manhattan Bank, N.A., as its reference rate. This rate of interest shall be applied to the actual elapsed days over the total days in the applicable calendar year. 9.71 "Related Agreements" shall mean (a) the Insurance Release Agreement, (b) the Insurance Novation Agreement, (c) the Term Loan Assignment Agreement, (d) an interim services agreement, if any, and (e) any security agreement and control agreement or any letter of credit issued pursuant to Section 5.3.4. 9.72 "Salaried Employees" shall mean all employees, including salaried, hourly employees of MidCon or any of its Subsidiaries who are not Union Employees and who are immediately prior to the Closing (i) in the active employment of MidCon or any of its Subsidiaries, or (ii) on sick leave, short term disability, long term disability, or other leave of absence approved by the Seller or any of its Subsidiaries. 9.73 "SEC" shall mean the Securities and Exchange Commission. 9.74 "SEC Reports" shall have the meaning set forth in Section 2.11. 9.75 "Securities Act" shall mean the Securities Act of 1933, as amended. 9.76 "Securities Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. 9.77 "Seller" shall mean Occidental Petroleum Corporation, a Delaware corporation. 68 76 9.78 "Seller Indemnitees" shall mean the Seller and each of its Affiliates and their respective officers, directors, employees and agents. 9.79 "Services Agreement" shall mean the Services Agreement dated November 20, 1996 by and between the Seller and MidCon. 9.80 "Shares" shall have the meaning set forth in Section 2.4. 9.81 "Significant Subsidiary" shall mean the following Subsidiaries of MidCon: mc2, Inc., MidCon Gas Products Corp., MidCon Gas Services Corp., MidCon Power Services Corp., MidCon Texas Pipeline Operator, Inc., Natural Gas Pipeline Company of America, NGPL Offshore Company, NGPL - Canyon Compression Co., NGPL - Trailblazer Inc., and Palo Duro Pipeline Company, Inc. 9.82 "Subsidiary" of any Person shall mean another Person, with respect to which such first Person owns, directly or indirectly, an amount of the voting securities or other voting ownership or partnership interests sufficient to elect at least a majority of its board of directors or other governing body (or, if there are no such voting interests, more than 50% of its equity). 9.83 "Substitute Note" shall mean one or more notes payable to the order of the Seller, substantially in the form of Exhibit 9.83 hereto, which provides for interest at a rate equal to 0.3% plus the rate of interest (the "fixed rate equivalent") applicable to a promissory note with a fixed rate of interest that has the same present value as a promissory note that bears interest at the LIBO Rate applicable for each interest period, assuming that both notes have the 69 77 same original principal amount as such Substitute Note and pay interest and principal at the same times as such Substitute Note, which fixed rate equivalent shall be determined on the fifth Business Day prior to the Closing Date by reference to the implied forward LIBO Rates derived from the eurodollar futures market, which implied forward LIBO Rates are published by an independent source agreed to by the Buyer and the Seller, in accordance with a methodology previously agreed to by the Buyer and the Seller. 9.84 "Tax" means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, environmental (including taxes under Code Section 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not. 9.85 "Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. 9.86 "Tax Sharing Agreement" shall mean the Tax Sharing Agreement dated as of November 20, 1996 by and between the Seller and MidCon. 9.87 "Term Loan Agreement" shall mean the Term Loan Agreement, dated as of November 20, 1996, by and among the Seller, MidCon Corp. ESOP Trust and MidCon. 70 78 9.88 "Term Loan Assignment Agreement" shall mean an agreement substantially in the form set forth in Exhibit 9.88. 9.89 "Termination Allowance Plan" shall mean the MidCon Corp. Termination Allowance Plan adopted by MidCon as amended from time to time. 9.90 "Termination Date" shall mean June 30, 1998 or such other date as the Parties may mutually agree in writing. 9.91 "Union" shall mean the United Steel Workers (Local 1445--2) representing certain hourly employees of MidCon. 9.92 "Union Contract" shall mean the collective bargaining agreement between Natural Gas Pipeline of America and the United Steel Workers Local 1445-2. 9.93 "Union Employees" shall mean all employees of MidCon or its Subsidiaries immediately prior to the Closing Date who are part of the collective bargaining unit represented by the Union, including such employees who, on the Closing Date and pursuant to the terms of the Union Contract, (i) are in the active employment of MidCon or any of its Subsidiaries, or (ii) are on layoff, sick leave or other leave of absence. 71 79 ARTICLE X MISCELLANEOUS 10.1 Further Assurances. Subject to the terms and conditions herein provided, each of the Parties agrees to use all reasonable commercial efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement, including using all reasonable commercial efforts to obtain all necessary waivers, consents and approvals in connection with any governmental requirements set forth in Section 2.3 and Section 3.3 of the Agreement, and to effect all necessary registrations and filings. In case at any time after the Closing Date any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and/or directors of the Seller, the Buyer or MidCon shall take all such necessary action. 10.2 Preservation of Books and Records. (a) Each Party agrees that for the period specified in subpart (b) such Party shall take all necessary action to ensure that all corporate books and records of MidCon and its Subsidiaries with respect to periods ending on or before the Closing Date in the possession or control of such Party or its Affiliates shall be open for inspection by representatives of the other Party at any time during regular business hours and that the other Party may during such statutory period at its expense make such excerpts therefrom as it may reasonably request. 72 80 (b) For the period of 10 years following the Closing Date or such longer period pursuant to Article VI, no Party or its Affiliates shall destroy or give up possession of any original or any copy of any of the books and records relating to any matter for which a Party shall have any continuing responsibility under this Agreement or any agreement contemplated by this Agreement without first offering to the other Party the opportunity, at its expense, to obtain such original or a copy thereof. During such period, the Party shall use reasonable commercial efforts to cooperate with the other Party and make such books and records available to the employees and representatives of the other Party to the extent that the other Party may reasonably require for its corporate and other business purposes. 10.3 Confidentiality. Each Party and its Affiliates shall, and shall cause their respective employees, agents, accountants, legal counsel and other representatives to perform and comply with the two Confidentiality Agreements dated October 9, 1997 and December 16, 1997 respectively between the Parties. 10.4 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given upon personal delivery, facsimile transmission (which is confirmed) or delivery by an overnight express courier service (delivery, postage or freight charges prepaid), or on the fourth day following deposit in the United States mail (if sent by registered or certified mail, return receipt requested, delivery, postage or freight charges prepaid), addressed to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): 73 81 (a) if to Seller: Occidental Petroleum Corporation 10889 Wilshire Boulevard Los Angeles, California 90024 Attention: General Counsel Facsimile Number: (310) 443-6195 (b) if to Buyer: KN Energy, Inc. P.O. Box 281304 370 Van Gordon Lakewood, Colorado 80228-8304 Attention: Vice President Facsimile Number: (303) 763-3115 10.5 Public Announcements. Prior to the Closing, the Parties shall not, and shall not permit any of their respective Affiliates to, issue any press release or other public announcement concerning this transaction except (a) with the prior approval of the other Party, or (b) when, on the advice of legal counsel, such release or announcement is required by the federal securities laws or the rules and regulations of any of the national exchanges, in which case the Parties shall. to the extent practicable, first consult with each other. 10.6 Successors and Assigns. No party to this Agreement may assign any of its rights or obligations under this Agreement without the express written consent of the other Party hereto. Any assignment in violation of the foregoing shall be null and void. Subject to the preceding sentences of this Section 10.6, the provisions of this Agreement (and, unless 74 82 otherwise expressly provided therein, of any document delivered pursuant to or in connection with this Agreement) shall be binding upon and inure to the benefit of the Parties and their respective legal representatives, successors and assigns. 10.7 Expenses. Whether or not this Agreement is consummated, all costs and expenses (including legal fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby and thereby shall be paid by the Party incurring such expense. Any brokerage, finders or other similar fees or commissions payable to Merrill Lynch & Co. or to Credit Suisse First Boston Corporation in connection with the transactions contemplated by this Agreement shall be paid by the Seller. Any brokerage, finder's or other similar fees payable to Morgan Stanley & Co. Incorporated, Petrie Parkman & Co., Inc. or to Salomon Brothers Inc in connection with the transactions contemplated by this Agreement shall be paid by the Buyer. 10.8 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void, unenforceable or against the applicable regulatory policy, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. 75 83 10.9 Construction; Interpretation. (a) When a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference shall be to an Article, Section, Exhibit or Schedule to this Agreement unless otherwise indicated. (b) The words "include," "includes" and "including" when used herein shall be deemed in each case to be followed by the words "without limitation." (c) The information set forth in any Section or in any Schedule shall be deemed to qualify and relate to every provision of this Agreement. (d) The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. (e) The Parties agree that they have been represented by counsel during the negotiation and execution of this Agreement and, therefore waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the Party drafting such agreement or document. (f) Any reference to any federal, state, local or foreign statute or law shall be deemed also to refer to all valid and enforceable rules and regulations promulgated thereunder, unless the context requires otherwise. 76 84 10.10 Entire Agreement; Third Party Beneficiaries. This Agreement, those certain Confidentiality Agreements by and between the Seller and the Buyer (including the documents and the instruments referred to herein and therein) as more fully described in Section 10.3 and that certain letter agreement from the Seller to the Buyer dated the date hereof regarding compensation of certain officers of MidCon (a) constitute the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, and (b) except as provided under Section 5.2.3, Section 5.2.6, Section 8.2 and Section 8.3, are not intended to confer upon any person other than the Parties any rights or remedies hereunder. 10.11 Amendment and Modification. This Agreement may not be amended, modified and supplemented, and no amendment to this Agreement shall be effective, unless evidenced by an instrument in writing signed by each Party. 10.12 Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Delaware, without regard to principles of conflicts of law. 10.13 Waiver of Jury Trial. Each of the Buyer and the Seller hereby irrevocably waive all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Agreement or actions of the Buyer and the Seller in the negotiation, administration, performance and enforcement hereof. 77 85 10.14 Consent to Jurisdiction and Forum Selection. Each Party hereby irrevocably agrees that any legal action or proceeding against it or any of its Affiliates arising out of this Agreement may be brought in the courts of the State of Delaware, or of the United States of America District Court for Delaware and does hereby irrevocably (a) designate, appoint and empower the Secretary of State of the State of Delaware to receive for and on behalf of it and its Affiliates service of process in the State of Delaware, and (b) consent to service of process outside the territorial jurisdiction of such courts in the manner permitted by law. In addition, each Party, on its own behalf and on behalf of its Affiliates, irrevocably waives (i) any objection which such Party or its Affiliates may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of, or relating to, this Agreement brought in any such court, (ii) any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum, and (iii) the right to object, with respect to any such claim, suit, action or proceeding brought in any such court, that such court does not have jurisdiction over such Party or any other Party. 10.15 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be considered one and the same agreement and shall become effective when two or more counterparts have been signed by each of the Parties and delivered to the other Party, it being understood that all Parties need not sign the same counterpart. 78 86 IN WITNESS WHEREOF, the Seller and the Buyer have caused this Agreement to be signed by their respective officers thereunder duly authorized, all as of the date first written above. OCCIDENTAL PETROLEUM CORPORATION ("Seller") By: /s/ Stephen I. Chazen ------------------------------------ Its: Executive Vice President - Corporate Development [Corporate Seal] Attest KN ENERGY, INC. ("Buyer") By: /s/ Larry D. Hall ------------------------------------ Its: Chairman of the Board, President and Chief Executive Officer [Corporate Seal] Attest 79 EX-23.1 3 CONSENT OF INDEPENDENT ACCOUNTANTS 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this Registration Statement of our report dated February 4, 1997, included in K N Energy, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1996, as amended, and to all references to our Firm included in this Registration Statement. /s/ ARTHUR ANDERSEN LLP -------------------------------------- Arthur Andersen LLP Denver, Colorado January 16, 1998 EX-23.2 4 CONSENT OF INDEPENDENT ACCOUNTANTS 1 EXHIBIT 23.2 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this Registration Statement of our report dated January 31, 1997, on MidCon Corp.'s consolidated financial statements for the year ended December 31, 1996, included in the K N Energy, Inc. Form 8-K dated January 16, 1998, and to all references to our Firm included in this Registration Statement. /s/ ARTHUR ANDERSEN LLP -------------------------------------- Arthur Andersen LLP Chicago, Illinois January 16, 1998 EX-24 5 POWERS OF ATTORNEY 1 EXHIBIT 24 LIMITED POWER OF ATTORNEY K N ENERGY, INC. KNOW ALL MEN BY THESE PRESENTS that, the undersigned director or officer of K N Energy, Inc., a Kansas corporation, does hereby make, constitute and appoint LARRY D. HALL, CLYDE E. McKENZIE and E. WAYNE LUNDHAGEN and each of them acting individually, his true and lawful attorney with power to act without the other and with full power of substitution, to execute, deliver and file, for and on his behalf, and in his name and in his capacity or capacities as aforesaid, a Registration Statement on Form S-3 for filing with the Securities and Exchange Commission under the Securities Act of 1933, as amended, with respect to stock purchase units, stock purchase contracts, debentures, guarantees, debt securities and Common Stock, $5.00 par value per share, of K N Energy, Inc. and preferred securities of K N Capital Trust III, and any and all amendments (including post-effective amendments) thereto and any and all related Registration Statements (including amendments thereto) filed pursuant to Rule 462 promulgated under the Securities Act of 1933 or other documents in support thereof or supplemental thereto, hereby granting to said attorneys and each of them full power and authority to do and perform each and every act and thing whatsoever as said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 13th day of January, 1998. /s/ LARRY D. HALL -------------------------------------- Larry D. Hall /s/ CLYDE E. MCKENZIE -------------------------------------- Clyde E. McKenzie /s/ EDWARD H. AUSTIN, JR. -------------------------------------- Edward H. Austin, Jr. /s/ CHARLES W. BATTEY -------------------------------------- Charles W. Battey /s/ STEWART A. BLISS -------------------------------------- Stewart A. Bliss /s/ DAVID W. BURKHOLDER -------------------------------------- David W. Burkholder /s/ DAVID M. CARMICHAEL -------------------------------------- David M. Carmichael /s/ ROBERT W. CHITWOOD -------------------------------------- Robert W. Chitwood /s/ HOWARD P. COGHLAN -------------------------------------- Howard P. Coghlan 2 /s/ JORDAN L. HAINES -------------------------------------- Jordan L. Haines /s/ WILLIAM J. HYBL -------------------------------------- William J. Hybl /s/ EDWARD RANDALL, III -------------------------------------- Edward Randall, III /s/ JAMES C. TAYLOR -------------------------------------- James C. Taylor /s/ H. A TRUE, III -------------------------------------- H. A True, III -----END PRIVACY-ENHANCED MESSAGE-----