-----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, U9mwrre74MoqT1Xu0VqbRDMtSYESzDUJ5GeQpDpubEx4ehmAp/NTiNz+M7HEe46Y r4y596nt01MpDxFOv2dVZw== 0000950123-98-010259.txt : 19981125 0000950123-98-010259.hdr.sgml : 19981125 ACCESSION NUMBER: 0000950123-98-010259 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19981119 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19981124 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: 8-K SEC ACT: SEC FILE NUMBER: 001-06446 FILM NUMBER: 98758552 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 8-K 1 FORM 8-K RE: K N ENERGY, INC. 1 Securities And Exchange Commission Washington, D.C. 20549 ------------ FORM 8-K ------------ CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (Date of earliest event reported) November 19, 1998 K N ENERGY, INC. (Exact name of registrant as specified in its charter) KANSAS 1-6446 48-0290000 (State or other jurisdiction (Commission File Number) (IRS Employer Identification of incorporation) Number)
370 VAN GORDON STREET P.O. BOX 281304 LAKEWOOD, COLORADO 80228-8304 (Address of principal executive offices) (303) 989-1740 (Registrant's telephone number, including area code) 2 2 Item 5. Other Events Pursuant to the terms and conditions of an Underwriting Agreement dated November 19, 1998, among K N Energy, Inc. (the "Registrant") and Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co., Petrie Parkman & Co., Inc., Salomon Smith Barney Inc., Jefferies & Company, Inc. and NationsBanc Montgomery Securities LLC, as representatives of the several underwriters named therein, the Registrant will issue on or about November 25, 1998, 10,706,000 of its 8.25% Premium Equity Participating Security Units -- PEPS Units (the "PEPS Units"). Pursuant to the terms and conditions of an Underwriting Agreement dated November 19, 1998, among the Registrant and Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co., Salomon Smith Barney Inc., Jefferies & Company, Inc., NationsBanc Montgomery Securities LLC and Petrie Parkman & Co., Inc., as the underwriters, the Registrant will issue on or about November 25, 1998, $400,000,000 aggregate principal amount of its 6.45% Senior Notes due 2001 (the "Senior Notes"). Item 7. Exhibits Exhibit 1.1 Underwriting Agreement for the PEPS Units, dated November 19, 1998, among the Registrant and Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co., Petrie Parkman & Co., Inc., Salomon Smith Barney Inc., Jefferies & Company, Inc. and NationsBanc Montgomery Securities LLC, as representatives of the several underwriters named therein. Exhibit 1.2 Underwriting Agreement for the Senior Notes, dated November 19, 1998, among the Registrant and Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co., Salomon Smith Barney Inc., Jefferies & Company, Inc., NationsBanc Montgomery Securities LLC and Petrie Parkman & Co., Inc., as the underwriters. 3 3 Exhibit 4.1 Form of 2001 Senior Note. Exhibit 4.2 Form of PEPS Unit (Coupon Security). Exhibit 4.3 Form of PEPS Unit (Zero-Coupon Security). Exhibit 4.4 Purchase Contract Agreement dated as of November 25, 1998, between the Registrant and U.S. Bank Trust National Association, as Purchase Contract Agent. Exhibit 4.5 Pledge Agreement dated as of November 25, 1998, among the Registrant, the Purchase Contract Agent and The Chase Manhattan Trust Company, National Association, as Collateral Agent. Exhibit 8 Tax Opinion of Simpson Thacher & Bartlett. 4 4 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. K N ENERGY, INC. (Registrant) By: /s/ Rose M. Robeson ------------------------------------ Name: Rose M. Robeson Title: Vice President and Treasurer Date: November 25, 1998 5 Exhibit Index Exhibits to Form 8-K
Number in Exhibit Table Exhibit ------------- ------- 1.1 Underwriting Agreement for the PEPS Units, dated November 19, 1998, among the Registrant and Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co., Petrie Parkman & Co., Inc., Salomon Smith Barney Inc., Jefferies & Company, Inc. and NationsBanc Montgomery Securities LLC, as representatives of the several underwriters named therein. 1.2 Underwriting Agreement for the Senior Notes, dated November 19, 1998, among the Registrant and Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co., Salomon Smith Barney Inc., Jefferies & Company, Inc., NationsBanc Montgomery Securities LLC and Petrie Parkman & Co., Inc., as the underwriters.
6 Exhibit 4.1 Form of 2001 Senior Note. Exhibit 4.2 Form of PEPS Unit (Coupon Security). Exhibit 4.3 Form of PEPS Unit (Zero Coupon Security). Exhibit 4.4 Purchase Contract Agreement dated as of November 25, 1998, between the Registrant and U.S. Bank Trust National Association, as Purchase Contract Agent. Exhibit 4.5 Pledge Agreement dated as of November 25, 1998, among the Registrant, the Purchase Contract Agent and The Chase Manhattan Trust Company, National Association, as Collateral Agent. Exhibit 8 Tax Opinion of Simpson Thacher & Bartlett. EX-1.1 2 UNDERWRITING AGREEMENT 1 Exhibit 1.1 CONFORMED COPY K N ENERGY, INC. 9,310,000 8.25% PREMIUM EQUITY PARTICIPATING SECURITY UNITS - PEPS(SM) UNITS UNDERWRITING AGREEMENT November 19, 1998 2 November 19, 1998 Morgan Stanley & Co. Incorporated Merrill Lynch, Pierce, Fenner & Smith Incorporated Goldman, Sachs & Co. Petrie Parkman & Co., Inc. Salomon Smith Barney Inc. Jefferies & Company, Inc. NationsBanc Montgomery Securities LLC c/o Morgan Stanley & Co. Incorporated 1585 Broadway New York, New York 10036 Dear Sirs and Mesdames: K N Energy, Inc., a Kansas corporation (the "COMPANY"), proposes to issue and sell to the several Underwriters listed in Schedule I hereto (the "UNDERWRITERS"), for whom you are acting as representatives (the "REPRESENTATIVES"), subject to the terms and conditions stated herein, an aggregate of 9,310,000 8.25% Premium Equity Participating Security Units - -PEPS(SM) Units (the "UNDERWRITTEN SECURITIES") of the Company. Each Security (as defined below) will consist of (a) a stock purchase contract (a "PURCHASE CONTRACT") under which (i) the holder of the Security will purchase from the Company on November 30, 2001, for an amount in cash equal to the stated amount per Security of $43 (the "STATED AMOUNT"), a number of shares of common stock, par value $5.00 per share, of the Company (the "COMMON STOCK"), as set forth in such Purchase Contract and (ii) the Company will pay contract fees as set forth in such Purchase Contract (the "CONTRACT FEES") to the holder of the Security, and (b) 5.875% United States Treasury Notes due November 30, 2001 that are held through the Treasury/Reserve Automated Debt Entry System ("TREASURY NOTES") having a principal amount equal to the Stated Amount, or security entitlements in respect thereof. In connection therewith, the Underwriters will, subject to the terms and conditions stated herein, purchase Treasury Notes (or security entitlements in respect thereof) at the direction of the Company and for the benefit of the holders of the Securities, which Treasury Notes (or security entitlements in respect thereof) will be pledged by the holders of the Securities to The Chase Manhattan Trust Company, National Association, 3 as collateral agent for the Company (the "COLLATERAL AGENT"). Additionally, the Company proposes to issue and sell to the several Underwriters, for the sole purpose of covering over-allotments in connection with the sale of the Underwritten Securities, at the option of the Underwriters, up to an additional 1,396,000 Securities (the "OPTION SECURITIES") and, in the event any such Option Securities are purchased, the Underwriters propose to purchase and pledge to the Collateral Agent the additional Treasury Notes (having an aggregate principal amount equal to the aggregate Stated Amount times the number of Option Securities to be purchased by the Underwriters upon the exercise of such option), or security entitlements in respect thereof, constituting a part of such Option Securities. The Underwritten Securities and any Option Securities are herein referred to as the "SECURITIES". The Common Stock will have attached thereto rights (the "RIGHTS") issued pursuant to a Rights Agreement (the "RIGHTS AGREEMENT") dated as of August 21, 1995 between the Company and The Bank of New York, as Rights Agent. The Company and U.S. Bank Trust National Association, as Purchase Contract Agent (the "AGENT") propose to enter into a Purchase Contract Agreement (the "PURCHASE CONTRACT AGREEMENT") to be dated as of the Closing Date (as defined below). The Company and the Collateral Agent propose to enter into a Pledge Agreement (the "PLEDGE AGREEMENT") to be dated as of the Closing Date. The Purchase Contracts, the Purchase Contract Agreement and the Pledge Agreement are herein collectively referred to as the "PEPS AGREEMENTS". The Company has prepared and filed with the Securities and Exchange Commission (the "COMMISSION"), in accordance with the provisions of the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder (collectively, the "SECURITIES ACT"), a registration statement on Form S-3 (registration no. 333-55921), including a related prospectus, relating to the registration of certain securities of the Company including the Securities (collectively, the "SHELF SECURITIES"), to be sold from time to time by the Company. Such registration statement also constitutes post-effective amendment number 1 to registration statement no. 333-44421 (the "PRIOR REGISTRATION STATEMENT"). The registration statement as amended at the date of this Agreement, including information, if any, deemed to be part of the registration statement at the time of effectiveness pursuant to Rule 430A under the Securities Act, together with the Prior Registration Statement, is hereinafter referred to as the "REGISTRATION STATEMENT" and the prospectus included therein relating to the Shelf Securities, in the form first used to confirm sales of the Securities, is hereinafter referred to as the "BASIC PROSPECTUS." The Basic Prospectus, as supplemented by the prospectus supplement dated November 19, 1998 (the "PROSPECTUS SUPPLEMENT"), relating to the Securities, in the form first used to confirm sales of the Securities is hereinafter referred to as the "PROSPECTUS". If the Company has filed an abbreviated registration statement 2 4 pursuant to Rule 462(b) under the Securities Act (the "RULE 462 REGISTRATION STATEMENT"), then any reference herein to the term "Registration Statement" shall be deemed to include such Rule 462 Registration Statement. Any reference to the term Registration Statement, any preliminary prospectus, the Basic Prospectus or the Prospectus shall include the documents incorporated therein by reference. The terms "SUPPLEMENT" and "AMENDMENT" or "AMEND" as used in this Agreement shall include all documents subsequently filed by the Company with the Commission pursuant to the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), that are deemed to be incorporated by reference in the Prospectus. Concurrently with the offering of Securities, the Company intends to offer $400 million aggregate principal amount of senior unsecured notes (the "DEBT OFFERING"). On January 30, 1998, the Company acquired from Occidental Petroleum Corporation ("OCCIDENTAL") all of the capital stock of MidCon Corp. ("MIDCON") and a short-term note in the aggregate principal amount of $1.39 billion for $2.1 billion in cash and another short-term note in the aggregate principal amount of $1.39 billion (the "ACQUISITION"). Upon the consummation of the Acquisition, MidCon became a wholly owned subsidiary of the Company. MidCon, MidCon Texas Pipeline Operator, Inc. and Natural Gas Pipeline Company of America, K N Gas Gathering, Inc., K N Interstate Gas Transmission Co. and K N Services, Inc. are referred to herein as "SIGNIFICANT SUBSIDIARIES". 1. Representations and Warranties of the Company. The Company represents and warrants to and agrees with each of the Underwriters that: (a) The Registration Statement has become effective; no stop order suspending the effectiveness of the Registration Statement is in effect, and no proceedings for such purpose are pending before or threatened by the Commission. (b) (i) Each document, if any, filed or to be filed pursuant to the Exchange Act and incorporated by reference in the Prospectus complied or will comply when so filed in all material respects with the Exchange Act and the applicable rules and regulations of the Commission thereunder, (ii) on the original effective date of the Registration Statement, and on the effective date of the most recent post-effective amendment thereto, if any, the Registration Statement did not contain and, as amended or supplemented, if applicable, will not contain, any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (iii) the Registration Statement and the Prospectus comply and, as amended or supplemented, if applicable, will comply in all material respects with the 3 5 Securities Act and the applicable rules and regulations of the Commission thereunder and (iv) the Prospectus does not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this paragraph do not apply to statements or omissions in the Registration Statement or the Prospectus based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter or its counsel through you expressly for use therein. (c) The Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the state of Kansas, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its consolidated subsidiaries, taken as a whole. (d) Each Significant Subsidiary has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its consolidated subsidiaries, taken as a whole; all of the issued shares of capital stock of each such Significant Subsidiary have been duly and validly authorized and issued, are fully paid and non-assessable and are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims. (e) This Agreement has been duly authorized, executed and delivered by the Company. (f) The Securities and the PEPS Agreements have been duly authorized and, at the Closing Date or, in the case of Purchase Contracts constituting part of the Option Securities, the Option Closing Date, will have been duly executed and delivered by the Company, and, as of the Closing Date or the Option Closing Date, as the case may be, assuming 4 6 due authorization, execution and delivery by parties other than the Company thereunder, the PEPS Agreements will be valid and legally binding obligations of the Company, enforceable in accordance with their respective terms, subject to applicable bankruptcy, insolvency or similar laws relating to or affecting creditors' rights generally and general principles of equity. The Securities and the PEPS Agreements conform in all material respects to the descriptions thereof contained in the Prospectus. (g) The shares of Common Stock to be issued and sold by the Company pursuant to the Purchase Contracts upon settlement thereof have been duly and validly authorized and reserved for issuance. Such Common Stock, when issued and delivered in accordance with the provisions of the PEPS Agreements, will be duly authorized, validly issued, fully paid and non-assessable, and the issuance of such Common Stock will not be subject to any preemptive or similar rights. (h) The authorized capital stock of the Company conforms as to legal matters to the description thereof contained in the Prospectus. (i) The shares of Common Stock outstanding prior to the issuance of the Securities have been duly authorized and are validly issued, fully paid and non-assessable. (j) The Rights Agreement has been duly authorized, executed and delivered by the Company; the Rights have been duly authorized by the Company and, when issued upon issuance of the shares of Common Stock upon settlement of the Purchase Contracts constituting a part of the Securities, will be validly issued, and the shares of Class B Junior Participating Series Preferred Stock issuable upon exercise of the Rights have been duly authorized by the Company and validly reserved for issuance, and when issued upon the exercise of the Rights in accordance with the terms of the Rights Agreement, will be validly issued, fully paid and non-assessable. (k) The execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement and the PEPS Agreements and the consummation of the transactions contemplated in this Agreement and the PEPS Agreements and compliance by the Company with its obligations under this Agreement and the PEPS Agreements will not contravene any provision of applicable law or the articles of incorporation or by-laws of the Company or any agreement or other instrument binding upon the Company or any of its 5 7 Significant Subsidiaries that is material to the Company and its subsidiaries, taken as a whole, or any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any Significant Subsidiary, and no consent, approval, authorization or order of, or qualification with, any governmental body or agency is required for the performance by the Company of its obligations under this Agreement, except the registration of the Securities under the Securities Act and such as have been obtained or as may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Securities. (l) There has not occurred any material adverse change, or any development involving a prospective material adverse change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Prospectus (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement). (m) There are no legal or governmental proceedings pending or threatened to which the Company or any of its subsidiaries is a party or to which any of the properties of the Company or any of its subsidiaries is subject that are required to be described in the Registration Statement or the Prospectus and are not so described or any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or the documents incorporated therein by reference or to be filed as an exhibit to the Registration Statement that are not described or filed as required. (n) Each preliminary prospectus relating to the Securities filed as part of the Registration Statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the Securities Act, complied when so filed in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder. (o) The Company is not and, after giving effect to the offering and sale of the Securities and the application of the proceeds thereof as described in the Prospectus, will not be an "investment company" as such term is defined in the Investment Company Act of 1940, as amended. (p) The Company and its subsidiaries (i) are in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants 6 8 ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole. (q) Except as disclosed in the Prospectus, there are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company or to require the Company to include such securities with the Securities registered pursuant to the Registration Statement. (r) To the knowledge of the Company, no person or corporation which is a "holding company" or a "subsidiary of a holding company", within the meaning of such terms as defined in the Public Utility Holding Company Act of 1935, directly or indirectly owns, controls or holds with power to vote 10% or more of the outstanding voting securities of the Company; and the Company is not a "holding company" or to its knowledge, a "subsidiary of a holding company" as so defined. (s) The Company and its subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities, including, without limitation, the Federal Energy Regulatory Commission, necessary to conduct their respective businesses as described in the Prospectus, except when the failure to possess such certificates, authorizations or permits would not have a material adverse effect on the Company and its subsidiaries, taken as a whole, and neither the Company nor any such subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a material adverse effect on the Company and its subsidiaries, taken as a whole. (t) The financial statements (including the related notes and supporting schedules) filed as part of the Registration Statement or included or incorporated by reference in the Prospectus present fairly in all material respects the financial position and results of operations of the 7 9 entities purported to be shown thereby, at the dates and for the periods indicated, and have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved, except as otherwise stated therein. (u) The pro forma financial statements of the Company, and the related notes thereto, included in the Prospectus present fairly in all material respects the pro forma financial position of the Company, as of the dates indicated and the results of their operations for the periods specified; the pro forma combined financial information, and the related notes thereto, included in the Prospectus has been prepared in accordance with the applicable requirements of the Exchange Act and is based upon good faith estimates and assumptions believed by the Company to be reasonable. (v) Subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, (i) the Company and its subsidiaries have not incurred any material liability or obligation, direct or contingent, nor entered into any material transaction not in the ordinary course of business; (ii) the Company has not purchased any of its outstanding capital stock, nor declared, paid or otherwise made any dividend or distribution of any kind on its capital stock other than ordinary and customary dividends; and (iii) there has not been any material change in the capital stock, short-term debt or long-term debt of the Company and its consolidated subsidiaries, except in each case as described in the Prospectus (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement). 2. Agreements to Sell and Purchase. The Company hereby agrees to sell to the several Underwriters, and each Underwriter, upon the basis of the representations and warranties herein contained, but subject to the conditions hereinafter stated, agrees, severally and not jointly, to purchase from the Company the number of Underwritten Securities set forth in Schedule I hereto opposite the name of such Underwriter. In connection therewith, the Underwriters agree to purchase, at the direction of the Company and for the benefit of the holders of the Securities, the Treasury Notes (or security entitlements in respect thereof) constituting a part of the Underwritten Securities. The Treasury Notes (or security entitlements in respect thereof) will be pledged to the Collateral Agent to secure the holders' obligations to purchase Common Stock under the Purchase Contracts. Such pledge shall be effected by the giving by the Underwriters to the securities intermediary in respect of their security entitlements with respect to the Treasury Notes to be pledged on the Closing Date (as defined below) in accordance with the Pledge Agreement of entitlement orders directing such 8 10 securities intermediary to credit, or to instruct the securities intermediary with whom the Collateral Agent maintains the applicable securities account to credit, the securities account of the Collateral Agent with security entitlements in respect of such Treasury Notes and the crediting by such securities intermediary of such security entitlements to such securities account. The purchase price per Underwritten Security (the "PURCHASE PRICE") to be paid by the Underwriters shall be $41.71, all of which shall be paid by the Underwriters in the form of the purchase of the Treasury Notes (or security entitlements in respect thereof) constituting a part of the Underwritten Securities as provided above. The Company agrees to pay to the Underwriters an amount per Underwritten Security (the "ADDITIONAL PURCHASE PRICE") representing the difference between the purchase price (exclusive of any accrued interest) of the Treasury Notes (or security entitlement in respect thereof) constituting a part of the Underwritten Securities and the principal amount thereof. On the basis of the representations and warranties contained in this Agreement, and subject to its terms and conditions, the Company agrees to sell to the Underwriters the Option Securities, and the Underwriters shall have a one-time right to purchase, severally and not jointly, up to 1,396,000 Option Securities. If you, on behalf of the Underwriters, elect to exercise such option, you shall so notify the Company in writing not later than 30 days after the date of this Agreement, which notice shall specify the number of Option Securities to be purchased by the Underwriters and the date on which such shares are to be purchased. Such date may be the same as the Closing Date (as defined below) but not earlier than the Closing Date nor later than ten business days after the date of such notice. Option Securities may be purchased as provided in Section 4 hereof solely for the purpose of covering over-allotments made in connection with the offering of the Underwritten Securities. If any Option Securities are to be purchased, each Underwriter agrees, severally and not jointly, to purchase the number of Option Securities (subject to such adjustments to eliminate fractional units as you may determine) that bears the same proportion to the total number of Option Securities to be purchased as the number of Underwritten Securities set forth in Schedule I hereto opposite the name of such Underwriter bears to the total number of Underwritten Securities. In connection with the purchase of any Option Securities, the Underwriters agree to purchase, at the direction of the Company and for the benefit of the holders of the Securities, the Treasury Notes (or security entitlements in respect thereof) constituting a part of such Option Securities. The Treasury Notes (or security entitlements in respect thereof) will be pledged to the Collateral Agent to secure the holders' obligations to purchase Common Stock under the Purchase Contracts. Such pledge shall be effected by the giving by the Underwriters to the 9 11 securities intermediary in respect of their security entitlements with respect to the Treasury Notes to be pledged on the Option Closing Date (as defined below) in accordance with the Pledge Agreement of entitlement orders directing such securities intermediary to credit, or to instruct the securities intermediary with whom the Collateral Agent maintains the applicable securities account to credit, the securities account of the Collateral Agent with security entitlements in respect of such Treasury Notes and the crediting by such securities intermediary of such security entitlements to such securities account. The purchase price per Option Security to be paid by the Underwriters shall be the Purchase Price, all of which shall be paid by the Underwriters in the form of the purchase of the Treasury Notes (or security entitlements in respect thereof) constituting a part of the Option Securities purchased by the Underwriters as provided above. The Company agrees to pay to the Underwriters an amount per Option Security purchased by the Underwriters equal to the Additional Purchase Price. Any difference between the purchase price paid by the Underwriters for the Treasury Notes (or security entitlement with respect thereof) constituting a part of the Option Securities purchased by the Underwriters and the Underwritten Securities Treasury Note Purchase Price shall be for the account of the Underwriters. The Company hereby agrees that, without the prior written consent of Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it will not, during the period ending 90 days after the date of the final prospectus supplement included in the Prospectus, (i) register, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any Securities, Purchase Contracts or shares of Common Stock or any securities convertible into or exercisable or exchangeable for Securities, Purchase Contracts or Common Stock or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Securities, Purchase Contracts or Common Stock, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Securities, Purchase Contracts or Common Stock or such other securities, in cash or otherwise. The foregoing sentence shall not apply to (A) the Securities to be sold hereunder, (B) the issuance by the Company of shares of Common Stock pursuant to, or the grant of options under the Company's existing stock option, employee benefit or dividend reinvestment plans or in connection with the Thermo acquisition (as described in the Prospectus), or (C) the issuance of shares of Common Stock by the Company in connection with future acquisitions provided that the recipients of such shares agree to be bound by the transfer restrictions set forth herein. 10 12 3. Terms of Public Offering. The Company is advised by you that the Underwriters propose (i) to make a public offering of their respective portions of the Securities as soon after the Registration Statement and this Agreement have become effective as in your judgment is advisable and (ii) initially to offer the Securities upon the terms set forth in the Prospectus. In connection with the transactions contemplated by this Agreement, the Company agrees to pay to the Underwriters an underwriting commission of $1.29 per Security (the "UNDERWRITING COMMISSION") purchased by the Underwriters. 4. Payment and Delivery. Delivery to you for the accounts of the several Underwriters of the certificates for the Underwritten Securities, or delivery to a securities intermediary designated by you of such certificates and crediting to your securities account at such securities intermediary for the account of the several Underwriters of security entitlements in respect of the Underwritten Securities, against, in either case, crediting to the securities account of the Collateral Agent of security entitlements in respect of the Treasury Notes constituting a part of the Underwritten Securities as set forth above, and payment to you of the Underwriting Commission with respect to the Underwritten Securities by wire transfer in immediately available funds to an account specified by you to the Company shall be made at 10:00 a.m., New York City time, on the fourth business day after the date of this Agreement, or at such other time on the same or such other date, not later than nine business days after the date of this Agreement as shall be designated in writing by you. The time and date of such payment are hereinafter referred to as the "CLOSING DATE." Delivery to the Representatives for the accounts of the several Underwriters of the certificates for the Option Securities purchased by the Underwriters, or delivery to a securities intermediary designated by the Representatives of such certificates and crediting to your securities account at such securities intermediary for the accounts of the several Underwriters of security entitlements in respect of such Option Securities, against, in either case, crediting to the securities account of the Collateral Agent of security entitlements in respect of the Treasury Notes constituting a part of such Option Securities as set forth above, and payment to the Representatives of the Underwriting Commission with respect to such Option Securities in the manner set forth above shall be made at 10:00 a.m., New York City time, on the date specified in the notice described in Section 2 or at such other time on the same or on such other date, in any event not later than 10 business days after the expiration of the Underwriters' option to purchase Option Securities as shall be designated in writing by you. The time and date of such payment are hereinafter referred to as the "OPTION CLOSING DATE". 11 13 The certificates, if any, for the Securities purchased by the Underwriters shall be registered in such names and in such denominations as you shall request in writing not later than one full business day prior to the Closing Date or the Option Closing Date, as the case may be. The certificates, if any, evidencing the Underwritten Securities or Option Securities shall be delivered to you on the Closing Date or the Option Closing Date, as the case may be, for the respective accounts of the several Underwriters, with any transfer taxes payable in connection with the transfer of the Underwritten Securities or Option Securities to the Underwriters duly paid, against payment of the Purchase Price and the Additional Purchase Price therefor and the Underwriting Commission with respect to such Securities. 5. Conditions to the Underwriters' Obligations. The obligations of the Company to sell the Securities to the Underwriters and the several obligations of the Underwriters to purchase and pay for the Securities on the Closing Date are subject to the following further conditions: (a) no stop order suspending the effectiveness of the Registration Statement shall have been issued under the Securities Act and no proceedings for that purpose shall have been instituted or shall be pending or, to your knowledge or the knowledge of the Company, shall be contemplated by the Commission, and any request on the part of the Commission for additional information shall have been complied with to the reasonable satisfaction of counsel for the Underwriters. (b) Subsequent to the execution and delivery of this Agreement and prior to the Closing Date: (i) there shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading or of any review for a possible change that is with negative implications, in the rating accorded any of the Company's securities by any "nationally recognized statistical rating organization," as such term is defined for purposes of Rule 436(g)(2) under the Securities Act; and (ii) there shall not have occurred any change, or any development involving a prospective change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Prospectus (exclusive of any amendments or supplements thereto effected subsequent to the execution and delivery of this Agreement) that, in your judgment, is material and 12 14 adverse and that makes it, in your judgment, impracticable to market the Securities on the terms and in the manner contemplated in the Prospectus. (c) The Underwriters shall have received on the Closing Date a certificate, dated the Closing Date, and signed by each of the chief executive officer and the chief financial officer of the Company, to the effect set forth in Section 5(b)(i) above and to the effect that the representations and warranties of the Company contained in this Agreement are true and correct as of the Closing Date and that the Company has complied with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied hereunder on or before the Closing Date. (d) The Underwriters shall have received on the Closing Date an opinion or opinions of Simpson Thacher & Bartlett, outside counsel for the Company, to the effect set forth in Exhibit A-1, an opinion of Martha Wyrsch, Esq., Vice President, General Counsel and Secretary of the Company, to the effect set forth in Exhibit A-2, and an opinion of Polsinelli, White, Vardeman & Shalton, Kansas counsel to the Company, to the effect set forth in Exhibit A-3, in each case dated as of the Closing Date. Such opinions shall be rendered to the Underwriters at the request of the Company and shall so state therein. (e) The Underwriters shall have received on the Closing Date an opinion of Davis Polk & Wardwell, counsel for the Underwriters, dated the Closing Date, in form and substance satisfactory to the Underwriters. (f) The Underwriters shall have received on each of the date hereof and on the Closing Date letters, dated the date hereof or the Closing Date, as the case may be, in form and substance satisfactory to the Underwriters, from Arthur Andersen LLP, the Company's independent public accountants, containing statements and information of the type ordinarily included in accountants' "comfort letters" to underwriters with respect to the financial statements and certain financial information relating to each of the Company and MidCon contained in or incorporated by reference in the Registration Statement and the Prospectus; provided that such letters delivered on the Closing Date shall use a "cut-off" date not earlier than the date hereof. (g) The "lock-up" agreements, each substantially in the form of Exhibit A hereto, between you and the executive officers and directors of the Company relating to sales and certain other dispositions of Common 13 15 Stock or certain other securities, delivered to you on or before the date hereof, shall be in full force and effect on the Closing Date. (h) As of the Closing Date, the Securities and the shares of Common Stock issuable upon settlement of the Purchase Contracts constituting part of the Securities shall have been approved for listing on the New York Stock Exchange, subject only to official notice of issuance. (i) The Company shall have obtained all consents, waivers and/or amendments under the Bank Facility (as defined in the Prospectus) necessary to consummate the Offering. The several obligations of the Underwriters to purchase Option Securities hereunder are subject to the delivery to you on the Option Closing Date of such documents as you may reasonably request with respect to the good standing of the Company, the due authorization and issuance of the Option Securities and other matters related to the issuance of the Option Securities. 6. Covenants of the Company. In further consideration of the agreements of the Underwriters herein contained, the Company covenants with each Underwriter as follows: (a) To furnish to you, without charge, seven signed copies of the Registration Statement (including exhibits and documents incorporated by reference thereto) and for delivery to each other Underwriter a conformed copy of the Registration Statement (without exhibits thereto) and to furnish to you in New York City, without charge, prior to 10:00 a.m. New York City time on the business day next succeeding the date of this Agreement and, during the period mentioned in Section 6(d) below, as many copies of the Prospectus, any documents incorporated by reference therein and any supplements and amendments thereto or to the Registration Statement as you may reasonably request. (b) During the period in which the Prospectus is required by law to be delivered in connection with sales of the Securities, before amending or supplementing the Registration Statement or the Prospectus, (including by filing any document that would as a result thereof be incorporated by reference in the Prospectus) to furnish to you a copy of each such proposed amendment, supplement or other document and not to file any such proposed amendment, supplement or other document to which you reasonably object, and to file with the Commission within the applicable period specified in Rule 424(b) under the Securities Act any prospectus required to be filed pursuant to such Rule. 14 16 (c) During the period when the Prospectus is required by law to be delivered in connection with sales of the Securities, to file promptly all documents required to be filed with the Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act. (d) If, during such period after the first date of the public offering of the Securities as in the reasonable opinion of counsel for the Underwriters or counsel for the Company the Prospectus is required by law to be delivered in connection with sales by an Underwriter or dealer, any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances existing when the Prospectus is delivered to a purchaser, not misleading, or if in the reasonable opinion of counsel for the Underwriters or counsel for the Company, it is necessary to amend or supplement the Prospectus to comply with applicable law, forthwith to prepare, file with the Commission and furnish, at its own expense, to the Underwriters and to the dealers (whose names and addresses you will furnish to the Company) to which Securities may have been sold by you on behalf of the Underwriters and to any other dealers upon request, either amendments or supplements to the Prospectus, so that the statements in the Prospectus as so amended or supplemented will not, in the light of the circumstances when the Prospectus is delivered to a purchaser, be misleading or so that the Prospectus, as so amended or supplemented, will comply with law. (e) To endeavor to qualify the Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions as you shall reasonably request and to maintain such qualifications for as long as the Underwriters shall reasonably request. (f) To make generally available to the Company's security holders and to you as soon as practicable an earning statement that satisfies the provisions of Section 11(a) of the Securities Act and the rules and regulations of the Commission thereunder. (g) To use its best efforts to effect the listing of the Securities and the shares of Common Stock issuable upon settlement of the Purchase Contracts constituting a part of the Securities on The New York Stock Exchange. (h) For a period of five years after the Closing Date, to furnish to you and, upon request, to each Underwriter, copies of all annual reports, 15 17 quarterly reports and current reports filed with the Commission on Forms 10-K, 10-Q and 8-K, or such other similar forms as may be designated by the Commission, and such other documents, reports and information as shall be furnished by the Company to its stockholders generally. 7. Expenses. Whether or not the transactions contemplated in this Agreement are consummated or this Agreement is terminated, the Company agrees to pay or cause to be paid all expenses incident to the performance of its obligations under this Agreement, including: (i) the fees, disbursements and expenses of the Company's counsel and the Company's accountants in connection with the registration and delivery of the Securities under the Securities Act and all other fees or expenses in connection with the preparation and filing of the Registration Statement, any preliminary prospectus, the Prospectus and amendments and supplements to any of the foregoing, including all printing costs associated therewith, and the mailing and delivering of copies thereof to the Underwriters and dealers, in the quantities hereinabove specified, (ii) all costs and expenses related to the transfer and delivery of the Securities to the Underwriters, including any transfer or other taxes payable thereon, (iii) the cost of printing or producing any Blue Sky memorandum in connection with the offer and sale of the Securities under state securities laws and all expenses in connection with the qualification of the Securities for offer and sale under state securities law as provided in Section 6(c) hereof, including filing fees and the reasonable fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the Blue Sky memorandum, (iv) all filing fees and the reasonable fees and disbursements of counsel to the Underwriters, if any, incurred in connection with the review and qualification of the offering of the Securities by the National Association of Securities Dealers, Inc., (v) any fees charged by rating agencies for the rating of the Securities, (vi) all costs and expenses incident to listing the Securities and the shares of Common Stock issuable upon settlement of the Purchase Contracts constituting part of the Securities on any national securities exchanges, (vii) the cost of printing certificates representing the Securities, (viii) the costs and charges of any transfer agent, registrar or depositary for the Securities, (ix) the costs and expenses of the Company relating to investor presentations on any "road show" undertaken in connection with the marketing of the offering of the Securities, including, without limitation, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged in connection with the road show presentations with the prior approval of the Company, travel and lodging expenses of the representatives and officers of the Company and any such consultants, and the cost of any aircraft chartered in connection with the road show, and (x) all other costs and expenses incident to the performance of the obligations of the Company hereunder for which provision is not otherwise made in this Section. It is understood, however, that except as provided in this Section, 16 18 Section 8 entitled "Indemnity and Contribution", and the last paragraph of Section 10 below, the Underwriters will pay all of their costs and expenses, including fees and disbursements of their counsel, stock transfer taxes payable on resale of any of the Securities by them and any advertising expenses connected with any offers they may make. 8. Indemnity and Contribution. (a) The Company agrees to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof, any preliminary prospectus or the Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto), or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter through you or through your counsel expressly for use therein; provided, however, that the foregoing indemnity agreement with respect to any preliminary prospectus shall not inure to the benefit of any Underwriter from whom the person asserting any such losses, claims, damages or liabilities purchased Securities, or any person controlling such Underwriter, if a copy of the Prospectus (as then amended or supplemented if the Company shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of such Underwriter to such person, if required by law so to have been delivered, at or prior to the written confirmation of the sale of the Securities to such person, and if the Prospectus (as so amended or supplemented) would have cured the defect giving rise to such losses, claims, damages or liabilities, unless such failure is the result of noncompliance by the Company with Section 6(a) hereof. (b) Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, the directors of the Company, the officers of the Company who signed the Registration Statement and each person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to such Underwriters, but only with reference to information relating to such Underwriter furnished to the Company in writing by such Underwriter through you or through your counsel expressly for use in the 17 19 Registration Statement, any preliminary prospectus, the Prospectus or any amendments or supplements thereto. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b), such person (the "INDEMNIFIED PARTY") shall promptly notify the person against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all such indemnified parties and that all such fees and expenses shall be reimbursed as they are incurred. Such firm shall be designated in writing by Morgan Stanley & Co. Incorporated in the case of parties indemnified pursuant to Section 8(a), and by the Company, in the case of parties indemnified pursuant to Section 8(b). The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for reasonable fees and expenses of counsel as contemplated by the third sentence of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such 18 20 indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (d) To the extent the indemnification provided for in Section 8(a) or 8(b) is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other hand from the offering of the Securities or (ii) if the allocation provided by clause 8(d)(i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause 8(d)(i) above but also the relative fault of the Company on the one hand and of the Underwriters on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other hand in connection with the offering of the Securities shall be deemed to be in the same respective proportions as the total price to public less underwriting discounts and commissions, and the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover of the Prospectus, bear to the total price to public of the Securities. The relative fault of the Company on the one hand and the Underwriters on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company (including information relating to MidCon) or by the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Underwriters' respective obligations to contribute pursuant to this Section 8 are several in proportion to the respective number of Securities they have purchased hereunder, and not joint. (e) The Company and the Underwriters agree that it would not be just or equitable if contribution pursuant to this Section 8 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in Section 8(d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such 19 21 action or claim. Notwithstanding the provisions of this Section 8, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Section 8 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. (f) The indemnity and contribution provisions contained in this Section 8 and the representations, warranties and other statements of the Company contained in this Agreement shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Underwriter or any person controlling any Underwriter or by or on behalf of the Company, its officers or directors or any person controlling the Company and (iii) acceptance of and payment for any of the Securities. 9. Termination. This Agreement shall be subject to termination by notice given by you to the Company, if (a) after the execution and delivery of this Agreement and prior to the Closing Date (i) trading generally shall have been suspended or materially limited on or by, as the case may be, the New York Stock Exchange or the National Association of Securities Dealers, Inc., (ii) trading of any securities of the Company shall have been suspended on any exchange or in any over-the-counter market, (iii) a general moratorium on commercial banking activities in New York shall have been declared by either Federal or New York State authorities or (iv) there shall have occurred any outbreak or escalation of hostilities or any change in financial markets or any calamity or crisis that, in your judgment, is material and adverse and (b) in the case of any of the events specified in clauses 9(a)(i) through 9(a)(iv), such event, singly or together with any other such event, makes it, in your judgment, impracticable to market the Securities on the terms and in the manner contemplated in the Prospectus. 10. Effectiveness; Defaulting Underwriters. This Agreement shall become effective upon the execution and delivery hereof by the parties hereto. If, on the Closing Date or the Option Closing Date, as the case may be, any one or more of the Underwriters shall fail or refuse to purchase Securities that it has or they have agreed to purchase hereunder on such date, and the aggregate number of Securities which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than one-tenth of the aggregate 20 22 number of the Securities to be purchased on such date, the other Underwriters shall be obligated severally in the proportions that the number of Underwritten Securities set forth opposite their respective names in Schedule I bears to the aggregate number of Underwritten Securities set forth opposite the names of all such non-defaulting Underwriters, or in such other proportions as you may specify, to purchase the Securities which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on such date; provided that in no event shall the number of Securities that any Underwriter has agreed to purchase pursuant to this Agreement be increased pursuant to this Section 10 by an amount in excess of one-ninth of such number of Securities without the written consent of such Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Underwritten Securities and the aggregate number of Underwritten Securities with respect to which such default occurs is more than one-tenth of the aggregate number of Underwritten Securities to be purchased, and arrangements satisfactory to you and the Company for the purchase of such Underwritten Securities are not made within 36 hours after such default, this Agreement shall terminate without liability on the part of any non-defaulting Underwriter or the Company. In any such case you shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and in the Prospectus or in any other documents or arrangements may be effected. If, on the Option Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Option Securities and the aggregate number of Option Securities with respect to which such default occurs is more than one-tenth of the aggregate number of Option Securities to be purchased, the non-defaulting Underwriters shall have the option to (i) terminate their obligation hereunder to purchase Option Securities or (ii) purchase not less than the number of Option Securities that such non-defaulting Underwriters would have been obligated to purchase in the absence of such default. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement. If this Agreement shall be terminated by the Underwriters, or any of them, because of any failure or refusal on the part of the Company to comply with the terms or to fulfill any of the conditions of this Agreement, or if for any reason the Company shall be unable to perform its obligations under this Agreement, the Company will reimburse the Underwriters or such Underwriters as have so terminated this Agreement with respect to themselves, severally, for all out-of-pocket expenses (including the reasonable fees and disbursements of their counsel) reasonably incurred by such Underwriters in connection with this Agreement or the offering contemplated hereunder. 21 23 11. Counterparts. This Agreement may be signed in two or more counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 12. Applicable Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York. 13. Headings. The headings of the sections of this Agreement have been inserted for convenience of reference only and shall not be deemed a part of this Agreement. 22 24 Very truly yours, K N ENERGY, INC. By: s:\\ Rose M. Robeson -------------------- Name: Rose M. Robeson Title: Vice President and Treasurer Accepted as of the date hereof MORGAN STANLEY & CO. INCORPORATED MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED GOLDMAN, SACHS & CO. SALOMON SMITH BARNEY INC. JEFFERIES & COMPANY, INC. NATIONSBANC MONTGOMERY SECURITIES LLC PETRIE PARKMAN & CO., INC. Acting severally on behalf of themselves and the several Underwriters named in Schedule I hereto. By: Morgan Stanley & Co. Incorporated By: s:\\ Bryan Andrzejewski ---------------------- Bryan Andrzejewski Vice President 23 25 SCHEDULE I
NUMBER-OF UNDERWRITTEN SECURITIES UBDERWRITTERS TO BE PURCHASED - ------------------------------------------------------------------------------ Morgan Stanley & Co. Incorporated.................... 1,855,100 Merrill Lynch, Pierce, Fenner & Smith 1,855,100 Incorporated................................ Goldman, Sachs & Co.................................. 1,406,980 Petrie Parkman & Co., Inc............................ 1,406,980 Salomon Smith Barney Inc............................. 1,406,980 Jefferies & Company, Inc............................. 464,430 NationsBanc Montgomery Securities LLC................ 464,430 Edward D. Jones & Co., L.P........................... 150,000 A.G. Edwards & Sons, Inc............................. 150,000 Dain Rauscher Incorporated........................... 150,000 --------- Total:...................................... 9,310,000 =========
26 EXHIBIT A LOCK-UP LETTER _______________ __, 1998 Morgan Stanley & Co. Incorporated Merrill Lynch, Pierce, Fenner & Smith Incorporated Goldman Sachs & Co. Salomon Smith Barney Inc. Jefferies & Company, Inc. NationsBanc Montgomery Securities LLC Petrie Parkman & Co., Inc. c/o Morgan Stanley & Co. Incorporated 1585 Broadway New York, NY 10036 Dear Sirs and Mesdames: The undersigned understands that Morgan Stanley & Co. Incorporated ("MORGAN STANLEY") proposes to enter into an Underwriting Agreement (the "UNDERWRITING AGREEMENT") with K N Energy, Inc., a Kansas corporation (the "COMPANY"), providing for the public offering (the "PUBLIC OFFERING") by the several Underwriters, including Morgan Stanley (the "UNDERWRITERS"), of an aggregate of 8,000,000 ___% Premium Equity Participating Security Units - -PEPS(SM) Units (each a, "SECURITY") which require any holder of a Security to, among other things, purchase from the Company, on a future date, shares of the Company's common stock (par value $5.00 per share) (the "COMMON STOCK"). To induce the Underwriters that may participate in the Public Offering to continue their efforts in connection with the Public Offering, the undersigned hereby agrees that, without the prior written consent of Morgan Stanley on behalf of the Underwriters, the undersigned will not, during the period commencing on the date of the Underwriting Agreement and ending 90 days after the date of the final prospectus supplement relating to the Public Offering (except that none of the following shall limit the undersigned's rights under any existing stock option or employee benefit plans (as such plans are in effect on the date hereof)), it being understood that any shares of Common Stock acquired pursuant to such plans shall otherwise be subject to the terms of this lock-up letter), (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option 27 or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of, directly or indirectly, any Securities or shares of Common Stock or any securities convertible into or exercisable or exchangeable for any Securities or shares of Common Stock or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Securities or shares of Common Stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Securities, Common Stock or such other securities, in cash or otherwise. The undersigned hereby acknowledges that, notwithstanding the foregoing, if the undersigned is an individual, he or she may transfer any or all of his or her shares of Common Stock either during his or her lifetime or on death by gift, will or intestacy (i) to his or her immediate family, (ii) to a trust, partnership or other entity, the beneficiaries, partners or equity holders of which are exclusively the undersigned and/or a member or members of his or her immediate family or (iii) to his or her alma mater; provided, however, that in any such case, it shall be a condition to the transfer that the transferee execute an agreement stating that the transferee is receiving and holding the shares of Common Stock subject to the provisions of this lock-up letter, and there shall be no further transfer of such shares of Common Stock except in accordance with this lock-up letter. For purposes of this paragraph, "immediate family" shall mean a lineal descendant, spouse, adopted child, father, mother, brother or sister of the transferor and the spouses, adopted children and lineal descendants of any of the foregoing. Whether or not the Public Offering actually occurs depends on a number of factors, including market conditions. Any Public Offering will only be made pursuant to an Underwriting Agreement, the terms of which are subject to negotiation between the Company and the Underwriters. Very truly yours, ---------------------------------- (Name) ---------------------------------- (Address) 2 28 EXHIBIT A-1 OPINION OF OUTSIDE COUNSEL FOR THE COMPANY The opinion of Simpson Thacher & Bartlett, outside counsel for the Company to be delivered pursuant to Section 5(d) of the Underwriting Agreement, shall be to the effect that: (i) The Registration Statement has become effective under the Act and, to such counsel's knowledge, no stop order suspending the effectiveness of the Registration Statement has been issued or proceeding for that purpose has been instituted or threatened by the Commission; (ii) The issue and sale of the Securities by the Company and the compliance by the Company with all of the provisions of the Underwriting Agreement, the PEPS Agreements and the Securities will not violate any federal or New York statute or any rule or regulation that has been issued pursuant to any federal or New York statute or any order known to such counsel issued pursuant to any federal or New York statute by any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or properties, and no consent, approval, authorization, order, registration, or qualification of or with, any federal or New York governmental body or agency or, to our knowledge, any federal or New York court is required for the issue and sale of the Securities by the Company and the compliance by the Company with all of the provisions of this Agreement, the PEPS Agreements and the Securities except for registration under the Act of the Securities and such as may be required by the securities or Blue Sky laws of the various states in connection with the purchase and distribution of the Securities by the Underwriters; (iii) Assuming that the Purchase Contract Agreement, the Pledge Agreement and the Purchase Contracts constituting a part of the Securities being delivered at the Closing Date or Option Closing Date, as the case may be, and the Securities have been duly authorized, executed and delivered by the Company, each is a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally and general principals of equity; provided, however, that the rights and remedies of the Agent and the Collateral Agent provided in Sections 4.02 and 5.08 of the Purchase Contract Agreement and Section 5(a) of the Pledge Agreement upon the occurrence of a Termination Event will not be limited under the Bankruptcy Code (11 U.S.C. 101 et seq.); provided, however, that procedural restrictions respecting A-1-1 29 relief from the automatic stay under Section 362 of the Bankruptcy Code may affect the timing of the exercise of such rights and remedies; (iv) Assuming that (1) the Pledge Agreement has been duly authorized, executed and delivered by the Agent on behalf of each of the holders of the Securities (the "HOLDERS"), (2) the Agent is duly incorporated and validly existing under the laws of the jurisdiction of its incorporation, (3) the Agent and each of the Holders has full power, authority and legal right (including, without limitation, any legal right dependent upon there being no necessary governmental approvals or filings and no conflict with laws, governing documents or contracts) to make and perform its obligations under the Pledge Agreement, (4) the Pledge Agreement is the legal, valid, binding and enforceable obligation of the Agent on behalf of each of the Holders, and (5) the Agent and each Holder have sufficient rights in the Treasury Notes (or security entitlements in respect thereof) for the security interest of the Collateral Agent for the benefit of the Company to attach, then (a) the Pledge Agreement creates a valid security interest in such Treasury Notes (or security entitlements in respect thereof) and, subject to Section 9-306 of the Uniform Commercial Code as in effect in the State of New York on the date hereof (the "UCC"), the proceeds thereof, to secure the obligations of the Holders under the Purchase Contracts and (b) assuming that (i) the securities intermediary with whom the Collateral Agent maintains the securities account to which such security entitlements have been credited (x) has not and will not agree to comply with entitlement orders originated by any person other than the Collateral Agent in respect of such security entitlements and (y) has waived any security interest or lien on such security entitlements in its favor (other than any such security interest or lien arising under the Pledge Agreement) and (ii) none of the Collateral Agent, the Agent or any Holder has any notice of any adverse claim thereto, upon the crediting by such securities intermediary of security entitlements in respect of such Treasury Notes to a securities account of the Collateral Agent on the books of such securities intermediary, such security interest shall be a perfected security interest (as to which the Collateral Agent shall have control), subject to no prior security interest arising under the UCC or 31 C.F.R. Section 357, subject to customary qualifications reasonably acceptable to the Representatives; (v) The statements in the Prospectus under the captions, "Description of Stock Purchase Contracts and Stock Purchase Units", "Description of the PEPS Units," "Description of the Purchase Contracts," and "Certain Provisions of the Purchase Contract Agreement and the Pledge Agreement", insofar as they purport to constitute summaries of the terms of the Securities or the PEPS Agreements, constitute accurate summaries of the terms of the Securities or the PEPS Agreements, as the case may be, in all material respects; A-1-2 30 (vi) The statements made in the Prospectus under the caption "United States Federal Income Tax Consequences," insofar as they purport to constitute summaries of matters of United States federal tax law and regulations or legal conclusions with respect thereto, constitute accurate summaries of the matters described therein in all material respects; (vii) The Company is not an "investment company" within the meaning of, or subject to regulation under, the Investment Company Act of 1940, as amended; and (viii) Such counsel (A) is of the opinion that the Registration Statement, as of its effective date, and Prospectus, as of the date of the Underwriting Agreement, (except for financial statements and schedules and other financial or statistical data included therein as to which such counsel need not express any opinion) comply as to form in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder, (B) has no reason to believe that (except for financial statements and schedules and other financial or statistical data as to which such counsel need not express any belief) the Registration Statement at the time the Registration Statement became effective or on the effective date of the most recent post-effective amendment thereto, if any, contained any untrue statements of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (C) has no reason to believe that (except for financial statements and schedules and other financial or statistical data as to which such counsel need not express any belief) the Prospectus at the time the Prospectus Supplement was issued or at the Closing Date contained or contains any untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. A-1-3 31 EXHIBIT A-2 OPINION OF GENERAL COUNSEL OF THE COMPANY The opinion of Martha B. Wyrsch, Esq., Vice President, General Counsel and Secretary of the Company, to be delivered pursuant to Section 5(d) of the Underwriting Agreement, shall be to the effect that: (i) Each of the Company and the Significant Subsidiaries (i) is duly qualified to do business as a foreign corporation and is in good standing under the laws of each jurisdiction which requires such qualification wherein it owns or leases material properties or conducts material business, except where the failure to be so qualified or in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole, and (ii) holds all material approvals, authorizations, orders, licenses, certificates and permits from governmental authorities necessary for the conduct of its business as described in the Prospectus, except where the failure to hold such approvals, authorizations, orders, licenses, certificates and/or permits would not, singularly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole; (ii) Each of the Significant Subsidiaries has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction in which it is incorporated, with full corporate power and authority to own its properties and conduct its business as described in the Prospectus except to the extent that the failure to be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; (iii) All the outstanding shares of capital stock of each Significant Subsidiary have been duly and validly authorized and issued and are fully paid and nonassessable, and, except as otherwise set forth in the Prospectus, all of such shares are owned by the Company either directly or through one or more subsidiaries free and clear of any pledge, security interest, claims, lien or other encumbrance; (iv) The authorized capital stock of the Company conforms as to legal matters to the description thereof contained in the Prospectus; (v) The shares of Common Stock outstanding prior to the issuance of the Securities, have been duly authorized and validly issued and are fully paid and non-assessable and none of such shares of Common Stock was issued in violation of the preemptive or other similar rights known to such counsel of any securityholder of the Company; A-2-1 32 (vi) The shares of Common Stock issuable upon settlement of the Purchase Contracts constituting a part of the Securities have been duly authorized and reserved for issuance and such Common Stock, when issued and delivered by the Company against payment therefor in accordance with the provisions of the Purchase Contracts, will be validly issued, fully paid and nonassessable and the issuance of such Common Stock is not subject to any preemptive or other similar rights arising by law; (vii) Each of the Securities, the Underwriting Agreement, the PEPS Agreements and the Rights Agreement has been duly executed and delivered by the Company; (viii) Such counsel does not know of any statutes or regulations, or any pending or threatened legal or governmental proceedings, required to be described in the Prospectus that are not described as required, nor of any contracts or documents of a character required to be described or referred to in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement that are not described, referred to or filed as required; (ix) The descriptions included in or incorporated by reference in the Prospectus of the statutes, regulations, legal or governmental proceedings, contracts and other documents therein described are accurate and fairly summarize the matters referred to therein; (x) No consent, approval, authorization or order of any court or governmental agency or body is required to be obtained by the Company or any subsidiary for the consummation of the transactions contemplated herein in connection with the purchase and sale of the Securities by the Underwriters, except such approvals (specified in such opinion) as have been obtained; (xi) The execution and delivery by the Company of the Underwriting Agreement, the PEPS Agreements, the consummation by the Company of the transactions contemplated therein and in the Registration Statement (including the issuance and delivery of the Securities, and the use of the proceeds from the sale of the Securities as described in the Prospectus under the caption "Use of Proceeds") and compliance by the Company with the terms of the Underwriting Agreement do not and will not result in any violation of the charter or by-laws of the Company or any Significant Subsidiary, and do not and will not conflict with, or result in a breach of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or asset of the Company or any Significant Subsidiary under (A) any indenture, mortgage or loan agreement, or any other agreement or A-2-2 33 instrument known to such counsel, to which the Company or any Significant Subsidiary is a party or by which it may be bound or to which any of its properties may be subject, (B) any existing applicable law, rule or regulation (other than the securities or blue sky laws of the various states, as to which such counsel need express no opinion), or (C) any judgment, order or decree of any government, governmental instrumentality or court, domestic or foreign, known to such counsel having jurisdiction over the Company or any Significant Subsidiary or any of its properties (except, in the case of subclauses (A) and (B) hereof, for such conflicts, breaches or defaults, liens, charges or encumbrances that would not have a material adverse effect on the condition (financial or otherwise), earnings, business affairs or business prospects of the Company and its subsidiaries, considered as one enterprise or the transactions contemplated by the Underwriting Agreement); (xii) The Company and the Significant Subsidiaries hold all requisite Certificates of Public Convenience and Necessity from the Federal Energy Regulatory Commission to enable them to carry on the respective businesses in which they are engaged; (xiii) To the knowledge of such counsel (after due inquiry), none of the Company or any Significant Subsidiary is in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any contract, indenture, loan agreement, note, lease or other agreement or instrument that is described or referred to in the Registration Statement or Prospectus or filed as an exhibit to the Registration Statement; (xiv) To the knowledge of such counsel, after due inquiry, no person or corporation which is a "holding company" or a "subsidiary of a holding company," within the meaning of such terms as defined in the Public Utility Holding Company Act of 1935, directly or indirectly owns, controls or holds with power to vote 10% or more of the outstanding voting securities of the Company; and the Company is not a "holding company" or to the knowledge of such counsel, after due inquiry, a "subsidiary of a holding company" as so defined; and (xv) The documents incorporated by reference in the Prospectus (except for the consolidated financial statements and other financial or statistical data included therein or omitted therefrom, as to which such counsel need express no opinion), as of the dates they were filed with the Commission or to the extent such documents were subsequently amended prior to the date hereof, at the time so amended, complied as to form in all material respects with the requirements of the Exchange Act and the regulations thereunder. A-2-3 34 In addition, such counsel shall state that such counsel has participated in the preparation of the Registration Statement and the Prospectus (including the documents incorporated by reference therein) and participated in conferences with representatives of your legal counsel and representatives of the Underwriters at which the contents of the Registration Statement and the Prospectus and related matters were discussed. Such counsel shall also state that although such counsel is not passing upon and does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement and the Prospectus except as stated above, such counsel advises you that, on the basis of the foregoing, no facts have come to such counsel's attention which lead such counsel to believe that (A) the Registration Statement or any amendments thereto (other than the financial statements, the Statements of Eligibility and Qualification of the Trustee on Form T-1s and other financial or statistical information included or incorporated by reference therein as to which such counsel need not comment), at the time the Registration Statement initially became effective or on the effective date of the most recent post-effective amendment thereto, if any, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or (B) the Prospectus or any amendment or supplement thereto (other than the financial statements and other financial or statistical information included or incorporated by reference therein as to which such counsel need not comment), at the time the Prospectus Supplement was issued or at the Closing Date contained or contains an untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. In rendering such opinions, such counsel may (A) state that her opinion is limited to the laws of the State of Colorado, the General Corporation Law of the State of Delaware and the federal laws of the United States and (B) rely as to matters involving the application of laws of any jurisdiction other than the State of Colorado or the United States, to the extent deemed proper and specified in such opinion, upon the opinions of Polsinelli, White, Vardeman & Shalton and other local counsel of good standing believed to be reliable and who are satisfactory to counsel for the Underwriters and as to matters of fact, to the extent deemed proper, on certificates of responsible officers of the Company and public officials. A-2-4 35 EXHIBIT A-3 OPINION OF KANSAS COUNSEL OF THE COMPANY The opinion of Polsinelli, White, Vardeman & Shalton, Kansas counsel to the Company, to be delivered pursuant to Section 5(d) of the Underwriting Agreement, shall be to the effect that: (i) The Company is duly incorporated, validly existing and in good standing under the laws of the State of Kansas, with corporate power and authority under such laws to own, lease, and operate its properties and conduct its business as described in the Prospectus; (ii) The execution and delivery of each of the Securities, the PEPS Agreements and the Underwriting Agreement has been duly authorized by the Company; (iii) The Rights Agreement has been duly authorized by the Company; the Rights have been duly authorized by the Company and, when issued upon issuance of the shares of Common Stock issuable upon settlement of the Purchase Contracts constituting a part of the Securities, will be validly issued, and the shares of Class B Junior Participating Series Preferred Stock issuable upon exercise of the Rights have been duly authorized by the Company and, when issued upon such exercise in accordance with the terms of the Rights Agreement, will be validly issued, fully paid and non-assessable; and (iv) No approval, authorization, consent or other action (other than under the securities or blue sky laws of the State of Kansas) is required by any regulatory authority or governmental body of the State of Kansas for the valid issuance, sale, and delivery by the Company of the Securities pursuant to the Underwriting Agreement and to the best of our knowledge, do not result in any breach or violation of any judgment, order or decree of any governmental body, agency or court located in Kansas having jurisdiction over the Company. A-3-1 EX-1.2 3 UNDERWRITING AGREEMENT 1 EXHIBIT 1.2 UNDERWRITING AGREEMENT November 19, 1998 K N Energy, Inc. 370 Van Gordon Street Lakewood, CO 80228-8304 Dear Sirs and Mesdames: We are acting on behalf of the underwriters (including ourselves) named below (such underwriters being herein called the "UNDERWRITERS"), and we understand that K N Energy, Inc., a Kansas corporation (the "COMPANY"), proposes to issue and sell $400 million aggregate principal amount of its 6.45% senior notes due 2001 (the "SENIOR NOTES"). (The Senior Notes are also referred to herein as the "OFFERED SECURITIES"). The Senior Notes will be issued pursuant to the provisions of an Indenture dated as of November 20, 1993 (the "INDENTURE") between the Company and U.S. Bank Trust National Association, as successor trustee (the "TRUSTEE"), as supplemented. Subject to the terms and conditions set forth or incorporated by reference herein, the Company hereby agrees to sell to the several Underwriters, and each Underwriter agrees, severally and not jointly, to purchase from the Company the respective principal amounts of Senior Notes set forth below opposite their names at a purchase price of 99.578% of the principal amount of Senior Notes: 2
PRINCIPAL AMOUNT OF NAME SENIOR NOTES - ---------------------------------------------------- ------------------- Morgan Stanley & Co. Incorporated $160,000,000 Merrill Lynch, Pierce, Fenner & Smith Incorporated $100,000,000 Goldman, Sachs & Co. $40,000,000 Salomon Smith Barney Inc. $40,000,000 Jefferies & Company, Inc. $20,000,000 NationsBanc Montgomery Securities LLC $20,000,000 Petrie Parkman & Co., Inc. $20,000,000 ----------------- Total...................................... $400,000,000
The Underwriters will pay for the Offered Securities upon delivery thereof at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, NY 10017 at 10:00 a.m. (New York City time) on November 25, 1998, or at such other time, not later than 5:00 p.m. (New York City time) on December 3, 1998, as shall be designated by the Underwriters. The time and date of such payment and delivery are hereinafter referred to as the "CLOSING DATE". Terms of Senior Notes The Offered Securities shall have the terms set forth in the Prospectus dated October 19, 1998, and the Prospectus Supplement dated November 19, 1998, including the following: Maturity Date: November 30, 2001 Interest Rate: 6.45% Redemption Provisions: None Interest Payment Dates: May 31 and November 30 commencing May 31, 1999 Form and Denomination: Book entry, $1,000 minimum denomination and integral multiples thereof All provisions contained in the document entitled K N Energy, Inc. Underwriting Agreement Standard Provisions (Senior Debt Securities) dated November 19, 2 3 1998, a copy of which is attached hereto, are herein incorporated by reference in their entirety and shall be deemed to be a part of this Agreement to the same extent as if such provisions had been set forth in full herein, except that (i) if any term defined in such document is otherwise defined herein, the definition set forth herein shall control, and (ii) all references in the Standard Provisions to the "MANAGER" shall be deemed to be to the "UNDERWRITERS", as defined herein. 3 4 Please confirm your agreement by having an authorized officer sign a copy of this Agreement in the space set forth below. Very truly yours, MORGAN STANLEY & CO. INCORPORATED MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED GOLDMAN, SACHS & CO. SALOMON SMITH BARNEY INC. JEFFERIES & COMPANY, INC. NATIONSBANC MONTGOMERY SECURITIES LLC PETRIE PARKMAN & CO., INC. By: MORGAN STANLEY & CO. INCORPORATED Acting severally on behalf of themselves and the several Underwriters named herein By: s:\\ Harold J. Hendershot II ------------------------------ Name: Harold J. Hendershot III Title: Vice President Accepted: K N ENERGY, INC. By: s:\\ Rose M. Robeson ------------------------------------ Name: Rose M. Robeson Title: Vice President and Treasury 5 K N ENERGY, INC. UNDERWRITING AGREEMENT STANDARD PROVISIONS (SENIOR DEBT SECURITIES) November 19, 1998 From time to time, K N ENERGY, INC., a Kansas corporation (the "COMPANY"), may enter into one or more underwriting agreements that provide for the sale of designated securities to the several underwriters named therein. The standard provisions set forth herein may be incorporated by reference in any such underwriting agreement (an "UNDERWRITING AGREEMENT"). The Underwriting Agreement, including the provisions incorporated therein by reference, is herein sometimes referred to as this "Agreement". Terms defined in the Underwriting Agreement are used herein as therein defined. The Company has filed with the Securities and Exchange Commission (the "COMMISSION") a registration statement on Form S-3 (registration no. 333- 55921), including a prospectus, relating to certain Senior Debt Securities (hereinafter, the "OFFERED SECURITIES") and other securities issuable by the Company and has filed with, or transmitted for filing to, or shall promptly hereafter file with or transmit for filing to, the Commission a prospectus supplement (the "PROSPECTUS SUPPLEMENT") specifically relating to the Offered Securities pursuant to Rule 424 under the Securities Act of 1933, as amended (the "SECURITIES ACT"). Such registration statement also constitutes post-effective amendment number 1 to registration statement no. 333-44421 (the "PRIOR REGISTRATION STATEMENT"). The registration statement as amended at the date of this Agreement, including information, if any, deemed to be part of the registration statement at the time of effectiveness pursuant to Rule 430A under the Securities Act, together with the Prior Registration Statement, is hereinafter referred to as the "REGISTRATION STATEMENT". The term "BASIC PROSPECTUS" means the prospectus relating to the Offered Securities included in the Registration Statement. The term "PROSPECTUS" means the Basic Prospectus together with the Prospectus Supplement. The term "PRELIMINARY PROSPECTUS" means a preliminary prospectus supplement specifically relating to the Offered Securities, together with the Basic Prospectus. As used herein, the terms "Registration Statement", "Basic Prospectus", "Prospectus" and "preliminary prospectus" shall include in each case the documents, if any, incorporated by reference therein. The terms "SUPPLEMENT", "AMENDMENT" and "AMEND" as used herein shall include all 1 6 documents deemed to be incorporated by reference in the Prospectus that are filed subsequent to the date of the Basic Prospectus by the Company with the Commission pursuant to the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"). If the Company has filed an abbreviated registration statement to register additional Debt Securities pursuant to Rule 462(b) under the Securities Act (the "RULE 462 REGISTRATION STATEMENT"), then any reference herein to the term "REGISTRATION STATEMENT" shall be deemed to include such Rule 462 Registration Statement. Concurrently with the offering of the Offered Securities, the Company intends to offer 8,000,000 Premium Equity Participating Security Units -- PEPS(sm) Units (the "PEPS UNITS OFFERINg"). On January 30, 1998, the Company acquired from Occidental Petroleum Corporation all of the capital stock of MidCon Corp. ("MIDCON") and a short term note in the aggregate principal amount of $1.39 billion for $2.1 billion in cash and another short-term note in the aggregate principal amount of $1.39 billion (the "ACQUISITION"). Upon the consummation of the Acquisition, MidCon became a wholly owned subsidiary of the Company. MidCon, MidCon Texas Pipeline Operator, Inc., Natural Gas Pipeline Company of America, K N Gas Gathering, Inc., K N Interstate Gas Transmission Co. and K N Services, Inc. are referred to herein as "SIGNIFICANT SUBSIDIARIES". 1. Representations and Warranties. The Company represents and warrants to and agrees with each of the Underwriters that: (a) The Registration Statement has become effective; no stop order suspending the effectiveness of the Registration Statement is in effect, and no proceedings for such purpose are pending before or threatened by the Commission. (b) (i) Each document, if any, filed or to be filed pursuant to the Exchange Act and incorporated by reference in the Prospectus complied or will comply when so filed in all material respects with the Exchange Act and the applicable rules and regulations of the Commission thereunder, (ii) on the original effective date of the Registration Statement, and on the effective date of the most recent post-effective amendment thereto, if any, the Registration Statement did not contain, and, as amended or 2 7 supplemented, if applicable, will not contain, any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (iii) the Registration Statement and the Prospectus comply, and, as amended or supplemented, if applicable, will comply in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder and (iv) the Prospectus does not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this paragraph do not apply (A) to statements or omissions in the Registration Statement or the Prospectus based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter through the Manager or its counsel expressly for use therein or (B) to that part of the Registration Statement that constitutes the Statement of Eligibility (Form T-1) under the Trust Indenture Act of 1939, as amended (the "TRUST INDENTURE ACT"), of the Trustee. (c) The Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the state of Kansas, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its consolidated subsidiaries, taken as a whole. (d) Each Significant Subsidiary has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its consolidated subsidiaries, taken as a whole; all of the issued shares of capital stock of each such Significant Subsidiary have been duly and validly authorized and issued, are fully paid and non-assessable and are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims. (e) This Agreement has been duly authorized, executed and delivered by the Company. (f) The Indenture has been duly qualified under the Trust Indenture Act and has been duly authorized, executed and delivered by the Company and is a valid and binding agreement of the Company, enforceable in accordance with its terms, subject to applicable bankruptcy, 3 8 insolvency or similar laws relating to or affecting creditors' rights generally and general principles of equity. (g) The Offered Securities have been duly authorized and, when executed and authenticated in accordance with the provisions of the Indenture and delivered to and paid for by the Underwriters in accordance with the terms of the Underwriting Agreement, will be entitled to the benefits of the Indenture, and will be valid and binding obligations of the Company, in each case enforceable in accordance with their respective terms, subject to applicable bankruptcy, insolvency or similar laws relating to or affecting creditors' rights generally and general principles of equity. (h) The execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement, the Indenture and the Offered Securities will not contravene any provision of applicable law or the articles of incorporation or by-laws of the Company or any agreement or other instrument binding upon the Company or any of its Significant Subsidiaries that is material to the Company and its subsidiaries, taken as a whole, or any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any Significant Subsidiary, and no consent, approval, authorization or order of, or qualification with, any governmental body or agency is required for the performance by the Company of its obligations under this Agreement, the Indenture or the Offered Securities, except the registration of the Offered Securities under the Securities Act and such as have been obtained or as may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Offered Securities. (i) There has not occurred any material adverse change, or any development involving a prospective material adverse change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Prospectus (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement). (j) There are no legal or governmental proceedings pending or threatened to which the Company or any of its subsidiaries is a party or to which any of the properties of the Company or any of its subsidiaries is subject that are required to be described in the Registration Statement or the Prospectus and are not so described or any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or the documents incorporated 4 9 therein by reference or to be filed as an exhibit to the Registration Statement that are not described or filed as required. (k) Each preliminary prospectus relating to the Offered Securities filed as part of the Registration Statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the Securities Act, complied when so filed in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder. (l) The Company is not and, after giving effect to the offering and sale of the Offered Securities and the application of the proceeds thereof as described in the Prospectus, will not be an "investment company" as such term is defined in the Investment Company Act of 1940, as amended. (m) The Company and its subsidiaries are in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and are in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole. (n) To the knowledge of the Company, no person or corporation which is a "holding company" or a "subsidiary of a holding company", within the meaning of such terms as defined in the Public Utility Holding Company Act of 1935, directly or indirectly owns, controls or holds with power to vote 10% or more of the outstanding voting securities of the Company; and the Company is not a "holding company" or to its knowledge, a "subsidiary of a holding company" as so defined. (o) The Company and its subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities, including, without limitation, the Federal Energy Regulatory Commission, necessary to conduct their respective businesses as described in the Prospectus, except when the failure to possess such certificates, authorizations or permits would not have a 5 10 material adverse effect on the Company and its subsidiaries, taken as a whole, and neither the Company nor any such subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a material adverse effect on the Company and its subsidiaries, taken as a whole. (p) The financial statements (including the related notes and supporting schedules) filed as part of the Registration Statement or included or incorporated by reference in the Prospectus present fairly in all material respects the financial position and results of operations of the entities purported to be shown thereby, at the dates and for the periods indicated, and have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved, except as otherwise stated therein. (q) The pro forma financial statements of the Company, and the related notes thereto, included in the Prospectus present fairly in all material respects the pro forma financial position of the Company, as of the dates indicated and the results of their operations for the periods specified; the pro forma combined financial information, and the related notes thereto, included in the Prospectus has been prepared in accordance with the applicable requirements of the Exchange Act and is based upon good faith estimates and assumptions believed by the Company to be reasonable. (r) Subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, the Company and its subsidiaries have not incurred any material liability or obligation, direct or contingent, nor entered into any material transaction not in the ordinary course of business; the Company has not purchased any of its outstanding capital stock, nor declared, paid or otherwise made any dividend or distribution of any kind on its capital stock other than ordinary and customary dividends; and there has not been any material change in the capital stock, short-term debt or long-term debt of the Company and its consolidated subsidiaries, except in each case as described in the Prospectus (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement). 2. Terms of Public Offering. The Company is advised by the Manager that the Underwriters propose to make a public offering of their respective portions of the Offered Securities as soon after this Agreement has been entered 6 11 into as in the Manager's judgment is advisable. The terms of the public offering of the Offered Securities are set forth in the Prospectus. 3. Payment and Delivery. Payment for the Offered Securities shall be made to the Company in Federal or other funds immediately available in New York City at the time and place set forth in the Underwriting Agreement, upon delivery to the Manager for the respective accounts of the several Underwriters of the Offered Securities registered in such names and in such denominations as the Manager shall request in writing not less than one full business day prior to the date of delivery, with any transfer taxes payable in connection with the transfer of the Offered Securities to the Underwriters duly paid. 4. Conditions to the Underwriters' Obligations. The several obligations of the Underwriters hereunder are subject to the following conditions: (a) No stop order suspending the effectiveness of the Registration Statement shall have been issued under the Securities Act and no proceedings for that purpose shall have been instituted or shall be pending or, to your knowledge or the knowledge of the Company, shall be contemplated by the Commission, and any request on the part of the Commission for additional information shall have been complied with to the reasonable satisfaction of counsel for the Underwriters. (b) Subsequent to the execution and delivery of the Underwriting Agreement and prior to the Closing Date: (i) there shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading or of any review for a possible change that is with negative implications, in the rating accorded any of the Company's securities by any "nationally recognized statistical rating organization," as such term is defined for purposes of Rule 436(g)(2) under the Securities Act; and (ii) there shall not have occurred any change, or any development involving a prospective change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Prospectus (exclusive of any amendments or supplements thereto effected subsequent to the execution and delivery of this Agreement) that, in the judgment of the 7 12 Manager, is material and adverse and that makes it, in the judgment of the Manager, impracticable to market the Offered Securities on the terms and in the manner contemplated in the Prospectus. (c) The Underwriters shall have received on the Closing Date a certificate, dated the Closing Date and signed by each of the chief executive officer and the chief financial officer of the Company, to the effect set forth in Section and to the effect that the representations and warranties of the Company contained in this Agreement are true and correct as of the Closing Date sand that the Company has complied with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied hereunder on or before the Closing Date. (d) The Underwriters shall have received on the Closing Date an opinion or opinions of Simpson Thacher & Bartlett, outside counsel for the Company, to the effect set forth in Exhibit A-1, an opinion of Martha Wyrsch, Esq., Vice President, General Counsel and Secretary of the Company, to the effect set forth in Exhibit A-2, and an opinion of Polsinelli, White, Vardeman & Shalton, Kansas counsel to the Company, to the effect set forth in Exhibit A-3, in each case, dated the Closing Date. Such opinions shall be rendered to the Underwriters at the request of the Company and shall so state therein. (e) The Underwriters shall have received on the Closing Date an opinion of Davis Polk & Wardwell, counsel for the Underwriters, dated the Closing Date, in form and substance satisfactory to the Underwriters. (f) The Underwriters shall have received on the date hereof and on the Closing Date letters, dated the date hereof or the Closing Date, as the case may be, in form and substance satisfactory to the Underwriters, from Arthur Andersen LLP, the Company's independent public accountants, containing statements and information of the type ordinarily included in accountants' "comfort letters" to underwriters with respect to the financial statements and certain financial information relating to each of the Company and MidCon contained in or incorporated by reference in the Registration Statement and the Prospectus; provided that such letters delivered on the Closing Date shall use a "cut-off date" not earlier than the date of the Underwriting Agreement. (g) The Company shall have obtained all consents, waivers and/or amendments under the Bank Facility (as defined in the Prospectus) necessary to consummate the Offering. 8 13 (h) The PEPS Units Offering shall have closed on, or prior to the Closing Date hereof. 5. Covenants of the Company. In further consideration of the agreements of the Underwriters herein contained, the Company covenants with each Underwriter as follows: (a) To furnish to the Manager, without charge, eight signed copies of the Registration Statement (including exhibits thereto) and for delivery to each other Underwriter a conformed copy of the Registration Statement (without exhibits thereto) and to furnish to the Manager in New York City, without charge, prior to 10:00 a.m. New York City time on the business day next succeeding the date of this Agreement and, during the period mentioned in Section below, as many copies of the Prospectus, any documents incorporated by reference therein and any supplements and amendments thereto or to the Registration Statement as the Manager may reasonably request. (b) During the period in which the Prospectus is required by law to be delivered in connection with the sale of the Offered Securities, before amending or supplementing the Registration Statement or the Prospectus (including by filing any document that would as a result thereof be incorporated by reference in the Prospectus), to furnish to you a copy of each such proposed amendment, supplement or other document and not to file any such proposed amendment, supplement or other document to which you reasonably object, and to file with the Commission within the applicable period specified in Rule 424(b) under the Securities Act any prospectus required to be filed pursuant to such Rule. (c) If, during such period after the first date of the public offering of the Offered Securities as in the reasonable opinion of counsel for the Underwriters or counsel for the Company the Prospectus is required by law to be delivered in connection with sales by an Underwriter or dealer, any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances existing when the Prospectus is delivered to a purchaser, not misleading, or if, in the reasonable opinion of counsel for the Underwriters or counsel for the Company, it is necessary to amend or supplement the Prospectus to comply with applicable law, forthwith to prepare, file with the Commission and furnish, at its own expense, to the Underwriters and to the dealers (whose names and addresses the Manager will furnish to the Company) to which Offered 9 14 Securities may have been sold by the Manager on behalf of the Underwriters and to any other dealers upon request, either amendments or supplements to the Prospectus so that the statements in the Prospectus as so amended or supplemented will not, in the light of the circumstances existing when the Prospectus is delivered to a purchaser, be misleading or so that the Prospectus, as so amended or supplemented, will comply with law. (d) To endeavor to qualify the Offered Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions as the Manager shall reasonably request and to maintain such qualifications for as long as the Manager shall reasonably request. (e) To make generally available to the Company's security holders and to the Manager as soon as practicable an earning statement that satisfies the provisions of Section 11(a) of the Securities Act and the rules and regulations of the Commission thereunder. (f) During the period beginning on the date of the Underwriting Agreement and continuing to and including the Closing Date, not to offer, sell, contract to sell or otherwise dispose of any debt securities of the Company or warrants to purchase or otherwise acquire debt securities of the Company substantially similar to the Offered Securities (other than (i) the Offered Securities and (ii) commercial paper issued in the ordinary course of business), without the prior written consent of the Manager. (g) Whether or not the transactions contemplated in this Agreement are consummated or this Agreement is terminated, to pay or cause to be paid all expenses incident to the performance of its obligations under this Agreement, including: (i) the fees, disbursements and expenses of the Company's counsel and the Company's accountants in connection with the registration and delivery of the Offered Securities under the Securities Act and all other fees or expenses in connection with the preparation and filing of the Registration Statement, any preliminary prospectus, the Prospectus and amendments and supplements to any of the foregoing, including all printing costs associated therewith, and the mailing and delivering of copies thereof to the Underwriters and dealers, in the quantities hereinabove specified, (ii) all costs and expenses related to the transfer and delivery of the Offered Securities to the Underwriters, including any transfer or other taxes payable thereon, (iii) the cost of printing or producing any Blue Sky memorandum in connection with the offer and sale of the Offered Securities under state securities law and all expenses in connection with the qualification of the Offered Securities for 10 15 offer and sale under state law as provided in Section hereof, including filing fees and the reasonable fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the Blue Sky memorandum, (iv) all filing fees and the reasonable fees and disbursements of counsel to the Underwriters, if any, incurred in connection with the review and qualification of the offering of the Offered Securities by the National Association of Securities Dealers, Inc., (v) any fees charged by the rating agencies for the rating of the Offered Securities, (vi) if applicable, all costs and expenses incident to listing the Offered Securities on any national securities exchanges and foreign stock exchanges, (vii) the cost of printing certificates representing the Offered Securities, (viii) the costs and charges of any trustee, transfer agent, registrar or depositary, (ix) the costs and expenses of the Company relating to investor presentations on any "road show" undertaken in connection with the marketing of the offering of the Offered Securities, including, without limitation, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged in connection with the road show presentations with the prior approval of the Company, travel and lodging expenses of the representatives and officers of the Company and any such consultants, and the cost of any aircraft chartered in connection with the road show, and (x) all other costs and expenses incident to the performance of the obligations of the Company hereunder for which provision is not otherwise made in this Section. It is understood, however, that except as provided in this Section, Section 6 entitled "Indemnification and Contribution", and the last paragraph of Section 8 below, the Underwriters will pay all of their costs and expenses, including fees and disbursements of their counsel, transfer taxes payable on resale of any of the Offered Securities by them and any advertising expenses connected with any offers they may make. 6. Indemnification and Contribution. (a) The Company agrees to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) caused by any untrue statement or allegedly untrue statement of a material fact contained in the Registration Statement or any amendment thereof, any preliminary prospectus or the Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto), or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages 11 16 or liabilities are caused by any such untrue statement or omission or allegedly untrue statement or omission based upon information relating to any Underwriter furnished to the Company in writing by such Underwriters through the Manager or its counsel expressly for use therein; provided however, that the foregoing indemnity agreement with respect to any preliminary prospectus shall not inure to the benefit of any Underwriter from whom the person asserting any such losses, claims, damages or liabilities purchased Offered Securities, or any person controlling such Underwriter, if a copy of the Prospectus (as then amended or supplemented if the Company shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of such Underwriter to such person, if required by law so to have been delivered, at or prior to the written confirmation of sale of the Offered Securities to such person, and if the Prospectus (as so amended or supplemented) would have cured the defect giving rise to such losses, claims, damages or liabilities, unless such failure is the result of noncompliance by the Company with Section 5(a) hereof. (b) Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors, its officers who signed the Registration Statement and each person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to such Underwriter, but only with reference to information relating to such Underwriter furnished to the Company in writing by such Underwriter through the Manager or its counsel expressly for use in the Registration Statement, any preliminary prospectus, the Prospectus or any amendments or supplements thereto. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to either Section or , such person (the "INDEMNIFIED PARTY") shall promptly notify the person against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in respect of the legal 12 17 expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all such indemnified parties and that all such fees and expenses shall be reimbursed as they are incurred. Such firm shall be designated in writing by the Manager, in the case of parties indemnified pursuant to Section above, and by the Company, in the case of parties indemnified pursuant to Section above. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for reasonable fees and expenses of counsel as contemplated by the third sentence of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (d) To the extent the indemnification provided for in Section or is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other hand from the offering of the Offered Securities or (ii) if the allocation provided by clause above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause above but also the relative fault of the Company on the one hand and of the Underwriters on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other hand in connection with the offering of the Offered Securities shall be deemed to be in the same respective proportions as the net proceeds from the 13 18 offering of such Offered Securities (before deducting expenses) received by the Company and the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover of the Prospectus Supplement, bear to the aggregate public offering price of the Offered Securities. The relative fault of the Company on the one hand and the Underwriters on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company (including information relating to MidCon) or by the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Underwriters' respective obligations to contribute pursuant to this Section are several in proportion to the respective principal amounts of Offered Securities they have purchased hereunder, and not joint. (e) The Company and the Underwriters agree that it would not be just or equitable if contribution pursuant to this Section were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in Section . The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section , no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Offered Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Section are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. (f) The indemnity and contribution provisions contained in this Section and the representations, warranties and other statements of the Company contained in this Agreement shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Underwriter or any person controlling any Underwriter or the Company, its officers or directors or any person controlling the Company and (iii) acceptance of and payment for any of the Offered Securities. 14 19 7. Termination. This Agreement shall be subject to termination by notice given by the Manager to the Company, if (a) after the execution and delivery of the Underwriting Agreement and prior to the Closing Date (i) trading generally shall have been suspended or materially limited on or by, as the case may be, the New York Stock Exchange or the National Association of Securities Dealers, Inc., (ii) trading of any securities of the Company shall have been suspended on any exchange or in any over-the-counter market, (iii) a general moratorium on commercial banking activities in New York shall have been declared by either Federal or New York State authorities or (iv) there shall have occurred any outbreak or escalation of hostilities or any change in financial markets or any calamity or crisis that, in the judgment of the Manager, is material and adverse and (b) in the case of any of the events specified in clauses through , such event, singly or together with any other such event, makes it, in the judgment of the Manager, impracticable to market the Offered Securities on the terms and in the manner contemplated in the Prospectus. 8. Defaulting Underwriters. If, on the Closing Date, any one or more of the Underwriters shall fail or refuse to purchase Offered Securities that it has or they have agreed to purchase hereunder on such date, and the aggregate principal amount of Offered Securities which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than one-tenth of the aggregate principal amount of the Offered Securities to be purchased on such date, the other Underwriters shall be obligated severally in the proportions that the principal amount of Offered Securities set forth opposite their respective names in the Underwriting Agreement bears to the aggregate principal amount of Offered Securities set forth opposite the names of all such non-defaulting Underwriters, or in such other proportions as the Manager may specify, to purchase the Offered Securities which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on such date; provided that in no event shall the principal amount of Offered Securities that any Underwriter has agreed to purchase pursuant to this Agreement be increased pursuant to this Section by an amount in excess of one-ninth of such principal amount of Offered Securities without the written consent of such Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Offered Securities and the aggregate principal amount of Offered Securities with respect to which such default occurs is more than one-tenth of the aggregate principal amount of Offered Securities to be purchased on such date, and arrangements satisfactory to the Manager and the Company for the purchase of such Offered Securities are not made within 36 hours after such default, this Agreement shall terminate without liability on the part of any non-defaulting Underwriter or the Company. In any such case either the Manager or the Company shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if 15 20 any, in the Registration Statement and in the Prospectus or in any other documents or arrangements may be effected. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement. If this Agreement shall be terminated by the Underwriters, or any of them, because of any failure or refusal on the part of the Company to comply with the terms or to fulfill any of the conditions of this Agreement, or if for any reason the Company shall be unable to perform its obligations under this Agreement, the Company will reimburse the Underwriters or such Underwriters as have so terminated this Agreement with respect to themselves, severally, for all out-of-pocket expenses (including the fees and disbursements of their counsel) reasonably incurred by such Underwriters in connection with this Agreement or the offering contemplated hereunder. 9. Counterparts. This Agreement may be signed in two or more counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 10. Applicable Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York. 11. Headings. The headings of the sections of this Agreement have been inserted for convenience of reference only and shall not be deemed a part of this Agreement. 16 21 EXHIBIT A-1 OPINION OF OUTSIDE COUNSEL FOR THE COMPANY The opinion of Simpson Thacher & Bartlett, outside counsel for the Company to be delivered pursuant to Section 4(d) of the Underwriting Agreement, shall be to the effect that: (i) The Registration Statement has become effective under the Act and, to such counsel's knowledge, no stop order suspending the effectiveness of the Registration Statement has been issued or proceeding for that purpose has been instituted or threatened by the Commission; (ii) The Indenture has been duly qualified under the Trust Indenture Act and, assuming the Indenture has been duly authorized, executed and delivered by the Company and the Trustee, constitutes a valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally and general principal of equity; (iii) Assuming the Offered Securities have been duly authorized, executed and delivered by the Company and duly authenticated by the Trustee, and upon payment and delivery thereof in accordance with the Underwriting Agreement, the Offered Securities will constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their terms and entitled to the benefits of the Indenture; (iv) The issue and sale of the Offered Securities, and the compliance by the Company with all of the provisions of the Underwriting Agreement and the Indenture, will not violate any federal or New York statute or any rule or regulation that has been issued pursuant to any federal or New York statute or any order known by such counsel issued pursuant to any federal or New York statute by any court or governmental agency or body or court having jurisdiction over the Company or any of its subsidiaries or any properties, and no consent, approval, authorization or order, registration, or qualification of or with, any federal or New York governmental body or agency or, to our knowledge, any federal or New York court is required for the issue and sale of the Offered Securities by the Company and the compliance by the Company with all of the provisions of this 22 Agreement, the Indenture or the Offered Securities, except for registration under the Act of the Offered Securities and such as may be required by the securities or Blue Sky laws of the various states in connection with the purchase and distribution of the Offered Securities; (v) The statements in the Prospectus under the caption "Description of the Senior Notes" insofar as they purport to constitute summaries of the terms of the Offered Securities, constitute accurate summaries of the terms of such Offered Securities in all material respects; (vi) The Company is not an "investment company" within the meaning of, and subject to regulation under, the Investment Company Act of 1940, as amended; and (vii) Such counsel (A) is of the opinion that the Registration Statement, as of its effective date, and Prospectus, as of the date of the Underwriting Agreement, (except for financial statements and schedules and other financial data included therein as to which such counsel need not express any opinion) comply as to form in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder, (B) has no reason to believe that (except for financial statements and schedules and other financial data as to which such counsel need not express any belief) the Registration Statement at the time the Registration Statement became effective or on the effective date of the most recent post-effective amendment thereto, if any, contained any untrue statements of a material fact or omitted or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (C) has no reason to believe that (except for financial statements and schedules and other financial or statistical data as to which such counsel need not express any belief) the Prospectus at the time the Prospectus Supplement was issued or at the Closing Date contained or contains any untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. A-1-2 23 EXHIBIT A-2 OPINION OF GENERAL COUNSEL OF THE COMPANY The opinion of Martha B. Wyrsch, Esq., Vice President, General Counsel and Secretary of the Company, to be delivered pursuant to Section 4(d) of the Underwriting Agreement, shall be to the effect that: (i) Each of the Company and the Significant Subsidiaries (i) is duly qualified to do business as a foreign corporation and is in good standing under the laws of each jurisdiction which requires such qualification wherein it owns or leases material properties or conducts material business, except where the failure to be so qualified or in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole, and (ii) holds all material approvals, authorizations, orders, licenses, certificates and permits from governmental authorities necessary for the conduct of its business as described in the Prospectus, except where the failure to hold such approvals, authorizations, orders, licenses, certificates and/or permits would not, singularly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole; (ii) Each of the Significant Subsidiaries has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction in which it is incorporated, with full corporate power and authority to own its properties and conduct its business as described in the Prospectus except to the extent that the failure to be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; (iii) All the outstanding shares of capital stock of each Significant Subsidiary have been duly and validly authorized and issued and are fully paid and nonassessable, and, except as otherwise set forth in the Prospectus, all of such shares are owned by the Company either directly or through one or more subsidiaries free and clear of any pledge, security interest, claims, lien or other encumbrance; (iv) Such counsel does not know of any statutes or regulations, or any pending or threatened legal or governmental proceedings, required to be described in the Prospectus that are not described as required, nor of any contracts or documents of a character required to be described or referred to in the Registration 18 24 Statement or the Prospectus or to be filed as exhibits to the Registration Statement that are not described, referred to or filed as required; (v) The descriptions included in or incorporated by reference in the Prospectus of the statutes, regulations, legal or governmental proceedings, contracts and other documents therein described are accurate and fairly summarize the matters referred to therein; (vi) No consent, approval, authorization or order of any court or governmental agency or body is required to be obtained by the Company or any subsidiary for the consummation of the transactions contemplated herein in connection with the purchase and sale of the Offered Securities by the Underwriters, except such approvals (specified in such opinion) as have been obtained; (vii) The execution and delivery by the Company of the Underwriting Agreement and the Indenture, the issuance and delivery of the Offered Securities, the consummation by the Company of the transactions contemplated therein and compliance by the Company with the terms of the Underwriting Agreement do not and will not result in any violation of the charter or by-laws of the Company or any Significant Subsidiary and do not and will not conflict with, or result in a breach of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or asset of the Company or any Significant Subsidiary under (A) any indenture, mortgage or loan agreement, or any other agreement or instrument known to such counsel, to which the Company or any Significant Subsidiary is a party or by which it may be bound or to which any of its properties may be subject, (B) any existing applicable law, rule or regulation (other than the securities or Blue Sky laws of the various states, as to which such counsel need express no opinion), or (C) any judgment, order or decree of any government, governmental instrumentality or court, domestic or foreign, known to such counsel having jurisdiction over the Company or any Significant Subsidiary or any of its properties (except, in the case of subclauses (A) and (B) hereof, for such conflicts, breaches or defaults or liens, charges or encumbrances that would not have a material adverse effect on the condition (financial or otherwise), earnings, business affairs or business prospects of the Company and its subsidiaries, considered as one enterprise or the transactions contemplated by the Underwriting Agreement); (viii) Each of the Underwriting Agreement, the Indenture and the Offered Securities has been duly executed and delivered by the Company; A-2-2 25 (ix) The Offered Securities in global form have been duly executed and delivered by the Company; (x) The Company and the Significant Subsidiaries hold all requisite Certificates of Public Convenience and Necessity from the Federal Energy Regulatory Commission to enable them to carry on the respective businesses in which they are engaged; (xi) To the knowledge of such counsel (after due inquiry), none of the Company or any Significant Subsidiary is in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any contract, indenture, loan agreement, note, lease or other agreement or instrument that is described or referred to in the Registration Statement or Prospectus or filed as an exhibit to the Registration Statement; (xii) To the knowledge of such counsel, after due inquiry, no person or corporation which is a "holding company" or a "subsidiary of a holding company," within the meaning of such terms as defined in the Public Utility Holding Company Act of 1935, directly or indirectly owns, controls or holds with power to vote 10% or more of the outstanding voting securities of the Company; and the Company is not a "holding company" or to the knowledge of such counsel, after due inquiry, a "subsidiary of a holding company" as so defined; and (xiii) The documents incorporated by reference in the Prospectus (except for the consolidated financial statements and other financial or statistical data included therein or omitted therefrom, as to which such counsel need express no opinion), as of the dates they were filed with the Commission or to the extent such documents were subsequently amended prior to the date hereof, at the time so amended, complied as to form in all material respects with the requirements of the Exchange Act and the regulations thereunder. In addition, such counsel shall state that such counsel has participated in the preparation of the Registration Statement and the Prospectus (including the documents incorporated by reference therein) and participated in conferences with representatives of your legal counsel and representatives of the Underwriters at which the contents of the Registration Statement and the Prospectus and related matters were discussed. Such counsel shall also state that although such counsel is not passing upon and does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement and the Prospectus except as stated above, such counsel advises you that, on the basis of the foregoing, no facts have come to such counsel's attention which lead such counsel to believe that (A) the Registration Statement or any amendments thereto (other than the financial statements and other financial or statistical A-2-3 26 information included or incorporated by reference therein as to which such counsel need not comment and except for that part of the Registration Statement that constitutes the Statement of Eligibility (Form T-1) under the Trust Indenture Act of the Trustee), at the time the Registration Statement initially became effective or on the effective date of the most recent post-effective amendment thereto, if any, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or (B) the Prospectus or any amendment or supplement thereto (other than the financial statements and other financial or statistical information included or incorporated by reference therein as to which such counsel need not comment and except for that part of the Registration Statement that constitutes the Form T-1 heretofore referred to), at the time the Prospectus Supplement was issued or at the Closing Date contained or contains an untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. In rendering such opinions, such counsel may (A) state that her opinion is limited to the laws of the State of Colorado and the federal laws of the United States and (B) rely as to matters involving the application of laws of any jurisdiction other than the State of Colorado or the United States, to the extent deemed proper and specified in such opinion, upon the opinions of Polsinelli, White, Vardeman & Shalton and other local counsel of good standing believed to be reliable and who are satisfactory to counsel for the Underwriters and as to matters of fact, to the extent deemed proper, on certificates of responsible officers of the Company and public officials. A-2-4 27 EXHIBIT A-3 OPINION OF KANSAS COUNSEL OF THE COMPANY The opinion of Polsinelli, White, Vardeman & Shalton, Kansas counsel to the Company, to be delivered pursuant to Section 4(d) of the Underwriting Agreement, shall be to the effect that: (i) The Company is duly incorporated, validly existing, and in good standing under the laws of the State of Kansas, with corporate power and authority under such laws to own, lease and operate its properties and conduct its business as described in the Prospectus. (ii) The execution and delivery of each of the Indenture and the Underwriting Agreement have been duly authorized by all necessary corporate action of the Company. (iii) The execution and delivery of the Offered Securities have been duly authorized by all necessary corporate action of the Company. (iv) No approval, authorization, consent or other action (other than under the securities or Blue Sky laws of the State of Kansas) is required by any regulatory authority or governmental body of the State of Kansas for the valid issuance, sale, and delivery by the Company of the Offered Securities pursuant to the Underwriting Agreement and to the best of our knowledge, do not result in any breach or violation of any judgment, order or decree of any governmental body, agency or court located in Kansas having jurisdiction over the Company. EX-4.1 4 FORM OF 2001 SENIOR NOTE 1 Exhibit 4.1 THIS SECURITY IS A BOOK-ENTRY SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN SUCH LIMITED CIRCUMSTANCES. Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to the Company or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. K N ENERGY, INC. 6.45% Senior Notes due 2001 No. G-2 CUSIP No. 482-620-HA2 K N ENERGY, INC., a corporation duly organized and existing under the laws of the State of Kansas (herein called the "Company", which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to Cede & Co., or registered assigns, the principal sum of TWO HUNDRED MILLION DOLLARS ($200,000,000) on November 30, 2001, and to pay interest thereon from November 25, 1998 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually in arrears on May 31 and November 30 in each year, commencing May 31, 1999, at the rate of 6.45% per annum, until the principal hereof is fully paid or made available for full payment. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the fifteenth calendar day (whether or not a Business Day) immediately preceding such Interest Payment Date. Any such interest which is payable, but is not punctually paid or duly provided for on any Interest Payment Date ("Defaulted Interest") will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the 2 requirements of any securities exchange on which the Securities of this series may be then listed, and upon such notice as may be required by such exchange, all as more fully provided in such Indenture. Payment of the principal of and interest on this Security shall be made at the Corporate Trust Office of the Trustee in Chicago, Illinois, or at such other office or agency of the Company as it may designate for such purpose pursuant to the Indenture hereinafter referred to, in such immediately available funds of the United States of America as at the time of payment are legal tender for payment of public and private debts. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth in this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to below by manual signature of an authorized officer, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. 3 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. Dated: November ___, 1998 K N ENERGY, INC. By: _____________________________ Name: Title: ATTEST: By:______________________________ TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. Dated: November ___, 1998 U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee By:___________________________________ Authorized Officer 4 [REVERSE OF SECURITY] K N ENERGY, INC. 6.45% Senior Notes due 2001 This Security is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture, dated as of November 20, 1993 (herein called the "Indenture"), between the Company and U.S. Bank Trust National Association, as successor Trustee (herein called the "Trustee", which term includes any additional successor trustee under the Indenture), to which the Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitation of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. Capitalized terms used but not defined herein shall have the respective meanings assigned to them in the Indenture. This is one of the Book-Entry Securities representing the series designated on the face hereof, such series limited in aggregate principal amount to $400,000,000. The Securities of this series shall not be subject to redemption prior to November 30, 2001. The Securities of this series shall not be subject to a sinking fund requirement. The Indenture contains provisions for defeasance of (a) the entire indebtedness of this Security and (b) certain restrictive covenants upon compliance by the Company with certain conditions set forth therein. If an Event of Default with respect to the Securities of this series shall occur and be continuing, the unpaid principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of not less than a majority in principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all the Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. As set forth in, and subject to, the provisions of the Indenture, no Holder of any Security of this series shall have any right to institute any proceeding with respect to the Indenture or for any remedy thereunder, unless such Holder shall have previously given to the Trustee written notice of 5 a continuing Event of Default with respect to the Securities of this series, the Holders of not less than 25% in principal amount of the Outstanding Securities of this series shall have made written request, and offered reasonable indemnity, to the Trustee to institute such proceeding as trustee, and the Trustee shall not have received from the Holders of a majority in principal amount of the Outstanding Securities of this series a direction inconsistent with such request and shall have failed to institute such proceeding within 60 days; provided, however, that such limitations shall not apply to a suit instituted by the Holder hereof for the enforcement of payment of the principal of or interest on this Security on or after the respective due dates expressed herein. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. This Security shall be exchangeable for Securities of this series registered in the names of Persons other than the Depository with respect to such series or its nominee only as provided in this paragraph. This Security shall be so exchangeable if (x) such Depository notifies the Company that it is unwilling or unable to continue as Depository for this Security or if at any time such Depository ceases to be a clearing agency registered as such under the Securities Exchange Act of 1934, (y) the Company executes and delivers to the Trustee a written order providing that this Security shall be so exchangeable or (z) there shall have occurred and be continuing an Event of Default with respect to the Securities of this series. Securities so issued in exchange for this Security shall be of the same series and of like tenor, in authorized denominations and in the aggregate having the same unpaid principal amount as this Security and registered in such names as such Depository shall direct. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in any place where the principal of and interest on this Security are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or its attorney duly authorized in writing, and thereupon one or more new Securities of this series, and of like tenor, of authorized denominations and for the same aggregate unpaid principal amount, shall be issued to the designated transferee or transferees. At the date of the original issuance of this Security, such office or agency of the Company is maintained by U.S. Bank Trust National Association, at One Illinois Center, Suite 3000, 111 East Wacker Drive, Chicago, Illinois 60601. No service charge shall be made for any such exchange or registration of transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. 6 Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused a CUSIP number to be printed on this Security as a convenience to the Holder hereof. No representation is made as to the accuracy of such number and reliance may be placed only on the other identifying information printed hereon. Interest on this Security shall be computed on the basis of a 360-day year comprised of twelve 30-day months. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. The Indenture and this Security shall be governed by and construed in accordance with the laws of the State of New York. 7 ASSIGNMENT FORM I or we assign and transfer this Security to - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type name, address and zip code of assignee or transferee) - -------------------------------------------------------------------------------- (Insert Social Security or other identifying number of assignee or transferee) and irrevocably appoint ------------------------------------------------------ agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. Dated: Signed: ---------------------------- ------------------------------- (Sign exactly as name appears above or on the other side of this Security) Signature Guarantee: ------------------------------------------ Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor program reasonably acceptable to the Trustee) EX-4.2 5 FORM OF PEPS UNIT (COUPON SECURITY) 1 Exhibit 4.2 THIS SECURITY CERTIFICATE IS A GLOBAL SECURITY CERTIFICATE WITHIN THE MEANING OF THE PURCHASE CONTRACT AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY ("DTC") OR A NOMINEE OF DTC. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE PURCHASE CONTRACT AGREEMENT AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. K N ENERGY, INC. 8.25% PREMIUM EQUITY PARTICIPATING SECURITY UNITS (STATED AMOUNT $43 PER SECURITY) No. G-1 CUSIP No. 482620507 10,706,000 Coupon Securities This Security Certificate certifies that Cede & Co. is the registered Holder of the number of Securities set forth above. Each Security represents ownership by the Holder of 5.875% United States Treasury Notes due November 30, 2001 (CUSIP No. 9128272C5) that are held through the Treasury/Reserve Automated Debt Entry System ("TREASURY NOTES"), or security entitlements in respect thereof (together with Treasury Notes, "TREASURY SECURITIES"), with a principal amount equal to the Stated Amount, subject to the Pledge of such Treasury Securities by such Holder pursuant to the Pledge Agreement, and the rights and obligations of 2 the Holder under one Purchase Contract with K N Energy, Inc., a Kansas corporation (the "COMPANY"). The Treasury Securities represented by this Security Certificate were acquired by the Underwriters at the direction of the Company for the benefit of the Holder hereof and are being conveyed to the Holder of this Security Certificate (or such Holder's predecessor-in-interest) and pledged pursuant to the Pledge Agreement simultaneously therewith. Pursuant to the Pledge Agreement, the Treasury Securities constituting part of each Security evidenced hereby are pledged to the Collateral Agent to secure the obligation of the Holder under the Purchase Contract comprising a portion of such Security. The Pledge Agreement provides that all payments of principal of, or interest on, any Treasury Notes corresponding to Treasury Securities comprising a portion of the Securities received by the Collateral Agent shall be paid by the Collateral Agent by wire transfer in same day funds no later than 12:00 noon, New York City time, on the Business Day such payment is received by the Collateral Agent (provided that in the event such payment is received by the Collateral Agent on a day that is not a Business Day or after 11:30 a.m., New York City time, on a Business Day, then such payment shall be made no later than 10:00 a.m., New York City time, on the next succeeding Business Day) (i) in the case of interest payments and any principal payments with respect to any Treasury Notes corresponding to Treasury Securities that have been released from the Pledge pursuant to the Pledge Agreement, to the Agent to the account designated by it for such purpose and (ii) in the case of principal payments on any Treasury Notes corresponding to Pledged Treasury Securities (as defined in the Pledge Agreement), at the direction of the Agent on behalf of the Holders, to the Company, in full satisfaction of the respective obligations of the Holders of the Securities of which such Pledged Treasury Securities are a part under the Purchase Contracts forming a part of such Securities. Interest on any Treasury Note corresponding to any Treasury Security forming part of a Security evidenced hereby that is paid on any May 31 or November 30, commencing May 31, 1999 (a "PAYMENT DATE"), shall, subject to receipt thereof by the Agent from the Collateral Agent, be paid to the Person in whose name this Security Certificate (or a Predecessor Security Certificate) is registered at the close of business on the Record Date next preceding such Payment Date; provided, that on the first Payment Date, the Agent shall remit to the Persons in whose names such Security Certificates are registered on the Record Date with respect thereto, in addition to interest on the Treasury Notes paid on such Payment Date, interest payable with respect to the Treasury Notes for the period from the date of initial issuance of the Securities until November 29, 1998. Interest payable with respect to the Treasury Notes that accrued prior to the date of initial issuance of the Securities, and that is payable on the first interest payment date with respect to the Treasury Notes following the date of initial issuance of the Securities shall be remitted by the 2 3 Agent to Morgan Stanley & Co. Incorporated for the account of the Underwriters by 2:00 p.m. New York City time on the date of receipt by the Agent. Prior to November 15, 2001, the Holder of this Security Certificate shall have the right to substitute Zero-Coupon Treasury Securities for the Treasury Securities forming a part of the Securities evidenced hereby, thereby forming Zero-Coupon Securities, in the manner set forth in the Purchase Contract Agreement and the Pledge Agreement. Each Purchase Contract evidenced hereby obligates the Holder of this Security Certificate to purchase, and the Company to sell, on November 30, 2001 (the "FINAL SETTLEMENT DATE"), at a price equal to the Stated Amount, a number of shares of common stock, par value $5.00 per share ("COMMON STOCK"), of the Company, equal to the Settlement Rate, unless on or prior to the Final Settlement Date there shall have occurred a Termination Event or Early Settlement with respect to the Security of which such Purchase Contract is a part, all as provided in the Purchase Contract Agreement referred to on the reverse hereof and more fully described on the reverse hereof. The purchase price for the Common Stock purchased pursuant to each Purchase Contract evidenced hereby, if not paid earlier, shall be paid on the Final Settlement Date by application of payment received in respect of the principal of the Treasury Securities pledged to secure the obligations under such Purchase Contract of the Holder of the Security of which such Purchase Contract is a part. The Company shall pay, on each Payment Date, in respect of each Purchase Contract forming part of a Security evidenced hereby, an amount (the "CONTRACT FEES") equal to 2.375% per annum of the Stated Amount, computed on the basis of the actual number of days elapsed in a year of 365 or 366 days, as the case may be, subject to deferral at the option of the Company as provided in the Purchase Contract Agreement and more fully described on the reverse hereof. Such Contract Fee shall be payable to the Person in whose name this Security Certificate (or a Predecessor Security Certificate) is registered at the close of business on the Record Date immediately preceding such Payment Date. Interest on the Treasury Notes and the Contract Fees shall be payable at the office or agency of the Agent in The City of New York or, at the option of the Company, by check mailed to the address of the Person entitled thereto as such address appears on Security Register. Reference is hereby made to the further provisions set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Agent by manual signature, this Security Certificate shall not be entitled to any 3 4 benefit under the Pledge Agreement or the Purchase Contract Agreement or be valid or obligatory for any purpose. 4 5 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed. K N ENERGY, INC. By: _________________________ Name: Title: Attested by: HOLDER SPECIFIED ABOVE (as to obligations of such Holder under the Purchase Contracts evidenced hereby) By: U.S. BANK TRUST NATIONAL ASSOCIATION, not individually but solely as Attorney-in-Fact of such Holder By: _________________________ Authorized Signatory Dated: (Form of Certificate of Authentication) This is one of the Security Certificates referred to in the within mentioned Purchase Contract Agreement. U.S. BANK TRUST NATIONAL ASSOCIATION, as Agent By: ___________________________ Authorized Signatory 5 6 [REVERSE OF SECURITY CERTIFICATE] Each Purchase Contract evidenced hereby is governed by a Purchase Contract Agreement, dated as of November 25, 1998 (the "PURCHASE CONTRACT AGREEMENT"), between the Company and U.S. Bank Trust National Association, as Purchase Contract Agent (herein called the "AGENT"), to which Purchase Contract Agreement and supplemental agreements thereto reference is hereby made for a description of the respective rights, limitations of rights, obligations, duties and immunities thereunder of the Agent, the Company and the Holders and of the terms upon which the Security Certificates are, and are to be, executed and delivered. Each Purchase Contract evidenced hereby shall obligate the Holder of this Security Certificate to purchase, and the Company to sell, on the Final Settlement Date at a price equal to the Stated Amount, a number of shares of Common Stock of the Company equal to the Settlement Rate, unless, on or prior to the Final Settlement Date, there shall have occurred a Termination Event or an Early Settlement with respect to the Security of which such Purchase Contract is a part. The "SETTLEMENT RATE" is equal to (a) if the Applicable Market Value (as defined below) is greater than $51.60 (the "THRESHOLD APPRECIATION PRICE"), .8333 of a share of Common Stock per Purchase Contract, (b) if the Applicable Market Value is less than or equal to the Threshold Appreciation Price but is greater than the Stated Amount, a fractional share of Common Stock per Purchase Contract equal to the Stated Amount divided by the Applicable Market Value (rounded upward or downward to the nearest 1/10,000th of a share) and (c) if the Applicable Market Value is less than or equal to the Stated Amount, one share of Common Stock per Purchase Contract, in each case subject to adjustment as provided in the Purchase Contract Agreement. No fractional shares of Common Stock shall be issued upon settlement of Purchase Contracts, as provided in the Purchase Contract Agreement. The "APPLICABLE MARKET VALUE" means the average of the Closing Prices per share of Common Stock on each of the twenty consecutive Trading Days ending on the second Trading Day immediately preceding the Final Settlement Date. The "CLOSING PRICE" of the Common Stock on any date of determination means the closing sale price (or, if no closing price is reported, the last reported sale price) of the Common Stock on The New York Stock Exchange, Inc. (the "NYSE") on such date or, if the Common Stock is not listed for trading on the NYSE on any such date, as reported in the composite transactions for the principal United States securities exchange on which the Common Stock is so listed or, if the Common Stock is not so listed on a United States national or regional securities exchange, as reported by the Nasdaq Stock Market or, if such price of the Common Stock is not so reported, the last quoted bid price for the Common Stock in the over-the-counter market as reported by the National Quotation Bureau or similar organization or, if such bid price is not available, the market 6 7 value of the Common Stock on such date as determined by a nationally recognized independent investment banking firm retained for this purpose by the Company. A "TRADING DAY" means a day on which the Common Stock (A) is not suspended from trading on any national or regional securities exchange or association or over-the-counter market at the close of business and (B) has traded at least once on the national or regional securities exchange or association or over-the-counter market that is the primary market for the trading of the Common Stock. The purchase price for the shares of Common Stock purchased pursuant to each Purchase Contract shall be paid by application of payments received by the Company on the Final Settlement Date from the Collateral Agent at the direction of the Agent on behalf of the Holders pursuant to the Pledge Agreement in respect of the principal of the Treasury Securities pledged to secure the obligations of the relevant Holder under such Purchase Contract. The Company shall not be obligated to issue any shares of Common Stock in respect of a Purchase Contract or deliver any certificates therefor to the Holder unless it shall have received payment in full of the aggregate purchase price for the shares of Common Stock to be purchased thereunder in the manner set forth herein and in the Purchase Contract Agreement. Subject to the next succeeding paragraph and the provisions of the Purchase Contract Agreement, the Company shall pay, on each Payment Date, the Contract Fee payable in respect of each Purchase Contract to the Person in whose name the Security Certificate (or one or more Predecessor Security Certificates) evidencing the Security of which such Purchase Contract is a part and is registered at the close of business on the Record Date immediately preceding such Payment Date. The Company shall have the right, at any time prior to the Final Settlement Date, to defer the payment of any or all of the Contract Fees otherwise payable on any Payment Date (on a pro rata basis among all Outstanding Securities), but only if the Company shall give the Holders and the Agent written notice of its election to defer such payment (specifying the amount to be deferred and the period of deferment) as provided in the Purchase Contract Agreement. Any Contract Fees so deferred shall bear additional Contract Fees thereon at the rate of 8.25% per annum (computed on the basis of the actual number of days elapsed in a year of 365 or 366 days, as the case may be), compounding on each succeeding Payment Date, until paid in full (such deferred installments of Contract Fees, together with the additional Contract Fees accrued thereon, are referred to herein as the "DEFERRED CONTRACT FEES"). Deferred Contract Fees shall be due on the next succeeding Payment Date except to the extent that payment is deferred pursuant to the Purchase Contract Agreement. No Contract Fees may be deferred to a date that is after the Final Settlement Date. 7 8 In the event that the Company elects to defer the payment of Contract Fees on Purchase Contracts until the Final Settlement Date, the Holder of this Security Certificate shall receive on the Final Settlement Date, in lieu of a cash payment, a number of shares of Common Stock (in addition to a number of Common Stock equal to the Settlement Rate) equal to (x) the aggregate amount of Deferred Contract Fees payable to the Holder of this Security Certificate divided by (y) the Applicable Market Value. No fractional shares of Common Stock shall be issued with respect to the payment of Deferred Contract Fees on the Final Settlement Date, as provided in the Purchase Contract Agreement. In the event the Company exercises its option to defer the payment of Contract Fees, then, until the Deferred Contract Fees have been paid in full, the Company 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 purchases or acquisitions of Common Stock in connection with the satisfaction by the Company or any of its subsidiaries of their respective obligations under any benefit plans for directors, officers, agents or employees or the Company's dividend reinvestment or director, officer, agent or employee stock purchase plans, as a result of a reclassification of the Company's capital stock or the exchange or conversion of one class or series of capital stock for another class or series of the Company's capital stock, the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of the Company's capital stock or the security being converted or exchanged for the Company's capital stock), dividends or distributions in the form of shares of, or options, warrants or rights to subscribe for or purchase, shares of capital stock of the Company or any declaration of a dividend in connection with the implementation of 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)), shall not make any payment of interest, principal or premium, if any, on, or repay, repurchase or redeem any debt securities issued by the Company that rank pari passu with or junior to such Contract Fees and (c) shall not make any guarantee payments with respect to any guarantee by the Company of any securities of any subsidiary of the Company if such guarantee ranks pari passu with or junior in right of payment to the Contract Fees. The Purchase Contracts and the obligations and rights of the Company and the Holders thereunder, including, without limitation, the rights of the Holders to receive and the obligation of the Company to pay any Contract Fee or any Deferred Contract Fees, shall immediately and automatically terminate, without the necessity of any notice or action by any Holder, the Agent or the Company, if, on or prior to the Final Settlement Date, a Termination Event shall have occurred. Upon the occurrence of a Termination Event, the Company shall promptly but in no event more than two Business Days thereafter give written notice to the Agent, the Collateral Agent and the Holders. Upon and after the occurrence of a 8 9 Termination Event, the Collateral Agent shall release the Treasury Securities from the Pledge in accordance with the provisions of the Pledge Agreement. The Securities shall thereafter represent the right to receive the Treasury Securities forming a part of such Securities in accordance with the provisions of the Purchase Contract Agreement and the Pledge Agreement. Subject to and upon compliance with the provisions of the Purchase Contract Agreement, at the option of the Holder thereof, any Purchase Contracts underlying Securities may be settled early in whole multiples of 1,000 Securities ("EARLY SETTLEMENT") as provided in the Purchase Contract Agreement. In order to exercise the right to effect Early Settlement with respect to any Purchase Contracts evidenced by this Security Certificate, the Holder of this Security Certificate shall deliver this Security Certificate to the Agent at the Corporate Trust Office duly endorsed for transfer to the Company or in blank with the form of Election to Settle Early set forth below duly completed and accompanied by payment in the form of immediately available funds in an amount (the "EARLY SETTLEMENT AMOUNT") equal to the product of the Stated Amount times the number of Purchase Contracts with respect to which the Holder has elected to effect Early Settlement plus if such delivery is made with respect to any Purchase Contracts during the period from the close of business on any Record Date immediately preceding any Payment Date to the opening of business of such Payment Date, an amount equal to the sum of (x) the Contract Fees and Deferred Contract Fees, if any, payable on such Payment Date with respect to such Purchase Contracts plus (y) the interest with respect to the related Treasury Notes payable on such Payment Date. Upon Early Settlement of Purchase Contracts by a Holder of the related Securities, the Treasury Securities underlying such Securities shall be released from the Pledge as provided in the Pledge Agreement and the Holder shall be entitled to receive a number of shares of Common Stock on account of each Purchase Contract forming part of a Security as to which Early Settlement is effected equal to the Early Settlement Rate; provided, however, that upon the Early Settlement of the Purchase Contracts, the Holder thereof shall forfeit the right to receive accrued Contract Fees and any Deferred Contract Fees on such Purchase Contracts. The "EARLY SETTLEMENT RATE" shall initially be equal to .8333 and shall be adjusted in the same manner and at the same time as the Settlement Rate is adjusted as provided in the Purchase Contract Agreement. The Security Certificates are issuable only in registered form and only in denominations of a single Security and any integral multiple thereof. The transfer of any Security Certificates shall be registered and Security Certificates may be exchanged as provided in the Purchase Contract Agreement. The Security Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents permitted by the Purchase Contract Agreement. No service charge shall be required for any such registration of transfer or exchange, but the Company and the Agent may require payment of a sum sufficient to cover any tax or other governmental charge payable in 9 10 connection therewith. For so long as the Purchase Contract underlying a Security remains in effect, such Security shall not be separable into its constituent parts (provided that the Holder shall have the right to effect a Collateral Substitution), and the rights and obligations of the Holder of such Security in respect of the Treasury Securities and Purchase Contract constituting such Security may be transferred and exchanged only as a Security. Upon registration of transfer of this Security Certificate, the transferee shall be bound (without the necessity of any other action on the part of such transferee) under the terms of the Purchase Contract Agreement, the Purchase Contracts evidenced hereby and the Pledge Agreement, and the transferor shall be released from the obligations under the Purchase Contracts evidenced by this Security Certificate. The Company covenants and agrees, and the Holder, by such Holder's acceptance hereof, likewise covenants and agrees, to be bound by the provisions of this paragraph. The Holder of this Security Certificate, by such Holder's acceptance hereof, authorizes the Agent to enter into and perform the related Purchase Contracts forming part of the Securities evidenced hereby on such Holder's behalf as such Holder's attorney-in-fact, expressly withholds any consent to the assumption (i.e., affirmance) of the Purchase Contracts by the Company or such Holder's trustee in the event that the Company becomes the subject of a case under the Bankruptcy Code, agrees to be bound by the terms and provisions thereof, covenants and agrees to perform its obligations under the Purchase Contracts forming a part of the Securities evidenced hereby, consents to the provisions of the Purchase Contract Agreement, authorizes the Agent to enter into and perform the Pledge Agreement on such Holder's behalf as such Holder's attorney-in-fact, and consents to the Pledge of the Treasury Securities underlying this Security Certificate pursuant to the Pledge Agreement. The Holder, by such Holder's acceptance hereof, further covenants and agrees that, to the extent and in the manner provided in the Purchase Contract Agreement and the Pledge Agreement, but subject to the terms thereof, payments in respect of principal of the Treasury Securities on the Final Settlement Date shall be paid by the Collateral Agent to the Company in satisfaction of such Holder's obligations under such Purchase Contract and such Holder shall acquire no right, title or interest in such payments. Subject to certain exceptions, the provisions of the Purchase Contract Agreement may be amended with the consent of the Holders of at least 66 2/3% in Stated Amount of the Outstanding Securities. All terms used herein that are defined in the Purchase Contract Agreement have the meanings set forth therein. 10 11 The Purchase Contracts shall for all purposes be governed by, and construed in accordance with, the laws of the State of New York. The Company and the Agent, and any agent of the Company or the Agent, may treat the Person in whose name this Security Certificate is registered as the owner of the Securities evidenced hereby for the purpose of receiving payments of interest on the Treasury Notes, receiving payments of Contract Fees and any Deferred Contract Fees, performance of the Purchase Contracts and for all other purposes whatsoever, whether or not the payment of interest on the Treasury Notes or any Contract Fee payable in respect of the Purchase Contracts constituting a part of the Securities evidenced thereby shall be overdue and notwithstanding any notice to the contrary, and neither the Company, the Agent nor any such agent shall be affected by notice to the contrary. The Purchase Contracts shall not, prior to the settlement thereof, entitle the Holder to any of the rights of a holder of shares of Common Stock. A copy of the Purchase Contract Agreement is available for inspection at the offices of the Agent. 11 12 SETTLEMENT INSTRUCTIONS The undersigned Holder directs that a certificate for shares of Common Stock deliverable upon settlement on or after the Final Settlement Date of the Purchase Contracts underlying the number of Securities evidenced by this Security Certificate be registered in the name of, and delivered, together with a check in payment for any fractional share, to, the undersigned at the address indicated below, unless a different name and address have been indicated below. If shares are to be registered in the name of a Person other than the undersigned, the undersigned shall pay any transfer tax payable incident thereto. Dated: Signature If shares are to be registered in the name of and delivered to a Person other than the Holder, please print REGISTERED HOLDER such Person's name and address: Please print name and address of Registered Holder: Name Name Address Address Social Security or other Taxpayer Identification Number, if any 12 13 ELECTION TO SETTLE EARLY The undersigned Holder of this Security Certificate hereby irrevocably exercises the option to effect Early Settlement in accordance with the terms of the Purchase Contract Agreement with respect to the Purchase Contracts underlying the number of Securities evidenced by this Security Certificate specified below. The option to effect Early Settlement may be exercised only with respect to whole multiples of 1,000 Securities. The undersigned Holder directs that a certificate for shares of Common Stock deliverable upon such Early Settlement be registered in the name of, and delivered, together with a check in payment for any fractional share and any Security Certificate representing any Securities evidenced hereby as to which Early Settlement of the related Purchase Contracts is not effected, to, the undersigned at the address indicated below, unless a different name and address have been indicated below. Treasury Securities deliverable upon such Early Settlement shall be transferred in accordance with the transfer instructions set forth below. If shares are to be registered in the name of a Person other than the undersigned, the undersigned shall pay any transfer tax payable incident thereto. Dated: Signature 13 14 Number of Securities evidenced hereby as to which Early Settlement of the related Purchase Contracts is being elected: If shares or Security Certificates are to REGISTERED HOLDER be registered in the name of and delivered to and Treasury Securities are to be transferred to a Person other than the Holder, please print such Person's name and address: Please print name and address of Registered Holder: Name Name Address Address Social Security or other Taxpayer Identification Number, if any Transfer Instructions for Treasury Securities transferable upon Early Settlement: 14 15 ELECTION TO SUBSTITUTE COLLATERAL The undersigned Holder of this Security Certificate hereby irrevocably exercises the option to effect Collateral Substitution in accordance with the terms of the Purchase Contract Agreement and the Pledge Agreement with respect to the number of Securities evidenced by this Security Certificate specified below. The option to effect Collateral Substitution may be exercised only with respect to whole multiples of 1,000 Securities. The undersigned Holder hereby represents and warrants to the Company and the Agent that the undersigned Holder has deposited with the Collateral Agent Zero-Coupon Treasury Securities having an aggregate principal amount equal to the aggregate Stated Amount of the Securities evidenced hereby with respect to which Collateral Settlement is being elected, in the manner provided in the Pledge Agreement. The undersigned Holder directs that a Security Certificate for Zero-Coupon Securities deliverable upon such Collateral Substitution be registered in the name of, and delivered, together with any Security Certificate representing any Securities evidenced hereby as to which Collateral Substitution is not effected, to, the undersigned at the address indicated below, unless a different name and address have been indicated below. Coupon Treasury Securities deliverable upon such Collateral substitution shall be transferred in accordance with the transfer instructions set forth below. If Zero-Coupon Securities are to be registered in the name of a Person other than the undersigned, the undersigned shall pay any transfer tax payable incident thereto. Dated: Signature 15 16 Number of Securities evidenced hereby as to which Collateral Substitution is being elected: If Security Certificates are to be REGISTERED HOLDER registered in the name of and delivered to and Treasury Securities are to be transferred to a Person other than the Holder, please print such Person's name and address: Please print name and address of Registered Holder: Name Name Address Address Social Security or other Taxpayer Identification Number, if any Transfer Instructions for Treasury Securities transferable upon Collateral Substitution: 16 EX-4.3 6 FORM OF PEPS UNIT (ZERO-COUPON SECURITY) 1 Exhibit 4.3 THIS SECURITY CERTIFICATE IS A GLOBAL SECURITY CERTIFICATE WITHIN THE MEANING OF THE PURCHASE CONTRACT AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY ("DTC") OR A NOMINEE OF DTC. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE PURCHASE CONTRACT AGREEMENT AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. K N ENERGY, INC. 8.25% PREMIUM EQUITY PARTICIPATING SECURITY UNITS (STATED AMOUNT $43 PER SECURITY) No. G-1 CUSIP No. 482620606 0 Zero-Coupon Securities This Security Certificate certifies that Cede & Co. is the registered Holder of the number of Securities set forth above. Each Security represents ownership by the Holder of United States Treasury Strips due November 15, 2001 (CUSIP No. 912820BC0) that are held through the Treasury/Reserve Automated Debt Entry System ("TREASURY STRIPS"), or security entitlements in respect thereof (together with Treasury Strips, "TREASURY SECURITIES"), with a principal amount equal to the Stated Amount, subject to the Pledge of such Treasury Securities by such Holder pursuant to the Pledge Agreement, and the rights and obligations of the Holder under one Purchase Contract with K N Energy, Inc., a Kansas corporation (the "COMPANY"). The Treasury Securities represented by this Security Certificate were acquired by the Holder hereof (or such Holder's predecessor-in-interest) in the open market and are being conveyed to the Holder of this Security Certificate (or such Holder's predecessor-in-interest) and pledged pursuant to the Pledge Agreement simultaneously therewith. 2 2 Pursuant to the Pledge Agreement, the Treasury Securities constituting part of each Security evidenced hereby are pledged to the Collateral Agent to secure the obligation of the Holder under the Purchase Contract comprising a portion of such Security. The Pledge Agreement provides that all payments of principal of any Treasury Strips corresponding to Treasury Securities comprising a portion of the Securities received by the Collateral Agent shall be paid by the Collateral Agent by wire transfer in same day funds no later than 12:00 noon, New York City time, on the Final Settlement Date (i) in the case of any principal payments with respect to any Treasury Strips corresponding to Treasury Securities that have been released from the Pledge pursuant to the Pledge Agreement, to the Agent to the account designated by it for such purpose and (ii) in the case of principal payments on any Treasury Strips corresponding to Pledged Treasury Securities (as defined in the Pledge Agreement), at the direction of the Agent on behalf of the Holders, to the Company, in full satisfaction of the respective obligations of the Holders of the Securities of which such Pledged Treasury Securities are a part under the Purchase Contracts forming a part of such Securities. Each Purchase Contract evidenced hereby obligates the Holder of this Security Certificate to purchase, and the Company to sell, on November 30, 2001 (the "FINAL SETTLEMENT DATE"), at a price equal to the Stated Amount, a number of shares of common stock, par value $5.00 per share ("COMMON STOCK"), of the Company, equal to the Settlement Rate, unless on or prior to the Final Settlement Date there shall have occurred a Termination Event or Early Settlement with respect to the Security of which such Purchase Contract is a part, all as provided in the Purchase Contract Agreement referred to on the reverse hereof and more fully described on the reverse hereof. The purchase price for the Common Stock purchased pursuant to each Purchase Contract evidenced hereby, if not paid earlier, shall be paid on the Final Settlement Date by application of payment received in respect of the principal of the Treasury Securities pledged to secure the obligations under such Purchase Contract of the Holder of the Security of which such Purchase Contract is a part. The Company shall pay, on each Payment Date, in respect of each Purchase Contract forming part of a Security evidenced hereby, an amount (the "CONTRACT FEES") equal to 2.375% per annum of the Stated Amount, computed on the basis of the actual number of days elapsed in a year of 365 or 366 days, as the case may be, subject to deferral at the option of the Company as provided in the Purchase Contract Agreement and more fully described on the reverse hereof. Such Contract Fee shall be payable to the Person in whose name this Security Certificate (or a Predecessor Security Certificate) is registered at the close of business on the Record Date immediately preceding such Payment Date. The Contract Fees shall be payable at the office or agency of the Agent in The City of New York or, at the option of the Company, by check mailed to the address of the Person entitled thereto as such address appears on Security Register. Reference is hereby made to the further provisions set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. 3 3 Unless the certificate of authentication hereon has been executed by the Agent by manual signature, this Security Certificate shall not be entitled to any benefit under the Pledge Agreement or the Purchase Contract Agreement or be valid or obligatory for any purpose. 4 4 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed. K N ENERGY, INC. By: _________________________ Name: Title: Attested by: HOLDER SPECIFIED ABOVE (as to obligations of such Holder under the Purchase Contracts evidenced hereby) By: U.S. BANK TRUST NATIONAL ASSOCIATION, not individually but solely as Attorney-in-Fact of such Holder By: _________________________ Authorized Signatory Dated: (Form of Certificate of Authentication) This is one of the Security Certificates referred to in the within mentioned Purchase Contract Agreement. U.S. BANK TRUST NATIONAL ASSOCIATION, as Agent By: ___________________________ Authorized Signatory 5 5 [REVERSE OF SECURITY CERTIFICATE] Each Purchase Contract evidenced hereby is governed by a Purchase Contract Agreement, dated as of November 25, 1998 (the "PURCHASE CONTRACT AGREEMENT"), between the Company and U.S. Bank Trust National Association, as Purchase Contract Agent (herein called the "AGENT"), to which Purchase Contract Agreement and supplemental agreements thereto reference is hereby made for a description of the respective rights, limitations of rights, obligations, duties and immunities thereunder of the Agent, the Company and the Holders and of the terms upon which the Security Certificates are, and are to be, executed and delivered. Each Purchase Contract evidenced hereby shall obligate the Holder of this Security Certificate to purchase, and the Company to sell, on the Final Settlement Date at a price equal to the Stated Amount, a number of shares of Common Stock of the Company equal to the Settlement Rate, unless, on or prior to the Final Settlement Date, there shall have occurred a Termination Event or an Early Settlement with respect to the Security of which such Purchase Contract is a part. The "SETTLEMENT RATE" is equal to (a) if the Applicable Market Value (as defined below) is greater than $51.60 (the "THRESHOLD APPRECIATION PRICE"), .8333 of a share of Common Stock per Purchase Contract, (b) if the Applicable Market Value is less than or equal to the Threshold Appreciation Price but is greater than the Stated Amount, a fractional share of Common Stock per Purchase Contract equal to the Stated Amount divided by the Applicable Market Value (rounded upward or downward to the nearest 1/10,000th of a share) and (c) if the Applicable Market Value is less than or equal to the Stated Amount, one share of Common Stock per Purchase Contract, in each case subject to adjustment as provided in the Purchase Contract Agreement. No fractional shares of Common Stock shall be issued upon settlement of Purchase Contracts, as provided in the Purchase Contract Agreement. The "APPLICABLE MARKET VALUE" means the average of the Closing Prices per share of Common Stock on each of the twenty consecutive Trading Days ending on the second Trading Day immediately preceding the Final Settlement Date. The "CLOSING PRICE" of the Common Stock on any date of determination means the closing sale price (or, if no closing price is reported, the last reported sale price) of the Common Stock on The New York Stock Exchange, Inc. (the "NYSE") on such date or, if the Common Stock is not listed for trading on the NYSE on any such date, as reported in the composite transactions for the principal United States securities exchange on which the Common Stock is so listed or, if the Common Stock is not so listed on a United States national or regional securities exchange, as reported by the Nasdaq Stock Market or, if such price of the Common Stock is not so reported, the last quoted bid price for the Common Stock in the over-the-counter market as reported by the National Quotation Bureau or similar organization or, if such bid price is not available, the market value of the Common Stock on such date as determined by a nationally recognized independent investment banking firm retained for this purpose by the Company. A "TRADING DAY" means a day on which the Common Stock (A) is not suspended from trading on any national or regional securities exchange or association or over-the-counter market at the close of business and (B) has traded at least once on the national or regional securities exchange or association or over-the-counter market that is the primary market for the trading of the Common Stock. 6 6 The purchase price for the shares of Common Stock purchased pursuant to each Purchase Contract shall be paid by application of payments received by the Company on the Final Settlement Date from the Collateral Agent at the direction of the Agent on behalf of the Holders pursuant to the Pledge Agreement in respect of the principal of the Treasury Securities pledged to secure the obligations of the relevant Holder under such Purchase Contract. The principal of the Treasury Securities pledged to secure the Holders' obligations under the Purchase Contracts will be paid at maturity to the Collateral Agent who will hold such amount until the Final Settlement Date. Holders will not be entitled to any interest in respect of amounts so held. The Company shall not be obligated to issue any shares of Common Stock in respect of a Purchase Contract or deliver any certificates therefor to the Holder unless it shall have received payment in full of the aggregate purchase price for the shares of Common Stock to be purchased thereunder in the manner set forth herein and in the Purchase Contract Agreement. Subject to the next succeeding paragraph and the provisions of the Purchase Contract Agreement, the Company shall pay, on each Payment Date, the Contract Fee payable in respect of each Purchase Contract to the Person in whose name the Security Certificate (or one or more Predecessor Security Certificates) evidencing the Security of which such Purchase Contract is a part and is registered at the close of business on the Record Date immediately preceding such Payment Date. The Company shall have the right, at any time prior to the Final Settlement Date, to defer the payment of any or all of the Contract Fees otherwise payable on any Payment Date (on a pro rata basis among all Outstanding Securities), but only if the Company shall give the Holders and the Agent written notice of its election to defer such payment (specifying the amount to be deferred and the period of deferment) as provided in the Purchase Contract Agreement. Any Contract Fees so deferred shall bear additional Contract Fees thereon at the rate of 8.25% per annum (computed on the basis of the actual number of days elapsed in a year of 365 or 366 days, as the case may be), compounding on each succeeding Payment Date, until paid in full (such deferred installments of Contract Fees, together with the additional Contract Fees accrued thereon, are referred to herein as the "DEFERRED CONTRACT FEES"). Deferred Contract Fees shall be due on the next succeeding Payment Date except to the extent that payment is deferred pursuant to the Purchase Contract Agreement. No Contract Fees may be deferred to a date that is after the Final Settlement Date. In the event that the Company elects to defer the payment of Contract Fees on Purchase Contracts until the Final Settlement Date, the Holder of this Security Certificate shall receive on the Final Settlement Date, in lieu of a cash payment, a number of shares of Common Stock (in addition to a number of Common Stock equal to the Settlement Rate) equal to (x) the aggregate amount of Deferred Contract Fees payable to the Holder of this Security Certificate divided by (y) the Applicable Market Value. No fractional shares of Common Stock shall be issued with respect to the payment of Deferred Contract Fees on the Final Settlement Date, as provided in the Purchase Contract Agreement. 7 7 In the event the Company exercises its option to defer the payment of Contract Fees, then, until the Deferred Contract Fees have been paid in full, the Company 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 purchases or acquisitions of Common Stock in connection with the satisfaction by the Company or any of its subsidiaries of their respective obligations under any benefit plans for directors, officers, agents or employees or the Company's dividend reinvestment or director, officer, agent or employee stock purchase plans, as a result of a reclassification of the Company's capital stock or the exchange or conversion of one class or series of capital stock for another class or series of the Company's capital stock, the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of the Company's capital stock or the security being converted or exchanged for the Company's capital stock), dividends or distributions in the form of shares of, or options, warrants or rights to subscribe for or purchase, shares of capital stock of the Company or any declaration of a dividend in connection with the implementation of 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)), shall not make any payment of interest, principal or premium, if any, on, or repay, repurchase or redeem any debt securities issued by the Company that rank pari passu with or junior to such Contract Fees and (c) shall not make any guarantee payments with respect to any guarantee by the Company of any securities of any subsidiary of the Company if such guarantee ranks pari passu with or junior in right of payment to the Contract Fees. The Purchase Contracts and the obligations and rights of the Company and the Holders thereunder, including, without limitation, the rights of the Holders to receive and the obligation of the Company to pay any Contract Fee or any Deferred Contract Fees, shall immediately and automatically terminate, without the necessity of any notice or action by any Holder, the Agent or the Company, if, on or prior to the Final Settlement Date, a Termination Event shall have occurred. Upon the occurrence of a Termination Event, the Company shall promptly but in no event more than two Business Days thereafter give written notice to the Agent, the Collateral Agent and the Holders. Upon and after the occurrence of a Termination Event, the Collateral Agent shall release the Treasury Securities from the Pledge in accordance with the provisions of the Pledge Agreement. The Securities shall thereafter represent the right to receive the Treasury Securities forming a part of such Securities in accordance with the provisions of the Purchase Contract Agreement and the Pledge Agreement. Subject to and upon compliance with the provisions of the Purchase Contract Agreement, at the option of the Holder thereof, any Purchase Contracts underlying Securities may be settled early in whole multiples of 1,000 Securities ("EARLY SETTLEMENT") as provided in the Purchase Contract Agreement at any time prior to November 15, 2001. In order to exercise the right to effect Early Settlement with respect to any Purchase Contracts evidenced by this Security Certificate, the Holder of this Security Certificate shall deliver this Security Certificate to the Agent at the Corporate Trust Office duly endorsed for transfer to the Company or in blank with the form of Election to Settle Early set forth below duly completed and accompanied by payment in the form of immediately available funds in an amount (the "EARLY SETTLEMENT AMOUNT") equal to the product of the Stated Amount times the number of Purchase Contracts with respect 8 8 to which the Holder has elected to effect Early Settlement plus if such delivery is made with respect to any Purchase Contracts during the period from the close of business on any Record Date immediately preceding any Payment Date to the opening of business of such Payment Date, an amount equal to the Contract Fees and Deferred Contract Fees, if any, payable on such Payment Date with respect to such Purchase Contracts. Upon Early Settlement of Purchase Contracts by a Holder of the related Securities, the Treasury Securities underlying such Securities shall be released from the Pledge as provided in the Pledge Agreement and the Holder shall be entitled to receive a number of shares of Common Stock on account of each Purchase Contract forming part of a Security as to which Early Settlement is effected equal to the Early Settlement Rate; provided, however, that upon the Early Settlement of the Purchase Contracts, the Holder thereof shall forfeit the right to receive accrued Contract Fees and any Deferred Contract Fees on such Purchase Contracts. The "EARLY SETTLEMENT RATE" shall initially be equal to .8333 and shall be adjusted in the same manner and at the same time as the Settlement Rate is adjusted as provided in the Purchase Contract Agreement. The Security Certificates are issuable only in registered form and only in denominations of a single Security and any integral multiple thereof. The transfer of any Security Certificates shall be registered and Security Certificates may be exchanged as provided in the Purchase Contract Agreement. The Security Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents permitted by the Purchase Contract Agreement. No service charge shall be required for any such registration of transfer or exchange, but the Company and the Agent may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. For so long as the Purchase Contract underlying a Security remains in effect, such Security shall not be separable into its constituent parts, and the rights and obligations of the Holder of such Security in respect of the Treasury Securities and Purchase Contract constituting such Security may be transferred and exchanged only as a Security. Upon registration of transfer of this Security Certificate, the transferee shall be bound (without the necessity of any other action on the part of such transferee) under the terms of the Purchase Contract Agreement, the Purchase Contracts evidenced hereby and the Pledge Agreement, and the transferor shall be released from the obligations under the Purchase Contracts evidenced by this Security Certificate. The Company covenants and agrees, and the Holder, by such Holder's acceptance hereof, likewise covenants and agrees, to be bound by the provisions of this paragraph. The Holder of this Security Certificate, by such Holder's acceptance hereof, authorizes the Agent to enter into and perform the related Purchase Contracts forming part of the Securities evidenced hereby on such Holder's behalf as such Holder's attorney-in-fact, expressly withholds any consent to the assumption (i.e., affirmance) of the Purchase Contracts by the Company or such Holder's trustee in the event that the Company becomes the subject of a case under the Bankruptcy Code, agrees to be bound by the terms and provisions thereof, covenants and agrees to perform its obligations under the Purchase Contracts forming a part of the Securities evidenced hereby, consents to the provisions of the Purchase Contract Agreement, authorizes the Agent to enter into and perform the Pledge Agreement on such Holder's behalf as such Holder's 9 9 attorney-in-fact, and consents to the Pledge of the Treasury Securities underlying this Security Certificate pursuant to the Pledge Agreement. The Holder, by such Holder's acceptance hereof, further covenants and agrees that, to the extent and in the manner provided in the Purchase Contract Agreement and the Pledge Agreement, but subject to the terms thereof, payments in respect of principal of the Treasury Securities on the Final Settlement Date shall be paid by the Collateral Agent to the Company in satisfaction of such Holder's obligations under such Purchase Contract and such Holder shall acquire no right, title or interest in such payments. Subject to certain exceptions, the provisions of the Purchase Contract Agreement may be amended with the consent of the Holders of at least 66 2/3% in Stated Amount of the Outstanding Securities. All terms used herein that are defined in the Purchase Contract Agreement have the meanings set forth therein. The Purchase Contracts shall for all purposes be governed by, and construed in accordance with, the laws of the State of New York. The Company and the Agent, and any agent of the Company or the Agent, may treat the Person in whose name this Security Certificate is registered as the owner of the Securities evidenced hereby for the purpose of receiving payments of Contract Fees and any Deferred Contract Fees, performance of the Purchase Contracts and for all other purposes whatsoever, whether or not the payment of any Contract Fee payable in respect of the Purchase Contracts constituting a part of the Securities evidenced thereby shall be overdue and notwithstanding any notice to the contrary, and neither the Company, the Agent nor any such agent shall be affected by notice to the contrary. The Purchase Contracts shall not, prior to the settlement thereof, entitle the Holder to any of the rights of a holder of shares of Common Stock. A copy of the Purchase Contract Agreement is available for inspection at the offices of the Agent. 10 10 SETTLEMENT INSTRUCTIONS The undersigned Holder directs that a certificate for shares of Common Stock deliverable upon settlement on or after the Final Settlement Date of the Purchase Contracts underlying the number of Securities evidenced by this Security Certificate be registered in the name of, and delivered, together with a check in payment for any fractional share, to, the undersigned at the address indicated below, unless a different name and address have been indicated below. If shares are to be registered in the name of a Person other than the undersigned, the undersigned shall pay any transfer tax payable incident thereto. Dated: Signature If shares are to be registered in the name of and delivered to a Person other than the Holder, please print REGISTERED HOLDER such Person's name and address: Please print name and address of Registered Holder: Name Name Address Address Social Security or other Taxpayer Identification Number, if any 11 11 ELECTION TO SETTLE EARLY The undersigned Holder of this Security Certificate hereby irrevocably exercises the option to effect Early Settlement in accordance with the terms of the Purchase Contract Agreement with respect to the Purchase Contracts underlying the number of Securities evidenced by this Security Certificate specified below. The option to effect Early Settlement may be exercised only with respect to whole multiples of 1,000 Securities. The undersigned Holder directs that a certificate for shares of Common Stock deliverable upon such Early Settlement be registered in the name of, and delivered, together with a check in payment for any fractional share and any Security Certificate representing any Securities evidenced hereby as to which Early Settlement of the related Purchase Contracts is not effected, to, the undersigned at the address indicated below, unless a different name and address have been indicated below. Treasury Securities deliverable upon such Early Settlement shall be transferred in accordance with the transfer instructions set forth below. If shares are to be registered in the name of a Person other than the undersigned, the undersigned shall pay any transfer tax payable incident thereto. Dated: Signature 12 12 Number of Securities evidenced hereby as to which Early Settlement of the related Purchase Contracts is being elected: If shares or Security Certificates are to REGISTERED HOLDER be registered in the name of and delivered to and Treasury Securities are to be transferred to a Person other than the Holder, please print such Person's name and address: Please print name and address of Registered Holder: Name Name Address Address Social Security or other Taxpayer Identification Number, if any Transfer Instructions for Treasury Securities transferable upon Early Settlement: EX-4.4 7 PURCHASE CONTRACT AGREEMENT 1 Exhibit 4.4 K N ENERGY, INC. AND U.S. BANK TRUST NATIONAL ASSOCIATION, AS PURCHASE CONTRACT AGENT PURCHASE CONTRACT AGREEMENT DATED AS OF NOVEMBER 25, 1998 2 TABLE OF CONTENTS
PAGE ARTICLE 1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 1.01. Definitions..................................................................... 1 SECTION 1.02. Compliance Certificates and Opinions............................................ 9 SECTION 1.03. Form of Documents Delivered to Agent............................................ 10 SECTION 1.04. Acts of Holders; Record Dates................................................... 10 SECTION 1.05. Notices, Etc., to Agent and the Company......................................... 12 SECTION 1.06. Notice to Holders; Waiver....................................................... 13 SECTION 1.07. Effect of Headings and Table of Contents........................................ 13 SECTION 1.08. Successors and Assigns.......................................................... 13 SECTION 1.09. Separability Clause............................................................. 13 SECTION 1.10. Benefits of Agreement........................................................... 13 SECTION 1.11. Governing Law................................................................... 14 SECTION 1.12. Legal Holidays.................................................................. 14 SECTION 1.13. Counterparts.................................................................... 14 SECTION 1.14. Inspection of Agreement......................................................... 14 SECTION 1.15. Appointment of Financial Institution as Agent for the Company............................................................................... 14 ARTICLE 2 SECURITY CERTIFICATE FORMS SECTION 2.01. Forms of Security Certificates Generally........................................ 15 SECTION 2.02. Form of Agent's Certificate of Authentication................................... 17 ARTICLE 3 THE SECURITIES SECTION 3.01. Title and Terms; Denominations.................................................. 17 SECTION 3.02. Rights and Obligations Evidenced by the Security Certificates.......................................................................... 18 SECTION 3.03. Execution, Authentication, Delivery and Dating.................................. 18 SECTION 3.04. Temporary Security Certificates................................................. 19 SECTION 3.05. Registration; Registration of Transfer and Exchange............................. 20 SECTION 3.06. Mutilated, Destroyed, Lost and Stolen Security Certificates..................... 22 SECTION 3.07. Persons Deemed Owners........................................................... 23 SECTION 3.08. Cancellation.................................................................... 24 SECTION 3.09. Securities Not Separable........................................................ 24
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PAGE SECTION 3.10. No Consent to Assumption........................................................ 24 ARTICLE 4 THE TREASURY SECURITIES SECTION 4.01. Payment of Interest; Interest Rights Preserved.................................. 25 SECTION 4.02. Transfer of Treasury Securities Upon Occurrence of Termination Event..................................................................... 26 SECTION 4.03. Substitution of Collateral...................................................... 27 ARTICLE 5 THE PURCHASE CONTRACTS SECTION 5.01. Purchase of Shares of Common Stock.............................................. 28 SECTION 5.02. Contract Fees................................................................... 30 SECTION 5.03. Deferral of Payment Dates for Contract Fees..................................... 31 SECTION 5.04. Payment of Purchase Price....................................................... 33 SECTION 5.05. Issuance of Shares of Common Stock.............................................. 33 SECTION 5.06. Adjustment of Settlement Rate................................................... 34 SECTION 5.07. Notice of Adjustments and Certain Other Events.................................. 41 SECTION 5.08. Termination Event; Notice....................................................... 41 SECTION 5.09. Early Settlement................................................................ 42 SECTION 5.10. No Fractional Shares............................................................ 43 SECTION 5.11. Charges and Taxes............................................................... 44 ARTICLE 6 REMEDIES SECTION 6.01. Unconditional Right of Holders to Receive Contract Fees and Purchase Common Stock............................................................. 44 SECTION 6.02. Restoration of Rights and Remedies.............................................. 45 SECTION 6.03. Rights and Remedies Cumulative.................................................. 45 SECTION 6.04. Delay or Omission Not Waiver.................................................... 45 SECTION 6.05. Undertaking for Costs........................................................... 45 SECTION 6.06. Waiver of Stay or Extension Laws................................................ 46 ARTICLE 7 THE AGENT SECTION 7.01. Certain Duties and Responsibilities............................................. 46 SECTION 7.02. Notice of Default............................................................... 47
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PAGE SECTION 7.03. Certain Rights of Agent......................................................... 47 SECTION 7.04. Not Responsible for Recitals or Issuance of Securities.......................... 48 SECTION 7.05. May Hold Securities............................................................. 48 SECTION 7.06. Money Held in Custody........................................................... 49 SECTION 7.07. Compensation and Reimbursement.................................................. 49 SECTION 7.08. Corporate Agent Required; Eligibility........................................... 49 SECTION 7.09. Resignation and Removal; Appointment of Successor............................... 50 SECTION 7.10. Acceptance of Appointment by Successor.......................................... 51 SECTION 7.11. Merger, Conversion, Consolidation or Succession to Business.............................................................................. 52 SECTION 7.12. Preservation of Information; Communications to Holders.......................... 52 SECTION 7.13. No Obligations of Agent......................................................... 52 SECTION 7.14. Tax Compliance.................................................................. 53 ARTICLE 8 SUPPLEMENTAL AGREEMENTS SECTION 8.01. Supplemental Agreements Without Consent of Holders.............................. 53 SECTION 8.02. Supplemental Agreements with Consent of Holders................................. 54 SECTION 8.03. Execution of Supplemental Agreements............................................ 55 SECTION 8.04. Effect of Supplemental Agreements............................................... 55 SECTION 8.05. Reference to Supplemental Agreements............................................ 56 ARTICLE 9 CONSOLIDATION, MERGER, SALE OR CONVEYANCE SECTION 9.01. Covenant Not to Merge, Consolidate, Sell or Convey Property Except Under Certain Conditions.............................................. 56 SECTION 9.02. Rights and Duties of Successor Corporation...................................... 56 SECTION 9.03. Opinion of Counsel to Agent..................................................... 57 ARTICLE 10 COVENANTS SECTION 10.01. Performance under Purchase Contracts........................................... 57 SECTION 10.02. Maintenance of Office or Agency................................................ 58 SECTION 10.03. Company to Reserve Common Stock................................................ 58 SECTION 10.04. Covenant as to Common Stock.................................................... 58 SECTION 10.05. Statement of Officers of the Company as to Default............................. 59
iii 5 PURCHASE CONTRACT AGREEMENT, dated as of November 25, 1998, between K N Energy, Inc., a Kansas corporation (the "COMPANY"), and U.S. Bank Trust National Association, acting as purchase contract agent for the Holders (as defined below) from time to time (the "AGENT"). RECITALS The Company has duly authorized the execution and delivery of this Agreement and the Security Certificates evidencing the Securities. All things necessary to make the Company's obligations under the Securities, when the Security Certificates are executed by the Company and authenticated, executed on behalf of the Holders and delivered by the Agent, as in this Agreement provided, the valid obligations of the Company, enforceable in accordance with their terms, and to constitute these presents a valid agreement of the Company, enforceable in accordance with its terms, have been done. W I T N E S S E T H: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually agreed as follows: ARTICLE 1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 1.01. Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: (i) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; and (ii) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision. "ACT" when used with respect to any Holder, has the meaning specified in Section 1.04. "AFFILIATE" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control 6 with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "AGENT" means the Person named as the "Agent" in the first paragraph of this instrument until a successor Agent shall have become such pursuant to the applicable provisions of this Agreement, and thereafter "Agent" shall mean the Person who is then the Agent hereunder. "AGREEMENT" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more agreements supplemental hereto entered into pursuant to the applicable provisions hereof. "APPLICABLE MARKET VALUE" has the meaning specified in Section 5.01. "BANKRUPTCY CODE" means title 11 of the United States Code, or any other law of the United States that from time to time provides a uniform system of bankruptcy laws. "BENEFICIAL OWNER" means, with respect to a Book Entry Interest, a Person who is the beneficial owner of such Book Entry Interest, as reflected on the books of the Depositary, or on the books of a Person maintaining an account with such Depositary (directly as a Depositary Participant or as an indirect participant, in each case in accordance with the rules of such Depositary). "BOARD OF DIRECTORS" means the board of directors of the Company or a duly authorized committee of that board. "BOARD RESOLUTION" means one or more resolutions of the Board of Directors, a copy of which has been certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification and delivered to the Agent. "BOOK ENTRY INTEREST" means a beneficial interest in a Global Security Certificate registered in the name of a Depositary or a nominee thereof, ownership and transfers of which shall be maintained and made through book entries by such Depositary as described in Section 2.01. 2 7 "BUSINESS DAY" means any day that is not a Saturday, a Sunday or a day on which the NYSE or banking institutions or trust companies in The City of New York are authorized or obligated by law or executive order to be closed. "CLOSING PRICE" has the meaning specified in Section 5.01. "COLLATERAL AGENT" means The Chase Manhattan Trust Company, National Association, as Collateral Agent under the Pledge Agreement until a successor Collateral Agent shall have become such pursuant to the applicable provisions of the Pledge Agreement, and thereafter "Collateral Agent" shall mean the Person who is then the Collateral Agent thereunder. "COLLATERAL SUBSTITUTION" has the meaning specified in Section 4.03(a). "COLLATERAL SUBSTITUTION DATE " has the meaning specified in Section 4.03(a). "COMMON STOCK" means the common stock, par value $5.00 per share, of the Company. "COMPANY" means the Person named as the "Company" in the first paragraph of this instrument until a successor shall have become such pursuant to the applicable provisions of this Agreement, and thereafter "Company" shall mean such successor. "CONSTITUENT PERSON" has the meaning specified in Section 5.06(b). "CONTRACT FEES" means the fees payable by the Company on each Payment Date in respect of each Purchase Contract as provided in the Purchase Contract. "CORPORATE TRUST OFFICE" means the principal corporate trust office of the Agent at which, at any particular time, its corporate trust business shall be administered, which office at the date hereof is located at One Illinois Center, Suite 3000, 111 East Wacker Drive, Chicago, Illinois 60601 Attention: Corporate Trust Services Division, except that for purposes of Section 10.02, such term shall mean the office or agency of the Agent in the Borough of Manhattan, the City of New York, which office at the date hereof is located at 100 Wall Street, Suite 2000, New York, New York 10005. "COUPON SECURITY" means the collective rights and obligations of a Holder of a Security Certificate in respect of Coupon Treasury Securities with a 3 8 principal amount equal to the Stated Amount, subject to the Pledge thereof, and a Purchase Contract. "COUPON TREASURY SECURITIES" means Treasury Notes and security entitlements in respect thereof. "CURRENT MARKET PRICE" has the meaning specified in Section 5.06(a)(ix). "DEFERRED CONTRACT FEES" has the meaning specified in Section 5.03. "DEPOSITARY" means a clearing agency registered under the Exchange Act that is designated to act as Depositary for the Securities as contemplated by Section 2.01. "DEPOSITARY PARTICIPANT" means a broker, dealer, bank, other financial institution or other Person for whom from time to time the Depositary effects book entry transfers and pledges of securities deposited with the Depositary. "EARLY SETTLEMENT" has the meaning specified in Section 5.09(a). "EARLY SETTLEMENT AMOUNT" has the meaning specified in Section 5.09(a). "EARLY SETTLEMENT DATE" has the meaning specified in Section 5.09(a). "EARLY SETTLEMENT RATE" has the meaning specified in Section 5.09(b). "EVENT CONSIDERATION" has the meaning specified in Section 5.06(b). "EXCHANGE ACT" means the Securities Exchange Act of 1934 and any statute successor thereto, in each case as amended from time to time, and the rules and regulations promulgated thereunder. "EXCESS COUPON TREASURY SECURITIES" and "EXCESS ZERO-COUPON TREASURY SECURITIES" have the respective meanings specified in Section 4.02. "EXPIRATION DATE" has the meaning specified in Section 1.04. "EXPIRATION TIME" has the meaning specified in Section 5.06(a)(vi). "FINAL SETTLEMENT DATE" means November 30, 2001. "FINAL SETTLEMENT FUND" has the meaning specified in Section 5.05. 4 9 "GLOBAL SECURITY CERTIFICATE" means a Security Certificate that evidences all or part of the Securities and is registered in the name of a Depositary or a nominee thereof. "HOLDER" when used with respect to a Security Certificate (or a Security) means a Person in whose name the Security evidenced by such Security Certificate (or the Security Certificate evidencing such Security) is registered in the Security Register, subject to Section 3.07. "ISSUER ORDER" or "ISSUER REQUEST" means a written order or request signed in the name of the Company by its Chairman of the Board, any Vice Chairman, its President or a Vice President and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Agent. "MARKETABLE COMMON STOCK" has the meaning specified in Section 5.06(b). "NYSE" means The New York Stock Exchange, Inc. "OFFICERS' CERTIFICATE" means a certificate signed by the Chairman of the Board, any Vice Chairman of the Board, the President or any Vice President and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of the Company and delivered to the Agent. "OPINION OF COUNSEL" means an opinion in writing signed by legal counsel, who may be an employee of or counsel to the Company and who shall be reasonably acceptable to the Agent. "OUTSTANDING SECURITIES" means, as of the date of determination, all Securities evidenced by then Outstanding Security Certificates, except: (i) if a Termination Event has occurred, Securities for which (A) the underlying Treasury Notes or Treasury Strips, as the case may be, have been theretofore deposited with the Agent or (B) security entitlements in respect of the underlying Treasury Notes or Treasury Strips, as the case may be, have been credited to a securities account of the Agent, in either case in trust for the Holders of such Securities; and (ii) on and after the applicable Early Settlement Date, Securities as to which the Holder has elected to effect Early Termination of the related Purchase Contracts; 5 10 provided, however, that in determining whether the Holders of the requisite number of Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by, or in respect of which security entitlements are owned by, the Company or any Affiliate of the Company shall be disregarded and deemed not to be outstanding, except that, in determining whether the Agent shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities that the Agent knows to be so owned, or in respect of which the Agent knows security entitlements to be so held, shall be so disregarded. Securities so owned, or security entitlements in respect thereof that are so owned, that have been pledged in good faith may be regarded as outstanding if the pledgee establishes to the satisfaction of the Agent the pledgee's right so to act with respect to such Securities or security entitlements and that the pledgee is not the Company or any Affiliate of the Company. "OUTSTANDING SECURITY CERTIFICATES" means, as of the date of determination, all Security Certificates theretofore authenticated, executed and delivered under this Agreement, except: (i) Security Certificates theretofore canceled by the Agent or delivered to the Agent for cancellation; and (ii) Security Certificates in exchange for or in lieu of which other Security Certificates have been authenticated, executed on behalf of the Holder and delivered pursuant to this Agreement, other than any such Security Certificate in respect of which there shall have been presented to the Agent proof satisfactory to it that such Security Certificate is held by a protected purchaser in whose hands the Securities evidenced by such Security Certificate are valid obligations of the Company. "PAYMENT DATE" means each May 31 and November 30, commencing May 31, 1999. "PERSON" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "PLEDGE" means the pledge under the Pledge Agreement of the Treasury Securities constituting a part of the Securities. "PLEDGE AGREEMENT" means the Pledge Agreement, dated as of the date hereof, among the Company, the Collateral Agent and the Agent on its own behalf and as attorney-in-fact for the Holders from time to time of the Securities. 6 11 "PREDECESSOR SECURITY CERTIFICATE" of any particular Security Certificate means every previous Security Certificate evidencing all or a portion of the rights and obligations of the Holder under the Securities evidenced thereby; and, for the purposes of this definition, any Security Certificate authenticated and delivered under Section 3.06 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security Certificate shall be deemed to evidence the same rights and obligations of the Holder as the mutilated, destroyed, lost or stolen Security Certificate. "PURCHASE CONTRACT" when used with respect to any Security, means the contract obligating the Company to sell and the Holder of such Security to purchase Common Stock on the terms and subject to the conditions set forth in Article 5 hereof. "PURCHASED SHARES" has the meaning specified in Section 5.06(a)(vi). "RECORD DATE" for the interest and Contract Fees payable on any Payment Date means, as to any Securities evidenced by a Global Security Certificate, the Business Day immediately preceding such Payment Date and, as to any Securities evidenced by any other Security Certificate, 15 days prior to such Payment Date. "REORGANIZATION EVENT" has the meaning specified in Section 5.06(b). "RESPONSIBLE OFFICER" when used with respect to the Agent, means any officer of the Agent assigned by the Agent to administer its corporate trust matters. "RIGHTS" has the meaning specified in Section 5.06(a)(vii). "SECURITIES" means Coupon Securities or Zero-Coupon Securities. "SECURITY CERTIFICATE" means a certificate evidencing the rights and obligations of a Holder in respect of the number of Securities specified on such certificate. "SECURITY REGISTER" and "SECURITY REGISTRAR" have the respective meanings specified in Section 3.05. "SETTLEMENT RATE" has the meaning specified in Section 5.01. "STATED AMOUNT" means $43. 7 12 "TERMINATION DATE" means the date, if any, on which a Termination Event occurs. "TERMINATION EVENT" means the occurrence of any of the following events: (i) at any time on or prior to the Final Settlement Date, a judgment, decree or order by a court having jurisdiction in the premises shall have been entered granting relief under the Bankruptcy Code, adjudicating the Company to be insolvent, or approving as properly filed a petition seeking reorganization or liquidation of the Company under the Bankruptcy Code or any other similar applicable Federal or State law, and, unless such judgment, decree or order shall have been entered within 60 days prior to the Final Settlement Date, such decree or order shall have continued undischarged and unstayed for a period of 60 days; or (ii) a judgment, decree or order of a court having jurisdiction in the premises for the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of the Company or of its property, or for the winding up or liquidation of its affairs, shall have been entered, and, unless such judgment, decree or order shall have been entered within 60 days prior to the Final Settlement Date, such judgment, decree or order shall have continued undischarged and unstayed for a period of 60 days, or (iii) at any time on or prior to the Final Settlement Date the Company shall file a petition for relief under the Bankruptcy Code, or shall consent to the filing of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking reorganization or liquidation under the Bankruptcy Code or any other similar applicable Federal or State law, or shall consent to the filing of any such petition, or shall consent to the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of it or of any substantial part of its property, or shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due. "THRESHOLD APPRECIATION PRICE" has the meaning specified in Section 5.01. "TIA" means the Trust Indenture Act of 1939, as amended, or any successor statute. "TRADING DAY" has the meaning specified in Section 5.01. "TREASURY NOTES" means 5.875% United States Treasury Notes due November 30, 2001 (CUSIP No. 9128272C5) that are held through the Treasury/Reserve Automated Debt Entry System. "TREASURY SECURITIES" means Coupon Treasury Securities or Zero- Coupon Treasury Securities. 8 13 "TREASURY STRIPS" means zero-coupon United States Treasury Strips due November 15, 2001 (CUSIP No. 912820BC0) that are held through the Treasury/Reserve Automated Debt Entry System. "UNDERWRITERS" means the several Underwriters named in the Underwriting Agreement. "UNDERWRITING AGREEMENT" means the Underwriting Agreement dated November 19, 1998 between the Company and Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co., Petrie Parkman & Co., Inc., Salomon Smith Barney Inc., Jefferies & Company, Inc. and NationsBanc Montgomery Securities LLC, as representatives of the several Underwriters named therein, and relating to the Securities. "VICE PRESIDENT" means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president." "ZERO-COUPON SECURITY" means the collective rights and obligations of a Holder of a Security Certificate in respect of Zero-Coupon Treasury Securities with a principal amount equal to the Stated Amount, subject to the Pledge thereof, and a Purchase Contract. "ZERO-COUPON TREASURY SECURITIES" means Treasury Strips and security entitlements in respect thereof. SECTION 1.02. Compliance Certificates and Opinions. Except as otherwise expressly provided by this Agreement, upon any application or request by the Company to the Agent to take any action under any provision of this Agreement, the Company shall furnish to the Agent an Officers' Certificate stating that all conditions precedent, if any, provided for in this Agreement relating to the proposed action have been complied with and an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Agreement relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Agreement shall include: (a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; 9 14 (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of each such individual, such individual has made such examination or investigation as is necessary to enable such individual to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. SECTION 1.03. Form of Documents Delivered to Agent. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which such officer's certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representation by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Agreement, they may, but need not, be consolidated and form one instrument. SECTION 1.04. Acts of Holders; Record Dates. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Agreement to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in 10 15 person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Agent and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "ACT" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Agreement and (subject to Section 7.01) conclusive in favor of the Agent and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to such notary public or other officer the execution thereof. Where such execution is by a signer acting in a capacity other than such signer's individual capacity, such certificate or affidavit shall also constitute sufficient proof of such signer's authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner that the Agent deems sufficient. (c) The ownership of Securities shall be proved by the Security Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security Certificate evidencing such Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Agent or the Company in reliance thereon, whether or not notation of such action is made upon such Security Certificate. (e) The Company may set any date as a record date for the purpose of determining the Holders of Outstanding Securities entitled to give, make or take any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Agreement to be given, made or taken by Holders. If any record date is set pursuant to this paragraph, the Holders of Outstanding Securities on such record date, and no other Holders, shall be entitled to take the relevant action, whether or not such Holders remain Holders after such record date; provided that no such action shall be effective hereunder unless taken on or prior to the applicable Expiration Date by Holders of the requisite number of Outstanding Securities on such record date. Nothing in this paragraph shall be construed to prevent the Company from setting a new record date for any action 11 16 for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be canceled and of no effect), and nothing in this paragraph shall be construed to render ineffective any action taken by Holders of the requisite number of Outstanding Securities on the date such action is taken. Promptly after any record date is set pursuant to this paragraph, the Company, at its own expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Agent in writing and to each Holder in the manner set forth in Section 1.06. With respect to any record date set pursuant to this Section, the Company may designate any date as the "EXPIRATION DATE" and from time to time may change the Expiration Date to any earlier or later day; provided that no such change shall be effective unless notice of the proposed new Expiration Date is given to the Agent in writing, and to each Holder in the manner set forth in Section 1.06, on or prior to the existing Expiration Date. If an Expiration Date is not designated with respect to any record date set pursuant to this Section, the Company shall be deemed to have initially designated the 180th day after such record date as the Expiration Date with respect thereto, subject to its right to change the Expiration Date as provided in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be later than the 180th day after the applicable record date. SECTION 1.05. Notices, Etc., to Agent and the Company. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Agreement to be made upon, given or furnished to, or filed with, (a) the Agent by any Holder or by the Company shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if made, given, furnished or filed in writing and personally delivered or mailed, first-class postage prepaid or by guaranteed overnight courier, to the Agent at One Illinois Center, Suite 3000, 111 East Wacker Drive, Chicago, Illinois 60601, Attention: Corporate Trust Services Division, or at any other address previously furnished for such purpose in writing by the Agent to the Holders and the Company, or (b) the Company by the Agent or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if made, given, furnished or filed in writing and personally delivered or mailed, first-class postage prepaid or by guaranteed overnight courier, to the Company at 370 Van Gordon Street, Lakewood, Colorado 80228-1740, Attention: Treasurer, or at any other address previously furnished for such purpose in writing to the Agent by the Company. 12 17 SECTION 1.06. Notice to Holders; Waiver. Where this Agreement provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at such Holder's address as it appears in the Security Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice nor any defect in any notice so mailed to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Agreement provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Agent, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Agent shall constitute a sufficient notification for every purpose hereunder. SECTION 1.07. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 1.08. Successors and Assigns. All covenants and agreements in this Agreement by the Company shall bind its successors and assigns, whether so expressed or not. SECTION 1.09. Separability Clause. In case any provision in this Agreement or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions hereof and thereof shall not in any way be affected or impaired thereby. SECTION 1.10. Benefits of Agreement. Except as set forth below, nothing in this Agreement or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder and the Holders, any benefits or any legal or equitable right, remedy or claim under this Agreement. The Holders from time to time shall be beneficiaries of this Agreement and shall be bound by all of the terms and conditions hereof and of the Securities evidenced by their Security Certificates by their acceptance of delivery thereof. The Underwriters shall be third-party beneficiaries of Section 4.01, and 13 18 shall have the same rights to enforce Section 4.01 as if the Underwriters were parties hereto. SECTION 1.11. Governing Law. This Agreement and the Securities shall be governed by and construed in accordance with the laws of the State of New York. SECTION 1.12. Legal Holidays. In any case where any Payment Date, any Early Settlement Date or the Final Settlement Date shall not be a Business Day, then (notwithstanding any other provision of this Agreement or of the Securities) payment in respect of interest on Treasury Notes, Contract Fees or Deferred Contract Fees shall not be made, Purchase Contracts shall not be performed and Early Settlement shall not be effected on such date, but such payments shall be made, Purchase Contracts performed or Early Settlement effected, as applicable, on the next succeeding Business Day with the same force and effect as if made on such Payment Date, Early Settlement Date or Final Settlement Date, as the case may be; provided, that no interest shall accrue or be payable by the Company or any Holder for the period from and after any such Payment Date, Early Settlement Date or Final Settlement Date, as the case may be. SECTION 1.13. Counterparts. This Agreement may be executed in any number of counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall together constitute one and the same instrument. SECTION 1.14. Inspection of Agreement. A copy of this Agreement shall be available at all reasonable times at the Corporate Trust Office for inspection by any Holder. SECTION 1.15. Appointment of Financial Institution as Agent for the Company. The Company may appoint a financial institution (which may be the Collateral Agent) to act as its agent in performing its obligations, and in accepting and enforcing performance of the obligations of the Agent and the Holders, under this Agreement and the Purchase Contracts, by giving notice of such appointment in the manner provided in Section 1.05 hereof. Any such appointment shall not relieve the Company in any way from its obligations hereunder. 14 19 ARTICLE 2 SECURITY CERTIFICATE FORMS SECTION 2.01. Forms of Security Certificates Generally. The Security Certificates (including the form of Purchase Contracts forming part of the Securities evidenced thereby) shall be in substantially the form set forth in Exhibit A hereto (in the case of Security Certificates evidencing Coupon Securities) or Exhibit B hereto (in the case of Security Certificates evidencing Zero-Coupon Securities), with such letters, numbers or other marks of identification or designation and such legends or endorsements printed, lithographed or engraved thereon as may be required by the rules of any securities exchange on which the Securities are listed or Depositary therefor, or as may, consistently herewith, be determined by the officers of the Company executing such Security Certificates, as evidenced by their execution of the Security Certificates. The definitive Security Certificates (if any) shall be printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers of the Company executing the Security Certificates, consistent with the provisions of this Agreement, as evidenced by their execution thereof. Every Global Security Certificate authenticated, executed on behalf of the Holders and delivered hereunder shall bear a legend in substantially the following form: THIS SECURITY CERTIFICATE IS A GLOBAL SECURITY CERTIFICATE WITHIN THE MEANING OF THE PURCHASE CONTRACT AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY ("DTC") OR A NOMINEE OF DTC. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE PURCHASE CONTRACT AGREEMENT AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC, TO ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. 15 20 OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. The Securities will be initially issued in the form of one or more fully registered Global Security Certificates, to be delivered to the Depositary or its custodian by or on behalf of the Company. The Company hereby designates The Depository Trust Company as the initial Depositary. Such Global Security Certificates shall initially be registered in the Security Register in the name of Cede & Co., the nominee of the Depositary, and no Holder will receive a definitive Security Certificate representing such Holder's interests in such Global Security Certificates, except as provided in this Section 2.01. Unless and until definitive, fully registered Security Certificates have been issued to a Holder pursuant to the provisions of this Section 2.01: (a) the provisions of this Section 2.01 shall be in full force and effect; (b) the Company and the Agent shall be entitled to deal with the Depositary for all purposes of this Agreement (including the payment of any amounts on the Global Security Certificates and receiving approvals, votes or consents hereunder) as the Holder and the sole owner of the Global Security Certificates; (c) to the extent that the provisions of this Section 2.01 conflict with any other provisions of this Agreement or the Purchase Contracts, the provisions of this Section 2.01 shall control; and (d) the rights of the Beneficial Owners shall be exercised only through the Depositary and shall be limited to those established by law and agreements between such Beneficial Owners and the Depositary and/or the Depositary Participants. The Depositary will make book entry transfers among the Depositary Participants and receive and transmit payments of amounts on the Global Security Certificates to such Depositary Participants. Whenever a notice or other communication to the Holders is required to be given under this Agreement, unless and until definitive Security Certificates shall have been issued, the Company and the Agent shall give all such notices and communications, specified herein to be given to Holders, to the Depositary and, 16 21 with respect to any Security Certificate registered in the name of the Depositary or the nominee of the Depositary, the Company and the Agent shall have no notice obligations to Beneficial Owners. If the Depositary elects to discontinue its services as securities depositary with respect to the Securities, the Company may, in its sole discretion, appoint a successor Depositary with respect to the Securities. If (i) the Depositary elects to discontinue its services as securities depositary with respect to the Securities and a successor Depositary is not appointed within 90 days after such discontinuance or (ii) the Company elects after consultation with the Agent to terminate the book entry system through the Depositary with respect to the Securities, then (x) definitive Security Certificates shall be prepared by the Agent on behalf of the Company with respect to such Securities and (y) upon surrender of the Global Security Certificates by the Depositary, accompanied by registration instructions, the Agent shall cause definitive Security Certificates to be delivered to Holders in accordance with the instructions of the Depositary. Each definitive Security Certificate so delivered shall evidence Securities of the same tenor (Coupon Securities or Zero-Coupon Securities) as the Global Security Certificate so surrendered in respect thereof. Neither the Agent nor the Company shall be liable for any delay in delivery of such instructions and each of them may conclusively rely on and shall be protected in relying on, such instructions. SECTION 2.02. Form of Agent's Certificate of Authentication. The Agent's certificate of authentication of the Securities shall be in substantially the form set forth on the form of the Security Certificates. ARTICLE 3 THE SECURITIES SECTION 3.01. Title and Terms; Denominations. The aggregate number of Securities evidenced by Security Certificates authenticated, executed on behalf of the Holders and delivered hereunder is limited to 9,310,000 (subject to increase up to a maximum of 1,396,000 to the extent the over-allotment option of the Underwriters granted in the Underwriting Agreement is exercised), except for Security Certificates authenticated, executed and delivered upon registration of transfer of, in exchange for, or in lieu of, other Security Certificates pursuant to Section 3.04, 3.05, 3.06, 5.09 or 8.05. 17 22 The Security Certificates shall be issuable only in registered form and only in denominations of a single Security and any integral multiple thereof. SECTION 3.02. Rights and Obligations Evidenced by the Security Certificates. Each Security Certificate shall evidence the number and tenor (Coupon Securities or Zero-Coupon Securities) of Securities specified therein, with each such Security representing the ownership by the Holder thereof of Treasury Securities with a principal amount equal to the Stated Amount, subject to the Pledge of such Treasury Securities by such Holder pursuant to the Pledge Agreement, and the rights and obligations of the Holder under one Purchase Contract. The Agent is hereby authorized by each Holder to act as attorney-in-fact for and on behalf of such Holder to pledge, pursuant to the Pledge Agreement, the Treasury Securities to the Collateral Agent and grant to the Collateral Agent a security interest in the right, title and interest of such Holders in the Treasury Securities, for the benefit of the Company, to secure the obligation of the Holders under the Purchase Contracts to purchase the Common Stock of the Company. Prior to the purchase, if any, of shares of Common Stock under the Purchase Contracts, the Securities shall not entitle the Holders to any of the rights of a holder of shares of Common Stock, including, without limitation, the right to vote or receive any dividends or other payments or to consent or to receive notice as stockholders in respect of the meetings of stockholders or for the election of directors of the Company or for any other matter, or any other rights whatsoever as stockholders of the Company, except to the extent otherwise expressly provided in this Agreement. SECTION 3.03. Execution, Authentication, Delivery and Dating. Upon the execution and delivery of this Agreement, and at any time from time to time thereafter, the Company may deliver Security Certificates executed by the Company to the Agent for authentication, execution on behalf of the Holders and delivery, together with its Issuer Order for authentication of such Security Certificates, and the Agent in accordance with such Issuer Order shall authenticate, execute on behalf of the Holder and deliver such Security Certificates. The Security Certificates shall be executed on behalf of the Company by its Chairman of the Board, its Vice Chairman of the Board, its President or one of its Vice Presidents, under its corporate seal reproduced thereon attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Security Certificates may be manual or facsimile. Security Certificates bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to 18 23 hold such offices prior to the authentication and delivery of such Security Certificates or did not hold such offices at the date of such Security Certificates. No Purchase Contract underlying a Security evidenced by a Security Certificate shall be valid until such Security Certificate has been executed on behalf of the Holder by the manual signature of an authorized signatory of the Agent, as such Holder's attorney-in-fact. Such signature by an authorized signatory of the Agent shall be conclusive evidence that the Holder of such Security Certificate has entered into the Purchase Contracts underlying the Securities evidenced by such Security Certificate. Each Security Certificate shall be dated the date of its authentication. No Security Certificate shall be entitled to any benefit under this Agreement or be valid or obligatory for any purpose unless there appears on such Security Certificate a certificate of authentication substantially in the form provided for herein executed by an authorized signatory of the Agent by manual signature, and such certificate upon any Security Certificate shall be conclusive evidence, and the only evidence, that such Security Certificate has been duly authenticated and delivered hereunder. SECTION 3.04. Temporary Security Certificates. Pending the preparation of definitive Security Certificates, the Company may execute and deliver to the Agent, and the Agent shall authenticate, execute on behalf of the Holders, and deliver, in lieu of such definitive Security Certificates, temporary Security Certificates that are in substantially the form set forth in Exhibit A hereto, with such letters, numbers or other marks of identification or designation and such legends or endorsements printed, lithographed or engraved thereon as may be required by the rules of any securities exchange on which the Securities are listed, or as may, consistently herewith, be determined by the officers of the Company executing such Security Certificates, as evidenced by their execution of the Security Certificates. If temporary Security Certificates are issued, the Company shall cause definitive Security Certificates to be prepared without unreasonable delay. After the preparation of definitive Security Certificates, the temporary Security Certificates shall be exchangeable for definitive Security Certificates upon surrender of the temporary Security Certificates at the Corporate Trust Office, at the expense of the Company and without charge to the Holder. Upon surrender for cancellation of any one or more temporary Security Certificates, the Company shall execute and deliver to the Agent, and the Agent shall authenticate, execute on behalf of the Holder, and deliver in exchange therefor, one or more definitive Security Certificates of authorized denominations and evidencing a like number of 19 24 Securities as the temporary Security Certificate or Security Certificates so surrendered. Each definitive Security Certificate so delivered shall evidence Securities of the same tenor (Coupon Securities or Zero-Coupon Securities) as the temporary Security Certificate so surrendered in exchange therefor. Until so exchanged, the temporary Security Certificates shall in all respects evidence the same benefits and the same obligations with respect to the Securities evidenced thereby as definitive Security Certificates. SECTION 3.05. Registration; Registration of Transfer and Exchange. The Agent shall keep at the Corporate Trust Office a register (the register maintained in such office being herein referred to as the "SECURITY REGISTER") in which, subject to such reasonable regulations as it may prescribe, the Agent shall provide for the registration of Security Certificates and of transfers of Security Certificates (the Agent, in such capacity, the "SECURITY REGISTRAR"). The Security Register shall record separately the registration and transfer of Security Certificates evidencing Coupon Securities and Zero-Coupon Securities. Upon surrender for registration of transfer of any Security Certificate at the Corporate Trust Office, the Company shall execute and deliver to the Agent, and the Agent shall authenticate, execute on behalf of the designated transferee or transferees, and deliver, in the name of the designated transferee or transferees, one or more new Security Certificates of any authorized denominations and evidencing a like number of Securities of the same tenor (Coupon Securities or Zero-Coupon Securities). At the option of the Holder, Security Certificates may be exchanged for other Security Certificates, of any authorized denominations and evidencing a like number of Securities of the same tenor (Coupon Securities or Zero-Coupon Securities), upon surrender of the Security Certificates to be exchanged at the Corporate Trust Office. Whenever any Security Certificates are so surrendered for exchange, the Company shall execute and deliver to the Agent, and the Agent shall authenticate, execute on behalf of the Holder, and deliver the Security Certificates that the Holder making the exchange is entitled to receive. All Security Certificates issued upon any registration of transfer or exchange of a Security Certificate shall evidence the ownership of the same number of Securities of the same tenor (Coupon Securities or Zero-Coupon Securities) and be entitled to the same benefits and be subject to the same obligations, under this Agreement as the Securities evidenced by the Security Certificate surrendered upon such registration of transfer or exchange. Every Security Certificate presented or surrendered for registration of transfer or for exchange shall (if so required by the Agent) be duly endorsed, or be 20 25 accompanied by a written instrument of transfer in form satisfactory to the Company and the Agent duly executed, by the Holder thereof or such Holder's attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of a Security Certificate, but the Company and the Agent may require payment from the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Security Certificates, other than any exchanges pursuant to Sections 3.04, 3.06, 5.09 and 8.05 not involving any transfer. Notwithstanding the foregoing, the Company shall not be obligated to execute and deliver to the Agent, and the Agent shall not be obligated to authenticate, execute on behalf of the Holder and deliver any Security Certificate presented or surrendered for registration of transfer or for exchange on or after the Final Settlement Date or the Termination Date. In lieu of delivery of a new Security Certificate, upon satisfaction of the applicable conditions specified above in this Section and receipt of appropriate registration or transfer instructions from such Holder, the Agent shall (i) if the Final Settlement Date has occurred, deliver the shares of Common Stock issuable in respect of the Purchase Contracts forming a part of the Securities evidenced by such Security Certificate, or (ii) if a Termination Event shall have occurred prior to the Final Settlement Date, transfer the principal amount of the Treasury Securities evidenced thereby, in each case subject to the applicable conditions and in accordance with the applicable provisions of Article 5 hereof. The provisions of paragraphs (a), (b), (c) and (d) below shall apply only to Global Security Certificates: (a) Each Global Security Certificate authenticated and executed on behalf of the Holders under this Agreement shall be registered in the name of Cede & Co., as the nominee of the Depositary as set forth in Section 2.01. (b) Notwithstanding any other provision in this Agreement, no Global Security Certificate may be exchanged in whole or in part for Security Certificates registered, and no transfer of a Global Security Certificate in whole or in part may be registered, in the name of any Person other than the Depositary for such Global Security Certificate or a nominee thereof unless (i) the Depositary elects to discontinue its services as securities depositary with respect to the Securities and a successor Depositary is not appointed within 90 days after such discontinuance or (ii) the Company elects after consultation with the Agent to terminate the book entry system through the Depositary with respect to the Securities. 21 26 (c) Subject to clause (b) above, any exchange of a Global Security Certificate for other Security Certificates may be made in whole or in part, and all Security Certificates issued in exchange for a Global Security Certificate or any portion thereof shall be registered in such names as the Depositary for such shall direct. (d) Every Security Certificate authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Security Certificate or any portion thereof, whether pursuant to this Section, Section 3.04, 3.06, 5.09 or 8.05 or otherwise, shall be authenticated, executed on behalf of the Holders and delivered in the form of, and shall be, a Global Security Certificate, unless such Security Certificate is registered in the name of a Person other than the Depositary for such Global Security Certificate or a nominee thereof. SECTION 3.06. Mutilated, Destroyed, Lost and Stolen Security Certificates. If any mutilated Security Certificate is surrendered to the Agent, the Company shall execute and deliver to the Agent, and the Agent shall authenticate, execute on behalf of the Holder, and deliver in exchange therefor, a new Security Certificate, evidencing the same number of Securities of the same tenor (Coupon Securities or Zero Coupon Securities) and bearing a number not contemporaneously outstanding. If there shall be delivered to the Company and the Agent (i) evidence to their satisfaction of the destruction, loss or theft of any Security Certificate, and (ii) such security or indemnity as may be required by them to save each of them and any agent of any of them harmless, then, in the absence of notice to the Company or the Agent that such Security Certificate has been acquired by a protected purchaser, the Company shall execute and deliver to the Agent, and the Agent shall authenticate, execute on behalf of the Holder, and deliver to the Holder, in lieu of any such destroyed, lost or stolen Security Certificate, a new Security Certificate, evidencing the same number of Securities of the same tenor (Coupon Securities or Zero-Coupon Securities) and bearing a number not contemporaneously outstanding. Notwithstanding the foregoing, the Company shall not be obligated to execute and deliver to the Agent, and the Agent shall not be obligated to authenticate, execute on behalf of the Holder, and deliver to the Holder, a Security Certificate on or after the Final Settlement Date or the Termination Date. In lieu of delivery of a new Security Certificate, upon satisfaction of the applicable conditions specified above in this Section and receipt of appropriate registration or transfer instructions from such Holder, the Agent shall (i) if the Final Settlement Date has occurred, deliver the shares of Common Stock issuable in respect of the Purchase Contracts forming a part of the Securities evidenced by 22 27 such Security Certificate, or (ii) if a Termination Event shall have occurred prior to the Final Settlement Date, transfer the principal amount of the Treasury Securities evidenced thereby, in each case subject to the applicable conditions and in accordance with the applicable provisions of Article 5 hereof. Upon the issuance of any new Security Certificate under this Section, the Company and the Agent may require the payment by the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto. Every new Security Certificate issued pursuant to this Section in lieu of any destroyed, lost or stolen Security Certificate shall constitute an original additional contractual obligation of the Company and of the Holder, whether or not the destroyed, lost or stolen Security Certificate shall be at any time enforceable by anyone, and shall be entitled to all the benefits and be subject to all the obligations of this Agreement equally and proportionately with any and all other Security Certificates delivered hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or settlement of mutilated, destroyed, lost or stolen Security Certificates. SECTION 3.07. Persons Deemed Owners. Prior to due presentment of a Security Certificate for registration of transfer, the Company and the Agent, and any agent of the Company or the Agent, may treat the Person in whose name such Security Certificate is registered as the owner of the Securities evidenced thereby, for the purpose of receiving payments of interest on the Treasury Notes (in the case of Coupon Securities), receiving payments of Contract Fees and any Deferred Contract Fees, delivery of the Treasury Securities, performance of the Purchase Contracts and for all other purposes whatsoever, whether or not the payment of interest on the Treasury Notes (in the case of Coupon Securities) or any Contract Fees payable in respect of the Purchase Contracts constituting a part of the Securities evidenced thereby shall be overdue and notwithstanding any notice to the contrary, and neither the Company nor the Agent, nor any agent of the Company or the Agent, shall be affected by notice to the contrary. Notwithstanding the foregoing, with respect to any Global Security Certificate, nothing herein shall prevent the Company, the Agent or any agent of the Company or the Agent, from giving effect to any written certification, proxy or other authorization furnished by any Depositary (or its nominee), as a Holder, with respect to such Global Security Certificate or impair, as between such Depositary and the Beneficial Owners, the operation of customary practices 23 28 governing the exercise of rights of such Depositary (or its nominee) as Holder of such Global Security Certificate. SECTION 3.08. Cancellation. All Security Certificates surrendered for delivery of shares of Common Stock on or after the Final Settlement Date, transfer of Treasury Securities after the occurrence of a Termination Event or pursuant to an Early Settlement or Collateral Substitution or registration of transfer or exchange shall, if surrendered to any Person other than the Agent, be delivered to the Agent and, if not already canceled, shall be promptly canceled by it. The Company may at any time deliver to the Agent for cancellation any Security Certificates previously authenticated, executed and delivered hereunder that the Company may have acquired in any manner whatsoever, and all Security Certificates so delivered shall, upon the receipt by the Agent of an Issuer Order requesting such cancellation, be promptly canceled by the Agent. No Security Certificates shall be authenticated, executed on behalf of the Holder and delivered in lieu of or in exchange for any Security Certificates canceled as provided in this Section, except as expressly permitted by this Agreement. All canceled Security Certificates held by the Agent shall be disposed of as directed in an Issuer Order. If the Company or any Affiliate of the Company shall acquire any Security Certificate, such acquisition shall not operate as a cancellation of such Security Certificate unless and until such Security Certificate is delivered to the Agent canceled or for cancellation. SECTION 3.09. Securities Not Separable. Notwithstanding anything contained herein or in the Security Certificates to the contrary (except as provided in Section 4.03), for so long as the Purchase Contract comprising a portion of a Security remains in effect, such Security shall not be separable into its constituent parts for purposes of transfer or exchange of such Security, and the rights and obligations of the Holder of such Security in respect of the Treasury Securities and Purchase Contracts comprising such Security may be acquired, and may be transferred and exchanged, only as a Security. Other than a Security Certificate evidencing a Security, no Holder of a Security, or any transferee thereof, shall be entitled to receive a certificate evidencing the ownership of Treasury Securities (except as provided in Section 4.03) or the rights and obligations of the Holder and the Company under a Purchase Contract for so long as the Purchase Contract underlying the Security remains in effect. SECTION 3.10. No Consent to Assumption. Each Holder of a Security, by acceptance thereof, shall be deemed expressly to have withheld any consent to the assumption under Section 365 of the Bankruptcy Code or otherwise, of the Purchase Contract by the Company or its trustee in the event that the Company becomes a debtor under the Bankruptcy Code. 24 29 ARTICLE 4 THE TREASURY SECURITIES SECTION 4.01. Payment of Interest; Interest Rights Preserved. Interest on any Treasury Note that is paid on any Payment Date shall, subject to receipt thereof by the Agent from the Collateral Agent as provided by the terms of the Pledge Agreement, be paid to the Person in whose name the Security Certificate (or one or more Predecessor Security Certificates) representing the Securities of which the Treasury Security corresponding to such Treasury Note is a part is registered at the close of business on the Record Date immediately preceding such Payment Date; provided, that on the first Payment Date, the Agent shall remit to the Persons in whose names such Security Certificates are registered on the Record Date with respect thereto, in addition to interest on the Treasury Notes paid on such Payment Date, interest payable with respect to the Treasury Notes for the period from the date of initial issuance of the Securities until November 29, 1998. Interest payable with respect to the Treasury Notes that accrued prior to the date of initial issuance of the Securities and that is payable on the first interest payment date with respect to the Treasury Notes, received from the Collateral Agent following the date of initial issuance of the Securities, shall be remitted by the Agent, upon its receipt thereof, to Morgan Stanley & Co. Incorporated for the account of the Underwriters by 2:00 p.m. New York City time on the date of receipt by the Agent. Funds received by the Purchase Contract Agent for interest accrued from and including the date of initial issuance to the first interest payment date with respect to the Treasury Notes shall remain uninvested. Except as otherwise provided in the immediately preceding paragraph, each Security Certificate that evidences, in part, Coupon Treasury Securities delivered under this Agreement upon registration of transfer of or in exchange for or in lieu of any other Security Certificate shall carry the rights to interest accrued and unpaid, and to accrue, that were carried by the Coupon Treasury Securities forming a part of the Securities represented by such other Security Certificate. In the case of any Coupon Security with respect to which Early Settlement of the underlying Purchase Contract is effected on an Early Settlement Date, or with respect to which a Collateral Substitution is effected on any Collateral Substitution Date, in either case after any Record Date and on or prior to the next succeeding Payment Date, the Agent shall remit to the Person in whose name the Security Certificate representing such Coupon Security is registered on the Record Date with respect thereto interest on the Treasury Notes corresponding to the Treasury Securities underlying such Security otherwise payable on such Payment Date notwithstanding the release of the Treasury Securities pursuant to such Early 25 30 Settlement or Collateral Substitution. Except as otherwise expressly provided in the immediately preceding sentence, in the case of any Coupon Security with respect to which Early Settlement of the underlying Purchase Contract is effected on an Early Settlement Date or Collateral Substitution is effected on a Collateral Substitution Date, interest on the related Treasury Notes that would otherwise be payable after the Early Settlement Date or the Collateral Substitution Date, as the case may be, shall not be payable hereunder to the Holder of such Security. SECTION 4.02. Transfer of Treasury Securities Upon Occurrence of Termination Event. Upon the occurrence of a Termination Event and the transfer to the Agent of the Treasury Securities forming a part of the Securities pursuant to the terms of the Pledge Agreement, the Agent shall request transfer instructions with respect to such Treasury Securities from each Holder by written request mailed to such Holder at such Holder's address as it appears in the Security Register, in respect of the Treasury Securities forming a part of the Securities represented by the Security Certificate held by such Holder. Upon surrender to the Agent of a Security Certificate with such transfer instructions in proper form for transfer of the Treasury Securities by Federal Reserve Bank-Wire or other appropriate procedure, the Agent shall transfer the Treasury Securities evidenced by such Security Certificate to such Holder in accordance with such instructions. If a Security Certificate is not duly surrendered to the Agent with appropriate transfer instructions, the Agent shall hold the Treasury Securities evidenced by such Security Certificate as custodian for the Holder of such Security Certificate. Treasury Securities shall be transferred only in denominations of $1,000 and integral multiples thereof. As promptly as practicable following the occurrence of a Termination Event, the Agent shall determine (i) the excess of (A) the aggregate principal amount of Coupon Treasury Securities underlying the Outstanding Securities that are Coupon Securities over (B) the aggregate principal amount of Coupon Treasury Securities in denominations of $1,000 and integral multiples thereof transferrable to Holders of record on the date of such Termination Event (such excess being herein referred to as the "EXCESS COUPON TREASURY SECURITIES") and (ii) the excess of (A) the aggregate principal amount of Zero-Coupon Treasury Securities underlying the Outstanding Securities that are Zero-Coupon Securities over (B) the aggregate principal amount of Zero-Coupon Treasury Securities in denominations of $1,000 and integral multiples thereof transferrable to Holders of record on the date of such Termination Event (such excess being herein referred to as the "EXCESS ZERO-COUPON TREASURY SECURITIES"). As soon as practicable after transfer to the Agent of the Treasury Securities underlying the Outstanding Securities as provided in the Pledge Agreement, the Agent shall sell the Excess Coupon Treasury Securities and the Excess Zero-Coupon Treasury Securities to or through one or more U.S. Government securities dealers at then prevailing prices. The Agent shall deduct 26 31 from the proceeds of such sales all commissions and other out-of-pocket transaction costs incurred in connection with such sales and, until the net proceeds of such sale or sales have been distributed to Holders, the Agent shall hold such proceeds as custodian for the Holders. Such proceeds shall be held by the Agent uninvested without liability to any Person for interest or other compensation thereon. Each Holder of Coupon Securities shall be entitled to receive a portion, if any, of the net proceeds of such sales of Excess Coupon Treasury Securities in lieu of Treasury Securities with a principal amount of less than $1,000 determined by multiplying the aggregate amount of such net proceeds by a fraction, the numerator of which is the fraction of $1,000 in principal amount of Treasury Securities to which such Holder would otherwise be entitled (after taking into account all Securities then held by such Holder) and the denominator of which is the aggregate principal amount of Excess Coupon Treasury Securities. Each Holder of Zero-Coupon Securities shall be entitled to receive a portion, if any, of the net proceeds of such sales of Excess Zero-Coupon Treasury Securities in lieu of Treasury Securities with a principal amount of less than $1,000 determined by multiplying the aggregate amount of such net proceeds by a fraction, the numerator of which is the fraction of $1,000 in principal amount of Treasury Securities to which such Holder would otherwise be entitled (after taking into account all Securities then held by such Holder) and the denominator of which is the aggregate principal amount of Excess Zero-Coupon Treasury Securities. SECTION 4.03. Substitution of Collateral. (a) Subject to and upon compliance with the provisions of this Section 4.03, at any time prior to November 15, 2001, the Holder of any Coupon Securities may, in integral multiples of 1,000 Securities, substitute Zero-Coupon Treasury Securities for the Coupon Treasury Securities forming a part thereof, thereby forming Zero-Coupon Securities ("COLLATERAL SUBSTITUTION") as provided herein. In order to exercise the right to effect Collateral Substitution with respect to any Coupon Securities, the Holder of the Security Certificate evidencing such Securities shall (i) deposit with the Collateral Agent Zero-Coupon Treasury Securities having an aggregate principal amount equal to the aggregate Stated Amount of such Securities, in the manner provided in the Pledge Agreement, and (ii) shall deliver such Security Certificate to the Agent at the Corporate Trust Office duly endorsed for transfer to the Company or in blank with the form of Election to Substitute Collateral on the reverse thereof duly completed. If the foregoing requirements are first satisfied with respect to any Securities at or prior to 5:00 p.m., New York City time, on a Business Day, such day shall be the "COLLATERAL SUBSTITUTION DATE" with respect to such Securities and if such requirements are first satisfied after 5:00 p.m, New York City time, on a Business Day or on a day that is not a Business Day, the "COLLATERAL SUBSTITUTION DATE" with respect to such Securities shall be the next succeeding Business Day. 27 32 (b) Upon a Collateral Substitution, the Company shall execute, and the Agent shall authenticate, execute on behalf of the Holder and deliver to the Holder a Security Certificate evidencing a number of Zero-Coupon Securities equal to the number of Coupon Securities evidenced by the Security Certificate surrendered. (c) The Company shall cause the Coupon Treasury Securities deliverable upon Collateral Substitution to be released from the Pledge by the Collateral Agent and credited to a securities account of the Agent for delivery or credit to the Holder or its designee no later than 5:00 p.m. New York City time on the third Business Day after the applicable Collateral Substitution Date. (d) Upon Collateral Substitution, and subject to receipt thereof from the Collateral Agent, the Agent shall, in accordance with the instructions provided by the Holder on the applicable form of Election to Substitute Collateral on the reverse of the Security Certificate evidencing the relevant Securities, credit the Treasury Securities forming a part of such Securities to the securities account so designated by such Holder. (e) In the event that Collateral Substitution is effected with respect to less than all the Securities evidenced by a Security Certificate, upon such Collateral Substitution, the Company shall execute, and the Agent shall authenticate, execute on behalf of the Holder and deliver to the Holder, at the expense of the Company, a Security Certificate evidencing the Securities as to which Collateral Substitution was not effected. ARTICLE 5 THE PURCHASE CONTRACTS SECTION 5.01. Purchase of Shares of Common Stock. Each Purchase Contract shall obligate the Holder of the related Security to purchase, and the Company to sell, on the Final Settlement Date at a price equal to the Stated Amount, a number of shares of Common Stock equal to the Settlement Rate, unless, on or prior to the Final Settlement Date, there shall have occurred a Termination Event or an Early Settlement with respect to the Security of which such Purchase Contract is a part. The "SETTLEMENT RATE" is equal to (a) if the Applicable Market Value (as defined below) is greater than $51.60 (the "THRESHOLD APPRECIATION PRICE"), .8333 of a share of Common Stock per Purchase Contract, (b) if the Applicable Market Value is less than or equal to the Threshold Appreciation Price but is greater than the Stated Amount, a fractional share of Common Stock per Purchase Contract equal to the Stated Amount 28 33 divided by the Applicable Market Value (rounded upward or downward to the nearest 1/10,000th of a share) and (c) if the Applicable Market Value is less than or equal to the Stated Amount, one share of Common Stock per Purchase Contract, in each case subject to adjustment as provided in Section 5.06. As provided in Section 5.10, no fractional shares of Common Stock shall be issued upon settlement of Purchase Contracts. Subject to Section 5.06(b), the "APPLICABLE MARKET VALUE" means the average of the Closing Prices per share of Common Stock on each of the twenty consecutive Trading Days ending on the second Trading Day immediately preceding the Final Settlement Date. The "CLOSING PRICE" of the Common Stock on any date of determination means the closing sale price (or, if no closing price is reported, the last reported sale price) of the Common Stock on the NYSE on such date or, if the Common Stock is not listed for trading on the NYSE on any such date, as reported in the composite transactions for the principal United States securities exchange on which the Common Stock is so listed or, if the Common Stock is not so listed on a United States national or regional securities exchange, as reported by the Nasdaq Stock Market or, if such price of the Common Stock is not so reported, the last quoted bid price for the Common Stock in the over-the-counter market as reported by the National Quotation Bureau or similar organization or, if such bid price is not available, the market value of the Common Stock on such date as determined by a nationally recognized independent investment banking firm retained for this purpose by the Company. A "TRADING DAY" means a day on which the Common Stock (A) is not suspended from trading on any national or regional securities exchange or association or over-the-counter market at the close of business and (B) has traded at least once on the national or regional securities exchange or association or over-the-counter market that is the primary market for the trading of the Common Stock. Each Holder of a Security, by such Holder's acceptance thereof, authorizes the Agent to enter into and perform the related Purchase Contracts on such Holder's behalf as such Holder's attorney-in-fact, agrees to be bound by the terms and provisions thereof, expressly withholds any consent to the assumption (i.e., affirmance) of the Purchase Contracts by the Company or its trustee in the event that the Company becomes the subject of a case under the Bankruptcy Code, covenants and agrees to perform such Holder's obligations under such Purchase Contracts, consents to the provisions hereof, authorizes the Agent to enter into and perform the Pledge Agreement on such Holder's behalf as such Holder's attorney-in-fact, and consents to and agrees to be bound by the Pledge of the Treasury Securities underlying such Security Certificate pursuant to the Pledge Agreement; provided that upon a Termination Event the rights of the Holder of such Security under the Purchase Contract may be enforced without regard to any other rights or obligations. Each Holder of a Security, by such Holder's 29 34 acceptance thereof, further covenants and agrees that, to the extent and in the manner provided in Section 5.04 and the Pledge Agreement, but subject to the terms thereof, payments in respect of principal of the Treasury Securities on the Final Settlement Date shall be paid by the Collateral Agent to the Company in satisfaction of such Holder's obligations under such Purchase Contract and such Holder shall acquire no right, title or interest in such payments. Upon registration of transfer of a Security Certificate evidencing Purchase Contracts, the transferee shall be bound (without the necessity of any other action on the part of such transferee) under the terms of this Agreement, the Purchase Contracts evidenced thereby and the Pledge Agreement, and the transferor shall be released from the obligations under the Purchase Contracts evidenced by the Security Certificates so transferred. The Company covenants and agrees, and each Holder of a Security Certificate, by such Holder's acceptance thereof, likewise covenants and agrees, to be bound by the provisions of this paragraph. SECTION 5.02. Contract Fees. Subject to Section 5.03, the Company shall pay by 10:00 A.M. New York City time to the Agent, on each Payment Date, the Contract Fees payable in respect of each Purchase Contract for the benefit of the Person in whose name the Security Certificate (or one or more Predecessor Security Certificates) evidencing the Security of which such Purchase Contract is a part is registered at the close of business on the Record Date next preceding such Payment Date. The Contract Fees shall be payable at the office or agency of the Agent in The City of New York maintained for that purpose or, at the option of the Company, by check mailed to the address of the Person entitled thereto at such address as it appears on the Security Register. Notwithstanding any provisions of this Agreement and the Securities to the contrary, if the Company and a Holder of at least $1,000,000 Stated Amount of Securities so agree, payments of Contract Fees and Deferred Contract Fees, if any, payable in respect of each Purchase Contract, and interest on the Treasury Notes (in the case of Coupon Securities), in each case underlying such Securities shall be made by the Agent, upon receipt from the Company and the Collateral Agent (in the case of Coupon Securities) of immediately available funds by 1:00 P.M. New York City time (or such other time as may be agreed to between the Company and the Agent), directly to the Holder of such Security (by Federal funds wire transfer or otherwise within the United States) if the Holder has delivered written instructions to the Agent at least 15 days prior to such Payment Date requesting that such payment shall be so made and designating the bank account in the United States to which such payment shall be so made. The Agent shall be entitled to rely on the last instruction delivered by the Holder pursuant to this Section 5.02 unless a new instruction is delivered at least 15 days prior to a Payment Date. 30 35 Each Security Certificate delivered under this Agreement upon registration of transfer of or in exchange for or in lieu of any other Security Certificate shall carry the rights to Contract Fees and Deferred Contract Fees, if any, accrued and unpaid, and to accrue, which were carried by the Purchase Contracts that were a part of the Securities evidenced by such other Security Certificate. In the case of any Security with respect to which Early Settlement of the underlying Purchase Contract is effected on an Early Settlement Date after any Record Date and on or prior to the next succeeding Payment Date, Contract Fees and Deferred Contract Fees, if any, otherwise payable on such Payment Date shall be payable on such Payment Date notwithstanding such Early Settlement, and such Contract Fees and Deferred Contract Fees, if any, shall be paid to the Person in whose name the Security Certificate evidencing such Security (or one or more Predecessor Security Certificates) is registered at the close of business on such Record Date. Except as otherwise expressly provided in the immediately preceding sentence, in the case of any Security with respect to which Early Settlement of the underlying Purchase Contract is effected on an Early Settlement Date, Contract Fees and Deferred Contract Fees, if any, that would otherwise be payable after the Early Settlement Date with respect to the Purchase Contract underlying such Security shall not be payable. The Company's obligations with respect to Contract Fees and Deferred Contract Fees, if any, are subordinate and junior in right of payment to all other liabilities of the Company (other than liabilities that expressly provide that they are pari passu with the Company's obligations with respect to Contract Fees and Deferred Contract Fees, if any) and pari passu with the most senior preferred stock directly issued from time to time, if any, by the Company. SECTION 5.03. Deferral of Payment Dates for Contract Fees. The Company shall have the right, at any time prior to the Final Settlement Date, to defer the payment of any or all of the Contract Fees otherwise payable on any Payment Date (on a pro rata basis among all Outstanding Securities), but only if the Company shall give the Holders and the Agent written notice of its election to defer such payment (specifying the amount to be deferred and the period of deferment) at least ten Business Days prior to the earlier of (i) the next succeeding Payment Date or (ii) the date the Company is required to give notice of the Record Date or Payment Date with respect to payment of such Contract Fees to the NYSE or other applicable self-regulatory organization or to Holders, but in any event not less than two Business Days prior to such Record Date. Any Contract Fees so deferred shall bear additional Contract Fees thereon at the rate of 8.25% per annum (computed on the basis of the actual number of days elapsed in a year of 365 or 366 days, as the case may be), compounding on each succeeding Payment Date, until paid in full (such deferred installments of Contract Fees, 31 36 together with the additional Contract Fees accrued thereon, are referred to herein as the "DEFERRED CONTRACT FEES"). The Company may pay the Deferred Contract Fees in whole or in part on any Payment Date (on a pro rata basis among all Outstanding Securities). No Contract Fees or Deferred Contract Fees may be deferred to a date that is after the Final Settlement Date. In the event that the Company elects to defer the payment of Contract Fees on the Purchase Contracts until the Final Settlement Date, each Holder shall receive on the Final Settlement Date, in lieu of a cash payment, a number of shares of Common Stock (in addition to a number of shares of Common Stock equal to the Settlement Rate) equal to (x) the aggregate amount of Deferred Contract Fees payable to a Holder divided by (y) the Applicable Market Value. No fractional shares of Common Stock shall be issued by the Company with respect to the payment of Deferred Contract Fees on the Final Settlement Date. In lieu of fractional shares otherwise issuable with respect to such payment of Deferred Contract Fees, the Holder shall be entitled to receive an amount in cash as provided in Section 5.10. In the event the Company exercises its option to defer the payment of Contract Fees, then, until the Deferred Contract Fees have been paid in full, the Company (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 (i) purchases or acquisitions of Common Stock in connection with the satisfaction by the Company or any of its subsidiaries of their respective obligations under any benefit plans for directors, officers, agents or employees or the Company's dividend reinvestment or director, officer, agent or employee stock purchase plans, (ii) as a result of a reclassification of the Company's capital stock or the exchange or conversion of one class or series of the Company's capital stock for another class or series of capital stock, (iii) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of the Company's capital stock or the security being converted or exchanged for the Company's capital stock, (iv) dividends or distributions in the form of shares of, or options, warrants or rights to subscribe for or purchase, shares of capital stock of the Company or (v) any declaration of a dividend in connection with the implementation of 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 the Company that rank pari passu with or junior to such Contract Fees and (c) shall not make any guarantee payments with respect to any guarantee by the Company of any securities of any subsidiary of the 32 37 Company if such guarantee ranks pari passu with or junior in right of payment to the Contract Fees. SECTION 5.04. Payment of Purchase Price. Unless a Holder settles the underlying Purchase Contract either through the early delivery of cash to the Agent in the manner described in Section 5.09 or otherwise, the purchase price for the shares of Common Stock purchased pursuant to a Purchase Contract shall be paid by application of payments received by the Company on the Final Settlement Date from the Collateral Agent pursuant to the Pledge Agreement in respect of the principal of the Treasury Securities pledged to secure the obligations of the relevant Holder under such Purchase Contract. Such application shall satisfy in full the obligations under such Purchase Contract of the Holder of the Security of which such Purchase Contract is a part. The Company shall not be obligated to issue any shares of Common Stock in respect of a Purchase Contract or deliver any certificates therefor to the Holder unless it shall have received payment in full of the aggregate purchase price for the shares of Common Stock to be purchased thereunder in the manner herein set forth. SECTION 5.05. Issuance of Shares of Common Stock. Unless a Termination Event or an Early Settlement shall have occurred on or prior to the Final Settlement Date, on the Final Settlement Date, upon its receipt of payment in full of the purchase price for the shares of Common Stock purchased by the Holders pursuant to the foregoing provisions of this Article, and in payment of Deferred Contract Fees, if any, owed by the Company to the Holders and subject to Section 5.06(b), the Company shall issue and deposit with the Agent, for the benefit of the Holders of the Outstanding Securities, one or more certificates representing the shares of Common Stock to which the Holders are entitled hereunder, registered in the name of the Agent (or its nominee) as custodian for the Holders (such certificates for shares of Common Stock, together with any dividends or distributions with respect thereto, being hereinafter referred to as the "FINAL SETTLEMENT FUND"). Subject to the foregoing, upon surrender of a Security Certificate to the Agent on or after the Final Settlement Date, together with settlement instructions thereon duly completed and executed, the Holder of such Security Certificate shall be entitled to receive in exchange therefor a certificate representing that number of whole shares of Common Stock that such Holder is entitled to receive pursuant to the provisions of this Article 5 (after taking into account all Securities then held by such Holder) together with cash in lieu of fractional shares as provided in Section 5.10 and any dividends or distributions with respect to such shares constituting part of the Final Settlement Fund, but without any interest thereon, and the Security Certificate so surrendered shall forthwith be canceled. Each certificate evidencing such shares shall be registered in the name of the Holder or the Holder's designee as specified in the settlement instructions on the Security Certificate. If any shares of Common Stock 33 38 issued in respect of a Purchase Contract and in payment of any Deferred Contract Fees are to be registered to a Person other than the Person in whose name the Security Certificate evidencing such Purchase Contract is registered, no such registration shall be made unless the Person requesting such registration has paid any transfer and other taxes required by reason of such registration in a name other than that of the registered Holder of the Security Certificate evidencing such Purchase Contract or has established to the satisfaction of the Company that such tax either has been paid or is not payable. SECTION 5.06. Adjustment of Settlement Rate. (a) Adjustments for Dividends, Distributions, Stock Splits, Etc. (i) In case the Company shall pay or make a dividend or other distribution on any class of common stock of the Company in Common Stock, the Settlement Rate in effect at the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution shall be increased by dividing such Settlement Rate by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination and the denominator shall be the sum of such number of shares and the total number of shares constituting such dividend or other distribution, such increase to become effective immediately after the opening of business on the day following the date fixed for such determination. For the purposes of this clause (i), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of Common Stock. The Company shall not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Company. (ii) In case the Company shall issue rights, options or warrants to all holders of its Common Stock (not being available on an equivalent basis to Holders upon settlement of the Purchase Contracts underlying such Securities) entitling them, for a period expiring within 45 days after the record date for the determination of stockholders entitled to receive such rights, options or warrants, to subscribe for or purchase shares of Common Stock at a price per share less than the Current Market Price per share of Common Stock on the date fixed for the determination of stockholders entitled to receive such rights, options or warrants (other than pursuant to a dividend reinvestment plan), the Settlement Rate in effect at the opening of business on the day following the date fixed for such determination shall be increased by dividing such Settlement Rate by a 34 39 fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock that the aggregate of the offering price of the total number of shares of Common Stock so offered for subscription or purchase would purchase at such Current Market Price and the denominator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock so offered for subscription or purchase, such increase to become effective immediately after the opening of business on the day following the date fixed for such determination. For the purposes of this clause (ii), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Company shall not issue any such rights, options or warrants in respect of shares of Common Stock held in the treasury of the Company. (iii) In case outstanding shares of Common Stock shall be subdivided or split into a greater number of shares of Common Stock, the Settlement Rate in effect at the opening of business on the day following the day upon which such subdivision or split becomes effective shall be proportionately increased, and, conversely, in case outstanding shares of Common Stock shall each be combined into a smaller number of shares of Common Stock, the Settlement Rate in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately reduced, such increase or reduction, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision, split or combination becomes effective. (iv) In case the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock evidences of its indebtedness, shares of capital stock, securities, cash or property (excluding any rights or warrants referred to in Section 5.06(a)(ii), any dividend or distribution paid exclusively in cash and any dividend or distribution referred to in Section 5.06(a)(i)), the Settlement Rate shall be adjusted so that the same shall equal the rate determined by dividing the Settlement Rate in effect immediately prior to the close of business on the date fixed for the determination of stockholders entitled to receive such distribution by a fraction of which the numerator shall be the Current Market Price per share of Common Stock on the date fixed for such determination less the then fair market value (as determined by the Board 35 40 of Directors, whose determination shall be conclusive and described in a Board Resolution filed with the Agent) of the portion of the assets or evidences of indebtedness so distributed applicable to one share of Common Stock and the denominator shall be such Current Market Price per share of Common Stock, such adjustment to become effective immediately prior to the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such distribution. (v) In case the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock cash (excluding (x) any quarterly cash dividend on the Common Stock to the extent that the aggregate cash dividend per share of Common Stock in any fiscal quarter does not exceed the greater of (A) the amount per share of Common Stock of the next preceding quarterly cash dividend on the Common Stock to the extent that such preceding quarterly dividend did not require an adjustment of the Settlement Rate pursuant to this Section 5.06(a)(v) (as adjusted to reflect subdivisions or combinations of the Common Stock), and (B) 3.75% of the arithmetic average of the Closing Prices of the Common Stock during the ten consecutive Trading Days immediately prior to the date of declaration of such dividend, and (y) any dividend or distribution in connection with the liquidation, dissolution or winding up of the Company, whether voluntary or involuntary), then, in such case, the Settlement Rate shall be increased so that the same shall equal the rate determined by multiplying the Settlement Rate in effect immediately prior to the close of business on such record date by a fraction of which the numerator shall be the Current Market Price of the Common Stock, and the denominator shall be the Current Market Price of the Common Stock on the record date less the amount of cash so distributed (and not excluded as provided above) applicable to one share of Common Stock, such increase to be effective immediately prior to the opening of business on the day following the record date; provided, however, that in the event the portion of the cash so distributed applicable to one share of Common Stock of the Company is equal to or greater than the Current Market Price of the Common Stock of the Company on the record date, in lieu of the foregoing adjustment, adequate provision shall be made so that each holder of a Security shall have the right to receive upon settlement of the Securities the amount of cash such Holder would have received had such Holder settled each Security on the record date. In the event that such dividend or distribution is not so paid or made, the Settlement Rate shall again be adjusted to be the Settlement Rate which would then be in effect if such dividend or distribution had not been declared. If any adjustment is required to be made as set forth in this Section 5.06(a)(v) as a result of a 36 41 distribution that is a quarterly dividend, such adjustment shall be based upon the amount by which such distribution exceeds the amount of the quarterly cash dividend permitted to be excluded pursuant to this Section 5.06(a)(v) (notwithstanding the provisions of Section 5.06(a)(x)). If an adjustment is required to be made as set forth in this Section 5.06(a)(v) above as a result of a distribution that is not a quarterly dividend, such adjustment shall be based upon the full amount of the distribution. (vi) In case of a tender or exchange offer made by a Person other than the Company or any subsidiary of the Company for an amount which increases the offeror's ownership of Common Stock of the Company to more than 25% of the Common Stock outstanding and shall involve the payment by such Person of consideration per share of Common Stock having a fair market value (as determined by the Board of Directors, whose determination shall be conclusive, and described in a Board Resolution) at the last time (the "EXPIRATION TIME") tenders or exchanges may be made pursuant to such tender or exchange offer (as it shall have been amended) that exceeds the Current Market Price of the Common Stock on the Trading Day next succeeding the Expiration Time, and in which, as of the Expiration Time, the Board of Directors is recommending acceptance of the offer, the Settlement Rate shall be increased so that the same shall equal the rate determined by multiplying the Settlement Rate in effect immediately prior to the Expiration Time by a fraction of which the numerator shall be the sum of (x) the fair market value (determined as aforesaid) of the aggregate consideration payable to stockholders based on the acceptance (up to any maximum specified in the terms of the tender or exchange offer) of all shares validly tendered or exchanged and not withdrawn as of the Expiration Time (the shares deemed so accepted, up to any such maximum, being referred to as the "PURCHASED SHARES") and (y) the product of the number of shares of Common Stock of the Company outstanding (less any Purchased Shares) on the Expiration Time and the Current Market Price of the Common Stock on the Trading Day next succeeding the Expiration Time, and the denominator shall be the number of shares of Common Stock of the Company outstanding (including any tendered or exchanged shares) on the Expiration Time multiplied by the Current Market Price of the Common Stock on the Trading Day next succeeding the Expiration Time, such increase to become effective immediately prior to the opening of business on the day following the Expiration Time. In the event that such Person is obligated to purchase shares pursuant to any such tender or exchange offer, but such Person is permanently prevented by applicable law from effecting any such purchases or all such purchases are rescinded, the Settlement Rate shall again be adjusted to be the Settlement Rate which would then be in effect 37 42 if such tender or exchange offer had not been made. Notwithstanding the foregoing, the adjustment described in this Section 5.06(a)(vi) shall not be made if, as of the Expiration Time, the offering documents with respect to such offer disclose a plan or intention to cause the Company to engage in a consolidation or merger of the Company or a sale of all or substantially all of the assets of the Company. (vii) In the event that the rights (the "RIGHTS") are separated from the Common Stock in accordance with the provisions of the Rights Agreement dated as of August 21, 1995 between the Company and The Bank of New York, as Rights Agent (or any successor rights plan) such that the Holders would thereafter not be entitled to receive any such Rights in respect of the Common Stock issuable pursuant to the Purchase Contracts, the Settlement Rate shall be adjusted as provided in Section 5.06(a)(iv) (subject to readjustment in the event of the expiration, termination or redemption of the Rights). (viii) The reclassification of Common Stock into securities including securities other than Common Stock (other than any reclassification upon a Reorganization Event to which Section 5.06(b) applies) shall be deemed to involve (A) a distribution of such securities other than Common Stock to all holders of Common Stock (and the effective date of such reclassification shall be deemed to be "the date fixed for the determination of stockholders entitled to receive such distribution" and the "date fixed for such determination" within the meaning of paragraph (iv) of this Section), and (B) a subdivision, split or combination, as the case may be, of the number of shares of Common Stock outstanding immediately prior to such reclassification into the number of shares of Common Stock outstanding immediately thereafter (and the effective date of such reclassification shall be deemed to be "the date upon which such subdivision or split becomes effective" or "the day upon which such combination becomes effective", as the case may be and "the day upon which such subdivision, split or combination becomes effective" within the meaning of Section 5.06(a)(iii)). (ix) The "CURRENT MARKET PRICE" per share of Common Stock on any day means the average of the daily Closing Prices for the five consecutive Trading Days selected by the Company commencing not more than 20 Trading Days before, and ending not later than, the earlier of the day in question and the day before the "ex date" with respect to the issuance or distribution requiring such computation. For purposes of this paragraph, the term "EX DATE", when used with respect to any issuance or distribution, shall mean the first date on which the Common Stock trades 38 43 regular way on the applicable exchange or in the applicable market without the right to receive such issuance or distribution. (x) All adjustments to the Settlement Rate shall be calculated to the nearest 1/10,000th of a share of Common Stock (or if there is not a nearest 1/10,000th of a share to the next lower 1/10,000th of a share). No adjustment in the Settlement Rate shall be required unless such adjustment would require an increase or decrease of at least one percent therein; provided, however, that any adjustments that by reason of this clause (x) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. If an adjustment is made to the Settlement Rate pursuant to Section 5.06(a)(i), (ii), (iii), (iv), (v), (vi), (vii), (viii) or (xi), an adjustment shall also be made to the Applicable Market Value solely to determine which of clauses (a), (b) or (c) of the definition of Settlement Rate in Section 5.01 shall apply on the Final Settlement Date. Such adjustment shall be made by multiplying the Applicable Market Value by a fraction of which the numerator shall be the Settlement Rate immediately after such adjustment pursuant to Section 5.06(a)(i), (ii), (iii), (iv), (v), (vi), (vii), (viii) or (xi) and the denominator shall be the Settlement Rate immediately before such adjustment. (xi) The Company may make such increases in the Settlement Rate, in addition to those required by this Section, as the Board of Directors deems advisable in order to avoid or diminish any income tax to any holders of Common Stock resulting from any dividend or distribution of stock or issuance of rights or warrants to purchase or subscribe for stock or from any event treated as such for income tax purposes or for any other reasons. (b) Adjustment for Consolidation, Merger or Other Reorganization Event. In the event of (i) any consolidation or merger of the Company with or into another Person (other than a merger or consolidation in which the Company is the continuing corporation and in which the Common Stock outstanding immediately prior to the merger or consolidation is not exchanged for cash, securities or other property of the Company or another corporation), (ii) any sale, transfer, lease or conveyance to another Person of the property of the Company as an entirety or substantially as an entirety, (iii) any statutory exchange of securities of the Company with another Person (other than in connection with a merger or acquisition) or (iv) any liquidation, dissolution or winding up of the Company other than as a result of or after the occurrence of a Termination Event (any such event, a "REORGANIZATION EVENt"), the Settlement Rate shall be adjusted to provide that each Holder of Securities shall receive on the Final Settlement Date with respect to each Purchase Contract forming a part thereof, the kind and 39 44 amount of securities, cash and other property (the "EVENT CONSIDERATION") receivable upon consummation of the Reorganization Event by a holder of a number of shares of Common Stock equal to the Settlement Rate, assuming such holder of Common Stock is not a Person with which the Company consolidated or into which the Company merged or that merged into the Company or to which such sale or transfer was made, as the case may be ("CONSTITUENT PERSON"), or an Affiliate of a Constituent Person, and that such holder failed to exercise such holder's rights of election, if any, as to the kind or amount of securities, cash and other property receivable upon such Reorganization Event (provided that if the kind or amount of securities, cash and other property receivable upon such Reorganization Event is not the same for each share of Common Stock held immediately prior to such Reorganization Event by other than a Constituent Person or an Affiliate thereof and in respect of which such rights of election shall not have been exercised ("NON-ELECTING SHARE"), then for the purpose of this Section the kind and amount of securities, cash and other property receivable upon such Reorganization Event by each non-electing share shall be deemed to be the kind and amount so receivable per share by a plurality of the non-electing shares). Following a Reorganization Event, the Applicable Market Value shall equal the value of the Event Consideration receivable in respect of one share of Common Stock, determined in the following manner: (i) for any Event Consideration consisting of cash, the amount of such cash; (ii) for any Event Consideration consisting of Marketable Common Stock, the average of the Closing Prices per share of such Marketable Common Stock on each of the twenty consecutive Trading Days ending on the second Trading Day immediately preceding the Final Settlement Date; and (iii) for any Event Consideration consisting of securities or other property other than cash or Marketable Common Stock, an amount equal to the fair market value of such Event Consideration on the Final Settlement Date as determined by the Board of Directors. "MARKETABLE COMMON STOCK" means any common equity securities listed on a U.S. national exchange or automated quotation system. In the event of such a Reorganization Event, the Person formed by such consolidation, merger or exchange or the Person that acquires the assets of the Company or, in the event of a liquidation or dissolution of the Company, the Company or a liquidating trust created in connection therewith, shall execute and deliver to the Agent an agreement supplemental hereto providing that the Holders of each Outstanding Security shall have the rights provided by this Section 5.06. Such supplemental agreement shall provide for adjustments that, for events subsequent to the effective date of such supplemental agreement, shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section, and shall provide for such modifications to the definition of "Common Stock" and such other provisions hereof and of the Securities as shall be necessary to carry out the economic intent of this Agreement. The above provisions of this Section shall similarly apply to successive Reorganization Events. 40 45 SECTION 5.07. Notice of Adjustments and Certain Other Events. (a) Whenever the Settlement Rate is adjusted as herein provided, the Company shall: (i) forthwith compute the adjusted Settlement Rate in accordance with Section 5.06 and prepare and transmit to the Agent an Officers' Certificate setting forth the adjusted Settlement Rate, the method of calculation thereof in reasonable detail and the facts requiring such adjustment and upon which such adjustment is based; and (ii) within 10 Business Days following the occurrence of an event that permits or requires an adjustment to the Settlement Rate pursuant to Section 5.06 (or if the Company is not aware of such occurrence, as soon as practicable after becoming so aware), provide a written notice to the Holders of the occurrence of such event and a statement in reasonable detail setting forth the method by which the adjustment to the Settlement Rate was determined and setting forth the adjusted Settlement Rate. (b) The Agent shall not at any time be under any duty or responsibility to any Holder to determine whether any facts exist that may require any adjustment of the Settlement Rate, or with respect to the nature or extent or calculation of any such adjustment when made, or with respect to the method employed in making the same. The Agent shall not be accountable with respect to the validity or value (or the kind or amount) of any shares of Common Stock, or of any securities or property, which may at the time be issued or delivered with respect to any Purchase Contract; and the Agent makes no representation with respect thereto. The Agent shall not be responsible for any failure of the Company to issue, transfer or deliver any shares of Common Stock pursuant to a Purchase Contract or to comply with any of the duties, responsibilities or covenants of the Company contained in this Article. SECTION 5.08. Termination Event; Notice. The Purchase Contracts and the obligations and rights of the Company and the Holders thereunder, including, without limitation, the rights of the Holders to receive and the obligation of the Company to pay any Contract Fees or any Deferred Contract Fees, shall immediately and automatically terminate, without the necessity of any notice or action by any Holder, the Agent or the Company, if, on or prior to the Final Settlement Date, a Termination Event shall have occurred. Upon and after the occurrence of a Termination Event, the Securities shall thereafter represent the right to receive the Treasury Securities forming a part of such Securities in accordance with the provisions of Section 4.02 and the Pledge Agreement. Upon the occurrence of a Termination Event, the Company shall promptly but in no 41 46 event more than two Business Days thereafter give written notice to the Agent, the Collateral Agent and the Holders. SECTION 5.09. Early Settlement. (a) Subject to and upon compliance with the provisions of this Section 5.09, at the option of the Holder thereof, any Purchase Contracts in integral multiples of 1,000 Securities may be settled early ("EARLY SETTLEMENT") as provided herein. In order to exercise the right to effect Early Settlement with respect to any Purchase Contracts, the Holder of the Security Certificate evidencing such Purchase Contracts shall deliver such Security Certificate to the Agent at the Corporate Trust Office duly endorsed for transfer to the Company or in blank with the form of Election to Settle Early on the reverse thereof duly completed and accompanied by payment in the form of immediately available funds in an amount (the "EARLY SETTLEMENT AMOUNT") equal to (i) the product of (A) the Stated Amount times (B) the number of Purchase Contracts with respect to which the Holder has elected to effect Early Settlement plus (ii) if such delivery is made with respect to any Purchase Contracts during the period from the close of business on any Record Date immediately preceding any Payment Date to the opening of business on such Payment Date, an amount equal to the sum of (x) the Contract Fees and Deferred Contract Fees, if any, payable on such Payment Date with respect to such Purchase Contracts plus (y) if such Security Certificate evidences Coupon Securities, the interest on the related Treasury Notes payable on such Payment Date. Except as provided in the immediately preceding sentence and subject to the second to the last paragraph of Section 5.02, no payment or adjustment shall be made upon Early Settlement of any Purchase Contract on account of any Contract Fees or Deferred Contract Fees, if any, accrued on such Purchase Contract or on account of any dividends on the Common Stock issued upon such Early Settlement. If the foregoing requirements are first satisfied with respect to Purchase Contracts underlying any Securities at or prior to 5:00 p.m., New York City time, on a Business Day, such day shall be the "EARLY SETTLEMENT DATE" with respect to such Securities and if such requirements are first satisfied after 5:00 p.m, New York City time, on a Business Day or on a day that is not a Business Day, the "EARLY SETTLEMENT DATE" with respect to such Securities shall be the next succeeding Business Day. Notwithstanding the foregoing, a Holder of Zero-Coupon Securities will not have the right to elect Early Settlement on any Early Settlement Date occurring after November 14, 2001. (b) Upon Early Settlement of Purchase Contracts by a Holder of the related Securities, the Company shall issue, and the Holder shall be entitled to receive, a number of shares of Common Stock on account of each Purchase Contract as to which Early Settlement is effected equal to the Early Settlement Rate; provided, however, that upon the Early Settlement of the Purchase Contracts, the Holder of such related Securities shall forfeit the right to receive 42 47 accrued Contract Fees and any Deferred Contract Fees. The "EARLY SETTLEMENT RATE" shall initially be equal to .8333 and shall be adjusted in the same manner and at the same time as the Settlement Rate is adjusted. As promptly as practicable after Early Settlement of Purchase Contracts in accordance with the provisions of this Section 5.09, the Company shall issue and shall deliver to the Agent at the Corporate Trust Office a certificate or certificates for the full number of shares of Common Stock issuable upon such Early Settlement together with payment in lieu of any fraction of a share, as provided in Section 5.10. (c) The Company shall cause the shares of Common Stock issuable, and Treasury Securities deliverable, upon Early Settlement of Purchase Contracts to be issued and delivered to the Agent, in the case of such shares of Common Stock, and released from the Pledge by the Collateral Agent and credited to a securities account of the Agent, in the case of such Treasury Securities, for delivery or credit to the Holder thereof or its designee, no later than 5:00 p.m. New York City time the third Business Day after the applicable Early Settlement Date. (d) Upon Early Settlement of any Purchase Contracts, and subject to receipt thereof from the Company or the Collateral Agent, as applicable, the Agent shall, in accordance with the instructions provided by the Holder thereof on the applicable form of Election to Settle Early on the reverse of the Security Certificate evidencing the related Securities, (i) credit the Treasury Securities forming a part of such Securities to the securities account so designated by such Holder and (ii) deliver a certificate or certificates for the full number of shares of Common Stock issuable upon such Early Settlement together with payment in lieu of any fraction of a share, as provided in Section 5.10. (e) In the event that Early Settlement is effected with respect to Purchase Contracts underlying less than all the Securities evidenced by a Security Certificate, upon such Early Settlement the Company shall execute, and the Agent shall authenticate, execute on behalf of the Holder and deliver to the Holder, at the expense of the Company, a Security Certificate evidencing the Securities as to which Early Settlement was not effected. SECTION 5.10. No Fractional Shares. No fractional shares or scrip representing fractional shares of Common Stock shall be issued or delivered upon settlement on the Final Settlement Date or upon Early Settlement of any Purchase Contracts or with respect to the payment of Deferred Contract Fees, if any, on the Final Settlement Date. If Security Certificates evidencing more than one Purchase Contract shall be surrendered for settlement at one time by the same Holder, the number of full shares of Common Stock that shall be delivered upon settlement shall be computed on the basis of the aggregate number of Purchase Contracts evidenced by the Security Certificates so surrendered. Instead of any fractional 43 48 shares of Common Stock that would otherwise be deliverable upon settlement of any Purchase Contracts on the Final Settlement Date or upon Early Settlement or with respect to the payment of any Deferred Contract Fees, the Company, through the Agent, shall make a cash payment in respect of such fractional interest in an amount equal to the value of such fractional shares at the Closing Price per share on the second Trading Day immediately preceding the Final Settlement Date or the related Early Settlement Date, respectively. The Company shall provide the Agent from time to time with sufficient funds to permit the Agent to make all cash payments required by this Section 5.10 in a timely manner. SECTION 5.11. Charges and Taxes. The Company shall pay all stock transfer and similar taxes attributable to the initial issuance and delivery of the shares of Common Stock pursuant to the Purchase Contracts and in payment of any Deferred Contract Fees; provided, however, that the Company shall not be required to pay any such tax or taxes that may be payable in respect of any exchange of or substitution for a Security Certificate evidencing a Purchase Contract or any issuance of a share of Common Stock in a name other than that of the registered Holder of a Security Certificate surrendered in respect of the Purchase Contracts evidenced thereby, other than in the name of the Agent, as custodian for such Holder, and the Company shall not be required to issue or deliver such share certificates or Security Certificates unless or until the Person or Persons requesting the transfer or issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid or is not payable. ARTICLE 6 REMEDIES SECTION 6.01. Unconditional Right of Holders to Receive Contract Fees and Purchase Common Stock. The Holder of any Security shall have the right, which is absolute and unconditional (subject to the right of the Company to defer payment thereof pursuant to Section 5.03 and subject to the forfeiture of accrued Contract Fees and any Deferred Contract Fees upon Early Settlement pursuant to Section 5.09(b) and upon a Termination Event pursuant to Section 5.08), to receive payment of each installment of the Contract Fees with respect to the Purchase Contract constituting a part of such Security on the respective Payment Date for such Security and to purchase Common Stock pursuant to such Purchase Contract and, in each such case, to institute suit for the enforcement of any such payment and right to purchase Common Stock, and such rights shall not be impaired without the consent of such Holder. 44 49 SECTION 6.02. Restoration of Rights and Remedies. If any Holder has instituted any proceeding to enforce any right or remedy under this Agreement and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to such Holder, then and in every such case, subject to any determination in such proceeding, the Company and such Holder shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of such Holder shall continue as though no such proceeding had been instituted. SECTION 6.03. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement of mutilated, destroyed, lost or stolen Security Certificates in the last paragraph of Section 3.06, no right or remedy herein conferred upon or reserved to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 6.04. Delay or Omission Not Waiver. No delay or omission of any Holder to exercise any right or remedy shall impair any such right or remedy or constitute a waiver of any such right. Every right and remedy given by this Article or by law to the Holders may be exercised from time to time, and as often as may be deemed expedient, by such Holders. SECTION 6.05. Undertaking for Costs. All parties to this Agreement agree, and each Holder of any Security by such Holder's acceptance of the Security Certificate evidencing such Security shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Agreement, or in any suit against the Agent for any action taken, suffered or omitted by it as Agent, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; provided that the provisions of this Section shall not apply to any suit instituted by the Company, to any suit instituted by the Agent, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% of the Outstanding Securities, or to any suit instituted by any Holder for the enforcement of the payment of the interest on any Treasury Note or the Contract Fees or Deferred Contract Fees, if any, on any Purchase Contract on or after the respective Payment Date therefor constituting a part of the Securities held by such Holder, or for enforcement of the right to 45 50 purchase Common Stock under the Purchase Contracts constituting a part of the Securities held by such Holder. SECTION 6.06. Waiver of Stay or Extension Laws. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Agreement; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it shall not hinder, delay or impede the execution of any power herein granted to the Agent or the Holders, but shall suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE 7 THE AGENT SECTION 7.01. Certain Duties and Responsibilities. (a) (i) the Agent undertakes to perform, with respect to the Securities, such duties and only such duties as are specifically set forth in this Agreement and the Pledge Agreement, and no implied covenants or obligations shall be read into this Agreement against the Agent; and (ii) in the absence of bad faith or negligence on its part, the Agent may, with respect to the Securities, conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Agent and conforming to the requirements of this Agreement, but in the case of any certificates or opinions that by any provision hereof are specifically required to be furnished to the Agent, the Agent shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Agreement; and (iii) in case of a Termination Event, the Agent shall exercise such of the rights and powers vested in it by this Agreement, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. 46 51 (b) No provision of this Agreement shall be construed to relieve the Agent from liability for its own negligent action, its own negligent failure to act, or its own wilful misconduct, except that (i) this Subsection shall not be construed to limit the effect of Subsection (a) of this Section; (ii) the Agent shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Agent was negligent in ascertaining the pertinent facts; and (iii) no provision of this Agreement shall require the Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if adequate indemnity is not provided to it. (c) Whether or not therein expressly so provided, every provision of this Agreement relating to the conduct or affecting the liability of or affording protection to the Agent shall be subject to the provisions of this Section. SECTION 7.02. Notice of Default. Within 30 days after the occurrence of any default by the Company in the performance of any of its obligations hereunder, of which a Responsible Officer of the Agent has actual knowledge, the Agent shall transmit by mail to all Holders, as their names and addresses appear in the Security Register, notice of such default hereunder, unless such default shall have been cured or waived. SECTION 7.03. Certain Rights of Agent. Subject to the provisions of Section 7.01: (a) the Agent may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by an Officers' Certificate, Issuer Order or Issuer Request, and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Agreement the Agent shall deem it desirable that a matter be proved or established prior to taking, suffering 47 52 or omitting any action hereunder, the Agent (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (d) the Agent may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Agent shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Agent, in its discretion, may make reasonable further inquiry or investigation into such facts or matters related to the issuance of the Securities and the execution, delivery and performance of the Purchase Contracts as it may see fit, and, if the Agent shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and promises of the Company, personally or by agent or attorney; and (f) the Agent may execute any of its powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys or an Affiliate and the Agent shall not be responsible for any misconduct or negligence on the part of any agent or attorney or an Affiliate appointed with due care by it hereunder. SECTION 7.04. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Security Certificates shall be taken as the statements of the Company and the Agent assumes no responsibility for their accuracy. The Agent makes no representations as to the validity or sufficiency of either this Agreement or of the Securities, or of the Pledge Agreement or the Pledge. The Agent shall not be accountable for the use or application by the Company of the proceeds in respect of the Purchase Contracts. SECTION 7.05. May Hold Securities. Any Security Registrar or any other agent of the Company, or the Agent and its Affiliates, in their individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Company, the Collateral Agent or any other Person with the same rights it would have if it were not Security Registrar or such other agent, or the Agent. SECTION 7.06. Money Held in Custody. Money held by the Agent in custody hereunder need not be segregated from the other funds except to the 48 53 extent required by law. The Agent shall be under no obligation to invest or pay interest on any money received by it hereunder except pursuant to the provisions of Section 4.01 or as otherwise agreed in writing with the Company. SECTION 7.07. Compensation and Reimbursement. The Company agrees: (a) to pay to the Agent from time to time reasonable compensation for all services rendered by it hereunder as the Company and the Agent shall, from time to time, agree in writing; (b) except as otherwise expressly provided herein, to reimburse the Agent upon its request for all reasonable expenses, disbursements and advances incurred or made by the Agent in accordance with any provision of this Agreement (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (c) to indemnify the Agent and any predecessor Agent for, and to hold each of them harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of its duties hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. SECTION 7.08. Corporate Agent Required; Eligibility. There shall at all times be an Agent hereunder, which shall be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to exercise corporate trust powers, having (or being a member of a bank holding company having) a combined capital and surplus of at least $50,000,000, subject to supervision or examination by Federal or State authority, if there be such a corporation qualified and eligible under this Article and willing to act on reasonable terms. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Agent shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. 49 54 SECTION 7.09. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Agent and no appointment of a successor Agent pursuant to this Article shall become effective until the acceptance of appointment by the successor Agent in accordance with the applicable requirements of Section 7.10. (b) The Agent may resign at any time by giving written notice thereof to the Company 60 days prior to the effective date of such resignation. If the instrument of acceptance by a successor Agent required by Section 7.10 shall not have been delivered to the Agent within 30 days after the giving of such notice of resignation, the resigning Agent may petition any court of competent jurisdiction for the appointment of a successor Agent. (c) The Agent may be removed at any time by Act of the Holders of a majority in Stated Amount of the Outstanding Securities delivered to the Agent and the Company. (d) If at any time (i) the Agent fails to comply with Section 310(b) of the TIA, as if the Agent were an indenture trustee under an indenture qualified under the TIA, after written request therefor by the Company or by any Holder who has been a Holder of a Security for at least six months, or (ii) the Agent shall cease to be eligible under Section 7.08 and shall fail to resign after written request therefor by the Company or by any such Holder, or (iii) the Agent shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Agent or of its property shall be appointed or any public officer shall take charge or control of the Agent or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Company by a Board Resolution may remove the Agent, or (ii) any Holder who has been a Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Agent and the appointment of a successor Agent. (e) If the Agent shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Agent for any cause, the Company, by a Board Resolution, shall promptly appoint a successor Agent and shall comply 50 55 with the applicable requirements of Section 7.10. If no successor Agent shall have been so appointed by the Company and accepted appointment in the manner required by Section 7.10, any Holder who has been a Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Agent. (f) The Company shall give, or shall cause such successor Agent to give, notice of each resignation and each removal of the Agent and each appointment of a successor Agent by mailing written notice of such event by first-class mail, postage prepaid, to all Holders as their names and addresses appear in the Security Register. Each notice shall include the name of the successor Agent and the address of its Corporate Trust Office. SECTION 7.10. Acceptance of Appointment by Successor. (a) In case of the appointment hereunder of a successor Agent, every such successor Agent so appointed shall execute, acknowledge and deliver to the Company and to the retiring Agent an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Agent shall become effective and such successor Agent, without any further act, deed or conveyance, shall become vested with all the rights, powers, agencies and duties of the retiring Agent; but, on the request of the Company or the successor Agent, such retiring Agent shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Agent all the rights, powers and trusts of the retiring Agent and shall duly assign, transfer and deliver to such successor Agent all property and money held by such retiring Agent hereunder. (b) Upon request of any such successor Agent, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Agent all such rights, powers and agencies referred to in Section 7.10(a). (c) No successor Agent shall accept its appointment unless at the time of such acceptance such successor Agent shall be qualified and eligible under this Article. SECTION 7.11. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Agent shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Agent, shall be the successor of the Agent hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution 51 56 or filing of any paper or any further act on the part of any of the parties hereto. In case any Security Certificates shall have been authenticated and executed on behalf of the Holders, but not delivered, by the Agent then in office, any successor by merger, conversion or consolidation to such Agent may adopt such authentication and execution and deliver the Security Certificates so authenticated and executed with the same effect as if such successor Agent had itself authenticated and executed such Securities. SECTION 7.12. Preservation of Information; Communications to Holders. (a) The Agent shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders received by the Agent in its capacity as Security Registrar. (b) If one or more Holders (herein referred to as "APPLICANTS") apply in writing to the Agent, and furnish to the Agent reasonable proof that each such applicant has owned a Security for a period of at least six months preceding the date of such application, and such application states that the applicants desire to communicate with other Holders with respect to their rights under this Agreement or under the Securities and is accompanied by a copy of the form of proxy or other communication that such applicants propose to transmit, then the Agent shall, within five Business Days after the receipt of such application, afford such applicants access to the information preserved at the time by the Agent in accordance with Section 7.12(a). (c) Every Holder, by receiving and holding the Security Certificates evidencing the Securities, agrees with the Company and the Agent that none of the Company, the Agent nor any agent of any of them shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with Section 7.12(b), regardless of the source from which such information was derived. SECTION 7.13. No Obligations of Agent. Except to the extent otherwise provided in this Agreement, the Agent assumes no obligations and shall not be subject to any liability under this Agreement, the Pledge Agreement or any Purchase Contract in respect of the obligations of the Holder of any Security thereunder. The Company agrees, and each Holder of a Security Certificate, by such Holder's acceptance thereof, shall be deemed to have agreed, that the Agent's execution of the Security Certificates on behalf of the Holders shall be solely as agent and attorney-in-fact for the Holders, and that the Agent shall have no obligation to perform such Purchase Contracts on behalf of the Holders, except to the extent expressly provided in Article 5 hereof. 52 57 SECTION 7.14. Tax Compliance. (a) The Agent, on its own behalf and on behalf of the Company, shall comply with all applicable certification, information reporting and withholding (including "backup" withholding) requirements imposed by applicable tax laws, regulations or administrative practice with respect to (i) any payments made with respect to the Securities or (ii) the issuance, delivery, holding, transfer, redemption or exercise of rights under the Securities. Such compliance shall include, without limitation, the preparation and timely filing of required returns and the timely payment of all amounts required to be withheld to the appropriate taxing authority or its designated agent. (b) The Agent shall comply with any direction received from the Company with respect to the application of such requirements to particular payments or Holders or in other particular circumstances, and may for purposes of this Agreement rely on any such direction in accordance with the provisions of Section 7.01(a)(ii) hereof. (c) The Agent shall maintain all appropriate records documenting compliance with such requirements, and shall make such records available, on written request, to the Company or to its authorized representative within a reasonable period of time after receipt of such request. ARTICLE 8 SUPPLEMENTAL AGREEMENTS SECTION 8.01. Supplemental Agreements Without Consent of Holders. Without the consent of any Holders, the Company and the Agent, at any time and from time to time, may enter into one or more agreements supplemental hereto, in form satisfactory to the Company and the Agent, for any of the following purposes: (a) to evidence the succession of another Person to the Company, and the assumption by any such successor of the covenants of the Company herein and in the Security Certificates; or (b) to add to the covenants of the Company for the benefit of the Holders, or to surrender any right or power herein conferred upon the Company; or (c) to evidence and provide for the acceptance of appointment hereunder by a successor Agent; or 53 58 (d) to make provision with respect to the rights of Holders pursuant to the requirements of Section 5.06(b); or (e) to make any of the following changes with respect to the Treasury Securities underlying a Security: (i) from a Treasury Note or a Treasury Strip, as the case may be, to a security entitlement in respect thereof, (ii) from a security entitlement in respect of a Treasury Note or a Treasury Strip, as the case may be, to a Treasury Note or a Treasury Strip, as the case may be, or (iii) from a security entitlement in respect of one securities account to a security entitlement in respect of another securities account, whether or not with the same securities intermediary; or (f) to cure any ambiguity, to correct or supplement any provisions herein that may be inconsistent with any other provisions herein, or to make any other provisions with respect to such matters or questions arising under this Agreement, provided in each case that such action shall not adversely affect the interests of the Holders. SECTION 8.02. Supplemental Agreements with Consent of Holders. With the consent of the Holders of not less than 66 2/3% in Stated Amount of the Outstanding Securities, by Act of said Holders delivered to the Company and the Agent, the Company, when authorized by a Board Resolution, and the Agent may enter into an agreement or agreements supplemental hereto for the purpose of modifying in any manner the terms of the Securities, or the provisions of this Agreement or the rights of the Holders in respect of the Securities; provided, however, that no such supplemental agreement shall, without the consent of the Holder of each Outstanding Security affected thereby, (a) change any Payment Date; (b) change the amount or type (other than a change of the type described in Section 8.01(e)) of Treasury Securities underlying a Security, impair the right of the Holder of any Security to receive interest payments on the Coupon Treasury Securities underlying Coupon Securities or otherwise adversely affect the Holder's rights in or to any such Treasury Securities; (c) change the place or currency of payment or reduce any Contract Fees or any Deferred Contract Fees; (d) impair the right to institute suit for the enforcement of any Purchase Contract; 54 59 (e) reduce the number of shares of Common Stock purchasable under any Purchase Contract, increase the price to purchase Common Stock upon settlement of any Purchase Contract, change the Final Settlement Date or otherwise adversely affect the Holder's rights under any Purchase Contract; or (f) reduce the percentage of the Outstanding Securities the consent of whose Holders is required for any modification or amendment of the provisions of the Purchase Contracts or this Agreement. Notwithstanding the foregoing, if any agreement supplemental hereto would modify only the terms of the Coupon Securities or the Zero-Coupon Securities, or would modify the rights of Holders of only Coupon Securities or Zero-Coupon Securities, then only Holders of Coupon Securities or Zero-Coupon Securities, as the case may be, shall be entitled to consent or withhold consent with respect thereto, and, with the consent of the Holders of not less than 66 2/3% in Stated Amount of the Outstanding Securities that are Coupon Securities or Zero-Coupon Securities, as the case may be, by Act of said Holders delivered to the Company and the Agent, the Company, when authorized by a Board Resolution, and the Agent may enter to such agreement supplemental hereto. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental agreement, but it shall be sufficient if such Act shall approve the substance thereof. SECTION 8.03. Execution of Supplemental Agreements. In executing, or accepting the additional agencies created by, any supplemental agreement permitted by this Article or the modifications thereby of the agencies created by this Agreement, the Agent shall be entitled to receive and (subject to Section 7.01) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental agreement is authorized or permitted by this Agreement. The Agent may, but shall not be obligated to, enter into any such supplemental agreement that affects the Agent's own rights, duties or immunities under this Agreement or otherwise. SECTION 8.04. Effect of Supplemental Agreements. Upon the execution of any supplemental agreement under this Article, this Agreement shall be modified in accordance therewith, and such supplemental agreement shall form a part of this Agreement for all purposes; and every Holder of Security Certificates theretofore or thereafter authenticated, executed on behalf of the Holders and delivered hereunder shall be bound thereby. SECTION 8.05. Reference to Supplemental Agreements. Security Certificates authenticated, executed on behalf of the Holders and delivered after 55 60 the execution of any supplemental agreement pursuant to this Article may, and shall if required by the Agent, bear a notation in form approved by the Agent as to any matter provided for in such supplemental agreement. If the Company shall so determine, new Security Certificates so modified as to conform, in the opinion of the Agent and the Company, to any such supplemental agreement may be prepared and executed by the Company and authenticated, executed on behalf of the Holders and delivered by the Agent in exchange for Outstanding Security Certificates. ARTICLE 9 CONSOLIDATION, MERGER, SALE OR CONVEYANCE SECTION 9.01. Covenant Not to Merge, Consolidate, Sell or Convey Property Except Under Certain Conditions. The Company covenants that it shall not merge or consolidate with any other Person or sell, assign, transfer, lease or convey all or substantially all of its properties and assets to any Person or group of affiliated Persons in one transaction or a series of related transactions, unless (a) either the Company shall be the continuing corporation, or the successor (if other than the Company) shall be a corporation organized and existing under the laws of the United States of America or a State thereof or the District of Columbia and such corporation shall expressly assume all the obligations of the Company under the Purchase Contracts, this Agreement and the Pledge Agreement by one or more supplemental agreements in form satisfactory to the Agent and the Collateral Agent, executed and delivered to the Agent and the Collateral Agent by such corporation, and (b) the Company or such successor corporation, as the case may be, shall not, immediately after such merger or consolidation, or such sale, assignment, transfer, lease or conveyance, be in default in the performance of any covenant or condition hereunder, under any of the Securities or under the Pledge Agreement. SECTION 9.02. Rights and Duties of Successor Corporation. In case of any such consolidation, merger, sale, assignment, transfer, lease or conveyance and upon any such assumption by the successor corporation in accordance with Section 9.01 such successor corporation shall succeed to and be substituted for the Company with the same effect as if it had been named herein as the Company; provided that no consolidation or merger with or into, and no such sale, assignment, transfer, lease or conveyance to, one or more subsidiaries of the Company shall relieve the Company from any of its obligations under this Agreement or the Securities. Such successor corporation thereupon may cause to be signed, and may issue either in its own name or in the name of K N Energy, 56 61 Inc., any or all of the Security Certificates evidencing Securities issuable hereunder that theretofore shall not have been signed by the Company and delivered to the Agent; and, upon the order of such successor corporation, instead of the Company, and subject to all the terms, conditions and limitations in this Agreement prescribed, the Agent shall authenticate and execute on behalf of the Holders and deliver any Security Certificates that previously shall have been signed and delivered by the officers of the Company to the Agent for authentication and execution, and any Security Certificates evidencing Securities that such successor corporation thereafter shall cause to be signed and delivered to the Agent for that purpose. All the Security Certificates so issued shall in all respects have the same legal rank and benefit under this Agreement as the Security Certificates theretofore or thereafter issued in accordance with the terms of this Agreement as though all of such Security Certificates had been issued at the date of the execution hereof. In case of any such consolidation, merger, sale, assignment, transfer, lease or conveyance such change in phraseology and form (but not in substance) may be made in Security Certificates evidencing Securities thereafter to be issued as may be appropriate. SECTION 9.03. Opinion of Counsel to Agent. The Agent, subject to Sections 7.01 and 7.03, shall receive an Opinion of Counsel as conclusive evidence that any such consolidation, merger, sale, assignment, transfer, lease or conveyance, and any such assumption, complies with the provisions of this Article and that all conditions precedent to the consummation of any such consolidation, merger, sale, assignment, transfer, lease or conveyance have been met. ARTICLE 10 COVENANTS SECTION 10.01. Performance under Purchase Contracts. The Company covenants and agrees for the benefit of the Holders from time to time that it shall duly and punctually perform its obligations under the Purchase Contracts in accordance with the terms of the Purchase Contracts and this Agreement. SECTION 10.02. Maintenance of Office or Agency. The Company shall maintain in the Borough of Manhattan, The City of New York, an office or agency where Security Certificates may be presented or surrendered for acquisition of shares of Common Stock upon settlement or Early Settlement and 57 62 for transfer of Treasury Securities upon occurrence of a Termination Event, where Security Certificates may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities and this Agreement may be served. The Company shall give prompt written notice to the Agent of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Agent with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office, and the Company hereby appoints the Agent as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies where Security Certificates may be presented or surrendered for any or all purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York, for such purposes. The Company shall give prompt written notice to the Agent of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates as the place of payment for the Securities the Corporate Trust Office and appoints the Agent at its Corporate Trust Office as paying agent in such city. SECTION 10.03. Company to Reserve Common Stock. The Company shall at all times prior to the Final Settlement Date reserve and keep available, free from preemptive rights, out of its authorized but unissued Common Stock the full number of shares of Common Stock issuable (x) against tender of payment in respect of all Purchase Contracts constituting a part of the Securities evidenced by Outstanding Security Certificates and (y) in payment of Deferred Contract Fees, if any, owed by the Company to the Holders. SECTION 10.04. Covenant as to Common Stock. The Company covenants that all Common Stock that may be issued against tender of payment in respect of any Purchase Contract constituting a part of the Outstanding Securities and in payment of any Deferred Contract Fees shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable. SECTION 10.05. Statement of Officers of the Company as to Default. The Company shall deliver to the Agent, within 120 days after the end of each fiscal year of the Company ending after the date hereof, an Officers' Certificate, stating whether or not to the best knowledge of the signers thereof the Company is in default in the performance and observance of any of the terms, provisions and 58 63 conditions hereof, and if the Company shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. 59 64 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. K N ENERGY, INC. By: _______________________________________ Name: Title: U.S. BANK TRUST NATIONAL ASSOCIATION, as Agent By: _______________________________________ Name: Title: 60 65 EXHIBIT A THIS SECURITY CERTIFICATE IS A GLOBAL SECURITY CERTIFICATE WITHIN THE MEANING OF THE PURCHASE CONTRACT AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY ("DTC") OR A NOMINEE OF DTC. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE PURCHASE CONTRACT AGREEMENT AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC, TO ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. K N ENERGY, INC. 8.25% PREMIUM EQUITY PARTICIPATING SECURITY UNITS (STATED AMOUNT $43 PER SECURITY) No. CUSIP No. 482620507 _____ Coupon Securities This Security Certificate certifies that Cede & Co. is the registered Holder of the number of Securities set forth above. Each Security represents (i) ownership by the Holder of 5.875% United States Treasury Notes due November 30, 2001 (CUSIP No. 9128272C5) that are held through the Treasury/Reserve A-1 66 Automated Debt Entry System ("TREASURY NOTES"), or security entitlements in respect thereof (together with Treasury Notes, "TREASURY SECURITIES"), with a principal amount equal to the Stated Amount, subject to the Pledge of such Treasury Securities by such Holder pursuant to the Pledge Agreement, and (ii) the rights and obligations of the Holder under one Purchase Contract with K N Energy, Inc., a Kansas corporation (the "COMPANY"). The Treasury Securities represented by this Security Certificate were acquired by the Underwriters at the direction of the Company for the benefit of the Holder hereof and are being conveyed to the Holder of this Security Certificate (or such Holder's predecessor-in-interest) and pledged pursuant to the Pledge Agreement simultaneously therewith. Pursuant to the Pledge Agreement, the Treasury Securities constituting part of each Security evidenced hereby are pledged to the Collateral Agent to secure the obligation of the Holder under the Purchase Contract comprising a portion of such Security. The Pledge Agreement provides that all payments of principal of, or interest on, any Treasury Notes corresponding to Treasury Securities comprising a portion of the Securities received by the Collateral Agent shall be paid by the Collateral Agent by wire transfer in same day funds no later than 12:00 noon, New York City time, on the Business Day such payment is received by the Collateral Agent (provided that in the event such payment is received by the Collateral Agent on a day that is not a Business Day or after 11:30 a.m., New York City time, on a Business Day, then such payment shall be made no later than 10:00 a.m., New York City time, on the next succeeding Business Day) (i) in the case of (A) interest payments and (B) any principal payments with respect to any Treasury Notes corresponding to Treasury Securities that have been released from the Pledge pursuant to the Pledge Agreement, to the Agent to the account designated by it for such purpose and (ii) in the case of principal payments on any Treasury Notes corresponding to Pledged Treasury Securities (as defined in the Pledge Agreement), at the direction of the Agent on behalf of the Holders, to the Company, in full satisfaction of the respective obligations of the Holders of the Securities of which such Pledged Treasury Securities are a part under the Purchase Contracts forming a part of such Securities. Interest on any Treasury Note corresponding to any Treasury Security forming part of a Security evidenced hereby that is paid on any May 31 or November 30, commencing May 31, 1999 (a "PAYMENT DATE"), shall, subject to receipt thereof by the Agent from the Collateral Agent, be paid to the Person in whose name this Security Certificate (or a Predecessor Security Certificate) is registered at the close of business on the Record Date next preceding such Payment Date; provided, that on the first Payment Date, the Agent shall remit to the Persons in whose names such Security Certificates are registered on the Record Date with respect thereto, in addition to A-2 67 interest on the Treasury Notes paid on such Payment Date, interest payable with respect to the Treasury Notes for the period from the date of initial issuance of the Securities until November 29, 1998. Interest payable with respect to the Treasury Notes that accrued prior to the date of initial issuance of the Securities, and that is payable on the first interest payment date with respect to the Treasury Notes following the date of initial issuance of the Securities shall be remitted by the Agent to Morgan Stanley & Co. Incorporated for the account of the Underwriters by 2:00 p.m. New York City time on the date of receipt by the Agent. The Holder of this Security Certificate shall have the right to substitute Zero-Coupon Treasury Securities for the Treasury Securities forming a part of the Securities evidenced hereby, thereby forming Zero-Coupon Securities, in the manner set forth in the Purchase Contract Agreement and the Pledge Agreement. Each Purchase Contract evidenced hereby obligates the Holder of this Security Certificate to purchase, and the Company to sell, on November 30, 2001 (the "FINAL SETTLEMENT DATE"), at a price equal to the Stated Amount, a number of shares of common stock, par value $5.00 per share ("COMMON STOCK"), of the Company, equal to the Settlement Rate, unless on or prior to the Final Settlement Date there shall have occurred a Termination Event or Early Settlement with respect to the Security of which such Purchase Contract is a part, all as provided in the Purchase Contract Agreement referred to on the reverse hereof and more fully described on the reverse hereof. The purchase price for the Common Stock purchased pursuant to each Purchase Contract evidenced hereby, if not paid earlier, shall be paid on the Final Settlement Date by application of payment received in respect of the principal of the Treasury Securities pledged to secure the obligations under such Purchase Contract of the Holder of the Security of which such Purchase Contract is a part. The Company shall pay, on each Payment Date, in respect of each Purchase Contract forming part of a Security evidenced hereby, an amount (the "CONTRACT FEES") equal to 2.375% per annum of the Stated Amount, computed on the basis of the actual number of days elapsed in a year of 365 or 366 days, as the case may be, subject to deferral at the option of the Company as provided in the Purchase Contract Agreement and more fully described on the reverse hereof. Such Contract Fee shall be payable to the Person in whose name this Security Certificate (or a Predecessor Security Certificate) is registered at the close of business on the Record Date immediately preceding such Payment Date. Interest on the Treasury Notes and the Contract Fees shall be payable at the office or agency of the Agent in The City of New York or, at the option of the Company, by check mailed to the address of the Person entitled thereto as such address appears on Security Register. A-3 68 Reference is hereby made to the further provisions set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Agent by manual signature, this Security Certificate shall not be entitled to any benefit under the Pledge Agreement or the Purchase Contract Agreement or be valid or obligatory for any purpose. A-4 69 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed. K N ENERGY, INC. By: _________________________ Name: Title: Attested by: _________________________ HOLDER SPECIFIED ABOVE (as to obligations of such Holder under the Purchase Contracts evidenced hereby) By: U.S. BANK TRUST NATIONAL ASSOCIATION, not individually but solely as Attorney-in-Fact of such Holder By: _________________________ Authorized Signatory Dated: (Form of Certificate of Authentication) This is one of the Security Certificates referred to in the within mentioned Purchase Contract Agreement. U.S. BANK TRUST NATIONAL ASSOCIATION, as Agent By: ___________________________ Authorized Signatory A-5 70 [FORM OF REVERSE OF SECURITY CERTIFICATE] Each Purchase Contract evidenced hereby is governed by a Purchase Contract Agreement, dated as of November 25, 1998 (the "PURCHASE CONTRACT AGREEMENT"), between the Company and U.S. Bank Trust National Association, as Purchase Contract Agent (herein called the "AGENT"), to which Purchase Contract Agreement and supplemental agreements thereto reference is hereby made for a description of the respective rights, limitations of rights, obligations, duties and immunities thereunder of the Agent, the Company and the Holders and of the terms upon which the Security Certificates are, and are to be, executed and delivered. Each Purchase Contract evidenced hereby shall obligate the Holder of this Security Certificate to purchase, and the Company to sell, on the Final Settlement Date at a price equal to the Stated Amount, a number of shares of Common Stock of the Company equal to the Settlement Rate, unless, on or prior to the Final Settlement Date, there shall have occurred a Termination Event or an Early Settlement with respect to the Security of which such Purchase Contract is a part. The "SETTLEMENT RATE" is equal to (a) if the Applicable Market Value (as defined below) is greater than $51.60 (the "THRESHOLD APPRECIATION PRICE"), .8333 of a share of Common Stock per Purchase Contract, (b) if the Applicable Market Value is less than or equal to the Threshold Appreciation Price but is greater than the Stated Amount, a fractional share of Common Stock per Purchase Contract equal to the Stated Amount divided by the Applicable Market Value (rounded upward or downward to the nearest 1/10,000th of a share) and (c) if the Applicable Market Value is less than or equal to the Stated Amount, one share of Common Stock per Purchase Contract, in each case subject to adjustment as provided in the Purchase Contract Agreement. No fractional shares of Common Stock shall be issued upon settlement of Purchase Contracts, as provided in the Purchase Contract Agreement. The "APPLICABLE MARKET VALUE" means the average of the Closing Prices per share of Common Stock on each of the twenty consecutive Trading Days ending on the second Trading Day immediately preceding the Final Settlement Date. The "CLOSING PRICE" of the Common Stock on any date of determination means the closing sale price (or, if no closing price is reported, the last reported sale price) of the Common Stock on The New York Stock Exchange, Inc. (the "NYSE") on such date or, if the Common Stock is not listed for trading on the NYSE on any such date, as reported in the composite transactions for the principal United States securities exchange on which the Common Stock is so listed or, if the Common Stock is not so listed on a United States national or regional securities exchange, as reported by the Nasdaq Stock Market or, if such price of the Common Stock is not so reported, the last quoted bid price for the Common A-6 71 Stock in the over-the-counter market as reported by the National Quotation Bureau or similar organization or, if such bid price is not available, the market value of the Common Stock on such date as determined by a nationally recognized independent investment banking firm retained for this purpose by the Company. A "TRADING DAY" means a day on which the Common Stock (A) is not suspended from trading on any national or regional securities exchange or association or over-the-counter market at the close of business and (B) has traded at least once on the national or regional securities exchange or association or over-the-counter market that is the primary market for the trading of the Common Stock. The purchase price for the shares of Common Stock purchased pursuant to each Purchase Contract shall be paid by application of payments received by the Company on the Final Settlement Date from the Collateral Agent at the direction of the Agent on behalf of the Holders pursuant to the Pledge Agreement in respect of the principal of the Treasury Securities pledged to secure the obligations of the relevant Holder under such Purchase Contract. The Company shall not be obligated to issue any shares of Common Stock in respect of a Purchase Contract or deliver any certificates therefor to the Holder unless it shall have received payment in full of the aggregate purchase price for the shares of Common Stock to be purchased thereunder in the manner set forth herein and in the Purchase Contract Agreement. Subject to the next succeeding paragraph and the provisions of the Purchase Contract Agreement, the Company shall pay, on each Payment Date, the Contract Fee payable in respect of each Purchase Contract to the Person in whose name the Security Certificate (or one or more Predecessor Security Certificates) evidencing the Security of which such Purchase Contract is a part and is registered at the close of business on the Record Date immediately preceding such Payment Date. The Company shall have the right, at any time prior to the Final Settlement Date, to defer the payment of any or all of the Contract Fees otherwise payable on any Payment Date (on a pro rata basis among all Outstanding Securities), but only if the Company shall give the Holders and the Agent written notice of its election to defer such payment (specifying the amount to be deferred and the period of deferment) as provided in the Purchase Contract Agreement. Any Contract Fees so deferred shall bear additional Contract Fees thereon at the rate of 8.25% per annum (computed on the basis of the actual number of days elapsed in a year of 365 or 366 days, as the case may be), compounding on each succeeding Payment Date, until paid in full (such deferred installments of Contract Fees, together with the additional Contract Fees accrued thereon, are A-7 72 referred to herein as the "DEFERRED CONTRACT FEES"). Deferred Contract Fees shall be due on the next succeeding Payment Date except to the extent that payment is deferred pursuant to the Purchase Contract Agreement. No Contract Fees may be deferred to a date that is after the Final Settlement Date. In the event that the Company elects to defer the payment of Contract Fees on Purchase Contracts until the Final Settlement Date, the Holder of this Security Certificate shall receive on the Final Settlement Date, in lieu of a cash payment, a number of shares of Common Stock (in addition to a number of Common Stock equal to the Settlement Rate) equal to (x) the aggregate amount of Deferred Contract Fees payable to the Holder of this Security Certificate divided by (y) the Applicable Market Value. No fractional shares of Common Stock shall be issued with respect to the payment of Deferred Contract Fees on the Final Settlement Date, as provided in the Purchase Contract Agreement. In the event the Company exercises its option to defer the payment of Contract Fees, then, until the Deferred Contract Fees have been paid in full, the Company (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 (i) purchases or acquisitions of Common Stock in connection with the satisfaction by the Company or any of its subsidiaries of their respective obligations under any benefit plans for directors, officers, agents or employees or the Company's dividend reinvestment or director, officer, agent or employee stock purchase plans, (ii) as a result of a reclassification of the Company's capital stock or the exchange or conversion of one class or series of capital stock for another class or series of the Company's capital stock, (iii) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of the Company's capital stock or the security being converted or exchanged for the Company's capital stock), (iv) dividends or distributions in the form of shares of, or options, warrants or rights to subscribe for or purchase, shares of capital stock of the Company or (v) any declaration of a dividend in connection with the implementation of 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 the Company that rank pari passu with or junior to such Contract Fees and (c) shall not make any guarantee payments with respect to any guarantee by the Company of any securities of any subsidiary of the Company if such guarantee ranks pari passu with or junior in right of payment to the Contract Fees. A-8 73 The Purchase Contracts and the obligations and rights of the Company and the Holders thereunder, including, without limitation, the rights of the Holders to receive and the obligation of the Company to pay any Contract Fee or any Deferred Contract Fees, shall immediately and automatically terminate, without the necessity of any notice or action by any Holder, the Agent or the Company, if, on or prior to the Final Settlement Date, a Termination Event shall have occurred. Upon the occurrence of a Termination Event, the Company shall promptly but in no event more than two Business Days thereafter give written notice to the Agent, the Collateral Agent and the Holders. Upon and after the occurrence of a Termination Event, the Collateral Agent shall release the Treasury Securities from the Pledge in accordance with the provisions of the Pledge Agreement. The Securities shall thereafter represent the right to receive the Treasury Securities forming a part of such Securities in accordance with the provisions of the Purchase Contract Agreement and the Pledge Agreement. Subject to and upon compliance with the provisions of the Purchase Contract Agreement, at the option of the Holder thereof, any Purchase Contracts underlying Securities having an aggregate Stated Amount equal to $43,000 or an integral multiple thereof may be settled early ("EARLY SETTLEMENT") as provided in the Purchase Contract Agreement. In order to exercise the right to effect Early Settlement with respect to any Purchase Contracts evidenced by this Security Certificate, the Holder of this Security Certificate shall deliver this Security Certificate to the Agent at the Corporate Trust Office duly endorsed for transfer to the Company or in blank with the form of Election to Settle Early set forth below duly completed and accompanied by payment in the form of immediately available funds in an amount (the "EARLY SETTLEMENT AMOUNT") equal to (i) the product of (A) the Stated Amount times (B) the number of Purchase Contracts with respect to which the Holder has elected to effect Early Settlement plus (ii) if such delivery is made with respect to any Purchase Contracts during the period from the close of business on any Record Date immediately preceding any Payment Date to the opening of business of such Payment Date, an amount equal to the sum of (x) the Contract Fees and Deferred Contract Fees, if any, payable on such Payment Date with respect to such Purchase Contracts plus (y) the interest with respect to the related Treasury Notes payable on such Payment Date. Upon Early Settlement of Purchase Contracts by a Holder of the related Securities, the Treasury Securities underlying such Securities shall be released from the Pledge as provided in the Pledge Agreement and the Holder shall be entitled to receive a number of shares of Common Stock on account of each Purchase Contract forming part of a Security as to which Early Settlement is effected equal to the Early Settlement Rate; provided, however, that upon the Early Settlement of the Purchase Contracts, the Holder thereof shall forfeit the right to receive accrued Contract Fees and any Deferred Contract Fees on such Purchase Contracts. The "EARLY SETTLEMENT RATE" shall initially be equal to .8333 and shall be adjusted in A-9 74 the same manner and at the same time as the Settlement Rate is adjusted as provided in the Purchase Contract Agreement. The Security Certificates are issuable only in registered form and only in denominations of a single Security and any integral multiple thereof. The transfer of any Security Certificates shall be registered and Security Certificates may be exchanged as provided in the Purchase Contract Agreement. The Security Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents permitted by the Purchase Contract Agreement. No service charge shall be required for any such registration of transfer or exchange, but the Company and the Agent may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. For so long as the Purchase Contract underlying a Security remains in effect, such Security shall not be separable into its constituent parts (provided that the Holder shall have the right to effect a Collateral Substitution), and the rights and obligations of the Holder of such Security in respect of the Treasury Securities and Purchase Contract constituting such Security may be transferred and exchanged only as a Security. Upon registration of transfer of this Security Certificate, the transferee shall be bound (without the necessity of any other action on the part of such transferee) under the terms of the Purchase Contract Agreement, the Purchase Contracts evidenced hereby and the Pledge Agreement, and the transferor shall be released from the obligations under the Purchase Contracts evidenced by this Security Certificate. The Company covenants and agrees, and the Holder, by such Holder's acceptance hereof, likewise covenants and agrees, to be bound by the provisions of this paragraph. The Holder of this Security Certificate, by such Holder's acceptance hereof, authorizes the Agent to enter into and perform the related Purchase Contracts forming part of the Securities evidenced hereby on such Holder's behalf as such Holder's attorney-in-fact, expressly withholds any consent to the assumption (i.e., affirmance) of the Purchase Contracts by the Company or such Holder's trustee in the event that the Company becomes the subject of a case under the Bankruptcy Code, agrees to be bound by the terms and provisions thereof, covenants and agrees to perform its obligations under the Purchase Contracts forming a part of the Securities evidenced hereby, consents to the provisions of the Purchase Contract Agreement, authorizes the Agent to enter into and perform the Pledge Agreement on such Holder's behalf as such Holder's attorney-in-fact, and consents to the Pledge of the Treasury Securities underlying this Security Certificate pursuant to the Pledge Agreement. The Holder, by such Holder's acceptance hereof, further covenants and agrees that, to the extent and in the manner provided in the Purchase Contract Agreement and the Pledge A-10 75 Agreement, but subject to the terms thereof, payments in respect of principal of the Treasury Securities on the Final Settlement Date shall be paid by the Collateral Agent to the Company in satisfaction of such Holder's obligations under such Purchase Contract and such Holder shall acquire no right, title or interest in such payments. Subject to certain exceptions, the provisions of the Purchase Contract Agreement may be amended with the consent of the Holders of at least 66 2/3% in Stated Amount of the Outstanding Securities. All terms used herein that are defined in the Purchase Contract Agreement have the meanings set forth therein. The Purchase Contracts shall for all purposes be governed by, and construed in accordance with, the laws of the State of New York. The Company and the Agent, and any agent of the Company or the Agent, may treat the Person in whose name this Security Certificate is registered as the owner of the Securities evidenced hereby for the purpose of receiving payments of interest on the Treasury Notes, receiving payments of Contract Fees and any Deferred Contract Fees, performance of the Purchase Contracts and for all other purposes whatsoever, whether or not the payment of interest on the Treasury Notes or any Contract Fee payable in respect of the Purchase Contracts constituting a part of the Securities evidenced thereby shall be overdue and notwithstanding any notice to the contrary, and neither the Company, the Agent nor any such agent shall be affected by notice to the contrary. The Purchase Contracts shall not, prior to the settlement thereof, entitle the Holder to any of the rights of a holder of shares of Common Stock. A copy of the Purchase Contract Agreement is available for inspection at the offices of the Agent. A-11 76 SETTLEMENT INSTRUCTIONS The undersigned Holder directs that a certificate for shares of Common Stock deliverable upon settlement on or after the Final Settlement Date of the Purchase Contracts underlying the number of Securities evidenced by this Security Certificate be registered in the name of, and delivered, together with a check in payment for any fractional share, to, the undersigned at the address indicated below, unless a different name and address have been indicated below. If shares are to be registered in the name of a Person other than the undersigned, the undersigned shall pay any transfer tax payable incident thereto. Dated: _________________________ _________________________ Signature If shares are to be registered in the name of and delivered to a Person other than the Holder, please print REGISTERED HOLDER such Person's name and address: Please print name and address of Registered Holder: _________________________ _________________________ Name Name _________________________ _________________________ Address Address _________________________ Social Security or other Taxpayer Identification Number, if any _________________________ A-12 77 ELECTION TO SETTLE EARLY The undersigned Holder of this Security Certificate hereby irrevocably exercises the option to effect Early Settlement in accordance with the terms of the Purchase Contract Agreement with respect to the Purchase Contracts underlying the number of Securities evidenced by this Security Certificate specified below. The option to effect Early Settlement may be exercised only with respect to integral multiples of 1,000 Securities. The undersigned Holder directs that a certificate for shares of Common Stock deliverable upon such Early Settlement be registered in the name of, and delivered, together with a check in payment for any fractional share and any Security Certificate representing any Securities evidenced hereby as to which Early Settlement of the related Purchase Contracts is not effected, to, the undersigned at the address indicated below, unless a different name and address have been indicated below. Treasury Securities deliverable upon such Early Settlement shall be transferred in accordance with the transfer instructions set forth below. If shares are to be registered in the name of a Person other than the undersigned, the undersigned shall pay any transfer tax payable incident thereto. Dated: _________________________ _________________________ Signature A-13 78 Number of Securities evidenced hereby as to which Early Settlement of the related Purchase Contracts is being elected: If shares or Security Certificates are to REGISTERED HOLDER be registered in the name of and delivered to and Treasury Securities are to be transferred to a Person other than the Holder, please print such Person's name and address: Please print name and address of Registered Holder: Name Name _________________________ _________________________ Address Address _________________________ _________________________ Social Security or other Taxpayer Identification Number, if any _________________________ Transfer Instructions for Treasury Securities transferable upon Early Settlement: A-14 79 ELECTION TO SUBSTITUTE COLLATERAL The undersigned Holder of this Security Certificate hereby irrevocably exercises the option to effect Collateral Substitution in accordance with the terms of the Purchase Contract Agreement and the Pledge Agreement with respect to the number of Securities evidenced by this Security Certificate specified below. The option to effect Collateral Substitution may be exercised only with respect to integral multiples of 1,000 Securities. The undersigned Holder hereby represents and warrants to the Company and the Agent that the undersigned Holder has deposited with the Collateral Agent Zero-Coupon Treasury Securities having an aggregate principal amount equal to the aggregate Stated Amount of the Securities evidenced hereby with respect to which Collateral Settlement is being elected, in the manner provided in the Pledge Agreement. The undersigned Holder directs that a Security Certificate for Zero-Coupon Securities deliverable upon such Collateral Substitution be registered in the name of, and delivered, together with any Security Certificate representing any Securities evidenced hereby as to which Collateral Substitution is not effected, to, the undersigned at the address indicated below, unless a different name and address have been indicated below. Coupon Treasury Securities deliverable upon such Collateral substitution shall be transferred in accordance with the transfer instructions set forth below. If Zero-Coupon Securities are to be registered in the name of a Person other than the undersigned, the undersigned shall pay any transfer tax payable incident thereto. Dated: _________________________ _________________________ Signature A-15 80 Number of Securities evidenced hereby as to which Collateral Substitution is being elected: If Security Certificates are to be REGISTERED HOLDER registered in the name of and delivered to and Treasury Securities are to be transferred to a Person other than the Holder, please print such Person's name and address: Please print name and address of Registered Holder: Name Name _________________________ _________________________ Address Address _________________________ _________________________ Social Security or other Taxpayer Identification Number, if any _________________________ Transfer Instructions for Treasury Securities transferable upon Collateral Substitution: A-16 81 EXHIBIT B THIS SECURITY CERTIFICATE IS A GLOBAL SECURITY CERTIFICATE WITHIN THE MEANING OF THE PURCHASE CONTRACT AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY ("DTC") OR A NOMINEE OF DTC. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE PURCHASE CONTRACT AGREEMENT AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC, TO ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. K N ENERGY, INC. 8.25% PREMIUM EQUITY PARTICIPATING SECURITY UNITS (STATED AMOUNT $43 PER SECURITY) No. CUSIP No. 482620606 B-1 82 _____ Zero-Coupon Securities This Security Certificate certifies that Cede & Co. is the registered Holder of the number of Securities set forth above. Each Security represents (i) ownership by the Holder of United States Treasury Strips due November 15, 2001 (CUSIP No. 912820BC0) that are held through the Treasury/Reserve Automated Debt Entry System ("TREASURY STRIPS"), or security entitlements in respect thereof (together with Treasury Strips, "TREASURY SECURITIES"), with a principal amount equal to the Stated Amount, subject to the Pledge of such Treasury Securities by such Holder pursuant to the Pledge Agreement, and (ii) the rights and obligations of the Holder under one Purchase Contract with K N Energy, Inc., a Kansas corporation (the "COMPANY"). The Treasury Securities represented by this Security Certificate were acquired by the Holder hereof (or such Holder's predecessor-in-interest) in the open market and are being conveyed to the Holder of this Security Certificate (or such Holder's predecessor-in-interest) and pledged pursuant to the Pledge Agreement simultaneously therewith. Pursuant to the Pledge Agreement, the Treasury Securities constituting part of each Security evidenced hereby are pledged to the Collateral Agent to secure the obligation of the Holder under the Purchase Contract comprising a portion of such Security. The Pledge Agreement provides that all payments of principal of any Treasury Strips corresponding to Treasury Securities comprising a portion of the Securities received by the Collateral Agent shall be paid by the Collateral Agent by wire transfer in same day funds no later than 12:00 noon, New York City time, on the Final Settlement Date (i) in the case of any principal payments with respect to any Treasury Strips corresponding to Treasury Securities that have been released from the Pledge pursuant to the Pledge Agreement, to the Agent to the account designated by it for such purpose and (ii) in the case of principal payments on any Treasury Strips corresponding to Pledged Treasury Securities (as defined in the Pledge Agreement), at the direction of the Agent on behalf of the Holders, to the Company, in full satisfaction of the respective obligations of the Holders of the Securities of which such Pledged Treasury Securities are a part under the Purchase Contracts forming a part of such Securities. Each Purchase Contract evidenced hereby obligates the Holder of this Security Certificate to purchase, and the Company to sell, on November 30, 2001 (the "FINAL SETTLEMENT DATE"), at a price equal to the Stated Amount, a number of B-2 83 shares of common stock, par value $5.00 per share ("COMMON STOCK"), of the Company, equal to the Settlement Rate, unless on or prior to the Final Settlement Date there shall have occurred a Termination Event or Early Settlement with respect to the Security of which such Purchase Contract is a part, all as provided in the Purchase Contract Agreement referred to on the reverse hereof and more fully described on the reverse hereof. The purchase price for the Common Stock purchased pursuant to each Purchase Contract evidenced hereby, if not paid earlier, shall be paid on the Final Settlement Date by application of payment received in respect of the principal of the Treasury Securities pledged to secure the obligations under such Purchase Contract of the Holder of the Security of which such Purchase Contract is a part. The Company shall pay, on each Payment Date, in respect of each Purchase Contract forming part of a Security evidenced hereby, an amount (the "CONTRACT FEES") equal to 2.375% per annum of the Stated Amount, computed on the basis of the actual number of days elapsed in a year of 365 or 366 days, as the case may be, subject to deferral at the option of the Company as provided in the Purchase Contract Agreement and more fully described on the reverse hereof. Such Contract Fee shall be payable to the Person in whose name this Security Certificate (or a Predecessor Security Certificate) is registered at the close of business on the Record Date immediately preceding such Payment Date. The Contract Fees shall be payable at the office or agency of the Agent in The City of New York or, at the option of the Company, by check mailed to the address of the Person entitled thereto as such address appears on Security Register. Reference is hereby made to the further provisions set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Agent by manual signature, this Security Certificate shall not be entitled to any benefit under the Pledge Agreement or the Purchase Contract Agreement or be valid or obligatory for any purpose. B-3 84 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed. K N ENERGY, INC. By: _________________________ Name: Title: Attested by: _________________________ HOLDER SPECIFIED ABOVE (as to obligations of such Holder under the Purchase Contracts evidenced hereby) By: U.S. BANK TRUST NATIONAL ASSOCIATION, not individually but solely as Attorney-in-Fact of such Holder By: _________________________ Authorized Signatory Dated: (Form of Certificate of Authentication) This is one of the Security Certificates referred to in the within mentioned Purchase Contract Agreement. U.S. BANK TRUST NATIONAL ASSOCIATION, as Agent By: ___________________________ Authorized Signatory B-4 85 [FORM OF REVERSE OF SECURITY CERTIFICATE] Each Purchase Contract evidenced hereby is governed by a Purchase Contract Agreement, dated as of November 25, 1998 (the "PURCHASE CONTRACT AGREEMENT"), between the Company and U.S. Bank Trust National Association, as Purchase Contract Agent (herein called the "AGENT"), to which Purchase Contract Agreement and supplemental agreements thereto reference is hereby made for a description of the respective rights, limitations of rights, obligations, duties and immunities thereunder of the Agent, the Company and the Holders and of the terms upon which the Security Certificates are, and are to be, executed and delivered. Each Purchase Contract evidenced hereby shall obligate the Holder of this Security Certificate to purchase, and the Company to sell, on the Final Settlement Date at a price equal to the Stated Amount, a number of shares of Common Stock of the Company equal to the Settlement Rate, unless, on or prior to the Final Settlement Date, there shall have occurred a Termination Event or an Early Settlement with respect to the Security of which such Purchase Contract is a part. The "SETTLEMENT RATE" is equal to (a) if the Applicable Market Value (as defined below) is greater than $51.60 (the "THRESHOLD APPRECIATION PRICE"), .8333 of a share of Common Stock per Purchase Contract, (b) if the Applicable Market Value is less than or equal to the Threshold Appreciation Price but is greater than the Stated Amount, a fractional share of Common Stock per Purchase Contract equal to the Stated Amount divided by the Applicable Market Value (rounded upward or downward to the nearest 1/10,000th of a share) and (c) if the Applicable Market Value is less than or equal to the Stated Amount, one share of Common Stock per Purchase Contract, in each case subject to adjustment as provided in the Purchase Contract Agreement. No fractional shares of Common Stock shall be issued upon settlement of Purchase Contracts, as provided in the Purchase Contract Agreement. The "APPLICABLE MARKET VALUE" means the average of the Closing Prices per share of Common Stock on each of the twenty consecutive Trading Days ending on the second Trading Day immediately preceding the Final Settlement Date. The "CLOSING PRICE" of the Common Stock on any date of determination means the closing sale price (or, if no closing price is reported, the last reported sale price) of the Common Stock on The New York Stock Exchange, Inc. (the "NYSE") on such date or, if the Common Stock is not listed for trading on the NYSE on any such date, as reported in the composite transactions for the principal United States securities exchange on which the Common Stock is so listed or, if the Common Stock is not so listed on a United States national or regional securities exchange, as reported by the Nasdaq Stock Market or, if such price of the Common Stock is not so reported, the last quoted bid price for the Common B-5 86 Stock in the over-the-counter market as reported by the National Quotation Bureau or similar organization or, if such bid price is not available, the market value of the Common Stock on such date as determined by a nationally recognized independent investment banking firm retained for this purpose by the Company. A "TRADING DAY" means a day on which the Common Stock (A) is not suspended from trading on any national or regional securities exchange or association or over-the-counter market at the close of business and (B) has traded at least once on the national or regional securities exchange or association or over-the-counter market that is the primary market for the trading of the Common Stock. The purchase price for the shares of Common Stock purchased pursuant to each Purchase Contract shall be paid by application of payments received by the Company on the Final Settlement Date from the Collateral Agent at the direction of the Agent on behalf of the Holders pursuant to the Pledge Agreement in respect of the principal of the Treasury Securities pledged to secure the obligations of the relevant Holder under such Purchase Contract. The Company shall not be obligated to issue any shares of Common Stock in respect of a Purchase Contract or deliver any certificates therefor to the Holder unless it shall have received payment in full of the aggregate purchase price for the shares of Common Stock to be purchased thereunder in the manner set forth herein and in the Purchase Contract Agreement. Subject to the next succeeding paragraph and the provisions of the Purchase Contract Agreement, the Company shall pay, on each Payment Date, the Contract Fee payable in respect of each Purchase Contract to the Person in whose name the Security Certificate (or one or more Predecessor Security Certificates) evidencing the Security of which such Purchase Contract is a part and is registered at the close of business on the Record Date immediately preceding such Payment Date. The Company shall have the right, at any time prior to the Final Settlement Date, to defer the payment of any or all of the Contract Fees otherwise payable on any Payment Date (on a pro rata basis among all Outstanding Securities), but only if the Company shall give the Holders and the Agent written notice of its election to defer such payment (specifying the amount to be deferred and the period of deferment) as provided in the Purchase Contract Agreement. Any Contract Fees so deferred shall bear additional Contract Fees thereon at the rate of 8.25% per annum (computed on the basis of the actual number of days elapsed in a year of 365 or 366 days, as the case may be), compounding on each succeeding Payment Date, until paid in full (such deferred installments of Contract Fees, together with the additional Contract Fees accrued thereon, are B-6 87 referred to herein as the "DEFERRED CONTRACT FEES"). Deferred Contract Fees shall be due on the next succeeding Payment Date except to the extent that payment is deferred pursuant to the Purchase Contract Agreement. No Contract Fees may be deferred to a date that is after the Final Settlement Date. In the event that the Company elects to defer the payment of Contract Fees on Purchase Contracts until the Final Settlement Date, the Holder of this Security Certificate shall receive on the Final Settlement Date, in lieu of a cash payment, a number of shares of Common Stock (in addition to a number of Common Stock equal to the Settlement Rate) equal to (x) the aggregate amount of Deferred Contract Fees payable to the Holder of this Security Certificate divided by (y) the Applicable Market Value. No fractional shares of Common Stock shall be issued with respect to the payment of Deferred Contract Fees on the Final Settlement Date, as provided in the Purchase Contract Agreement. In the event the Company exercises its option to defer the payment of Contract Fees, then, until the Deferred Contract Fees have been paid in full, the Company (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 (i) purchases or acquisitions of Common Stock in connection with the satisfaction by the Company or any of its subsidiaries of their respective obligations under any benefit plans for directors, officers, agents or employees or the Company's dividend reinvestment or director, officer, agent or employee stock purchase plans, (ii) as a result of a reclassification of the Company's capital stock or the exchange or conversion of one class or series of capital stock for another class or series of the Company's capital stock, (iii) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of the Company's capital stock or the security being converted or exchanged for the Company's capital stock), (iv) dividends or distributions in the form of shares of, or options, warrants or rights to subscribe for or purchase, shares of capital stock of the Company or (v) any declaration of a dividend in connection with the implementation of 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 the Company that rank pari passu with or junior to such Contract Fees and (c) shall not make any guarantee payments with respect to any guarantee by the Company of any securities of any subsidiary of the Company if such guarantee ranks pari passu with or junior in right of payment to the Contract Fees. B-7 88 The Purchase Contracts and the obligations and rights of the Company and the Holders thereunder, including, without limitation, the rights of the Holders to receive and the obligation of the Company to pay any Contract Fee or any Deferred Contract Fees, shall immediately and automatically terminate, without the necessity of any notice or action by any Holder, the Agent or the Company, if, on or prior to the Final Settlement Date, a Termination Event shall have occurred. Upon the occurrence of a Termination Event, the Company shall promptly but in no event more than two Business Days thereafter give written notice to the Agent, the Collateral Agent and the Holders. Upon and after the occurrence of a Termination Event, the Collateral Agent shall release the Treasury Securities from the Pledge in accordance with the provisions of the Pledge Agreement. The Securities shall thereafter represent the right to receive the Treasury Securities forming a part of such Securities in accordance with the provisions of the Purchase Contract Agreement and the Pledge Agreement. Subject to and upon compliance with the provisions of the Purchase Contract Agreement, at the option of the Holder thereof, any Purchase Contracts underlying Securities having an aggregate Stated Amount equal to $43,000 or an integral multiple thereof may be settled early ("EARLY SETTLEMENT") as provided in the Purchase Contract Agreement. In order to exercise the right to effect Early Settlement with respect to any Purchase Contracts evidenced by this Security Certificate, the Holder of this Security Certificate shall deliver this Security Certificate to the Agent at the Corporate Trust Office duly endorsed for transfer to the Company or in blank with the form of Election to Settle Early set forth below duly completed and accompanied by payment in the form of immediately available funds in an amount (the "EARLY SETTLEMENT AMOUNT") equal to (i) the product of (A) the Stated Amount times (B) the number of Purchase Contracts with respect to which the Holder has elected to effect Early Settlement plus (ii) if such delivery is made with respect to any Purchase Contracts during the period from the close of business on any Record Date immediately preceding any Payment Date to the opening of business of such Payment Date, an amount equal to the Contract Fees and Deferred Contract Fees, if any, payable on such Payment Date with respect to such Purchase Contracts. Upon Early Settlement of Purchase Contracts by a Holder of the related Securities, the Treasury Securities underlying such Securities shall be released from the Pledge as provided in the Pledge Agreement and the Holder shall be entitled to receive a number of shares of Common Stock on account of each Purchase Contract forming part of a Security as to which Early Settlement is effected equal to the Early Settlement Rate; provided, however, that upon the Early Settlement of the Purchase Contracts, the Holder thereof shall forfeit the right to receive accrued Contract Fees and any Deferred Contract Fees on such Purchase Contracts. The "EARLY SETTLEMENT RATE" shall initially be equal to .8333 and shall be adjusted in the same manner B-8 89 and at the same time as the Settlement Rate is adjusted as provided in the Purchase Contract Agreement. The Security Certificates are issuable only in registered form and only in denominations of a single Security and any integral multiple thereof. The transfer of any Security Certificates shall be registered and Security Certificates may be exchanged as provided in the Purchase Contract Agreement. The Security Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents permitted by the Purchase Contract Agreement. No service charge shall be required for any such registration of transfer or exchange, but the Company and the Agent may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. For so long as the Purchase Contract underlying a Security remains in effect, such Security shall not be separable into its constituent parts, and the rights and obligations of the Holder of such Security in respect of the Treasury Securities and Purchase Contract constituting such Security may be transferred and exchanged only as a Security. Upon registration of transfer of this Security Certificate, the transferee shall be bound (without the necessity of any other action on the part of such transferee) under the terms of the Purchase Contract Agreement, the Purchase Contracts evidenced hereby and the Pledge Agreement, and the transferor shall be released from the obligations under the Purchase Contracts evidenced by this Security Certificate. The Company covenants and agrees, and the Holder, by such Holder's acceptance hereof, likewise covenants and agrees, to be bound by the provisions of this paragraph. The Holder of this Security Certificate, by such Holder's acceptance hereof, authorizes the Agent to enter into and perform the related Purchase Contracts forming part of the Securities evidenced hereby on such Holder's behalf as such Holder's attorney-in-fact, expressly withholds any consent to the assumption (i.e., affirmance) of the Purchase Contracts by the Company or such Holder's trustee in the event that the Company becomes the subject of a case under the Bankruptcy Code, agrees to be bound by the terms and provisions thereof, covenants and agrees to perform its obligations under the Purchase Contracts forming a part of the Securities evidenced hereby, consents to the provisions of the Purchase Contract Agreement, authorizes the Agent to enter into and perform the Pledge Agreement on such Holder's behalf as such Holder's attorney-in-fact, and consents to the Pledge of the Treasury Securities underlying this Security Certificate pursuant to the Pledge Agreement. The Holder, by such Holder's acceptance hereof, further covenants and agrees that, to the extent and in the manner provided in the Purchase Contract Agreement and the Pledge Agreement, but subject to the terms thereof, payments in respect of principal of B-9 90 the Treasury Securities on the Final Settlement Date shall be paid by the Collateral Agent to the Company in satisfaction of such Holder's obligations under such Purchase Contract and such Holder shall acquire no right, title or interest in such payments. Subject to certain exceptions, the provisions of the Purchase Contract Agreement may be amended with the consent of the Holders of at least 66 2/3% in Stated Amount of the Outstanding Securities. All terms used herein that are defined in the Purchase Contract Agreement have the meanings set forth therein. The Purchase Contracts shall for all purposes be governed by, and construed in accordance with, the laws of the State of New York. The Company and the Agent, and any agent of the Company or the Agent, may treat the Person in whose name this Security Certificate is registered as the owner of the Securities evidenced hereby for the purpose of receiving payments of Contract Fees and any Deferred Contract Fees, performance of the Purchase Contracts and for all other purposes whatsoever, whether or not the payment of any Contract Fee payable in respect of the Purchase Contracts constituting a part of the Securities evidenced thereby shall be overdue and notwithstanding any notice to the contrary, and neither the Company, the Agent nor any such agent shall be affected by notice to the contrary. The Purchase Contracts shall not, prior to the settlement thereof, entitle the Holder to any of the rights of a holder of shares of Common Stock. A copy of the Purchase Contract Agreement is available for inspection at the offices of the Agent. B-10 91 SETTLEMENT INSTRUCTIONS The undersigned Holder directs that a certificate for shares of Common Stock deliverable upon settlement on or after the Final Settlement Date of the Purchase Contracts underlying the number of Securities evidenced by this Security Certificate be registered in the name of, and delivered, together with a check in payment for any fractional share, to, the undersigned at the address indicated below, unless a different name and address have been indicated below. If shares are to be registered in the name of a Person other than the undersigned, the undersigned shall pay any transfer tax payable incident thereto. Dated: _________________________ _________________________ Signature If shares are to be registered in the name of and delivered to a Person other than the Holder, please print REGISTERED HOLDER such Person's name and address: Please print name and address of Registered Holder: Name Name _________________________ _________________________ Address Address _________________________ _________________________ Social Security or other Taxpayer Identification Number, if any _________________________ B-11 92 ELECTION TO SETTLE EARLY The undersigned Holder of this Security Certificate hereby irrevocably exercises the option to effect Early Settlement in accordance with the terms of the Purchase Contract Agreement with respect to the Purchase Contracts underlying the number of Securities evidenced by this Security Certificate specified below. The option to effect Early Settlement may be exercised only with respect to integral multiples of 1,000 Securities. The undersigned Holder directs that a certificate for shares of Common Stock deliverable upon such Early Settlement be registered in the name of, and delivered, together with a check in payment for any fractional share and any Security Certificate representing any Securities evidenced hereby as to which Early Settlement of the related Purchase Contracts is not effected, to, the undersigned at the address indicated below, unless a different name and address have been indicated below. Treasury Securities deliverable upon such Early Settlement shall be transferred in accordance with the transfer instructions set forth below. If shares are to be registered in the name of a Person other than the undersigned, the undersigned shall pay any transfer tax payable incident thereto. Dated: _________________________ _________________________ Signature B-12 93 Number of Securities evidenced hereby as to which Early Settlement of the related Purchase Contracts is being elected: If shares or Security Certificates are to REGISTERED HOLDER be registered in the name of and delivered to and Treasury Securities are to be transferred to a Person other than the Holder, please print such Person's name and address: Please print name and address of Registered Holder: Name Name _________________________ _________________________ Address Address _________________________ _________________________ Social Security or other Taxpayer Identification Number, if any _________________________ Transfer Instructions for Treasury Securities transferable upon Early Settlement: B-13 EX-4.5 8 PLEDGE AGREEMENT 1 Exhibit 4.5 PLEDGE AGREEMENT PLEDGE AGREEMENT, dated as of November 25, 1998 (the "AGREEMENT"), among K N Energy, Inc., a Kansas corporation (the "COMPANY"), The Chase Manhattan Trust Company, National Association, located in Pittsburgh, Pennsylvania, not individually but solely as collateral agent (in such capacity, together with its successors in such capacity, the "COLLATERAL AGENT") and, in its individual capacity, as "securities intermediary" (as defined in Section 8-102(a)(14) of the UCC (as hereinafter defined) and in 31 C.F.R. Section 357.2, as amended (in such capacity, together with its successors in such capacity, the "SECURITIES INTERMEDIARY")) in respect of the Collateral Account (as hereinafter defined) and for any Treasury Securities (as hereinafter defined) credited to the Collateral Account, and U.S. Bank Trust National Association, not individually but solely as purchase contract agent and as attorney-in-fact of the Holders (as defined in the Purchase Contract Agreement as hereinafter defined) from time to time of the Securities (as hereinafter defined) (in such capacity, together with its successors in such capacity, the "PURCHASE CONTRACT AGENT") under the Purchase Contract Agreement (as hereinafter defined). RECITALS The Company and the Purchase Contract Agent are parties to the Purchase Contract Agreement, dated as of the date hereof (as modified and supplemented and in effect from time to time, the "PURCHASE CONTRACT AGREEMENT"), pursuant to which there will be issued 8.25% Premium Equity Participating Security Units (as further defined in the Purchase Contract Agreement, the "SECURITIES" and each a "SECURITY"). Each Security consists of (a) one Purchase Contract (as defined in the Purchase Contract Agreement) and (b) Treasury Securities (as defined in the Purchase Contract Agreement) having a principal amount equal to $43 (the "STATED AMOUNT"), subject to the pledge of such Treasury Securities created hereby. The Company has caused the Underwriters (as defined in the Purchase Contract Agreement) to purchase the Treasury Securities for the benefit of Holders, to be settled on November 30, 1998, with the proceeds of the offering of the Securities and other funds to be provided by the Company. The Company will cause the Underwriters to transfer such Treasury Securities to the Holders as a part of the Securities. Pursuant to the terms of the Purchase Contract Agreement and the Purchase Contracts, the Holders from time to time of the Securities have 2 authorized the Purchase Contract Agent, as attorney-in-fact of such Holders, among other things to execute and deliver this Agreement on behalf of such Holders and to grant the pledge provided hereby of the Treasury Securities constituting part of such Securities as provided herein and subject to the terms hereof. Accordingly, the Company, the Collateral Agent, the Securities Intermediary and the Purchase Contract Agent, on its own behalf and as attorney-in-fact of the Holders from time to time of the Securities, agree as follows: SECTION 1. Definitions. Capitalized terms used herein and not otherwise defined have the meanings specified in the Purchase Contract Agreement. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; and (b) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision. "AGREEMENT" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more agreements supplemental hereto entered into pursuant to the applicable provisions hereof. "APPLICABLE TREASURY REGULATIONS" means Subpart O - Book-Entry Procedure of Title 31 of the Code of Federal Regulations (31 C.F.R. Section 306.115 et seq.) and any other regulations of the United States Treasury Department from time to time applicable to the transfer or pledge of book-entry U.S. Treasury Securities, including, without limitation, the regulations set forth in 31 CFR Part 357. "COLLATERAL" has the meaning specified in Section 2 hereof. "COLLATERAL ACCOUNT" means the securities account of the Collateral Agent maintained at the Securities Intermediary and designated "The Chase Manhattan Trust Company, National Association, as Collateral Agent of K N Energy, Inc., as pledgee of U.S. Bank Trust National Association, as Purchase Contract Agent". 2 3 "OPINION OF COUNSEL" means an opinion in writing signed by legal counsel, who may be an employee of or counsel to the Company and who shall be reasonably acceptable to the Collateral Agent. "PLEDGE" has the meaning specified in Section 2 hereof. "PLEDGED TREASURY SECURITIES" has the meaning specified in Section 2 hereof. "SECURITIES INTERMEDIARY" has the meaning specified in the first paragraph of this instrument. "UCC" has the meaning specified in Section 6 hereof. SECTION 2. The Pledge. Each Holder from time to time of any Securities, acting through the Purchase Contract Agent as such Holder's attorney-in-fact, hereby pledges and grants to the Collateral Agent for the benefit of the Company, as collateral security for the performance when due by such Holder of such Holder's obligations under the Purchase Contracts comprising a portion of such Securities, a security interest in all right, title and interest of such Holder in the Treasury Securities (including Treasury Securities delivered in substitution therefor pursuant to Section 4.03 of the Purchase Contract Agreement) comprising a portion of such Securities, the Collateral Account, all funds, securities, security entitlements, financial assets, investment property and other property of any kind from time to time credited to the Collateral Account, all security entitlements in respect of any of the foregoing and all proceeds of any of the foregoing (collectively, the "COLLATERAL"). Concurrently with the issuance and delivery of the Securities, Morgan Stanley & Co. Incorporated, as representative of the Underwriters, shall cause (i) the Treasury Securities to be credited to an account of the Securities Intermediary at the Federal Reserve Bank of New York by Federal Reserve Bank-Wire and (ii) the Securities Intermediary to credit the Treasury Securities to the Collateral Account, in each case in accordance with Applicable Treasury Regulations and the UCC and pursuant to instructions from the Purchase Contract Agent on behalf of the Holders. The pledge provided in this Section 2 is herein referred to as the "PLEDGE" and the Treasury Securities subject to the Pledge, excluding any Treasury Securities released from the Pledge as provided in Section 5 hereof, are hereinafter referred to as the "PLEDGED TREASURY SECURITIES." Subject to the Pledge, and to the provisions of Article 4 of the Purchase Contract Agreement, the Holders from time to time of the Securities shall have full beneficial ownership of the Treasury Securities credited to the Collateral Account and all security entitlements (as defined in 31 C.F.R. Section 357.2 or Article 8 of the UCC or any similar provision of the law of any State)) in respect thereof. 3 4 Notwithstanding any other provision of this Agreement, the Securities Intermediary hereby agrees that (a) it will comply with "entitlement orders" (within the meaning of Section 8-102(a)(8) of the UCC or any similar provision of the law of any other State) with respect to the Collateral Account, financial assets credited thereto and security entitlements in respect of any of the foregoing issued by the Collateral Agent without further consent by the Purchase Contract Agent or any Holder and (b) it hereby waives any right of set-off or recoupment that it may have with respect to, and any lien, security interest or other encumbrance it may have on, the Collateral Account, any financial asset credited thereto and any security entitlement in respect of any of the foregoing. The Purchase Contract Agent, for itself and for each Holder from time to time of any Security, hereby consents to such agreement. The Securities Intermediary hereby represents and warrants that (a) it has not entered into, and hereby agrees that until the termination of the Purchase Contract Agreement it will not enter into, (i) any agreement in connection with or arising under the Collateral, the Collateral Account or this Agreement with any of the parties hereto specifying any jurisdiction other than the State of New York as the securities intermediary's jurisdiction for purposes of, without limitation, the UCC, or (ii) any agreement pursuant to which it has agreed to comply with entitlement orders with respect to the Collateral Account, any financial asset credited thereto and any security entitlement in respect of any of the foregoing issued by any Person other than the Collateral Agent, (b) the Collateral Account is a "securities account" as defined in Section 8-501(a) of the UCC and (c) the Securities Intermediary is a "securities intermediary" as defined in Section 8-102(a)(14) of the UCC. The Securities Intermediary, the Collateral Agent, the Company and the Purchase Contract Agent, for itself and as attorney-in-fact on behalf of the Holders from time to time of the Securities, hereby agree that all securities, security entitlements, cash balances and other property or assets of any kind or nature credited at any time to the Collateral Account shall, to the fullest extent permitted under applicable law, be treated as financial assets within the meaning of Article 8 of the UCC and any similar provision of the law of any other State. SECTION 3. Distribution of Principal and Interest. All payments of principal of, or interest on, any Treasury Notes corresponding to Treasury Securities constituting part of the Securities received by the Collateral Agent shall be paid by the Collateral Agent by wire transfer in same day funds no later than 12:00 noon, New York City time on the Business Day such payment is received by the Collateral Agent (provided that in the event such payment is received by the Collateral Agent on a day that is not a Business Day or after 11:30 a.m., New York City time, on a Business Day, then such payment shall be made no later than 10:00 a.m., New York City time, on the next succeeding Business Day) (i) in the case of (A) interest payments and (B) any principal payments with respect to any 4 5 Treasury Notes corresponding to Treasury Securities that have been released from the Pledge pursuant to Section 4 or 5 hereof, to the Purchase Contract Agent to the account designated by it for such purpose and (ii) in the case of principal payments on any Treasury Notes corresponding to Pledged Treasury Securities, the Purchase Contract Agent on behalf of the Holders hereby directs the Collateral Agent to make such payments to the Company, in full satisfaction of the respective obligations of the Holders of the Securities of which such Pledged Treasury Securities are a part under the Purchase Contracts forming a part of such Securities. All payments of principal of any Treasury Strips corresponding to Treasury Securities constituting part of the Securities received by the Collateral Agent shall be paid by the Collateral Agent by wire transfer in same day funds no later than 12:00 noon, New York City time, on the Final Settlement Date (i) in the case of any principal payments with respect to any Treasury Strips corresponding to Treasury Securities that have been released from the Pledge pursuant to Section 5 hereof, to the Purchase Contract Agent to the account designated by it for such purpose and (ii) in the case of principal payments on any Treasury Strips corresponding to Pledged Treasury Securities, the Purchase Contract Agent on behalf of the Holders hereby directs the Collateral Agent to make such payments to the Company, in full satisfaction of the respective obligations of the Holders of the Securities of which such Pledged Treasury Securities are a part under the Purchase Contracts forming a part of such Securities. If the Collateral Agent receives any principal payment on any Treasury Strips corresponding to Treasury Securities constituting part of the Securities prior to the Final Settlement Date, the Collateral Agent shall hold such payment until the Final Settlement Date uninvested, as Collateral, and shall have no liability to the Company, any Holder or any other Person for interest or other compensation thereon. All such payments received by the Purchase Contract Agent as provided herein shall be applied by the Purchase Contract Agent pursuant to the provisions of the Purchase Contract Agreement. If, notwithstanding the foregoing, the Purchase Contract Agent shall receive any payments of principal on account of any Treasury Notes or Treasury Strips corresponding to Pledged Treasury Securities, the Purchase Contract Agent shall hold the same as trustee of an express trust for the benefit of the Company (and promptly deliver over to the Company) for application to the obligations of the Holders of the Securities of which such Treasury Securities are a part under the Purchase Contracts relating to the Securities of which such Treasury Securities are a part, and such Holders shall acquire no right, title or interest in any such payments of principal so received. SECTION 4. Substitution of Collateral. (a) Subject to and upon compliance with the provisions of Section 4.03 of the Purchase Contract 5 6 Agreement, at any time prior to November 15, 2001, the Holder of any Coupon Securities may, in integral multiples of 1,000 Securities, substitute as Collateral Zero-Coupon Treasury Securities for the Coupon Treasury Securities forming a part thereof, thereby forming Zero-Coupon Securities ("COLLATERAL SUBSTITUTION") as provided in the Purchase Contract Agreement. In order to exercise the right to effect Collateral Substitution with respect to any Coupon Securities, the Holder of the Security Certificate evidencing such Securities shall (i) deposit with the Collateral Agent Zero-Coupon Treasury Securities having an aggregate principal amount equal to the aggregate Stated Amount of such Securities by causing (A) such Zero-Coupon Treasury Securities to be credited to an account of the Securities Intermediary at the Federal Reserve Bank of New York by Federal Reserve Bank-Wire and (B) the Securities Intermediary to credit such Zero-Coupon Treasury Securities to the Collateral Account, and (ii) comply with the other provisions of Section 4.03 of the Purchase Contract Agreement. Following a Collateral Substitution, the Zero-Coupon Treasury Securities deposited with the Collateral Agent shall constitute Collateral. Any Collateral Substitution shall not constitute a novation of the security interest created hereby. (b) Upon written notice to the Collateral Agent by the Purchase Contract Agent that one or more Holders have elected to effect Collateral Substitution with respect to such Securities in accordance with the terms of this Agreement and the Purchase Contract Agreement (setting forth the number of such Securities as to which such Holders have elected to effect Collateral Substitution), and that all conditions to such Collateral Substitution have been satisfied, then the Company shall direct the Collateral Agent to release from the Pledge and transfer to the Purchase Contract Agent, free and clear of any lien, pledge or security interest created by or arising through it as the Collateral Agent or Securities Intermediary hereunder, Coupon Treasury Securities with a principal amount equal to the product of (i) the Stated Amount times (ii) the number of such Securities as to which such Holders have elected to effect Collateral Substitution (provided that no such transfer shall take place prior to December 1, 1998). (c) Transfers of Coupon Treasury Securities pursuant to Section 4(b) shall be by Federal Reserve Bank-Wire or in another appropriate manner for credit to the securities account designated by the Purchase Contract Agent, (i) if the Collateral Agent shall have received such notification at or prior to 10:00 a.m. New York City time on a Business Day, then no later than the close of business for the Federal Reserve Bank of New York on such Business Day and (ii) if the Collateral Agent shall have received such notification on a day that is not a Business Day or after 10:00 a.m. New York City time on a Business Day, then no later than 10:00 a.m. New York City time on the next succeeding Business Day. 6 7 SECTION 5. Release of Pledged Treasury Securities. (a) Upon written notice to the Collateral Agent by the Company or the Purchase Contract Agent that there has occurred a Termination Event, the Collateral Agent shall release all Pledged Treasury Securities from the Pledge and shall transfer all such Treasury Securities, free and clear of any lien, pledge or security interest created by or arising through it as the Collateral Agent or Securities Intermediary hereunder, to the Purchase Contract Agent. If such Termination Event shall result from the Company's becoming a debtor under the Bankruptcy Code, and if the Collateral Agent shall for any reason fail immediately to effectuate the release and transfer of all Pledged Treasury Securities as provided by this Section 5(a), the Purchase Contract Agent shall, subject to Section 7(j), (i) use its best efforts to obtain an opinion of a nationally recognized law firm reasonably acceptable to the Collateral Agent to the effect that the Collateral Agent will not, as a result of the Company's being the debtor in such a bankruptcy case, be prohibited from releasing or transferring the Treasury Securities as provided in this Section 5(a), and shall deliver such opinion to the Collateral Agent within ten days after the occurrence of such Termination Event, and if (x) the Purchase Contract Agent shall be unable to obtain such opinion within ten days after the occurrence of such Termination Event or (y) the Collateral Agent shall continue, after delivery of such opinion, to refuse to effectuate the release and transfer of all Pledged Treasury Securities as provided in this Section 5(a), then the Purchase Contract Agent shall within fifteen days after the occurrence of such Termination Event commence an action or proceeding in the court with jurisdiction of the Company's case under the Bankruptcy Code seeking an order requiring the Collateral Agent to effectuate the release and transfer of all Pledged Treasury Securities as provided by this Section 5(a) or (ii) commence an action or proceeding like that described in clause (i)(y) above within ten days after the occurrence of such Termination Event. (b) Upon written notice to the Collateral Agent by the Purchase Contract Agent that one or more Holders have elected to effect Early Settlement of their respective obligations under the Purchase Contracts forming a part of such Securities in accordance with the terms of the Purchase Contracts and the Purchase Contract Agreement (setting forth the number of such Purchase Contracts as to which such Holders have elected to effect Early Settlement), and that the Purchase Contract Agent has received from such Holders, and paid to the Company, the related Early Settlement Amounts pursuant to the terms of the Purchase Contracts and the Purchase Contract Agreement and that all conditions to such Early Settlement have been satisfied, then the Company shall direct the Collateral Agent to release from the Pledge and transfer to the Purchase Contract Agent, free and clear of any lien, pledge or security interest created hereby, Treasury Securities with a principal amount equal to the product of (i) the Stated 7 8 Amount times (ii) the number of such Purchase Contracts as to which such Holders have elected to effect Early Settlement (provided that no such transfer shall take place prior to December 1, 1998). (c) Transfers of Treasury Securities pursuant to Section 5(a) or 5(b) shall be by Federal Reserve Bank-Wire or in another appropriate manner for credit to the securities account designated by the Purchase Contract Agent, (i) if the Collateral Agent shall have received such notification at or prior to 10:00 a.m. New York City time on a Business Day, then no later than the close of business for the Federal Reserve Bank of New York on such Business Day and (ii) if the Collateral Agent shall have received such notification on a day that is not a Business Day or after 10:00 a.m. New York City time on a Business Day, then no later than 10:00 a.m. New York City time on the next succeeding Business Day. SECTION 6. Rights and Remedies. (a) The Collateral Agent shall have all of the rights and remedies with respect to the Collateral of a secured party under the Uniform Commercial Code as in effect in the State of New York (the "UCC") (whether or not the UCC is in effect in the jurisdiction where the rights and remedies are asserted) and such additional rights and remedies to which a secured party is entitled under the laws in effect in any jurisdiction where any rights and remedies hereunder may be asserted. (b) Without limiting any rights or powers otherwise granted by this Agreement to the Collateral Agent, in the event the Collateral Agent is unable to make payments to the Company on account of principal payments of any Treasury Notes or Treasury Strips as provided in Section 3 hereof in satisfaction of the obligations of the Holder of the Securities of which the corresponding Pledged Treasury Securities are a part under the Purchase Contracts forming a part of such Securities, the Collateral Agent shall have and may exercise, with reference to such Pledged Treasury Securities and such obligations of such Holder, any and all of the rights and remedies available to a secured party under the UCC after default by a debtor, and as otherwise granted herein or under any other law. (c) Without limiting any rights or powers otherwise granted by this Agreement to the Collateral Agent, the Collateral Agent is hereby irrevocably authorized to receive and collect all payments of principal of or interest on the Pledged Treasury Securities. (d) The Purchase Contract Agent agrees that, from time to time, (upon the written request of either the Company or the Collateral Agent) it shall take all actions necessary, including the filing of UCC financing statements and continuation statements, to create and maintain a perfected security interest in the Collateral for the Collateral Agent and the Purchase Contract Agent shall execute 8 9 and deliver such further documents and do such other acts and things as are necessary or as the Collateral Agent may reasonably request in order to maintain the Pledge, and the perfection and priority thereof, and to confirm the rights of the Collateral Agent hereunder. SECTION 7. The Collateral Agent, the Securities Intermediary and the Purchase Contract Agent. It is hereby agreed as follows: (a) Appointment, Powers and Immunities. The Collateral Agent shall act as agent for the Company hereunder with such powers as are specifically vested in the Collateral Agent by the terms of this Agreement, together with such other powers as are reasonably incidental thereto. The Collateral Agent: (a) shall have no duties or responsibilities except those expressly set forth in this Agreement and no implied covenants or obligations shall be inferred from this Agreement against the Collateral Agent, nor shall the Collateral Agent be bound by the provisions of any agreement by any party hereto beyond the specific terms hereof; (b) shall not be responsible for any recitals contained in this Agreement, or in any certificate or other document referred to or provided for in, or received by it under, this Agreement, the Securities or the Purchase Contract Agreement, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of the Collateral, this Agreement (other than as against the Collateral Agent), the Securities or the Purchase Contract Agreement or any other document referred to or provided for herein or therein or for any failure by the Company or any other Person (except the Collateral Agent) to perform any of its obligations hereunder or thereunder; (c) shall not be required to initiate or conduct any litigation or collection proceedings hereunder (except pursuant to directions furnished under Section 7(b)); (d) shall not be responsible for any action taken or omitted to be taken by it hereunder or under any other document or instrument referred to or provided for herein or in connection herewith or therewith, except for its own negligence; and (e) shall not be required to advise any party as to selling or retaining, or taking or refraining from taking any action with respect to, any securities or other property deposited hereunder. Subject to the foregoing, during the term of this Agreement, the Collateral Agent shall take all reasonable action in connection with the safe keeping and preservation of the Collateral hereunder. No provision of this Agreement shall require the Collateral Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder. In no event shall the Collateral Agent be liable for any amount in excess of the value of the Collateral, and the Collateral Agent shall not be liable for loss of interest or penalties occasioned by a liquidation of Collateral prior to its maturity. The Collateral Agent shall have no duty or responsibility to do tax reporting to or on behalf of Holders. 9 10 (b) Instructions of the Company. The Company shall have the right, by one or more instruments in writing executed and delivered to the Collateral Agent, to direct the time, method and place of conducting any proceeding for any right or remedy available to the Collateral Agent, or of exercising any power conferred on the Collateral Agent, or to direct the taking or refraining from taking of any action authorized by this Agreement; provided, however, that (i) such direction shall not conflict with the provisions of any law or of this Agreement and (ii) the Collateral Agent shall be adequately indemnified as provided herein. Nothing in this Section 7(b) shall impair the right of the Collateral Agent in its discretion to take any action or omit to take any action that it deems proper and that is not inconsistent with such direction. (c) Reliance by Collateral Agent and Securities Intermediary. The Collateral Agent and the Securities Intermediary shall be entitled to rely upon any certification, order, judgment, opinion, notice or other communication (including, without limitation, any thereof by telephone, telecopy, telex, telegram or cable) reasonably believed by them to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons (without being required to determine the correctness of any fact stated therein), and upon advice and statements of legal counsel and other experts selected by the Collateral Agent or the Securities Intermediary, as the case may be. As to any matters not expressly provided for by this Agreement, the Collateral Agent and Securities Intermediary shall in all cases be fully protected in acting, or in refraining from acting, hereunder in accordance with instructions given by the Company in accordance with this Agreement. The Collateral Agent shall not be liable for any action taken or omitted by it in good faith unless a court of competent jurisdiction determines that the Collateral Agent's willful misconduct was the primary cause of a loss to the Company. In the administration of this Agreement, the Collateral Agent may execute any of its powers and perform its duties hereunder directly or through agents or attorneys and may consult with counsel, accountants and other skilled persons to be selected and retained by it. The Collateral Agent shall not be liable for anything done, suffered or omitted in good faith by it in accordance with the advice or opinion of any such counsel, accountants or other skilled persons selected by it in good faith. (d) Rights in Other Capacities. The Collateral Agent, the Securities Intermediary and their respective affiliates may (without having to account therefor to the Company) accept deposits from, lend money to, make investments in and generally engage in any kind of banking, trust or other business with the Purchase Contract Agent and any Holder (and any of their subsidiaries or affiliates) as if it were not acting as the Securities Intermediary or Collateral Agent, as the case may be, and the Collateral Agent, the Securities Intermediary and their respective affiliates may accept fees and other consideration from the 10 11 Purchase Contract Agent and any Holder without having to account for the same to the Company, provided that the Collateral Agent and Securities Intermediary hereby represent, covenant and agree with the Company that neither the Securities Intermediary nor the Collateral Agent has accepted, received or permitted there to be created in its favor, and neither the Securities Intermediary nor the Collateral Agent will accept, receive or permit there to be created in its favor, any security interest, lien or other encumbrance of any kind in or upon the Collateral. (e) Non-Reliance on Collateral Agent. Neither the Securities Intermediary nor the Collateral Agent shall be required to keep itself informed as to the performance or observance by the Purchase Contract Agent or any Holder of this Agreement, the Purchase Contract Agreement, the Securities or any other document referred to or provided for herein or therein or to inspect the properties or books of the Purchase Contract Agent or any Holder. Neither the Securities Intermediary nor the Collateral Agent shall have any duty or responsibility to provide the Company with any credit or other information concerning the affairs, financial condition or business of the Purchase Contract Agent or any Holder (or any of their affiliates) that may come into the possession of the Collateral Agent, the Securities Intermediary or any of their respective affiliates. Neither the Collateral Agent nor the Securities Intermediary shall have any responsibility for the filing of UCC financing statements or continuation statements. (f) Compensation and Indemnity. The Company agrees: (i) to pay the Collateral Agent and the Securities Intermediary (which for purposes of this paragraph (f) shall include their officers, directors, employees and agents) from time to time reasonable compensation for all services rendered by them hereunder, (ii) to indemnify each of the Purchase Contract Agent, the Securities Intermediary and the Collateral Agent for, and to hold it harmless against, any loss, liability or expense (including out-of-pocket incidental expenses and allocated costs and expenses of in-house counsel and legal staff) incurred without gross negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of its powers and duties under this Agreement, including the costs and expenses (including reasonable fees and expenses of counsel) of defending itself against any claim or liability or any other costs in connection with the exercise or performance of such powers and duties (this indemnity shall survive the resignation or removal of the Collateral Agent and the termination of this Agreement) and (iii) to pay, upon receipt of an invoice, the fees and expenses of counsel to the Collateral Agent on the date of the execution of this Agreement in connection with the preparation, execution and delivery of this Agreement and related documentation. (g) Failure to Act. In the event of any ambiguity in the provisions of this Agreement or any dispute between or conflicting claims by or among the 11 12 parties hereto and/or any other Person with respect to any funds or property deposited, or in which a lien or security interest is granted, hereunder, the Collateral Agent shall be entitled, at its sole option, to refuse to comply with any and all claims, demands or instructions with respect to such property or funds so long as such dispute or conflict shall continue, and the Collateral Agent shall not be or become liable in any way to any of the parties hereto for its failure or refusal to comply with such conflicting claims, demands or instructions. The Collateral Agent shall be entitled to refuse to act until either (i) such conflicting or adverse claims or demands shall have been finally determined by a court of competent jurisdiction or settled by agreement between the conflicting parties as evidenced in a writing, satisfactory to the Collateral Agent or (ii) the Collateral Agent shall have received security or an indemnity satisfactory to the Collateral Agent sufficient to save the Collateral Agent harmless from and against any and all loss, liability or expense that the Collateral Agent may incur by reason of its acting. The Collateral Agent may in addition elect to commence an interpleader action or seek other judicial relief or orders as the Collateral Agent may deem necessary. Notwithstanding anything contained herein to the contrary, the Collateral Agent shall not be required to take any action that is in its opinion contrary to law or to the terms of this Agreement, or that would in its opinion subject it or any of its officers, employees or directors to liability. (h) Resignation of Collateral Agent. Subject to the appointment and acceptance of a successor Collateral Agent as provided below, (a) the Collateral Agent may resign at any time by giving notice thereof to the Company and the Purchase Contract Agent, (b) the Collateral Agent may be removed at any time by the Company and (c) if the Collateral Agent fails to perform any of its material obligations hereunder in any material respect for a period of not less than 20 days after receiving written notice of such failure by the Purchase Contract Agent and such failure shall be continuing, the Collateral Agent may be removed by the Purchase Contract Agent. The Purchase Contract Agent shall promptly notify the Company of any removal of the Collateral Agent pursuant to clause (c) of the immediately preceding sentence. Upon any such resignation or removal, the Company shall have the right to appoint a successor Collateral Agent. If no successor Collateral Agent shall have been so appointed and shall have accepted such appointment within 30 days after the retiring Collateral Agent's giving of notice of resignation or such removal, then the retiring Collateral Agent may petition any court of competent jurisdiction for the appointment of a successor Collateral Agent. The Collateral Agent shall be a bank that has an office in New York, New York, and that has a combined capital and surplus of at least $50,000,000. Upon the acceptance of any appointment as Collateral Agent hereunder by a successor Collateral Agent, such successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent, and the retiring Collateral Agent shall 12 13 take all appropriate action to transfer any money and property held by it hereunder (including the Pledged Treasury Securities and any other Collateral) to such successor Collateral Agent. Such successor Collateral Agent shall also become, and shall succeed to and become vested with all the rights, powers, privileges and duties of, the Securities Intermediary. The retiring Collateral Agent shall, upon such succession, be discharged from its duties and obligations as Collateral Agent hereunder. After any retiring Collateral Agent's resignation hereunder as Collateral Agent, the provisions of this Section 7 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Collateral Agent. Promptly following the removal or resignation of the Collateral Agent the Company shall give written notice thereof to Moody's Investors Service, Inc. Any corporation or association into which the Collateral Agent and Securities Intermediary in its individual capacity may be merged or converted or with which it may be consolidated, or any corporation or association resulting from any merger, conversion or consolidation to which the Collateral Agent and Securities Intermediary in its individual capacity shall be a party, or any corporation or association to which all or substantially all the corporate trust business of the Collateral Agent and Securities Intermediary in its individual capacity may be sold or otherwise transferred, shall be the Collateral Agent and Securities Intermediary hereunder without further act. Promptly thereafter, however, the successor Collateral Agent and Securities Intermediary shall notify the Company and the Purchase Contract Agent of their succession. (i) Limitation on Liability. Anything in this Agreement to the contrary notwithstanding, in no event shall the Collateral Agent or Securities Intermediary or its respective officers, employees or agents be liable under this Agreement to any third party for indirect, special, punitive, or consequential loss or damage of any kind whatsoever, including lost profits, whether or not the likelihood of such loss or damage was known to the Collateral Agent or Securities Intermediary, or any of them. (j) The Purchase Contract Agent. The duties and responsibilities of the Purchase Contract Agent under this Agreement shall in each case be governed by Article 7 of the Purchase Contract Agreement. SECTION 8. Amendment. (a) Amendment Without Consent of Holders. Without the consent of any Holders, the Company, the Collateral Agent, the Securities Intermediary and the Purchase Contract Agent, at any time and from time to time, may amend this 13 14 Agreement, in form satisfactory to the Company, the Collateral Agent, the Securities Intermediary and the Purchase Contract Agent, for any of the following purposes: (i) to evidence the succession of another Person to the Company, and the assumption by any such successor of the covenants of the Company; or (ii) to add to the covenants of the Company for the benefit of the Holders, or to surrender any right or power herein conferred upon the Company; or (iii) to evidence and provide for the acceptance of appointment hereunder by a successor Collateral Agent or Purchase Contract Agent; or (iv) to make any of the following changes with respect to the Treasury Securities underlying a Security (A) from a Treasury Note or a Treasury Strip, as the case may be, to a security entitlement in respect thereof, (B) from a security entitlement in respect of a Treasury Note or a Treasury Strip, as the case may be, to a Treasury Note or a Treasury Strip, as the case may be, or (C) from a security entitlement in respect of one securities account to a security entitlement in respect of another securities account, whether or not with the same securities intermediary; or (v) to cure any ambiguity, to correct or supplement any provisions herein that may be inconsistent with any other such provisions herein, or to make any other provisions with respect to such matters or questions arising under this Agreement, provided such action shall not adversely affect the interests of the Holders. (b) Amendment With Consent of Holders. With the consent of the Holders of not less than 66 2/3% in Stated Amount of the Outstanding Securities, by Act of said Holders delivered to the Company, the Purchase Contract Agent, the Securities Intermediary and the Collateral Agent, the Company, when authorized by a Board Resolution, the Purchase Contract Agent, the Securities Intermediary and the Collateral Agent may amend this Agreement for the purpose of modifying in any manner the provisions of this Agreement or the rights of the Holders in respect of the Securities; provided, however, that no such amendment shall, without the consent of the Holder of each Outstanding Security affected thereby, (i) change any Payment Date; 14 15 (ii) change the amount or type (other than a change of the type described in Section 8(a)(iv)) of Treasury Securities underlying a Security, impair the right of the Holder of any Security to receive interest payments on the Coupon Treasury Securities underlying Coupon Securities or otherwise adversely affect the Holder's rights in or to any such Treasury Securities; (iii) impair the right to institute suit for the enforcement of any Purchase Contract; (iv) otherwise effect any action that would require the consent of the Holder of each Outstanding Security affected thereby pursuant to the Purchase Contract Agreement if such action were effected by an agreement supplemental thereto; or (v) reduce the percentage of Outstanding Securities the consent of whose Holders is required for any such amendment. Notwithstanding the foregoing, if any amendment hereto would modify only the terms of the Coupon Securities or the Zero-Coupon Securities, or would modify the rights of Holders of only Coupon Securities or Zero-Coupon Securities, then only Holders of Coupon Securities or Zero-Coupon Securities, as the case may be, shall be entitled to consent or withhold consent with respect thereto, and, with the consent of the Holders of not less than 66 2/3% in Stated Amount of the Outstanding Securities that are Coupon Securities or Zero-Coupon Securities, as the case may be, by Act of said Holders delivered to the Company, the Purchase Contract Agent, the Securities Intermediary and the Collateral Agent, the Company, when authorized by a Board Resolution, the Purchase Contract Agent, the Securities Intermediary and the Collateral Agent may enter to such amendment hereto. It shall not be necessary for any Act of Holders under this Section 8(b) approve the particular form of any proposed amendment, but it shall be sufficient if such Act shall approve the substance thereof. (c) Execution of Amendments. In executing any amendment permitted by this Section, the Collateral Agent and the Purchase Contract Agent shall be entitled to receive and (subject to Section 7(a) hereof, with respect to the Collateral Agent, and Section 7.01 of the Purchase Contract Agreement, with respect to the Purchase Contract Agent) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by this Agreement and applicable law and that all conditions precedent to such execution and delivery have been satisfied. 15 16 (d) Effect of Amendments. Upon the execution of any amendment under this Section, this Agreement shall be modified in accordance therewith, and such amendment shall form a part of this Agreement for all purposes; and every Holder of Security Certificates theretofore or thereafter authenticated, executed on behalf of the Holders and delivered under the Purchase Contract Agreement shall be bound thereby. (e) Reference to Amendments. Security Certificates authenticated, executed on behalf of the Holders and delivered after the execution of any amendment pursuant to this Section may, and shall if required by the Collateral Agent or the Purchase Contract Agent, bear a notation in form approved by the Purchase Contract Agent and/or the Collateral Agent, as the case may be, as to any matter provided for in such amendment. If the Company shall so determine, new Security Certificates so modified as to conform, in the opinion of the Purchase Contract Agent and the Company, to any such amendment may be prepared and executed by the Company and authenticated, executed on behalf of the Holders and delivered by the Purchase Contract Agent in accordance with the Purchase Contract Agreement in exchange for Outstanding Security Certificates. SECTION 9. Miscellaneous. (a) No Waiver. No failure on the part of the Collateral Agent or any of its agents to exercise, and no course of dealing with respect to, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by the Collateral Agent or any of its agents of any right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies herein are cumulative and are not exclusive of any remedies provided by law. (b) Governing Law. THIS AGREEMENT, THE COLLATERAL ACCOUNT, AND PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION AND THE PRIORITY OF THE SECURITY INTEREST IN THE COLLATERAL (INCLUDING ANY TREASURY NOTES OR TREASURY STRIPS OR ANY SECURITY ENTITLEMENT WITH RESPECT THERETO) SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND THE SECURITIES INTERMEDIARY'S JURISDICTION WILL BE THE STATE OF NEW YORK FOR PURPOSES OF 31 C.F.R. Section 357.11(b), AS AMENDED, THE UCC AND ANY SIMILAR STATE LAW. The Company, the Collateral Agent, the Securities Intermediary, and the Holders from time to time of the Securities, acting through the Purchase Contract Agent as their attorney-in- 16 17 fact, hereby submit to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York state court sitting in the Borough of Manhattan in New York City for the purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. The Company, the Collateral Agent, the Securities Intermediary, and the Holders from time to time of the Securities, acting through the Purchase Contract Agent as their attorney-in-fact, irrevocably waive, to the fullest extent permitted by applicable law, any objection that they may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. (c) Notices. All notices, requests, consents and other communications provided for herein (including, without limitation, any modifications of, or waivers or consents under, this Agreement) shall be given or made in writing (including, without limitation, by telecopy) delivered to the intended recipient at the "Address for Notices" specified below its name on the signature pages hereof or, as to any party, at such other address as shall be designated by such party in a notice to the other parties. Except as otherwise provided in this Agreement, all such communications shall be deemed to have been duly given when transmitted by telecopier or personally delivered or, in the case of a mailed notice, upon receipt, in each case given or addressed as aforesaid. (d) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of the Company, the Collateral Agent, the Securities Intermediary and the Purchase Contract Agent, and the Holders from time to time of the Securities, by their acceptance of the same, shall be deemed to have agreed to be bound by the provisions hereof and to have ratified the agreements of, and the grant of the Pledge hereunder by, the Purchase Contract Agent. (e) Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Agreement by signing any such counterpart. (f) Severability. If any provision hereof is invalid and unenforceable in any jurisdiction, then, to the fullest extent permitted by law, (i) the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in order to carry out the intentions of the parties hereto as nearly as may be possible and (ii) the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction. 17 18 (g) Expenses, etc. The Company agrees to reimburse the Collateral Agent for: (i) all reasonable out-of-pocket costs and expenses of the Collateral Agent (including, without limitation, the reasonable fees and expenses of counsel to the Collateral Agent), in connection with (A) the negotiation, preparation, execution and delivery or performance of this Agreement and any amendments hereto and (B) any modification, supplement or waiver of any of the terms of this Agreement; (ii) all reasonable costs and expenses of the Collateral Agent (including, without limitation, reasonable fees and expenses of counsel) in connection with (A) any enforcement or proceedings resulting or incurred in connection with causing any Holder to satisfy its obligations under the Purchase Contracts forming a part of the Securities and (B) the enforcement of this Section 9(g); and (iii) all transfer, stamp, documentary or other similar taxes, assessments or charges levied by any governmental or revenue authority in respect of this Agreement or any other document referred to herein and all costs, expenses, taxes, assessments and other charges incurred in connection with any filing, registration, recording or perfection of any security interest contemplated hereby. (h) Security Interest Absolute. All rights of the Collateral Agent and security interests hereunder, and all obligations of the Holders from time to time of the Securities hereunder, shall be absolute and unconditional irrespective of: (i) any lack of validity or enforceability of any provision of the Purchase Contracts or the Securities or any other agreement or instrument relating thereto; (ii) any change in the time, manner or place of payment of, or any other term of, or any increase in the amount of, all or any of the obligations of Holders under the related Purchase Contracts, or any other amendment or waiver of any term of, or any consent to any departure from any requirement of, the Purchase Contract Agreement or any Purchase Contract or any other agreement or instrument relating thereto; or (iii) any other circumstance that might otherwise constitute a defense available to, or discharge of, a borrower, a guarantor or a pledgor. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. K N ENERGY, INC. By: __________________________ 18 19 Name: Title: Address for Notices: 370 Van Gordon Street Lakewood, Colorado 80228-1740 Attention: Treasurer Telecopy: (303) 763-3155 U.S. BANK TRUST NATIONAL ASSOCIATION, as Purchase Contract Agent and as attorney-in-fact of the Holders from time to time of the Securities By: __________________________ Name: Title: Address for Notices: 111 East Wacker Drive Suite 3000 Chicago, IL 60601 Attention: Corporate Trust Services Division - K N Energy Telecopy: (312) 228-9401 THE CHASE MANHATTAN TRUST COMPANY, NATIONAL ASSOCIATION, as Collateral Agent By: __________________________ Name: Title: Address for Notices: 19 20 One Oxford Centre 301 Grant Street Suite #1100 Pittsburgh, Pennsylvania 15219 Tel: (412) 291-2017 Fax: (412) 456-5568 Attention: Global Trust Department THE CHASE MANHATTAN TRUST COMPANY, NATIONAL ASSOCIATION in its individual capacity as Securities Intermediary By:_____________________________ Name: Address for Notices: One Oxford Centre 301 Grant Street Suite #1100 Pittsburgh, Pennsylvania 15219 Tel: (412) 291-2017 Fax: (412) 456-5568 20 EX-8 9 TAX OPINION OF SIMPSON THATCHER & BARTLETT 1 Exhibit 8 [Simpson Thacher & Bartlett Letterhead] November 24, 1998 Re: Issuance and Sale of PEPS Units by K N Energy, Inc. K N Energy, Inc. 370 Van Gordon Street Lakewood, Colorado 80228 Ladies and Gentlemen: We have acted as special tax counsel ("Tax Counsel") to K N Energy, Inc., a Kansas corporation (the "Company"), in connection with the preparation of the Prospectus Supplement dated November 19, 1998 to the Prospectus of the Company dated October 19, 1998 (collectively, the "Prospectus") with respect to the issuance and sale of the 8.25% PEPS Units (the "PEPS Units") by the Company pursuant to the Purchase Contract Agreement (the "Purchase Contract Agreement") between the Company and U.S. Bank Trust National Association, as Purchase Contract Agent (in such capacity, the "Purchase Contract Agent"). The PEPS Units will be offered for sale to investors pursuant to the Prospectus. All capitalized terms used in this opinion letter and not otherwise defined herein shall have the meaning ascribed to such terms in the Prospectus. In delivering this opinion letter, we have reviewed and relied upon: (i) the Prospectus; (ii) a form of the Purchase Contract Agreement; (iii) a form of the PEPS Units; and (iv) a form of the Pledge Agreement between the Company, The Chase Manhattan Trust 2 K N Energy, Inc. -2- November 24, 1998 Company, National Association, as collateral agent and as securities intermediary, and the Purchase Contract Agent. We also have examined and relied upon originals or copies, certified or otherwise identified to our satisfaction, of such records of the Company and such other documents, certificates and records as we have deemed necessary or appropriate as a basis for the opinion set forth herein. In our examination of such material, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity to original documents of all copies of documents submitted to us. In addition, we also have assumed that the transactions related to the issuance of the PEPS Units will be consummated in accordance with the terms of the documents and forms of documents described herein. On the basis of the foregoing, we hereby confirm our opinion set forth in the Prospectus under the caption "United States Federal Income Tax Consequences". We express no opinion with respect to the transactions referred to herein or in the Prospectus other than as expressly set forth herein. Our opinion is based upon the Internal Revenue Code of 1986, as amended, the Treasury regulations promulgated thereunder and other relevant authorities and law, all as in effect on the date hereof. Consequently, future changes in the law may cause the tax treatment of the transactions referred to herein to be materially different from that described above. We are members of the Bar of the State of New York, and we do not express any opinion herein concerning any law other than the federal law of the United States. We hereby consent to the use of our name in the Prospectus under the caption "United States Federal Income Tax Consequences" and "Legal Matters". This opinion is being 3 K N Energy, Inc. -3- November 24, 1998 rendered to you in connection with the above-described transaction. This opinion may not be relied upon by you for any other purpose, or relied upon by, or furnished to, any other person, firm or corporation without our prior written consent. Very truly yours, /s/Simpson Thacher & Bartlett SIMPSON THACHER & BARTLETT -----END PRIVACY-ENHANCED MESSAGE-----