<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 24, 1997
REGISTRATION NUMBER 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
K N ENERGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
KANSAS 48-0290000
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
370 VAN GORDON STREET MARTHA B. WYRSCH
P.O. BOX 281304 VICE PRESIDENT, GENERAL COUNSEL & SECRETARY
LAKEWOOD, COLORADO 80228-8304 370 VAN GORDON STREET, P.O. BOX 281304
(303) 989-1740 LAKEWOOD, COLORADO 80228-8304
(303) 989-1740
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER,
INCLUDING (NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER,
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) INCLUDING AREA CODE, OF AGENT FOR SERVICE)
</TABLE>
------------------------
Copy to:
C. MICHAEL HARRINGTON
VINSON & ELKINS L.L.P.
3600 FIRST CITY TOWER
HOUSTON, TEXAS 77002-6760
(713) 758-2148
(713) 615-5306 (FAX)
------------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are being offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED
MAXIMUM
AMOUNT TO BE OFFERING PRICE
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED REGISTERED PER UNIT
- ------------------------------------------------------------------------------------------------------------------------------
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Primary Offering:
Debt Securities................................. (1) (1)
Common Stock, par value $5.00 per share.........
- ------------------------------------------------------------------------------------------------------------------------------
Secondary Offering:
Common Stock, par value $5.00 per share......... 642,232 shares $46.8125(3)
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<CAPTION>
==============================================================================================================================
PROPOSED
MAXIMUM AMOUNT OF
AGGREGATE OFFERING REGISTRATION
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED PRICE FEE
- -------------------------------------------------- ---------------------------------------------------------------------------
<S> <C> <C>
Primary Offering:
Debt Securities................................. $405,308,750(2) $122,821
Common Stock, par value $5.00 per share.........
- --------------------------------------------------
Secondary Offering:
Common Stock, par value $5.00 per share......... $30,064,485 $ 9,111
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</TABLE>
(1) Omitted pursuant to Rule 457(o).
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o).
(3) Estimated solely for the purpose of calculating the registration fee on the
basis of the average of the high and low prices of the Common Stock on the
New York Stock Exchange Composite Tape on November 17, 1997.
------------------------
Pursuant to Rule 429 under the Securities Act of 1933, the prospectus
contained in this Registration Statement also relates to (i) the remaining
securities unsold in a Primary Offering having a maximum aggregate offering
price of $94,691,250 and (ii) the remaining 150,000 shares of Common Stock
unsold in a Secondary Offering, such remaining unsold securities and Common
Stock having been previously registered pursuant to the Form S-3 Registration
Statement No. 333-04385.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
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<PAGE> 2
PROSPECTUS
K N ENERGY, INC.
DEBT SECURITIES
COMMON STOCK
------------------------------
K N Energy, Inc. ("K N" or the "Company") may offer and sell from time to
time, in one or more series, its unsecured debt securities consisting of notes,
debentures or other evidences of indebtedness (the "Debt Securities"). Both the
Company and its largest stockholder, Cabot Specialty Chemicals, Inc. (the
"Selling Stockholder"), may also offer and sell from time to time shares of the
Company's common stock, par value $5.00 per share (the "Common Stock"). The
aggregate initial offering prices of the Debt Securities and the Common Stock
offered by the Company hereby will not exceed $500,000,000 or, if applicable,
the equivalent thereof in any other currency or currency unit, and the number of
shares of Common Stock offered by the Selling Stockholder hereby will not exceed
792,232 (all such Debt Securities and shares of Common Stock being called,
collectively, the "Securities"). The Securities will be offered in amounts, at
prices and on terms to be determined in light of market conditions at the time
of sale and set forth in a supplement to this Prospectus (a "Prospectus
Supplement").
If the offering and sale of Securities in respect of which this Prospectus
is being delivered includes a series of Debt Securities, then the terms of such
series of Debt Securities, including, where applicable, the specific
designation, aggregate principal amount, authorized denominations, ranking as
senior or subordinated Debt Securities, maturity, interest rate or rates (or
method of determining the same) and time or times of payment of any interest,
any terms for optional or mandatory redemption, which may include redemption at
the option of holders upon the occurrence of certain events, conversion into
Common Stock, or payment of additional amounts or any sinking fund provisions,
any initial public offering price, the proceeds to the Company and any other
specific terms in connection with the offering and sale of such series of Debt
Securities will be set forth in a Prospectus Supplement. As used herein, Debt
Securities shall include securities denominated in United States dollars or, at
the option of the Company if so specified in an applicable Prospectus
Supplement, in any other currency or currency unit, or in amounts determined by
reference to an index.
The Securities may be sold directly by the Company or the Selling
Stockholder to investors, through agents designated from time to time or to or
through underwriters or dealers. See "Plan of Distribution". If any agents of
the Company or the Selling Stockholder or any underwriters are involved in the
sale of any Securities in respect of which this Prospectus is being delivered,
the names of such agents or underwriters and any applicable commissions or
discounts will be set forth in a Prospectus Supplement. The net proceeds to the
Company from such sale also will be set forth in a Prospectus Supplement. The
Company will not receive any of the proceeds from the sale of any Common Stock
by the Selling Stockholder. See "Use of Proceeds."
Debt Securities may be issued in registered form or bearer form with or
without interest coupons attached, or both. In addition, all or a portion of the
Debt Securities of a series may be issuable in temporary or permanent global
form. Debt Securities in bearer form are offered only to non-United States
persons and to offices located outside the United States of certain United
States financial institutions.
------------------------------
The Common Stock is traded on the New York Stock Exchange (the "NYSE")
under the symbol "KNE." Any Common Stock sold pursuant to a Prospectus
Supplement will be listed on such exchange, subject to official notice of
issuance.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------------
This Prospectus may not be used to consummate sales of the Securities
unless accompanied by a Prospectus Supplement.
THE DATE OF THE PROSPECTUS IS , 1997.
<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements, and other information filed by the Company with the Commission can
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the following Regional Offices of the Commission: Chicago
Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and New York Regional Office, Seven World Trade Center, 13th
Floor, New York, New York 10048. Copies of such material can be obtained from
the Public Reference Section of the Commission, Washington, D.C. 20549 at
prescribed rates. The Commission maintains a Web site that contains reports,
proxy and information statements and other materials that are filed through the
Commission's Electronic Data Gathering Analysis and Retrieval System. The Web
site can be accessed at http://www.sec.gov. In addition, reports, proxy
statements and other information concerning the Company can be inspected at the
New York Stock Exchange, 20 Broad Street, New York, New York 10005, on which
exchange the Common Stock is listed.
This Prospectus constitutes a part of two Registration Statements on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statements") filed by the Company with the Commission under the Securities Act
of 1933, as amended (the "Securities Act"). This Prospectus omits certain of the
information contained in the Registration Statements, and reference is hereby
made to the Registration Statements for further information with respect to the
Company and the securities offered hereby. Any statements contained herein
concerning the provisions of any document filed as an exhibit to the
Registration Statements or otherwise filed with the Commission are not
necessarily complete, and in each instance reference is made to the copy of such
document so filed. Each such statement is qualified in its entirety by such
reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission (File No.
1-6446) pursuant to the Exchange Act are incorporated by reference and made a
part hereof:
(a) the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, as amended by Amendment No. 1 thereto;
(b) the Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, June 30, and September 30, 1997; and
(c) the Company's Current Reports on Form 8-K filed with the
Commission on January 23 and 28 and October 27, 1997.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act, after the date of this Prospectus and
prior to the termination of the offering of the Securities pursuant hereto,
shall be deemed to be incorporated by reference herein and to be a part hereof
from the date of filing of such document. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to any person, including any
beneficial owner of Securities, to whom this Prospectus is delivered, upon
written or oral request of such person, a copy of any and all of the documents
referred to above which have been incorporated by reference in this Prospectus
(other than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such
2
<PAGE> 4
documents). Such requests should be directed to the office of the Treasurer, K N
Energy, Inc., P.O. Box 281304, Lakewood, Colorado 80228-8304, telephone number
(303) 989-1740.
THE COMPANY
The Company and its subsidiaries constitute an integrated energy services
company with operations that include natural gas gathering, processing,
marketing, field services, storage and transportation and energy commodity sales
of natural gas and natural gas liquids. The Company and its subsidiaries also
sell innovative products and services, such as the Simple Choice(SM) menu of
products and call center services designed for consumers, utilities and
commercial entities.
K N was incorporated under the laws of the State of Kansas in 1927. The
address of its principal executive offices is 370 Van Gordon Street, P. O. Box
281304, Lakewood, Colorado 80228-8304 and its telephone number is (303)
989-1740.
Additional information concerning the Company and its subsidiaries is
included in the Company reports and other documents incorporated by reference in
this Prospectus. See "Available Information" and "Incorporation of Certain
Documents by Reference."
USE OF PROCEEDS
Except as may otherwise be described in the Prospectus Supplement relating
to an offering of Securities, the net proceeds from the sale of the Securities
offered by the Company pursuant to this Prospectus and such Prospectus
Supplement (the "Offered Securities") will be used for general corporate
purposes. Any specific allocation of the net proceeds of an offering of
Securities by the Company to a specific purpose will be determined at the time
of such offering and will be described in the related Prospectus Supplement.
The Company will not receive any proceeds from the sale of any Common Stock
by the Selling Stockholder.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's consolidated ratios of
earnings to fixed charges for the periods shown.
<TABLE>
<CAPTION>
NINE MONTHS YEARS ENDED DECEMBER 31,
ENDED SEPTEMBER 30, ----------------------------------------------------
1997 1996 1995 1994 1993 1992
- ------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
2.47 3.21 3.07 1.69 2.41 2.61
</TABLE>
The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges. For this purpose, earnings are the sum of net income, taxes
and fixed charges. Fixed charges are interest, amortization of debt discount,
premium and expense, preferred stock dividends of a subsidiary, and the
estimated interest portion of rental charges. The allowance for borrowed funds
used during construction recognized for gas utility operations has been added to
fixed charges and is included in earnings. A statement setting forth the
computation of the ratios of earnings to fixed charges is filed as an exhibit to
the later of the two Registration Statements of which this Prospectus forms a
part.
3
<PAGE> 5
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will constitute either senior or subordinated debt of
the Company and will be issued, in the case of Debt Securities that will be
senior debt ("Senior Debt Securities"), under an Indenture dated as of November
20, 1993 (the "Senior Debt Indenture"), between the Company and First Trust
National Association, as successor trustee, and, in the case of Debt Securities
that will be subordinated debt ("Subordinated Debt Securities"), under a
Subordinated Indenture dated as of May 15, 1996 (the "Subordinated Debt
Indenture"), between the Company and First Trust National Association, as
trustee. The Senior Debt Indenture and the Subordinated Debt Indenture are
sometimes hereinafter referred to individually as an "Indenture" and
collectively as the "Indentures." First Trust National Association (and any
successor thereto as trustee under the Indentures) is hereinafter referred to as
the "Trustee." The Indentures are filed as exhibits to the Registration
Statements. The following summaries of certain provisions of the Indentures and
the Debt Securities do not purport to be complete and summaries of certain
provisions of the Indentures and the Debt Securities do not purport to be
complete and such summaries are subject to the detailed provisions of the
applicable Indenture to which reference is hereby made for a full description of
such provisions, including the definition of certain terms used herein. Section
references in parentheses below are to sections in both Indentures unless
otherwise indicated. Wherever particular sections or defined terms of the
applicable Indenture are referred to, such sections or defined terms are
incorporated herein by reference as part of the statement made, and the
statement is qualified in its entirety by such reference. The Indentures are
substantially identical, except for certain covenants of the Company and
provisions relating to subordination and conversion.
The Debt Securities may be issued from time to time in one or more series.
The following description of the Debt Securities sets forth certain general
terms and provisions of the Debt Securities of all series. The particular terms
of each series of Debt Securities offered by any Prospectus Supplement (the
"Offered Debt Securities") will be described therein.
PROVISIONS APPLICABLE TO BOTH SENIOR AND SUBORDINATED DEBT SECURITIES
General. The Debt Securities will be unsecured senior or subordinated
obligations of the Company and may be issued from time to time in one or more
series. The Indentures do not limit the amount of Debt Securities, debentures,
notes or other types of indebtedness that may be issued by the Company or any of
its subsidiaries nor do they restrict transactions between the Company and its
affiliates or the payment of dividends or other distributions by the Company to
its stockholders. The rights of the Company's creditors, including holders of
Debt Securities, will be limited to the assets of the Company and will not be an
obligation of any of its Subsidiaries. In addition, other than as may be set
forth in any Prospectus Supplement, the Indentures do not and the Debt
Securities will not contain any covenants or other provisions that are intended
to afford holders of the Debt Securities special protection in the event of
either a change of control of the Company or a highly leveraged transaction by
the Company.
Reference is made to the Prospectus Supplement for the following terms of
and information relating to the Offered Debt Securities (to the extent such
terms are applicable to such Offered Debt Securities): (i) the title of the
Offered Debt Securities; (ii) classification as either Senior Debt Securities or
Subordinated Debt Securities; (iii) whether the Offered Debt Securities that
constitute Subordinated Debt Securities are convertible into Common Stock and,
if so, the terms and conditions upon which such conversion will be effected
including the initial conversion price or conversion rate and any adjustments
thereto in addition to or different from those described herein, the conversion
period and other conversion provisions in addition to or in lieu of those
described herein; (iv) any limit on the aggregate principal amount of the
Offered Debt Securities; (v) whether the Offered Debt Securities are to be
issuable as Registered Securities or Bearer Securities or both, whether any of
the Offered Debt Securities are to be issuable initially in temporary global
form and whether any of the Offered Debt Securities are to be in permanent
global form; (vi) the price or prices (expressed as a percentage of the
aggregate principal amount thereof) at which the Offered Debt Securities will be
issued; (vii) the date or dates on which the Offered Debt Securities will
mature; (viii) the rate or rates per annum (or the method by which such will be
determined) at which the Offered Debt Securities will bear interest, if any, and
the date from which any such interest will accrue; (ix) the Interest Payment
Dates on
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which any such interest on the Offered Debt Securities will be payable, the
Regular Record Date for any interest payable on any Offered Debt Securities
which are Registered Securities on any Interest Payment Date and the extent to
which, or the manner in which, any interest payable on a temporary global
Offered Debt Security on an Interest Payment Date will be paid; (x) any
mandatory or optional sinking fund or analogous provisions; (xi) each office or
agency where, subject to the terms of the Indentures as described below under
"Payment and Paying Agents", the principal of and any premium and interest on
the Offered Debt Securities will be payable and each office or agency where,
subject to the terms of the Indentures as described below under "Form, Exchange,
Registration and Transfer", the Offered Debt Securities may be presented for
registration of transfer or exchange; (xii) the right of the Company to redeem
the Offered Debt Securities at its option and the period or periods, if any,
within which and the price or prices at which the Offered Debt Securities may,
pursuant to any optional or mandatory redemption provisions, be redeemed, in
whole or in part, and the other detailed terms and provisions of any such
optional or mandatory redemption; (xiii) the denominations in which any Offered
Debt Securities which are Registered Securities will be issuable, if other than
denominations of $1,000 and any integral multiple thereof, and the denomination
or denominations in which any Offered Debt Securities which are Bearer
Securities will be issuable, if other than the denomination of $5,000; (xiv) the
currency or currencies (including composite currencies) in which payment of
principal of and any premium and interest on the Offered Debt Securities is
payable; (xv) any index used to determine the amount of payments of principal of
and any premium and interest on the Offered Debt Securities; (xvi) information
with respect to book-entry procedures, if any; and (xvii) any other terms of the
Offered Debt Securities not inconsistent with the provisions of the Indentures.
(Section 301) Any such Prospectus Supplement will also describe any special
provisions for the payment of additional amounts with respect to the Offered
Debt Securities.
Debt Securities may be issued as Original Issue Discount Securities. An
Original Issue Discount Security is a Debt Security, including any Zero-Coupon
Security, which is issued at a price lower than the amount payable upon the
Stated Maturity thereof and which provides that upon redemption or acceleration
of the maturity thereof an amount less than the amount payable upon the Stated
Maturity thereof and determined in accordance with the terms of such Debt
Security shall become due and payable. Special United States federal income tax
considerations applicable to Debt Securities issued at an original issue
discount, including Original Issue Discount Securities, and special United
States tax considerations and other terms and restrictions applicable to any
Debt Securities which are issued in bearer form, offered exclusively to United
States Aliens or denominated in other than United States dollars, will be set
forth in a Prospectus Supplement relating thereto.
Form, Exchange, Registration and Transfer. Debt Securities of a series may
be issuable in definitive form solely as Registered Securities, solely as Bearer
Securities or as both Registered Securities and Bearer Securities. Unless
otherwise indicated in an applicable Prospectus Supplement, Bearer Securities
will have interest coupons attached. (Section 201) The Indentures also provide
that Debt Securities of a series may be issuable in temporary or permanent
global form. (Section 201)
Registered Securities of any series will be exchangeable for other
Registered Securities of the same series of any authorized denominations and of
a like aggregate principal amount and tenor. In addition, if Debt Securities of
any series are issuable as both Registered Securities and Bearer Securities, at
the option of the Holder, and subject to the terms of the applicable Indenture,
Bearer Securities (with all unmatured coupons, except as provided below, and all
matured coupons in default) of such series will be exchangeable for Registered
Securities of the same series of any authorized denominations and of a like
aggregate principal amount and tenor. Bearer Securities surrendered in exchange
for Registered Securities between a Regular Record Date or a Special Record Date
and the relevant date for payment of interest shall be surrendered without the
coupon relating to such date for payment of interest, and interest accrued as of
such date will not be payable in respect of the Registered Security issued in
exchange for such Bearer Security, but will be payable only to the Holder of
such coupon when due in accordance with the terms of the applicable Indenture.
Bearer Securities will not be issued in exchange for Registered Securities.
(Section 305)
Debt Securities may be presented for exchange as provided above, and
Registered Securities may be presented for registration of transfer (with the
form of transfer endorsed thereon duly executed), at the office
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<PAGE> 7
of the Security Registrar or at the office of any transfer agent designated by
the Company for such purpose with respect to any series of Debt Securities and
referred to in an applicable Prospectus Supplement, without service charge and
upon payment of any taxes and other governmental charges as described in the
Indentures. Such transfer or exchange will be effected upon the Security
Registrar or such transfer agent, as the case may be, being satisfied with the
documents of title and identity of the person making the request. The Trustee
will serve initially as Security Registrar. (Section 305) If a Prospectus
Supplement refers to any transfer agents (in addition to the Security Registrar)
initially designated by the Company with respect to any series of Debt
Securities, the Company may at any time rescind the designation of any such
transfer agent or approve a change in the location through which any such
transfer agent acts, except that, if Debt Securities of a series are issuable
solely as Registered Securities, the Company will be required to maintain a
transfer agent in each Place of Payment for such series and, if Debt Securities
of a series are also issuable as Bearer Securities, the Company will be required
to maintain (in addition to the Security Registrar) a transfer agent in a Place
of Payment for such series located outside the United States. The Company may at
any time designate additional transfer agents with respect to any series of Debt
Securities. (Section 1002)
In the event of any redemption in part, the Company shall not be required
to (i) issue, register the transfer of or exchange Debt Securities of any series
during a period beginning at the opening of business 15 days prior to the
selection of Debt Securities of that series for redemption and ending on the
close of business on (A) if Debt Securities of the series are issuable only as
Registered Securities, the day of mailing of the relevant notice of redemption
and (B) if Debt Securities of the series are issuable as Bearer Securities, the
date of the first publication of the relevant notice of redemption or, if
Securities of the series are also issuable as Registered Securities and there is
no publication, the mailing of the relevant notice of redemption; (ii) register
the transfer of or exchange any Registered Security, or portion thereof, called
for redemption, except the unredeemed portion of any Registered Security being
redeemed in part; or (iii) exchange any Bearer Security called for redemption,
except to exchange such Bearer Security for a Registered Security of that series
and like tenor which is immediately surrendered for redemption. (Section 305)
Payment and Paying Agents. Unless otherwise indicated in an applicable
Prospectus Supplement, payment of principal of and any premium and interest on
Bearer Securities will be payable, subject to any applicable laws and
regulations, at the offices of such Paying Agents outside the United States as
the Company may designate from time to time, in the manner indicated in such
Prospectus Supplement. (Section 1002) Unless otherwise indicated in an
applicable Prospectus Supplement, payment of interest on Bearer Securities on
any Interest Payment Date will be made only against surrender to the Paying
Agent of the coupon relating to such Interest Payment Date. (Section 1001) No
payment with respect to any Bearer Security will be made at any office or agency
of the Company in the United States or by check mailed to any address in the
United States or by transfer to any account maintained with a bank located in
the United States. Notwithstanding the foregoing, payments of principal of and
any premium and interest on Bearer Securities denominated and payable in U.S.
dollars will be made at the office of the Company's Paying Agent in the Borough
of Manhattan. The City of New York, if (but only if) payment of the full amount
thereof in U.S. dollars at all offices or agencies outside the United States is
illegal or effectively precluded by exchange controls or other similar
restrictions. (Section 1002)
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of and any premium and interest on Registered Securities will be
made at the office of such Paying Agent or Paying Agents as the Company may
designate from time to time, except that at the option of the Company payment of
any interest may be made by check mailed on or before the due date to the
address of the Person entitled thereto as such address shall appear in the
Security Register. (Sections 307, 1002) Unless otherwise indicated in an
applicable Prospectus Supplement, payment of any installment of interest on
Registered Securities will be made to the Person in whose name such Registered
Security is registered at the close of business on the Regular Record Date for
such interest. (Section 307)
Unless otherwise indicated in an applicable Prospectus Supplement, the
Trustee, at its corporate trust office in Chicago, Illinois, will act as Paying
Agent for payments with respect to Debt Securities which are issuable solely as
Registered Securities and the Company will maintain a Paying Agent outside the
United States for payments with respect to Debt Securities (subject to
limitations described above in the case of
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<PAGE> 8
Bearer Securities) which are issuable solely as Bearer Securities or as both
Registered Securities and Bearer Securities. Any Paying Agents outside the
United States and any other Paying Agents in the United States initially
designated by Company for the Debt Securities will be named in an applicable
Prospectus Supplement. The Company may at any time designate additional Paying
Agents or rescind the designation of any Paying Agent or approve a change in the
office through which any Paying Agent acts, except that, if Debt Securities of a
series are issuable solely as Registered Securities, the Company will be
required to maintain a Paying Agent in each Place of Payment for such series
and, if Debt Securities of a series are issuable as Bearer Securities, the
Company will be required to maintain (i) a Paying Agent in the Borough of
Manhattan, The City of New York for principal payments with respect to any
Registered Securities of the series (and for payments with respect to Bearer
Securities of the series in the circumstances described above, but not
otherwise), and (ii) a Paying Agent in a Place of Payment located outside the
United States where Debt Securities of such series and any coupons appertaining
thereto may be presented and surrendered for payment. (Section 1002)
All moneys paid by the Company to a Paying Agent for the payment of
principal of and any premium or interest on any Debt Security which remain
unclaimed at the end of two years after such principal, premium or interest
shall have become due and payable will (subject to applicable escheat laws) be
repaid to the Company, and the Holder of such Debt Security or any coupon will
thereafter look only to the Company for payment thereof. (Section 1003)
Global Debt Securities. Debt Securities of a series may be issued in whole
or in part in the form of one or more global Debt Securities that will be
deposited with, or on behalf of, a depository identified in the Prospectus
Supplement relating to such series. Global Debt Securities may be issued in
either registered or bearer form and in either temporary or permanent form.
(Section 203) Unless and until it is exchanged in whole or in part for the
individual Debt Securities represented thereby, a global Debt Security may not
be transferred except as a whole by the depository for such global Debt Security
to a nominee of such depository or by a nominee of such depository to such
depository or another nominee of such depository or by the depository or any
nominee to a successor depository or any nominee of such successor.
The specific terms of the depository arrangement with respect to a series
of Debt Securities and certain limitations and restrictions relating to a series
of Bearer Securities in the form of one or more global Debt Securities will be
described in the Prospectus Supplement relating to such series.
Events of Default. Any one of the following events constitutes an Event of
Default under each Indenture with respect to Debt Securities of any series: (a)
failure to pay any interest on any Debt Security of that series when due,
continued for 30 days; (b) failure to pay principal of or any premium on any
Debt Security of that series when due; (c) failure to deposit any sinking fund
payment, when due, in respect of any Debt Security of that series; (d) failure
to perform any other covenant of the Company in such Indenture (other than a
covenant included in such Indenture solely for the benefit of series of any Debt
Securities other than that series), continued for 90 days after written notice
as provided in such Indenture; (e) certain events in bankruptcy, insolvency or
reorganization involving the Company; and (f) any other Event of Default
provided with respect to Debt Securities of that series (Section 501)
If an Event of Default with respect to Debt Securities of any series at the
time Outstanding occurs and is continuing, either the Trustee or the Holders of
at least 25% in aggregate principal amount of the Outstanding Securities of that
series by notice as provided in the applicable Indenture may declare the
principal amount (or, if the Debt Securities of that series are Original Issue
Discount Securities, such portion of the principal amount as may be specified in
the terms of that series) of all the Debt Securities of that series to be due
and payable immediately. At any time after a declaration of acceleration with
respect to Debt Securities of any series has been made, but before a judgment or
decree for payment of money has been obtained by the Trustee, the Holders of a
majority in aggregate principal amount of the Outstanding Securities of that
series may, under certain circumstances, rescind and annul such acceleration.
(Section 502)
Each Indenture provides that, subject to the duty of the Trustee during
default to act with the required standard of care, the Trustee is under no
obligation to exercise any of its rights or powers under such Indenture at the
request or direction of any of the Holders, unless such Holders shall have
offered to the Trustee
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reasonable indemnity. (Sections 601, 603) Subject to such provisions for the
indemnification of the Trustee, the Holders of a majority in aggregate principal
amount of the Outstanding Securities of any series have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee, with
respect to the Debt Securities of that series; provided, however, that the
Trustee is not obligated to take any action unduly prejudicial to Holders not
joining in such direction or involving the Trustee in personal liability.
(Section 512)
The Company is required to furnish to the Trustee annually a statement as
to the performance by the Company of its obligations under each Indenture and as
to any default in such performance. (Section 1007)
Defeasance. If so specified with respect to any particular series of Debt
Securities issued under an Indenture, the Company may discharge its indebtedness
and its obligations or certain of its obligations under such Indenture with
respect to such series by depositing funds or obligations issued or guaranteed
by the United State of America with the Trustee. (Sections 1301-1303)
Defeasance and Discharge. Each Indenture provides that, if so specified
with respect to the Debt Securities of any series issued under such Indenture
(other than convertible Subordinated Debt Securities), the Company will be
discharged from any and all obligations in respect of the Debt Securities of
such series (except for certain obligations relating to temporary Debt
Securities and exchange of Debt Securities, registration of transfer or exchange
of Debt Securities of such series, replacement of stolen, lost or mutilated Debt
Securities of such series, maintenance of paying agencies to hold moneys for
payment in trust and payment of additional amounts, if any, required in
consequence of United States withholding taxes imposed on payments to non-United
States persons) upon the deposit with the Trustee, in trust, of money and/or
U.S. Government Obligations which through the payment of interest and principal
in respect thereof in accordance with their terms will provide money in an
amount sufficient to pay the principal of (and premium, if any), and each
installment of interest on, the Debt Securities of such series on the Stated
Maturity of such payments in accordance with the terms of such Indenture and the
Debt Securities of such series. (Sections 1302, 1304) Such a trust may only be
established if, among other things, the Company has delivered to the Trustee an
Opinion of Counsel to the effect that (i) the Company has received from, or
there has been published by, the Internal Revenue Service a ruling, or (ii)
since the date of such Indenture there has been a change in applicable federal
income tax law, in either case to the effect that, and based thereon such
Opinion of Counsel shall confirm that, the Holders of such series will not
recognize income, gain or loss for federal income tax purposes as a result of
such deposit, defeasance and discharge, and will be subject to federal income
tax on the same amounts and in the same manner and at the same times as would
have been the case if such deposit, defeasance and discharge had not occurred.
(Section 1304) In the event of any such defeasance and discharge of Debt
Securities of such series, Holders of such series would be entitled to look only
to such trust fund for payment of principal of and any premium and any interest
on their Debt Securities until Maturity.
Covenant Defeasance. Each Indenture also provides that, if so specified
with respect to the Debt Securities of any series issued thereunder, the Company
may omit to comply with certain restrictive covenants, including (in the case of
the Senior Debt Indenture) the covenant described under "Limitation on Liens"
below, but excluding (in the case of the Subordinated Debt Indenture) any
applicable obligation of the Company respecting the conversion of Debt
Securities of such series into Common Stock, and any such omission shall not be
an Event of Default with respect to the Debt Securities of such series, upon the
deposit with the Trustee, in trust, of money and/or U.S. Government Obligations
which through the payment of interest and principal in respect thereof in
accordance with their terms will provide money in an amount sufficient to pay
the principal of (and premium, if any), and each installment of interest on, the
Debt Securities of such series on the Stated Maturity of such payments in
accordance with the terms of such Indenture and the Debt Securities of such
series. The obligations of the Company under such Indenture and the Debt
Securities of such series other than with respect to such covenants shall remain
in full force and effect. (Section 1303) Such a trust may be established only
if, among other things, the Company has delivered to the Trustee an Opinion of
Counsel to the effect that the Holders of such series will not recognize income,
gain or loss for federal income tax purposes as a result of such deposit and
defeasance of certain obligations and will be subject to federal income tax on
the same amounts and in the same manner and at the same time as would have been
the case if such deposit and defeasance had not occurred. (Section 1304)
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Although the amount of money and U.S. Government Obligations on deposit
with the Trustee would be intended to be sufficient to pay amounts due on the
Debt Securities of such series at the time of their Stated Maturity, in the
event the Company exercises its option to omit compliance with the covenants
defeased with respect to the Debt Securities of any series as described above,
and the Debt Securities of such series are declared due and payable because of
the occurrence of any Event of Default, such amount may not be sufficient to pay
amounts due on the Debt Securities of such series at the time of the
acceleration resulting from such Event of Default. The Company shall in any
event remain liable for such payments as provided in the applicable Indenture.
Federal Income Tax Consequences. Under current United States federal income
tax law, defeasance and discharge would likely be treated as a taxable exchange
of Debt Securities to be defeased for an interest in the defeasance trust. As a
consequence, a holder would recognize gain or loss equal to the difference
between the holder's cost or other tax basis for such Debt Securities and the
value of the holder's interest in the defeasance trust, and thereafter would be
required to include in income the holder's share of the income, gain or loss of
the defeasance trust. Under current United States federal income tax law,
covenant defeasance would ordinarily not be treated as a taxable exchange of
such Debt Securities.
Meetings, Modification and Waiver. Modifications and amendments of either
Indenture may be made by the Company and the Trustee with the consent of the
Holders of a majority in aggregate principal amount of the Outstanding
Securities of each series affected by such modification or amendment; provided,
however, that no such modification or amendment may, without consent of the
Holder of each Outstanding Security affected thereby, (a) change the Stated
Maturity of the principal of, or any installment of principal of or interest on,
any Debt Security, (b) change the Redemption Date with respect to any Debt
Security, (c) reduce the principal amount of, or premium or interest on, any
Debt Security, (d) change any obligation of the Company to pay additional
amounts, (e) reduce the amount of principal of an Original Issue Discount
Security payable upon acceleration of the Maturity thereof, (f) change the coin
or currency in which any Debt Security or any premium or interest thereon is
payable, (g) change the redemption right of any Holder, (h) impair the right to
institute suit for the enforcement of any payment on or with respect to any Debt
Security or any conversion right with respect thereto, (i) reduce the percentage
in principal amount of Outstanding Securities of any series, the consent of
whose Holders is required for modification or amendment of such Indenture or for
waiver of compliance with certain provisions of such Indenture or for waiver of
certain defaults, (j) reduce the requirements contained in such Indenture for
quorum or voting, (k) change any obligation of the Company to maintain an office
or agency in the places and for the purposes required by such Indenture, (l)
adversely affect the right to convert Subordinated Debt Securities, if
applicable, or (l) modify any of the above provisions. (Section 902)
The Subordinated Debt Indenture may not be amended to alter the
subordination of any outstanding Subordinated Debt Securities without the
consent of each holder of Senior Indebtedness (as defined below under
"-- Provisions Applicable Solely to Subordinated Debt Securities") then
outstanding that would be adversely affected thereby. (Section 907 of the
Subordinated Debt Indenture)
The Holders of a majority in aggregate principal amount of the Outstanding
Securities of each series may, on behalf of all Holders of that series, waive,
insofar as that series is concerned, compliance by the Company with certain
restrictive provisions of the Indenture under which such series has been issued.
(Section 1008) The Holders of a majority in aggregate principal amount of the
Outstanding Securities of each series may, on behalf of all Holders of that
series, waive any past default under the applicable Indenture with respect to
any Debt Securities of that series, except a default (a) in the payment of
principal of, or premium, if any, or any interest on any Debt Security of such
series or (b) in respect of a covenant or provision of such Indenture which
cannot be modified or amended without the consent of the Holder of each
Outstanding Security of such series affected. (Section 513)
Each Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities have given any request,
demand, authorization, direction, notice, consent or waiver thereunder or are
present at a meeting of the Holders for quorum purposes, (i) the principal
amount of an Original Issue Discount Security that is deemed to be Outstanding
will be the amount of the principal that
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<PAGE> 11
would be due and payable as of the date of such determination upon acceleration
of the Maturity thereof, and (ii) the principal amount of a Debt Security
denominated in a foreign currency or currency units will be the U.S. dollar
equivalent, determined on the date of original issuance of such Debt Security,
of the principal amount of such Debt Security or, in the case of an Original
issue Discount Security, the U.S. dollar equivalent, determined on the date of
original issuance of such Security, of the amount determined as provided in (i)
above. (Section 101)
Each Indenture contains provisions for convening meetings of the Holders of
a series if Debt Securities of that series are issuable as Bearer Securities.
(Section 1401) A meeting may be called at any time by the Trustee, and also,
upon request, by the Company or the Holders of at least 10% in aggregate
principal amount of the Outstanding Securities of such series, in any such case
upon notice given in accordance with "Notices" below. (Section 1402) Except for
any consent which must be given by the Holder of each Outstanding Security
affected thereby, as described above, any resolution presented at a meeting (or
adjourned meeting at which a quorum is present) may be adopted by the
affirmative vote of the Holders of a majority in aggregate principal amount of
the Outstanding Securities of that series; provided, however, that any
resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action which may be made, given or taken by the
Holders of a specified percentage, which is less than a majority, in aggregate
principal amount of the Outstanding Securities of a series may be adopted at a
meeting (or adjourned meeting duly reconvened at which a quorum is present) by
the affirmative vote of the Holders of such specified percentage in aggregate
principal amount of the Outstanding Securities of that series. Any resolution
passed or decision taken at any meeting of Holders of any series duly held in
accordance with the applicable Indenture will be binding on all Holders of that
series and related coupons. The quorum at any meeting, and at any reconvened
meeting, will be Persons holding or representing a majority in aggregate
principal amount of the Outstanding Securities of a series. (Section 1404)
Consolidation, Merger and Sale of Assets. The Company, without the consent
of the Holders of any of the outstanding Debt Securities under either Indenture,
may consolidate with or merge into, or convey, transfer or lease its assets
substantially as an entirety to, any Person which is a corporation, partnership
or trust organized and validly existing under the laws of any domestic
jurisdiction, provided that any successor Person assumes the Company's
obligations on the Securities and under such Indenture, that after giving effect
to the transaction no Event of Default, and no event which, after notice or
lapse of time, would become an Event of Default, shall have occurred and be
continuing, and that certain other conditions are met. (Section 801)
Notices. Except as otherwise provided in the Indentures, notices to Holders
of Bearer Securities will be given by publication at least twice in a daily
newspaper in The City of New York and in such other city or cities as may be
specified in such Bearer Securities. Notices to Holders of Registered Securities
will be given by mail to the addresses of such Holders as they appear in the
Security Register. (Section 106)
Title. Title to any Bearer Securities (including Bearer Securities in
permanent global form) and any coupons appertaining thereto will pass by
delivery. The Company, the Trustee and any agent of the Company or the Trustee
may treat the bearer of any Bearer Security and the bearer of any coupon and the
registered owner of any Registered Security as the owner thereof (whether or not
such Debt Security or coupon shall be overdue and notwithstanding any notice to
the contrary) for the purpose of making payment and for all other purposes.
(Section 308)
Replacement of Securities and Coupons. Any mutilated Debt Security or a
Debt Security with a mutilated coupon appertaining thereto will be replaced by
the Company at the expense of the Holder upon surrender of such Debt Security to
the Trustee. Debt Securities or coupons that became destroyed, stolen or lost
will be replaced by the Company at the expense of the Holder upon delivery to
the Trustee of the Debt Security and coupons or evidence of destruction, loss or
theft thereof satisfactory to the Company and the Trustee; in the case of any
coupon which becomes destroyed, stolen or lost, such coupon will be replaced by
issuance of a new Debt Security in exchange for the Debt Security to which such
coupon appertains. In the case of a destroyed, lost or stolen Debt Security or
coupon, an indemnity satisfactory to the Trustee and the Company may be required
at the expense of the Holder of such Debt Security or coupon before a
replacement Debt Security will be issued. (Section 306)
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Governing Law. The Indentures, the Debt Securities and coupons will be
governed by, and construed in accordance with, the laws of the State of New
York. (Section 113)
Regarding the Trustee. First Trust National Association, the Trustee under
each Indenture, is also trustee under another indenture under which several
issues of the Company's debt securities are outstanding.
Each Indenture contains certain limitations on the right of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize for its own account on certain property received in
respect of any such claim as security or otherwise. (Section 613) The Trustee is
permitted to engage in certain other transactions; however, if it acquires any
conflicting interest (as described in the Indentures), it must eliminate such
conflict or resign. (Section 608)
Pursuant to the Trust Indenture Act of 1939, as amended, should a default
occur with respect to either the Senior Debt Securities or the Subordinated Debt
Securities, First Trust National Association would be required to resign as
Trustee under one of the Indentures within 90 days of such default unless such
default were cured, duly waived or otherwise eliminated.
PROVISIONS APPLICABLE SOLELY TO SENIOR DEBT SECURITIES
General. Senior Debt Securities will be issued under the Senior Debt
Indenture, and each series will rank pari passu as to the right of payment of
principal and any premium and interest with each other series issued thereunder
and will rank senior to all series of Subordinated Debt Securities that may be
issued.
Certain Definitions. For purposes of the following discussion, the
following definitions are applicable (Section 101 of the Senior Debt Indenture).
"Net Tangible Assets" means the total amount of assets appearing on a
consolidated balance sheet of the Company and its Subsidiaries less, without
duplication: (a) all current liabilities (excluding any thereof which are
extendible or renewable by their terms or replaceable or refundable pursuant to
enforceable commitments at the option of the obligor thereon without requiring
the consent of the obligee to a time more than 12 months after the time as of
which the amount thereof is being computed and excluding current maturities of
long-term debt and preferred stock); (b) all reserves for depreciation and other
asset valuation reserves but excluding reserves for deferred federal income
taxes arising from accelerated depreciation or otherwise; (c) all goodwill,
trademarks, trade names, patents and unamortized debt discount and expense and
other like intangible assets carried as an asset and (d) all appropriate
adjustments on account of minority interests of other Persons holding common
stock in any Subsidiary.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Principal Property" means any natural gas pipeline, natural gas
distribution system, natural gas gathering system or natural gas storage
facility located in the United States, except any such property that in the
opinion of the Board of Directors is not of material importance to the business
conducted by the Company and its consolidated Subsidiaries taken as a whole.
"Principal Subsidiary" means any Subsidiary which owns a Principal
Property.
"Subsidiary" means a corporation more than 50% of the outstanding stock of
which is owned, directly or indirectly, by the Company or by one or more
Subsidiaries, or by the Company and one or more other Subsidiaries. For the
purposes of this definition, "voting stock" means stock which ordinarily has
voting power for the election of directors, whether at all times or only so long
as no senior class of stock has such voting power by reason of any contingency.
Limitation on Liens. The Company covenants in the Senior Debt Indenture
that it will not, nor will it permit any Subsidiary to, issue, assume or
guarantee any debt for money borrowed ("Debt") if such Debt is secured by a
mortgage, pledge, security interest or lien (a "mortgage" or "mortgages") upon
any Principal Property of the Company or any Principal Subsidiary or upon any
shares of stock or indebtedness of any Principal Subsidiary (whether such
Principal Property, shares or indebtedness was owned on the date of the
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Senior Debt Indenture or thereafter acquired) without in any such case
effectively providing that the Senior Debt Securities shall be secured equally
and ratably with (or prior to) such Debt, except that the foregoing restrictions
shall not apply to: (a) mortgages on any property acquired, constructed or
improved by the Company or any Principal Subsidiary after the date of the Senior
Debt Indenture which are created within 180 days after such acquisition (or in
the case of property constructed or improved, after the completion and
commencement of commercial operation of such property, whichever is later) to
secure or provide for the payment of the purchase price or cost thereof,
provided that in the case of such construction or improvement the mortgages
shall not apply to any property theretofore owned by the Company or any
Subsidiary other than theretofore unimproved real property; (b) existing
mortgages on property acquired (including mortgages on any property acquired
from a Person which is consolidated with or merged with or into the Company or a
Subsidiary) or mortgages outstanding at the time any corporation becomes a
Subsidiary; (c) mortgages in favor of domestic or foreign governmental bodies to
secure advances or other payments pursuant to any contract or statute or to
secure indebtedness incurred to finance the purchase price or cost of
constructing or improving the property subject to such mortgages, including
mortgages to secure Debt of the pollution control or industrial revenue bond
type; (d) mortgages in favor of the Company or any Principal Subsidiary; or (e)
any extension, renewal or replacement (or successive extensions, renewals or
replacements), in whole or in part, of any mortgage referred to in any of the
foregoing clauses (a)-(d). (Section 1006 of the Senior Debt Indenture)
Notwithstanding the foregoing, the Company and any Subsidiary may, without
securing the Senior Debt Securities, issue, assume or guarantee secured Debt
(which would otherwise be subject to the foregoing restrictions) in an aggregate
amount which, together with all other such Debt, does not exceed 10% of the Net
Tangible Assets, as shown on a consolidated balance sheet as of a date not more
than 90 days prior to the proposed transaction prepared by the Company in
accordance with generally accepted accounting principles. (Section 1006 of the
Senior Debt Indenture)
PROVISIONS APPLICABLE SOLELY TO SUBORDINATED DEBT SECURITIES
Subordination. The Subordinated Debt Securities will be subordinate and
junior in right of payment, to the extent set forth in the Subordinated Debt
Indenture, to all Senior Indebtedness (as defined below) of the Company. If the
Company should default in the payment of any principal of or premium or interest
on any Senior Indebtedness when the same becomes due and payable, whether at
Stated Maturity or a date fixed for prepayment or by declaration of acceleration
or otherwise, then, upon written notice of such default to the Company by the
holders of such Senior Indebtedness or any trustee therefor and subject to
certain rights of the Company to dispute such default and subject to proper
notification of the Trustee, unless and until such default has been cured or
waived or ceases to exist, no direct or indirect payment (in cash, property,
securities, by set-off or otherwise) will be made or agreed to be made for
principal of, premium, if any, or interest, if any, on the Subordinated Debt
Securities, or in respect of any redemption, retirement, purchase or other
acquisition of the Subordinated Debt Securities other than those made in capital
stock of the Company (or cash in lieu of fractional shares thereof) pursuant to
any conversion right of the Subordinated Debt Securities or otherwise made in
capital stock of the Company. (Sections 1601, 1604 and 1605 of the Subordinated
Debt Indenture)
"Senior Indebtedness" is defined in Section 101 of the Subordinated Debt
Indenture as Indebtedness (as defined below) of the Company outstanding at any
time except (a) any Indebtedness as to which, by the terms of the instrument
creating or evidencing the same, it is provided that such Indebtedness is not
senior in right of payment to the Subordinated Debt Securities, (b) the
Subordinated Debt Securities, (c) any Indebtedness of the Company to a
wholly-owned Subsidiary of the Company, (d) interest accruing after the filing
of a petition initiating certain bankruptcy or insolvency proceedings unless
such interest is an allowed claim enforceable against the Company in a
proceeding under federal or state bankruptcy laws and (e) trade accounts
payable. "Indebtedness" is defined in Section 101 of the Subordinated Debt
Indenture as, with respect to any Person, (a) (i) the principal of and premium
and interest, if any, on indebtedness for money borrowed of such Person
evidenced by bonds, notes, debentures or similar obligations, including any
guaranty by such Person of any indebtedness for money borrowed of any other
Person, whether any such indebtedness
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or guaranty is outstanding on the date of the Subordinated Debt Indenture or is
thereafter created, assumed or incurred, (ii) the principal of and premium and
interest, if any, on indebtedness for money borrowed, incurred, assumed or
guaranteed by such Person in connection with the acquisition by it or any of its
subsidiaries of any other business, properties or other assets and (iii) lease
obligations which such Person capitalizes in accordance with Statement of
Financial Accounting Standards No. 13 promulgated by the Financial Accounting
Standards Board or such other generally accepted accounting principles as may be
from time to time in effect, (b) any other indebtedness of such Person,
including any indebtedness representing the balance deferred and unpaid of the
purchase price of any property or interest therein, including any such balance
that constitutes a trade account payable, and any guaranty, endorsement or other
contingent obligation of such Person in respect of any indebtedness of another,
which is outstanding on the date of the Subordinated Debt Indenture or is
thereafter created, assumed or incurred by such Person and (c) any amendments,
modifications, refundings, renewals or extensions of any indebtedness or
obligation described as Indebtedness in clause (a) or (b) above.
If (i) without the consent of the Company a court shall enter (A) an order
for relief with respect to the Company under the United States federal
bankruptcy laws, (B) a judgment, order or decree adjudging the Company a
bankrupt or insolvent, or (C) an order for relief for reorganization,
arrangement, adjustment or composition of or in respect of the Company under the
United States federal bankruptcy laws or state insolvency laws or (ii) the
Company shall institute proceedings for the entry of an order for relief with
respect to the Company under the United States federal bankruptcy laws or for an
adjudication of insolvency, or shall consent to the institution of bankruptcy or
insolvency proceedings against it, or shall file a petition seeking, or seek or
consent to reorganization, arrangement, composition or similar relief under any
applicable law, or shall consent to the filing of such petition or to the
appointment of a receiver, custodian, liquidator, assignee, trustee,
sequestrator or similar official in respect of the Company or of substantially
all of its property, or the Company shall make a general assignment for the
benefit of creditors, then all Senior Indebtedness (including any interest
thereon accruing after the commencement of any such proceedings) will first be
paid in full before any payment or distribution, whether in cash, securities or
other property, is made on account of the principal of, premium, if any, or
interest, if any, on the Subordinated Debt Securities. In such event, any
payment or distribution on account of the principal of, premium, if any, or
interest, if any, on the Subordinated Debt Securities, whether in cash,
securities or other property (other than securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment the payment
of which is subordinate, at least to the extent provided in the subordination
provisions with respect to the Subordinated Debt Securities, to the payment of
all Senior Indebtedness then outstanding and to any securities issued in respect
thereof under any such plan of reorganization or readjustment), which would
otherwise (but for the subordination provisions) be payable or deliverable in
respect of the Subordinated Debt Securities will be paid or delivered directly
to the holders of Senior Indebtedness in accordance with the priorities then
existing among such holders until all Senior Indebtedness (including any
interest thereon accruing after the commencement of any such proceedings) has
been paid in full. If any payment or distribution on account of the principal
of, premium, if any, or interest, if any, on the Subordinated Debt Securities of
any character, whether in cash, securities or other property (other than
securities of the Company or any other corporation provided for by a plan of
reorganization or readjustment the payment of which is subordinate, at least to
the extent provided in the subordination provisions with respect to the
Subordinated Debt Securities, to the payment of all Senior Indebtedness then
outstanding and to any securities issued in respect thereof under any such plan
of reorganization or readjustment), shall be received by the Trustee or any
Holder of any Subordinated Debt Securities in contravention of any of the terms
of the Subordinated Debt Indenture, such payment or distribution will be
received in trust for the benefit of, and will be paid over or delivered and
transferred to, the holders of the Senior Indebtedness then outstanding in
accordance with the priorities then existing among such holders for application
to the payment of all Senior Indebtedness remaining unpaid, to the extent
necessary to pay all such Senior Indebtedness in full. In the event of any such
proceeding, after payment in full of all sums owing with respect to Senior
Indebtedness, the Holders of Subordinated Debt Securities, together with the
holders of any other obligations of the Company ranking on a parity with the
Subordinated Debt Securities, will be entitled to be repaid from the remaining
assets of the Company the amounts at that time due and owing on account of
unpaid principal of or any premium or interest on the Subordinated Debt
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Securities and such other obligations before any payment or other distribution,
whether in cash, property or otherwise, shall be made on account of any capital
stock or obligations of the Company ranking junior to the Subordinated Debt
Securities and such other obligations. (Section 1601 of the Subordinated Debt
Indenture)
The Prospectus Supplement respecting any series of Subordinated Debt
Securities will set forth any subordination provisions applicable to such series
in addition to or different from those described above.
By reason of such subordination, in the event of the insolvency of the
Company, Holders of Senior Indebtedness and holders of other obligations of the
Company that are not subordinated to Senior Indebtedness may receive more,
ratably, than Holders of the Subordinated Debt Securities. Such subordination
will not prevent the occurrence of an Event of Default or limit the right of
acceleration in respect of the Subordinated Debt Securities.
Conversion. The Subordinated Debt Indenture may provide for a right of
conversion of Subordinated Debt Securities into Common Stock (or cash in lieu
thereof). (Sections 301 and 1501 of the Subordinated Debt Indenture) The
following provisions will apply to Debt Securities that are convertible
Subordinated Debt Securities unless otherwise provided in the Prospectus
Supplement for such Debt Securities.
The Holder of any convertible Subordinated Debt Securities will have the
right exercisable at any time set forth in the Prospectus Supplement, unless
previously redeemed or otherwise purchased by the Company, to convert such
Subordinated Debt Securities into shares of Common Stock at the conversion price
or conversion rate set forth in the Prospectus Supplement, subject to
adjustment. (Section 1502 of the Subordinated Debt Indenture) The holder of
convertible Subordinated Debt Securities may convert any portion thereof which
is $1,000 in principal amount or any integral multiple thereof. (Section 1502 of
the Subordinated Debt Indenture)
In certain events, the conversion price or conversion rate will be subject
to adjustment as set forth in the Subordinated Debt Indenture. Such events
include the issuance of shares of Common Stock of the Company as a dividend or
distribution on the Common Stock; subdivisions, combinations and
reclassifications of the Common Stock; the issuance to all holders of Common
Stock of rights or warrants entitling the holders thereof (for a period not
exceeding 45 days) to subscribe for or purchase shares of Common Stock at a
price per share less than the then current market price per share of Common
Stock (as determined pursuant to the Subordinated Debt Indenture); and the
distribution to substantially all holders of Common Stock of evidences of
indebtedness, equity securities (including equity interests in the Company's
Subsidiaries) other than Common Stock, or other assets (excluding cash dividends
paid from surplus) or subscription rights or warrants (other than those referred
to above). No adjustment of the conversion price or conversion rate will be
required unless an adjustment would require a cumulative increase or decrease of
at least 1% in such price or rate. (Section 1504 of the Subordinated Debt
Indenture) The Company has been advised by its counsel, Vinson & Elkins L.L.P.,
that certain adjustments in the conversion price or conversion rate in
accordance with the foregoing provisions may result in constructive
distributions to either holders of the Subordinated Debt Securities or holders
of Common Stock which would be taxable pursuant to Treasury Regulations issued
under section 305 of the Internal Revenue Code of 1986, as amended. The amount
of any such taxable constructive distribution would be the fair market value of
the Common Stock which is treated as having been constructively received, such
value being determined as of the time the adjustment resulting in the
constructive distribution is made.
Fractional shares of Common Stock will not be issued upon conversion, but,
in lieu thereof, the Company will pay a cash adjustment based on the then
current market price for the Common Stock. (Section 1503 of the Subordinated
Debt Indenture) Upon conversion, no adjustments will be made for accrued
interest or dividends, and therefore convertible Subordinated Debt Securities
surrendered for conversion between the record date for an interest payment and
the Interest Payment Date (except convertible Subordinated Debt Securities
called for redemption on a redemption date during such period) must be
accompanied by payment of an amount equal to the interest thereon which the
registered holder is to receive. (Sections 1504 and 1502 of the Subordinated
Debt Indenture)
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<PAGE> 16
In the case of any consolidation or merger of the Company (with certain
exceptions) or any conveyance, transfer or lease of the properties and assets of
the Company substantially as an entirety to any Person, each Holder of
convertible Subordinated Debt Securities, after the consolidation, merger,
conveyance, transfer or lease, will have the right to convert such convertible
Subordinated Debt Securities only into the kind and amount of securities, cash
and other property which the Holder would have been entitled to receive upon or
in connection with such consolidation, merger, conveyance, transfer or lease, if
the Holder had held the Common Stock issuable upon conversion of such
convertible Subordinated Debt Securities immediately prior to such
consolidation, merger, conveyance, transfer or lease. (Section 1505 of the
Subordinated Debt Indenture)
DESCRIPTION OF CAPITAL STOCK
GENERAL
K N is currently authorized by its Restated Articles of Incorporation, as
amended (the "K N Charter") to issue 50,000,000 shares of Common Stock, of which
31,415,563 were outstanding on September 11, 1997; 200,000 shares of Class A
Preferred Stock, no par value ("Class A Preferred Stock"), of which 70,000
shares were outstanding as Class A $5.00 Cumulative Preferred Stock on such
date; and 2,000,000 shares of Class B Preferred Stock, no par value ("Class B
Preferred Stock"), none of which were outstanding on such date.
The Board of Directors of K N is authorized by the K N Charter to provide,
without further stockholder action, for the issuance of one or more series of
Class A Preferred Stock and Class B Preferred Stock. The Board of Directors has
the power to fix various terms with respect to each such series, including
voting power, designations, preferences, dividend rates, conversion and exchange
provisions, redemption provisions and, in the case of the Class B Preferred
Stock, the amounts which holders are entitled to receive upon any liquidation,
dissolution or winding up of K N. Class A Preferred Stock and Class B Preferred
Stock will rank prior to the Common Stock with respect to both dividends and
distribution of assets on liquidation, dissolution or winding up of K N.
In the event of any liquidation, dissolution or winding up of K N, whether
voluntary or involuntary, the holders of shares of Class A Preferred Stock of
each series shall be entitled to receive in full out of the assets of K N the
sum of $100 per share of Class A Preferred Stock, plus any arrearages in
dividends thereon to the date fixed for the payment in liquidation, before any
distribution shall be made to the holders of shares of any stock junior to the
Class A Preferred Stock. K N may, at the option of the Board of Directors,
redeem the whole or any part of the Class A Preferred Stock, or of any series
thereof at any time or from time to time within the period during which such
stock is, according to the K N Charter, or the resolutions of the Board of
Directors providing for the issue thereof, redeemable, by paying the redemption
price thereof, including any arrearages in dividends thereon to the date fixed
for redemption. The Class A $5.00 Cumulative Preferred Stock is redeemable, in
whole or in part, at the option of K N at any time, or from time to time, at the
price of $105 per share plus accrued and unpaid dividends. This series has no
sinking fund requirements. Holders of shares of Class A $5.00 Cumulative
Preferred Stock are entitled to receive, when and as declared by the Board of
Directors of K N, cumulative preferential cash dividends at the annual rate of
$5.00 per share prior to the payment of any dividends or other distributions on
(or purchase or redemption of) the Class B Preferred Stock or the Common Stock.
In the event of any liquidation, dissolution or winding up of K N, whether
voluntary or involuntary, the holders of shares of Class B Preferred Stock of
each series shall be entitled to receive, subject to the prior rights of the
holders of shares of Class A Preferred Stock, the full preferential amount fixed
by the K N Charter, or the resolutions of the Board of Directors providing for
the issue thereof, including any arrearages in dividends thereon to the date
fixed for the payment in liquidation, before any distribution shall be made to
the holders of shares of any stock junior to the Class B Preferred Stock.
Dividends may not be declared or paid or set apart for payment on any series of
Class B Preferred Stock, unless there shall be no arrearages in dividends on any
series of Class A Preferred Stock entitled to cumulative dividends for any past
dividend period and dividends in full for the current dividend period have been
paid or declared or set aside for payment on all Class A Preferred Stock.
15
<PAGE> 17
In addition, the holders of the Class A Preferred Stock then outstanding
have the right to vote separately as a class with respect to (i) certain
amendments to the K N Charter or the By-Laws of K N which adversely affect the
voting powers, rights or preferences of the holders of shares of Class A
Preferred Stock, (ii) the creation of any class of stock or any security
convertible into or exchangeable for or evidencing the right to purchase any
stock ranking prior to or on a parity with, either as to dividends or upon
liquidation, the Class A Preferred Stock, or (iii) certain mergers or
consolidations of K N with or into any other corporation. For such actions to be
taken by K N, including increasing the authorized amount of any class of stock
ranking prior to the Class A Preferred Stock, the affirmative vote of the
holders of at least 50% of the shares of the Class A Preferred Stock then
outstanding would be required. The affirmative vote of at least 50% of the
shares of any series of Class A Preferred Stock then outstanding is required for
K N to amend the K N Charter or resolutions of the Board of Directors of K N
providing for the issue of such series of Class A Preferred Stock so as to
affect adversely the powers, preferences or rights of holders of Class A
Preferred Stock of such series. The holders of Class B Preferred Stock then
outstanding also have the right to a separate vote regarding (a) the events
described in the first sentence of this paragraph with regard to such Class B
Preferred Stock, requiring the affirmative vote of at least 50% of the shares of
Class B Preferred Stock then outstanding, and (b) amendments to the K N Charter,
or to resolutions of K N's Board of Directors providing for the issue of any
series of Class B Preferred Stock so as to affect adversely the powers,
preferences or rights of the holders of such series, requiring the affirmative
vote of at least 50% of the shares of such series then outstanding.
If dividends are in arrears on the shares of any series of Class A
Preferred Stock to which the following provisions are made applicable pursuant
to the K N Charter or resolutions of K N's Board of Directors providing for the
issue of any such series (i) in an aggregate amount equal to three but less than
six full quarterly dividends, then the holders of the shares of all such series
of Class A Preferred Stock have the exclusive right, voting separately as a
class and without regard to series, to elect directors constituting one-third of
K N's Board of Directors or (ii) in an aggregate amount equal to six full
quarterly dividends, then such holders have the exclusive right, voting
separately as a class and without regard to series, to elect directors
constituting one-half of K N's Board of Directors plus one additional director,
in each case until all arrearages in dividends and dividends in full for the
current quarterly period have been paid on or declared and set aside for payment
on the shares of such series. These provisions are applicable to the Class A
$5.00 Cumulative Preferred Stock. The holders of any outstanding Class B
Preferred Stock would have the right to elect directors of K N similar to the
Class A $5.00 Cumulative Preferred Stock in the event of non-declaration of
dividends, for the periods described above, on the Class B Preferred Stock if
the holders of the Class A $5.00 Cumulative Preferred Stock are not then
entitled to elect directors as described above.
All outstanding shares of Common Stock are, and any shares of Common Stock
newly issued under any Prospectus Supplement will be, validly issued, fully paid
and nonassessable. Holders of K N Common Stock and Class A $5.00 Cumulative
Preferred Stock are entitled to one vote for each share on all matters voted on
by stockholders. Holders of Common Stock, Class A Preferred Stock and Class B
Preferred Stock have no preemptive rights to subscribe for or purchase any
additional securities issued by K N. Subject to the preferential rights of the
holders of the Class A Preferred Stock and Class B Preferred Stock, the holders
of Common Stock are entitled to receive any dividends which may be declared by
the Board of Directors out of funds legally available therefor and to share pro
rata in the net assets of K N upon liquidation, dissolution or winding up.
Shares of Common Stock have no cumulative voting rights or redemption, sinking
fund or conversion privileges.
ANTI-TAKEOVER MATTERS
Charter and Bylaws Certain provisions of the K N Charter and the By-Laws of
K N could have the effect of preventing a change in control of K N in certain
situations. These provisions generally provide for (a) the classification of the
Board of Directors of K N into three classes of as nearly an equal number as
possible, having staggered terms of three years each; (b) the removal of
directors only for cause or by unanimous vote of the remaining members of the
Board of Directors; (c) the filling of any vacancy on the Board of Directors by
the remaining directors then in office; (d) the limitation of the number of
directors to a
16
<PAGE> 18
minimum of nine and a maximum of 15, with the exact number to be determined by
the Board of Directors; (e) increasing the stockholder vote required to amend,
repeal or adopt any provision inconsistent with the foregoing provisions under
(a), (b) and (d) above to two-thirds of the outstanding voting securities of K
N; (f) the requirement that certain business combinations or transactions
involving K N and any beneficial owner of more than 5% of the outstanding voting
securities of K N be approved by holders of at least two-thirds of the
outstanding voting securities of K N, including those held by such beneficial
owner, unless the business combination or transaction is (I) approved by the
Board of Directors before such beneficial owner became a holder of more than 5%
of K N's outstanding voting securities or (II) approved by sufficient members of
the Board of Directors to constitute a majority of the members of the full Board
of Directors in office prior to the time such beneficial owner became a holder
of more than 5% of K N's voting securities, or (III) with an entity of which a
majority of the outstanding shares of voting securities is owned by K N and its
subsidiaries; (g) increasing the stockholder vote required to amend, repeal or
adopt any provision inconsistent with the foregoing provision under (f) above to
two-thirds or more of the then outstanding shares of voting securities of K N;
(h) the requirement that certain business combinations or transactions involving
K N and any beneficial owner of 10% or more of the outstanding voting securities
of K N be approved by holders of at least 80% of the outstanding voting
securities of K N, including those held by such beneficial owner, unless (I) the
business combination or transaction is approved by three-fourths of the Board of
Directors then in office who are not associated with or related to anyone who
beneficially owns, and do not themselves own, 10 percent or more of K N's voting
securities or (II) certain conditions relating generally to the fairness of the
price to be received by stockholders of K N in such business combination or
transaction are satisfied; (i) increasing the stockholder vote required to
amend, repeal or adopt any provision inconsistent with the foregoing provision
under (h) above to 80% or more of the outstanding voting securities of K N
unless approved by an affirmative vote of three-fourths of the Board of
Directors then in office who are not associated with or related to anyone who
beneficially owns, and do not themselves own, 10% or more of K N's voting
securities; (j) certain procedural requirements for stockholder nominations to
the Board of Directors; and (k) the requirement that special meetings of
stockholders may only be called by stockholders owning 51% or more of the
outstanding voting securities of K N, by a majority of the Board of Directors,
the Chairman of the Board of Directors or the President of K N.
Shareholder Rights Plan. On August 17, 1995, the Board of Directors of K N
declared a dividend of one preferred share purchase right (a "Right") with
respect to each outstanding share of Common Stock held of record on September
15, 1995 or issued thereafter and prior to the date the Rights become
exercisable. Until the Rights become exercisable, they will be evidenced by
certificates for shares of Common Stock and will automatically trade with the
Common Stock. If and when the Rights become exercisable, Rights certificates
will be distributed and the Rights will become separately tradable. The full
terms of the Rights are set forth in the Rights Agreement dated as of August 21,
1995, between the Company and The Bank of New York, as Rights Agent, a copy of
which is filed as an exhibit to the Registration Statements.
Each Right entitles the holder thereof to purchase from the Company one
one-thousandth of a share of Class B Junior Participating Series Preferred
Stock, without par value (the "Preferred Shares"), for a price of $80 per one
one-thousandth of a Preferred Share (the "Purchase Price"), subject to
adjustment. The Rights become exercisable upon the earlier of (i) ten business
days following a public announcement that a person or group of affiliated or
associated persons has acquired beneficial ownership of 20% or more of the
outstanding voting shares of the Company or (ii) ten business days following the
commencement or announcement of an intention to commence a tender or exchange
offer the consummation of which would result in the beneficial ownership by a
person or group of 20% or more of the outstanding voting shares of the Company.
The Rights will expire on the later of September 15, 2005 or the third
anniversary of the date on which the Rights became exercisable (the "Final
Expiration Date"), unless the Final Expiration Date is extended or the Rights
are earlier redeemed or exchanged by the Company as described below.
If a person or group were to acquire 20% or more of the voting shares of
the Company, each Right then outstanding (other than Rights beneficially owned
by the acquiring person, which would become null and void) would become a right
to buy that number of shares of Common Stock (or, under certain circumstances,
the equivalent number of one one-thousandths of a Preferred Share) that at the
time of such acquisition would
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<PAGE> 19
have a market value of two times the Purchase Price of the Right. If the Company
were acquired in a merger or other business combination transaction or more than
50% of its consolidated assets or earning power were sold, proper provision will
be made so that holder of a Right will thereafter have the right to receive,
upon the exercise thereof at the then current Purchase Price of the Right, that
number of shares of common stock of the acquiring company which at the time of
such transaction would have a market value of two times the Purchase Price of
the Right.
At any time after the acquisition by a person or group of beneficial
ownership of 20% or more of the outstanding voting shares of the Company and
before the acquisition by a person or group of 50% or more of the outstanding
voting shares of the Company, the Board of Directors may, at its option, issue
shares of Common Stock (or Preferred Shares) in mandatory redemption of, and in
exchange for, all or part of the then outstanding and exercisable Rights (other
than Rights owned by such person or group, which would become null and void) at
an exchange ratio of one share of Common Stock (or one one-thousandth of a
Preferred Share) for each Right, subject to adjustment. In addition, the Company
is entitled to redeem all of the outstanding Rights at a price of $0.01 per
Right at any time prior to the first public announcement that a person or group
has become the beneficial owner of 20% or more of the outstanding voting shares
of the Company.
Until a Right is exercised, the holder thereof, as such, has no rights as a
stockholder of the Company, including, without limitation, the right to vote or
to receive dividends.
KANSAS BUSINESS COMBINATION ACT
K N is subject to Sections 17-12,100 et seq. of the Kansas Statutes
Annotated (the "K.S.A."), which imposes a three-year moratorium on business
combinations between a Kansas corporation and an "interested stockholder" (in
general, a stockholder owning 15% or more of a corporation's outstanding voting
stock) or an affiliate or associate thereof unless (a) prior to an interested
stockholder becoming such, the board of directors of the corporation has
approved either the business combination or the transaction by which the
interested stockholder became such; (b) upon consummation of the transaction
resulting in an interested stockholder becoming such, the interested stockholder
owns 85% of the voting stock that was outstanding at the time the transaction
commenced (excluding, from the calculation of outstanding shares, shares
beneficially owned by management, directors and certain employees stock plans);
or (c) on or after the date an interested stockholder becomes such, the business
combination is approved by (i) the Board of Directors and (ii) the affirmative
vote of the holders of at least 66 2/3% of the outstanding shares (other than
those shares beneficially owned by the interested stockholder) at a meeting of
stockholders.
KANSAS CONTROL SHARE ACQUISITIONS ACT
K N is also subject to Sections 17-1286 et seq. of the K.S.A. (the "Kansas
Control Share Acquisitions Act"), which applies to public corporations
incorporated in Kansas that have certain other connections with the state. The
Kansas Control Share Acquisitions Act relates principally to the acquisition of
"control shares" in such a corporation. Under the Kansas Control Share
Acquisitions Act, a control share acquisition is one that, except for the
operation of the Act, would raise the acquiring person's voting power in the
election of directors of the subject corporation to or above any of three
thresholds: one-fifth or more but less than one-third of all voting power;
one-third or more but less than a majority of all voting power; and at least a
majority of all voting power. Whenever a control share acquisition occurs, the
acquiring person has no voting rights with respect to those shares unless both a
majority of all outstanding shares and a majority of all such shares excluding
all "interested shares" (in general, shares beneficially controlled by the
acquiring person or any officer or inside director of the subject corporation)
approve the acquisition. If the control shares are accorded voting rights, then
dissenters' rights are available under the Kansas Control Share Acquisitions Act
to stockholders who did not vote in favor of the control share acquisition and
who comply with certain prescribed procedures. If the stockholders vote not to
accord voting rights to the control shares, however, then the issuing
corporation has a 60-day option to redeem all such shares at market value.
18
<PAGE> 20
OTHER MATTERS
The Bank of New York serves as registrar and transfer agent for the Common
Stock and for the Class A $5.00 Cumulative Preferred Stock.
SELLING STOCKHOLDER
The Selling Stockholder is a Delaware corporation wholly owned by Cabot
Corporation ("Cabot") having its principal office in Boston, Massachusetts. On
July 13, 1994, K N acquired American Oil and Gas Corporation ("AOG") in a
stock-for-stock merger (the "Merger") accounted for as a pooling of interests.
Cabot was the largest stockholder of AOG prior to the Merger, owning
approximately 34.4% of the outstanding shares of common stock of AOG at the time
of the Merger plus warrants to purchase approximately an additional 5.3% of such
shares. Beginning in June 1997, Cabot made capital contributions of all of its
shares of Common Stock to the Selling Stockholder.
Cabot acquired its interest in AOG in 1989 when it sold its Texas gas
pipeline business to AOG. In connection with that transaction, Cabot and AOG
entered into a Standstill and Registration Rights Agreement, which, among other
things, entitled Cabot to three representatives on the board of directors of
AOG. At the time of the Merger, two nominees of Cabot were among AOG's eight
directors. Such Standstill and Registration Rights Agreement ceased to have
effect upon consummation of the Merger. Also in connection with the 1989
transaction, Cabot and AOG agreed to a liability sharing arrangement primarily
covering certain contingent liabilities and potential gas contract losses of the
acquired business. Pursuant to this liability sharing arrangement, Cabot and AOG
agreed to bear an equal amount of such liabilities up to $20 million each; Cabot
agreed to be solely responsible for these liabilities above that amount. All
matters pertaining to the liability sharing arrangement with Cabot were settled
in April 1997, and all final payments required thereby have been made. The
Company's final liability under the liability sharing arrangement with Cabot was
$5.6 million, which was previously recorded in connection with the acquisition
of AOG.
AOG has asserted certain claims related to environmental matters against
Cabot under acquisition agreements related to assets previously owned by Cabot
or one or more of its subsidiaries (including assets acquired by AOG in the 1989
transaction referred to above and assets acquired by AOG from another company
which had previously purchased them from Cabot or one or more of its
subsidiaries). K N sued Cabot on such claims in state court in Potter County,
Texas, in November 1997. For additional information with respect to such law
suit, see K N's Quarterly Report on Form 10-Q for the quarter ended September
30, 1997, incorporated by reference herein.
Before its acquisition of AOG, K N had no material relationship with Cabot
or the Selling Stockholder. Pursuant to its merger agreement with AOG, at the
time of the Merger K N elected a designee of Cabot, John G. L. Cabot, as a
non-voting advisory director of K N, and agreed that for so long as Cabot
continued to own beneficially at least 10% of K N's voting Securities, Cabot
would have the right to designate one such advisory director. In addition, it
was agreed that if Cabot's beneficial ownership in K N was reduced below 10% but
continued over 5%, then the Board of Directors of K N would appoint Cabot's
advisory director as a full director with voting rights, and Cabot will be
entitled to have one designee for election to the Board of Directors of K N. In
April 1996, R. Gordon Shearer replaced John G. L. Cabot as Cabot's advisory
director, and in August 1996, when Cabot's beneficial ownership of K N voting
stock fell below 10%, Mr. Shearer was elected a director of K N.
The following table sets forth the number of shares of Common Stock owned
by the Selling Stockholder, the number of such shares being offered for sale by
it, the number of such shares to be owned by the Selling
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<PAGE> 21
Stockholder after such sale and the percentage of ownership of the outstanding
shares of Common Stock as of September 11, 1997 represented by the holdings of
the Selling Stockholder after such sale:
<TABLE>
<CAPTION>
PERCENT OF
SHARES TO BE CLASS TO
SHARES BEING OWNED AFTER BE OWNED
SHARES OWNED SOLD SALE* AFTER SALE*
------------ ------------ ------------ -----------
<C> <C> <C> <C>
2,990,186 792,232 2,197,954 7.0%
</TABLE>
The Prospectus Supplement relating to any Securities being offered by the
Selling Stockholder sets forth the number of shares of Common Stock being
offered for its account as well as the number of such shares and the percentage
of the outstanding Common Stock to be owned by the Selling Stockholder after
completion of the offering.
The Company will bear all of the expenses allocable to any Securities sold
for the Selling Stockholder's account, excluding any selling discounts or
commissions allocable to such Securities, fees and disbursements of counsel for
the Selling Stockholder and any stock transfer taxes payable by reason of any
such sale.
This Prospectus is not the exclusive means for resale of any Common Stock
of the Selling Stockholder registered hereunder. For example, the Selling
Stockholder may also sell Common Stock owned by it pursuant to Rule 144 under
the Securities Act. There can be no assurance that the Selling Stockholder will
sell any or all of its Common Stock offered hereunder.
PLAN OF DISTRIBUTION
GENERAL
Both the Company and the Selling Stockholder may sell Securities to or
through underwriters or dealers, and also may sell Securities directly to other
purchasers or through agents.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. If so indicated in the
Prospectus Supplement, the Selling Stockholder may sell Securities on the NYSE
or in the over-the-counter market, by methods that include block trades,
exchange or secondary distributions in accordance with NYSE rules and ordinary
brokerage transactions.
In connection with the sale of Securities, underwriters may receive
compensation from the Company, the Selling Stockholder or purchasers of
Securities for whom they may act as agents in the form of discounts, concessions
or commissions. Underwriters, dealers and agents that participate in the
distribution of Securities may be deemed to be underwriters, and any discounts
or commissions received by them from the Company or the Selling Stockholder, as
the case may be, and any profit on the resale of Securities by them may be
deemed to be underwriting discounts and commissions under the Securities Act.
Any such person who may be deemed to be an underwriter will be identified, and
any such compensation received from the Company or the Selling Stockholder, as
the case may be, will be described, in the Prospectus Supplement.
Debt Securities, when first issued, will have no established trading
market. Any underwriters or agents to or through whom Debt Securities are sold
by the Company for public offering and sale may make a market in such Debt
Securities, but such underwriters or agents will not be obligated to do so and
may discontinue any market making at any time without notice. No assurance can
be given as to the liquidity of the trading market for any Debt Securities.
Under agreements which may be entered into by the Company or the Selling
Stockholder, underwriters, dealers and agents who participate in the
distribution of Securities may be entitled to indemnification by the Company or
the Selling Stockholder, as the case may be, against or contribution toward
certain liabilities, including liabilities under the Securities Act.
DELAYED DELIVERY ARRANGEMENT
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters or other persons acting as the Company's agents to solicit offers
by certain institutions to purchase Debt Securities from the
20
<PAGE> 22
Company pursuant to contracts providing for payment and delivery on a future
date. Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases will be
subject to the approval of the Company. The obligations of any purchaser under
any such contract will be subject to the condition that the purchase of the Debt
Securities shall not at the time of delivery be prohibited under the laws of any
jurisdiction to which such purchaser is subject. The underwriters and such
agents will not have any responsibility in respect of the validity or
performance of such contracts.
VALIDITY OF SECURITIES
The validity of the Offered Securities, as well as certain tax matters in
connection therewith, will be passed upon for the Company by Vinson & Elkins
L.L.P., Houston, Texas, who may rely on the opinion of Polsinelli, White,
Vardeman & Shalton, Kansas City, Missouri, as to matters of Kansas law, and will
be passed upon for any agents, dealers or underwriters by counsel named in the
applicable Prospectus Supplement. If the Offered Securities include any Common
Stock of the Selling Stockholder, certain legal matters in connection therewith
will be passed upon for the Selling Stockholder by counsel named in the
applicable Prospectus Supplement.
EXPERTS
The consolidated financial statements of K N Energy, Inc. as of December
31, 1996 and 1995 and for each of the three years in the period ended December
31, 1996, incorporated by reference to its Annual Report on Form 10-K for the
year ended December 31, 1996, as amended, have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are incorporated herein in reliance upon the authority of said firm
as experts in accounting and auditing in giving said report.
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<PAGE> 23
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses payable by the Company or the
Selling Stockholder in connection with the issuance and distribution of the
Securities, other than underwriting discounts and commissions. The Company will
bear all of such expenses, except for the Selling Stockholder's legal fees and
expenses. All the amounts shown are estimates, except the registration fee.
<TABLE>
<S> <C>
Registration Fee............................................ $131,932
Fees and expenses of accountants............................ 75,000
Fees and expenses of counsel to the Company................. 125,000
Fees and expenses of the Selling Stockholder's counsel...... 5,000
Fees and expenses of Trustee and counsel.................... 15,000
Printing and engraving...................................... 150,000
Blue Sky fees and expenses (including counsel).............. 15,000
Rating agency fees.......................................... 150,000
Miscellaneous............................................... 83,068
--------
Total............................................. $750,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 17-6305 of the Kansas General Corporation Law provides that a
Kansas corporation shall have power to indemnify any person who was or is a
party, or is threatened to be made a party, to any threatened, pending or
completed action or suit (including an action by or in the right of the
corporation to procure a judgment in its favor) or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses actually and reasonably incurred by such
person in connection with the defense or settlement of such action or suit by or
in the right of the corporation, including attorney fees, and against expenses,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding, including
attorney fees, if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
corporation; and, with respect to any criminal action or proceeding, had no
reasonable cause to believe such person's conduct was unlawful. Article Ninth of
the articles of incorporation of the Company requires the Company to provide
substantially the same indemnification of its directors and officers as that
authorized by the Kansas General Corporation Law.
The Company has insurance policies which, among other things, include
liability insurance coverage for directors and officers, with a $200,000
corporate reimbursement deductible clause, under which directors and officers
are covered against "loss" arising from any claim or claims which may be made
against a director or officer by reason of any "wrongful act" in their
respective capacities as directors and officers. "Loss" is defined so as to
exclude, among other things, fines or penalties, as well as matters deemed
uninsurable under the law pursuant to which the policy is to be construed.
"Wrongful act" is defined to include any actual or alleged breach of duty,
neglect, error, misstatement, misleading statement or omission done or
wrongfully attempted. The policy also contains other specific definitions and
exclusions and provides an aggregate of $20,000,000 of insurance coverage.
II-1
<PAGE> 24
ITEM 16. EXHIBITS.
The following documents are filed as exhibits to this Registration
Statement, including those exhibits incorporated herein by reference to a prior
filing of the Company under the Securities Act or the Exchange Act as indicated
in parentheses:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBITS
------- --------
<C> <C> <S>
(1.1) -- Form of Purchase Agreement (including form of Delayed
Delivery Contract) relating to Debt Securities (incorporated
herein by reference to Exhibit 1.1 to the Company's Current
Report on Form 8-K filed with the Commission on October 27,
1997).
*(1.2) -- Form of Underwriting Agreement relating to Common Stock.
(4.1) -- Form of Indenture, dated as of November 20, 1993, between K
N Energy, Inc. and First Trust National Association, as
successor Trustee to Continental Bank, National Association
(incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement No. 33-51115).
(4.2) -- Form of Subordinated Indenture dated as of May 15, 1996
between the Company and First Trust National Association
f/k/a First Trust of Illinois, National Association, as
Trustee (incorporated by reference to Exhibit 4.2 to the
Company's S-3 Registration Statement No. 333-04385).
**(4.3) -- Forms of Debt Securities.
(4.4) -- Restated Articles of Incorporation of the Company
(incorporated by reference to Exhibit 3(a) to the Company's
Annual Report on Form 10-K for the year ended December 31,
1994).
(4.5) -- By-Laws of the Company, as amended to August 20, 1996
(incorporated by reference to Exhibit 3(b) to the Company's
Annual Report on Form 10-K for the year ended December 31,
1996).
(4.6) -- Rights Agreement dated as of August 21, 1995 between the
Company and The Bank of New York, as Rights Agent
(incorporated by reference to Exhibit 1 to the Company's
Form 8-A Registration Statement dated August 21, 1995).
***(5) -- Opinion of Vinson & Elkins L.L.P. as to the legality of the
Securities being registered.
***(12) -- Computation of ratios of earnings to fixed charges.
***(23.1) -- Consent of Independent Public Accountants.
(23.2) -- Consent of Vinson & Elkins L.L.P. (included in Exhibit (5)).
***(24) -- Powers of Attorney.
(25.1) -- Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 on Form T-1 of First Trust National
Association respecting the Senior Debt Securities
(incorporated herein by reference to Exhibit 25 to the
Company's S-3 Registration Statement No. 33-51115).
(25.2) -- Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 on Form T-1 of First Trust National
Association respecting the Subordinated Debt Securities
(incorporated herein by reference to Exhibit 25 to the
Company's S-3 Registration Statement No. 333-04385).
</TABLE>
- ---------------
* The Company will file any underwriting agreement relating to Common Stock
that it may enter into as an exhibit to a Current Report on Form 8-K which
is incorporated by reference into this Registration Statement.
** The Company will file any form of Debt Securities not previously so filed as
an exhibit to a Current Report on Form 8-K which is incorporated by
reference into this Registration Statement.
*** Filed herewith.
II-2
<PAGE> 25
ITEM 17. UNDERTAKINGS.
(a) The Company hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement; notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Company pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(5) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(b) The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Company's annual report
pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-3
<PAGE> 26
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to any charter provision, by-law, contract, arrangement,
statute, or otherwise, the Company has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any action, suit or proceeding) is asserted
against the Company by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-4
<PAGE> 27
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Lakewood, State of Colorado on the 24th day of
November, 1997.
K N ENERGY, INC.
BY: /s/ LARRY D. HALL
-------------------------------
Chairman of the Board,
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on November 24, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
(i) Principal executive officer:
/s/ Larry D. Hall Chairman of the Board, President and Chief
- -------------------------------------------- Executive Officer
(Larry D. Hall)
(ii) Principal financial and accounting
officer:
* Vice President and Chief Financial Officer
- ---------------------------------------------
(Clyde E. McKenzie)
(iii) Directors:
*
- ---------------------------------------------
(Edward H. Austin, Jr.)
*
- ---------------------------------------------
(Charles W. Battey)
*
- ---------------------------------------------
(Stewart A. Bliss)
*
- ---------------------------------------------
(David W. Burkholder)
*
- ---------------------------------------------
(David M. Carmichael)
*
- ---------------------------------------------
(Robert H. Chitwood)
*
- ---------------------------------------------
(Howard P. Coghlan)
</TABLE>
II-5
<PAGE> 28
<TABLE>
<CAPTION>
SIGNATURE
---------
<S> <C>
*
- -------------------------------------------------
(Jordan L. Haines)
<CAPTION>
/s/ LARRY D. HALL
- -------------------------------------------------
(Larry D. Hall)
*
- -------------------------------------------------
(William J. Hybl)
*
- -------------------------------------------------
(Edward Randall, III)
- -------------------------------------------------
(R. Gordon Shearer)
*
- -------------------------------------------------
(James C. Taylor)
*
- -------------------------------------------------
(H. A. True, III)
*By: /s/ Larry D. Hall
--------------------------------------------
(Larry D. Hall, Attorney-in-Fact)
</TABLE>
II-6
<PAGE> 29
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBITS
------- --------
<C> <C> <S>
(1.1) -- Form of Purchase Agreement (including form of Delayed
Delivery Contract) relating to Debt Securities (incorporated
herein by reference to Exhibit 1.1 to the Company's Current
Report on Form 8-K filed with the Commission on October 27,
1997).
*(1.2) -- Form of Underwriting Agreement relating to Common Stock
(4.1) -- Form of Indenture, dated as of November 20, 1993, between K
N Energy, Inc. and First Trust National Association, as
successor Trustee to Continental Bank, National Association
(incorporated by reference to Exhibit 4.1 to the Company's
S-3 Registration Statement No. 33-51115).
(4.2) -- Form of Subordinated Indenture dated as of May 15, 1996
between the Company and First Trust National Association
f/k/a First Trust of Illinois, National Association, as
Trustee (incorporated by reference to Exhibit 4.2 to the
Company's S-3 Registration Statement No. 333-04385).
**(4.3) -- Forms of Debt Securities.
(4.4) -- Restated Articles of Incorporation of the Company
(incorporated by reference to Exhibit 3(a) to the Company's
Annual Report on Form 10-K for the year ended December 31,
1994).
(4.5) -- By-Laws of the Company, as amended to August 20, 1996
(incorporated by reference to Exhibit 3(b) to the Company's
Annual Report on Form 10-K for the year ended December 31,
1996).
(4.6) -- Rights Agreement dated as of August 21, 1995 between the
Company and The Bank of New York, as Rights Agent
(incorporated by reference to Exhibit 1 to the Company's
Form 8-A Registration Statement dated August 21, 1995).
***(5) -- Opinion of Vinson & Elkins L.L.P. as to the legality of the
Securities being registered.
***(12) -- Computation of ratios of earnings to fixed charges.
***(23.1) -- Consent of Independent Public Accountants.
(23.2) -- Consent of Vinson & Elkins L.L.P. (included in Exhibit (5)).
***(24) -- Powers of Attorney.
(25.1) -- Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 on Form T-1 of First Trust National
Association respecting the Senior Debt Securities
(incorporated by reference to Exhibit 25 to the Company's
S-3 Registration Statement No. 33-51115).
(25.2) -- Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 on Form T-1 of First Trust National
Association respecting the Subordinated Debt Securities
(incorporated by reference to Exhibit 25 to the Company's
S-3 Registration Statement No. 333-04385).
</TABLE>
- ---------------
* The Company will file any underwriting agreement relating to Common Stock
that it may enter into as an exhibit to a Current Report on Form 8-K which
is incorporated by reference into this Registration Statement.
** The Company will file any form of Debt Securities not previously so filed as
an exhibit to a Current Report on Form 8-K which is incorporated by
reference into this Registration Statement.
*** Filed herewith.
<PAGE> 1
EXHIBIT 5
VINSON & ELKINS
L.L.P.
ATTORNEYS AT LAW
2300 FIRST CITY TOWER
1001 FANNIN
HOUSTON, TEXAS 77002-6760
November 24, 1997
K N Energy, Inc.
370 Van Gordon Street
Lakewood, Colorado 80228
Gentlemen:
We have acted as counsel for K N Energy, Inc., a Kansas corporation (the
"Company"), in connection with the filing by the Company with the Securities and
Exchange Commission (the "Commission") of a Registration Statement on Form S-3
(the "Registration Statement") with respect to one or more series of the
Company's senior debt securities or subordinated debt securities or both
(collectively, the "Debt Securities"), together with an indeterminate number of
shares of Common Stock, par value $5.00 per share ("Common Stock"), which may be
issued upon conversion of the Debt Securities, for sale from time to time
pursuant to Rule 415 under the Securities Act of 1933, as amended (the
"Securities Act"). The Debt Securities are issuable pursuant to a senior
Indenture or Subordinated Indenture or both, each between the Company and First
Trust National Association, as trustee (the "Trustee") (collectively, the
"Indentures" and individually, an "Indenture"). Both the Company and its largest
stockholder, Cabot Specialty Chemicals, Inc., a Delaware corporation (the
"Selling Stockholder"), may also offer and sell from time to time pursuant to
the Registration Statement and Rule 415 shares of the Common Stock. The
aggregate initial offering prices of the Debt Securities and the Common Stock
offered by the Company under the Registration Statement and the Company's Form
S-3 Registration Statement No. 333-04385 may not exceed $500 million and the
aggregate number of such shares offered by the Selling Stockholder may not
exceed 792,232 (collectively, the "Securities"). The Securities will be offered
in amounts, at prices and on terms to be determined at the time of offering and
to be set forth in supplements to the Prospectus contained in the Registration
Statement.
Before rendering our opinions hereinafter set forth, we examined such
certificates, instruments and documents, including forms of the Indentures filed
as exhibits to the Registration Statement, and we reviewed such questions of
law, as we considered appropriate.
Based upon the foregoing examination and review, we are of the opinion
that:
(i) When the Registration Statement has become effective under the
Securities Act, the terms of any Debt Securities and of their issuance and
sale have been duly established in conformity with the applicable Indenture
so as not to violate any applicable law or result in a default under or
breach of any agreement or instrument binding upon the Company and so as to
comply with any requirements or restriction imposed by any court or
governmental body having jurisdiction over the Company, and the Debt
Securities have been duly executed and authenticated in accordance with the
applicable Indenture and issued and sold as contemplated in the
Registration Statement, the Debt Securities will constitute valid and
legally binding obligations of the Company, subject to bankruptcy,
insolvency (including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium and similar laws relating to or
affecting creditors' rights generally and to general equitable principles,
and any shares of Common Stock issued upon conversion of any such Debt
Securities will be duly authorized, validly issued, fully paid and
nonassessable.
<PAGE> 2
(ii) When the Registration Statement has become effective under the
Securities Act, the terms of the issuance of any shares of Common Stock to
be issued and sold by the Company pursuant to the Registration Statement
have been established by the Board of Directors of the Company (or a
committee thereof), and such shares have been issued and sold as
contemplated in the Registration Statement, all such shares will be duly
authorized, validly issued, fully paid and nonassessable.
(iii) When the Registration Statement has become effective under the
Securities Act, any shares of Common Stock that may be sold by the Selling
Stockholder pursuant to the Registration Statement will be duly authorized,
validly issued, fully paid and non-assessable.
We hereby consent to the statements made with respect to us under the
captions "Validity of Securities" and "Description of Debt
Securities -- Provisions Applicable Solely to Subordinated Debt Securities --
Conversion" in the prospectus contained in the Registration Statement and to the
filing of this opinion as an exhibit to the Registration Statement. By giving
such consent, we do not admit that we are within the category of persons whose
consent is required under Section 7 of the Securities Act or the rules and
regulations of the Commission issued thereunder.
Very truly yours,
/s/ VINSON & ELKINS L.L.P.
<PAGE> 1
EXHIBIT 12
K N ENERGY, INC. AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
NINE
MONTHS
ENDED YEARS ENDED DECEMBER 31,
SEPTEMBER 30, ----------------------------------------------------
1997 1996 1995 1994 1993 1992
------------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Income From Continuing
Operations per Statements
of Income.................. $ 49,038 $ 63,819 $ 52,522 $ 15,321 $ 30,869 $ 36,342
Add:
Interest and Debt
Expense.................. 36,926 37,760 34,316 32,009 31,478 27,608
Income Taxes............... 25,488 35,897 29,050 9,500 18,599 20,068
Portion of Rents
Representative of the
Interest Factor.......... 13,928 7,417 5,082 3,492 2,863 1,901
-------- -------- -------- -------- -------- --------
Income as Adjusted......... $125,380 $144,893 $120,970 $ 60,322 $ 83,809 $ 85,919
======== ======== ======== ======== ======== ========
Fixed Charges:
Interest and Debt Expense per
Statements of Income
(Includes Amortization of
Debt Discount, Premium and
Expense)................... $ 30,991 $ 35,933 $ 34,211 $ 31,815 $ 30,909 $ 27,090
Add:
Interest Capitalized....... 5,935 1,827 105 338 965 842
Portion of Rents
Representative of the
Interest Factor.......... 13,928 7,417 5,082 3,492 2,863 1,901
Preferred Stock Dividends
of Subsidiary............ -- -- -- -- 69 3,084
-------- -------- -------- -------- -------- --------
Fixed Charges.............. $ 50,854 $ 45,177 $ 39,398 $ 35,645 $ 34,806 $ 32,917
======== ======== ======== ======== ======== ========
Ratio of Earnings to Fixed
Charges....................... 2.47 3.21 3.07 1.69 2.41 2.61
======== ======== ======== ======== ======== ========
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF K N INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Registration Statement of our report dated February 4,
1997, included in K N Energy, Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1996, as amended, and to all references to our Firm included
in this Registration Statement.
/s/ ARTHUR ANDERSEN LLP
Arthur Andersen LLP
Denver, Colorado
November 24, 1997
<PAGE> 1
EXHIBIT 24
LIMITED POWER OF ATTORNEY
K N ENERGY, INC.
KNOW ALL MEN BY THESE PRESENTS that, the undersigned director or officer of
K N Energy, Inc., a Kansas corporation, does hereby make, constitute and appoint
LARRY D. HALL, CLYDE E. McKENZIE and E. WAYNE LUNDHAGEN and each of them acting
individually, his true and lawful attorney with power to act without the other
and with full power of substitution, to execute, deliver and file, for and on
his behalf, and in his name and in his capacity or capacities as aforesaid, a
Registration Statement on Form S-3 for filing with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, with respect to debt
securities and Common Stock, $5.00 par value per share, of K N Energy, Inc., and
any and all amendments thereto or other documents in support thereof or
supplemental thereto, hereby granting to said attorneys and each of them full
power and authority to do and perform each and every act and thing whatsoever as
said attorney or attorneys may deem necessary or advisable to carry out fully
the intent of the foregoing as the undersigned might or could do personally or
in the capacity or capacities as aforesaid, hereby ratifying and confirming all
acts and things which said attorney or attorneys may do or cause to be done by
virtue of these presents.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 18th day
of November, 1997.
<TABLE>
<CAPTION>
<S> <C>
/s/ LARRY D. HALL
----------------------------------------------
Larry D. Hall
/s/ CLYDE E. MCKENZIE
----------------------------------------------
Clyde E. McKenzie
/s/ EDWARD H. AUSTIN, JR.
----------------------------------------------
Edward H. Austin, Jr.
/s/ CHARLES W. BATTEY
----------------------------------------------
Charles W. Battey
/s/ STEWART A. BLISS
----------------------------------------------
Stewart A. Bliss
/s/ DAVID W. BURKHOLDER
----------------------------------------------
David W. Burkholder
/s/ DAVID M. CARMICHAEL
----------------------------------------------
David M. Carmichael
/s/ ROBERT W. CHITWOOD
----------------------------------------------
Robert W. Chitwood
/s/ HOWARD P. COGHLAN
----------------------------------------------
Howard P. Coghlan
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
<S> <C>
/s/ JORDAN L. HAINES
----------------------------------------------
Jordan L. Haines
/s/ WILLIAM J. HYBL
----------------------------------------------
William J. Hybl
/s/ EDWARD RANDALL, III
----------------------------------------------
Edward Randall, III
----------------------------------------------
R. Gordon Shearer
/s/ JAMES C. TAYLOR
----------------------------------------------
James C. Taylor
/s/ H. A. TRUE, III
----------------------------------------------
H. A True, III
</TABLE>
2
