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Exhibit 1.1
CONFORMED COPY
K N ENERGY, INC.
9,310,000
8.25% PREMIUM EQUITY PARTICIPATING SECURITY UNITS - PEPS(SM) UNITS
UNDERWRITING AGREEMENT
November 19, 1998
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November 19, 1998
Xxxxxx Xxxxxxx & Co. Incorporated
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated
Xxxxxxx, Sachs & Co.
Xxxxxx Xxxxxxx & Co., Inc.
Xxxxxxx Xxxxx Barney Inc.
Xxxxxxxxx & Company, Inc.
NationsBanc Xxxxxxxxxx Securities LLC
c/o Morgan Xxxxxxx & Co. Incorporated
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs and Mesdames:
K N Energy, Inc., a Kansas corporation (the "COMPANY"), proposes to
issue and sell to the several Underwriters listed in Schedule I hereto (the
"UNDERWRITERS"), for whom you are acting as representatives (the
"REPRESENTATIVES"), subject to the terms and conditions stated herein, an
aggregate of 9,310,000 8.25% Premium Equity Participating Security Units
-PEPS(SM) Units (the "UNDERWRITTEN SECURITIES") of the Company. Each Security
(as defined below) will consist of (a) a stock purchase contract (a "PURCHASE
CONTRACT") under which (i) the holder of the Security will purchase from the
Company on November 30, 2001, for an amount in cash equal to the stated amount
per Security of $43 (the "STATED AMOUNT"), a number of shares of common stock,
par value $5.00 per share, of the Company (the "COMMON STOCK"), as set forth in
such Purchase Contract and (ii) the Company will pay contract fees as set forth
in such Purchase Contract (the "CONTRACT FEES") to the holder of the Security,
and (b) 5.875% United States Treasury Notes due November 30, 2001 that are held
through the Treasury/Reserve Automated Debt Entry System ("TREASURY NOTES")
having a principal amount equal to the Stated Amount, or security entitlements
in respect thereof. In connection therewith, the Underwriters will, subject to
the terms and conditions stated herein, purchase Treasury Notes (or security
entitlements in respect thereof) at the direction of the Company and for the
benefit of the holders of the Securities, which Treasury Notes (or security
entitlements in respect thereof) will be pledged by the holders of the
Securities to The Chase Manhattan Trust Company, National Association,
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as collateral agent for the Company (the "COLLATERAL AGENT"). Additionally, the
Company proposes to issue and sell to the several Underwriters, for the sole
purpose of covering over-allotments in connection with the sale of the
Underwritten Securities, at the option of the Underwriters, up to an additional
1,396,000 Securities (the "OPTION SECURITIES") and, in the event any such Option
Securities are purchased, the Underwriters propose to purchase and pledge to the
Collateral Agent the additional Treasury Notes (having an aggregate principal
amount equal to the aggregate Stated Amount times the number of Option
Securities to be purchased by the Underwriters upon the exercise of such
option), or security entitlements in respect thereof, constituting a part of
such Option Securities. The Underwritten Securities and any Option Securities
are herein referred to as the "SECURITIES". The Common Stock will have attached
thereto rights (the "RIGHTS") issued pursuant to a Rights Agreement (the "RIGHTS
AGREEMENT") dated as of August 21, 1995 between the Company and The Bank of New
York, as Rights Agent. The Company and U.S. Bank Trust National Association, as
Purchase Contract Agent (the "AGENT") propose to enter into a Purchase Contract
Agreement (the "PURCHASE CONTRACT AGREEMENT") to be dated as of the Closing Date
(as defined below). The Company and the Collateral Agent propose to enter into a
Pledge Agreement (the "PLEDGE AGREEMENT") to be dated as of the Closing Date.
The Purchase Contracts, the Purchase Contract Agreement and the Pledge Agreement
are herein collectively referred to as the "PEPS AGREEMENTS".
The Company has prepared and filed with the Securities and Exchange
Commission (the "COMMISSION"), in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "SECURITIES ACT"), a registration
statement on Form S-3 (registration no. 333-55921), including a related
prospectus, relating to the registration of certain securities of the Company
including the Securities (collectively, the "SHELF SECURITIES"), to be sold from
time to time by the Company. Such registration statement also constitutes
post-effective amendment number 1 to registration statement no. 333-44421 (the
"PRIOR REGISTRATION STATEMENT"). The registration statement as amended at the
date of this Agreement, including information, if any, deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Securities Act, together with the Prior Registration Statement, is
hereinafter referred to as the "REGISTRATION STATEMENT" and the prospectus
included therein relating to the Shelf Securities, in the form first used to
confirm sales of the Securities, is hereinafter referred to as the "BASIC
PROSPECTUS." The Basic Prospectus, as supplemented by the prospectus supplement
dated November 19, 1998 (the "PROSPECTUS SUPPLEMENT"), relating to the
Securities, in the form first used to confirm sales of the Securities is
hereinafter referred to as the "PROSPECTUS". If the Company has filed an
abbreviated registration statement
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pursuant to Rule 462(b) under the Securities Act (the "RULE 462 REGISTRATION
STATEMENT"), then any reference herein to the term "Registration Statement"
shall be deemed to include such Rule 462 Registration Statement. Any reference
to the term Registration Statement, any preliminary prospectus, the Basic
Prospectus or the Prospectus shall include the documents incorporated therein by
reference. The terms "SUPPLEMENT" and "AMENDMENT" or "AMEND" as used in this
Agreement shall include all documents subsequently filed by the Company with the
Commission pursuant to the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), that are deemed to be incorporated by reference in the
Prospectus. Concurrently with the offering of Securities, the Company intends to
offer $400 million aggregate principal amount of senior unsecured notes (the
"DEBT OFFERING").
On January 30, 1998, the Company acquired from Occidental Petroleum
Corporation ("OCCIDENTAL") all of the capital stock of MidCon Corp. ("MIDCON")
and a short-term note in the aggregate principal amount of $1.39 billion for
$2.1 billion in cash and another short-term note in the aggregate principal
amount of $1.39 billion (the "ACQUISITION"). Upon the consummation of the
Acquisition, MidCon became a wholly owned subsidiary of the Company. MidCon,
MidCon Texas Pipeline Operator, Inc. and Natural Gas Pipeline Company of
America, K N Gas Gathering, Inc., K N Interstate Gas Transmission Co. and K N
Services, Inc. are referred to herein as "SIGNIFICANT SUBSIDIARIES".
1. Representations and Warranties of the Company. The Company
represents and warrants to and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for such purpose are pending before or
threatened by the Commission.
(b) (i) Each document, if any, filed or to be filed pursuant to
the Exchange Act and incorporated by reference in the Prospectus
complied or will comply when so filed in all material respects with
the Exchange Act and the applicable rules and regulations of the
Commission thereunder, (ii) on the original effective date of the
Registration Statement, and on the effective date of the most recent
post-effective amendment thereto, if any, the Registration Statement
did not contain and, as amended or supplemented, if applicable, will
not contain, any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading, (iii) the Registration
Statement and the Prospectus comply and, as amended or supplemented,
if applicable, will comply in all material respects with the
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Securities Act and the applicable rules and regulations of the
Commission thereunder and (iv) the Prospectus does not contain and,
as amended or supplemented, if applicable, will not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except
that the representations and warranties set forth in this paragraph
do not apply to statements or omissions in the Registration
Statement or the Prospectus based upon information relating to any
Underwriter furnished to the Company in writing by such Underwriter
or its counsel through you expressly for use therein.
(c) The Company has been duly incorporated, is validly existing as
a corporation in good standing under the laws of the state of
Kansas, has the corporate power and authority to own its property
and to conduct its business as described in the Prospectus and is
duly qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership
or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing
would not have a material adverse effect on the Company and its
consolidated subsidiaries, taken as a whole.
(d) Each Significant Subsidiary has been duly incorporated, is
validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as
described in the Prospectus and is duly qualified to transact
business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure
to be so qualified or be in good standing would not have a material
adverse effect on the Company and its consolidated subsidiaries,
taken as a whole; all of the issued shares of capital stock of each
such Significant Subsidiary have been duly and validly authorized
and issued, are fully paid and non-assessable and are owned directly
or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims.
(e) This Agreement has been duly authorized, executed and
delivered by the Company.
(f) The Securities and the PEPS Agreements have been duly
authorized and, at the Closing Date or, in the case of Purchase
Contracts constituting part of the Option Securities, the Option
Closing Date, will have been duly executed and delivered by the
Company, and, as of the Closing Date or the Option Closing Date, as
the case may be, assuming
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due authorization, execution and delivery by parties other than the
Company thereunder, the PEPS Agreements will be valid and legally
binding obligations of the Company, enforceable in accordance with
their respective terms, subject to applicable bankruptcy, insolvency
or similar laws relating to or affecting creditors' rights generally
and general principles of equity. The Securities and the PEPS
Agreements conform in all material respects to the descriptions
thereof contained in the Prospectus.
(g) The shares of Common Stock to be issued and sold by the
Company pursuant to the Purchase Contracts upon settlement thereof
have been duly and validly authorized and reserved for issuance.
Such Common Stock, when issued and delivered in accordance with the
provisions of the PEPS Agreements, will be duly authorized, validly
issued, fully paid and non-assessable, and the issuance of such
Common Stock will not be subject to any preemptive or similar
rights.
(h) The authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the
Prospectus.
(i) The shares of Common Stock outstanding prior to the issuance
of the Securities have been duly authorized and are validly issued,
fully paid and non-assessable.
(j) The Rights Agreement has been duly authorized, executed and
delivered by the Company; the Rights have been duly authorized by
the Company and, when issued upon issuance of the shares of Common
Stock upon settlement of the Purchase Contracts constituting a part
of the Securities, will be validly issued, and the shares of Class B
Junior Participating Series Preferred Stock issuable upon exercise
of the Rights have been duly authorized by the Company and validly
reserved for issuance, and when issued upon the exercise of the
Rights in accordance with the terms of the Rights Agreement, will be
validly issued, fully paid and non-assessable.
(k) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement
and the PEPS Agreements and the consummation of the transactions
contemplated in this Agreement and the PEPS Agreements and
compliance by the Company with its obligations under this Agreement
and the PEPS Agreements will not contravene any provision of
applicable law or the articles of incorporation or by-laws of the
Company or any agreement or other instrument binding upon the
Company or any of its
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Significant Subsidiaries that is material to the Company and its
subsidiaries, taken as a whole, or any judgment, order or decree of
any governmental body, agency or court having jurisdiction over the
Company or any Significant Subsidiary, and no consent, approval,
authorization or order of, or qualification with, any governmental
body or agency is required for the performance by the Company of its
obligations under this Agreement, except the registration of the
Securities under the Securities Act and such as have been obtained
or as may be required by the securities or Blue Sky laws of the
various states in connection with the offer and sale of the
Securities.
(l) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole,
from that set forth in the Prospectus (exclusive of any amendments
or supplements thereto subsequent to the date of this Agreement).
(m) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a
party or to which any of the properties of the Company or any of its
subsidiaries is subject that are required to be described in the
Registration Statement or the Prospectus and are not so described or
any statutes, regulations, contracts or other documents that are
required to be described in the Registration Statement or the
Prospectus or the documents incorporated therein by reference or to
be filed as an exhibit to the Registration Statement that are not
described or filed as required.
(n) Each preliminary prospectus relating to the Securities filed
as part of the Registration Statement as originally filed or as part
of any amendment thereto, or filed pursuant to Rule 424 under the
Securities Act, complied when so filed in all material respects with
the Securities Act and the applicable rules and regulations of the
Commission thereunder.
(o) The Company is not and, after giving effect to the offering
and sale of the Securities and the application of the proceeds
thereof as described in the Prospectus, will not be an "investment
company" as such term is defined in the Investment Company Act of
1940, as amended.
(p) The Company and its subsidiaries (i) are in compliance with
any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety,
the environment or hazardous or toxic substances or wastes,
pollutants or contaminants
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("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws
to conduct their respective businesses and (iii) are in compliance
with all terms and conditions of any such permit, license or
approval, except where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, have a
material adverse effect on the Company and its subsidiaries, taken
as a whole.
(q) Except as disclosed in the Prospectus, there are no contracts,
agreements or understandings between the Company and any person
granting such person the right to require the Company to file a
registration statement under the Securities Act with respect to any
securities of the Company or to require the Company to include such
securities with the Securities registered pursuant to the
Registration Statement.
(r) To the knowledge of the Company, no person or corporation
which is a "holding company" or a "subsidiary of a holding company",
within the meaning of such terms as defined in the Public Utility
Holding Company Act of 1935, directly or indirectly owns, controls
or holds with power to vote 10% or more of the outstanding voting
securities of the Company; and the Company is not a "holding
company" or to its knowledge, a "subsidiary of a holding company" as
so defined.
(s) The Company and its subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state
or foreign regulatory authorities, including, without limitation,
the Federal Energy Regulatory Commission, necessary to conduct their
respective businesses as described in the Prospectus, except when
the failure to possess such certificates, authorizations or permits
would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole, and neither the Company nor any such
subsidiary has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or
permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a material
adverse effect on the Company and its subsidiaries, taken as a
whole.
(t) The financial statements (including the related notes and
supporting schedules) filed as part of the Registration Statement or
included or incorporated by reference in the Prospectus present
fairly in all material respects the financial position and results
of operations of the
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entities purported to be shown thereby, at the dates and for the
periods indicated, and have been prepared in conformity with
generally accepted accounting principles applied on a consistent
basis throughout the periods involved, except as otherwise stated
therein.
(u) The pro forma financial statements of the Company, and the
related notes thereto, included in the Prospectus present fairly in
all material respects the pro forma financial position of the
Company, as of the dates indicated and the results of their
operations for the periods specified; the pro forma combined
financial information, and the related notes thereto, included in
the Prospectus has been prepared in accordance with the applicable
requirements of the Exchange Act and is based upon good faith
estimates and assumptions believed by the Company to be reasonable.
(v) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, (i) the
Company and its subsidiaries have not incurred any material
liability or obligation, direct or contingent, nor entered into any
material transaction not in the ordinary course of business; (ii)
the Company has not purchased any of its outstanding capital stock,
nor declared, paid or otherwise made any dividend or distribution of
any kind on its capital stock other than ordinary and customary
dividends; and (iii) there has not been any material change in the
capital stock, short-term debt or long-term debt of the Company and
its consolidated subsidiaries, except in each case as described in
the Prospectus (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement).
2. Agreements to Sell and Purchase. The Company hereby agrees to sell
to the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from the
Company the number of Underwritten Securities set forth in Schedule I hereto
opposite the name of such Underwriter. In connection therewith, the Underwriters
agree to purchase, at the direction of the Company and for the benefit of the
holders of the Securities, the Treasury Notes (or security entitlements in
respect thereof) constituting a part of the Underwritten Securities. The
Treasury Notes (or security entitlements in respect thereof) will be pledged to
the Collateral Agent to secure the holders' obligations to purchase Common Stock
under the Purchase Contracts. Such pledge shall be effected by the giving by the
Underwriters to the securities intermediary in respect of their security
entitlements with respect to the Treasury Notes to be pledged on the Closing
Date (as defined below) in accordance with the Pledge Agreement of entitlement
orders directing such
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securities intermediary to credit, or to instruct the securities intermediary
with whom the Collateral Agent maintains the applicable securities account to
credit, the securities account of the Collateral Agent with security
entitlements in respect of such Treasury Notes and the crediting by such
securities intermediary of such security entitlements to such securities
account.
The purchase price per Underwritten Security (the "PURCHASE PRICE") to
be paid by the Underwriters shall be $41.71, all of which shall be paid by the
Underwriters in the form of the purchase of the Treasury Notes (or security
entitlements in respect thereof) constituting a part of the Underwritten
Securities as provided above. The Company agrees to pay to the Underwriters an
amount per Underwritten Security (the "ADDITIONAL PURCHASE PRICE") representing
the difference between the purchase price (exclusive of any accrued interest) of
the Treasury Notes (or security entitlement in respect thereof) constituting a
part of the Underwritten Securities and the principal amount thereof.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the Underwriters the Option Securities, and the Underwriters shall have a
one-time right to purchase, severally and not jointly, up to 1,396,000 Option
Securities. If you, on behalf of the Underwriters, elect to exercise such
option, you shall so notify the Company in writing not later than 30 days after
the date of this Agreement, which notice shall specify the number of Option
Securities to be purchased by the Underwriters and the date on which such shares
are to be purchased. Such date may be the same as the Closing Date (as defined
below) but not earlier than the Closing Date nor later than ten business days
after the date of such notice. Option Securities may be purchased as provided in
Section 4 hereof solely for the purpose of covering over-allotments made in
connection with the offering of the Underwritten Securities. If any Option
Securities are to be purchased, each Underwriter agrees, severally and not
jointly, to purchase the number of Option Securities (subject to such
adjustments to eliminate fractional units as you may determine) that bears the
same proportion to the total number of Option Securities to be purchased as the
number of Underwritten Securities set forth in Schedule I hereto opposite the
name of such Underwriter bears to the total number of Underwritten Securities.
In connection with the purchase of any Option Securities, the
Underwriters agree to purchase, at the direction of the Company and for the
benefit of the holders of the Securities, the Treasury Notes (or security
entitlements in respect thereof) constituting a part of such Option Securities.
The Treasury Notes (or security entitlements in respect thereof) will be pledged
to the Collateral Agent to secure the holders' obligations to purchase Common
Stock under the Purchase Contracts. Such pledge shall be effected by the giving
by the Underwriters to the
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securities intermediary in respect of their security entitlements with respect
to the Treasury Notes to be pledged on the Option Closing Date (as defined
below) in accordance with the Pledge Agreement of entitlement orders directing
such securities intermediary to credit, or to instruct the securities
intermediary with whom the Collateral Agent maintains the applicable securities
account to credit, the securities account of the Collateral Agent with security
entitlements in respect of such Treasury Notes and the crediting by such
securities intermediary of such security entitlements to such securities
account.
The purchase price per Option Security to be paid by the Underwriters
shall be the Purchase Price, all of which shall be paid by the Underwriters in
the form of the purchase of the Treasury Notes (or security entitlements in
respect thereof) constituting a part of the Option Securities purchased by the
Underwriters as provided above. The Company agrees to pay to the Underwriters an
amount per Option Security purchased by the Underwriters equal to the Additional
Purchase Price. Any difference between the purchase price paid by the
Underwriters for the Treasury Notes (or security entitlement with respect
thereof) constituting a part of the Option Securities purchased by the
Underwriters and the Underwritten Securities Treasury Note Purchase Price shall
be for the account of the Underwriters.
The Company hereby agrees that, without the prior written consent of
Xxxxxx Xxxxxxx & Co. Incorporated on behalf of the Underwriters, it will not,
during the period ending 90 days after the date of the final prospectus
supplement included in the Prospectus, (i) register, offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, any Securities,
Purchase Contracts or shares of Common Stock or any securities convertible into
or exercisable or exchangeable for Securities, Purchase Contracts or Common
Stock or (ii) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the Securities, Purchase Contracts or Common Stock, whether any such transaction
described in clause (i) or (ii) above is to be settled by delivery of
Securities, Purchase Contracts or Common Stock or such other securities, in cash
or otherwise. The foregoing sentence shall not apply to (A) the Securities to be
sold hereunder, (B) the issuance by the Company of shares of Common Stock
pursuant to, or the grant of options under the Company's existing stock option,
employee benefit or dividend reinvestment plans or in connection with the Thermo
acquisition (as described in the Prospectus), or (C) the issuance of shares of
Common Stock by the Company in connection with future acquisitions provided that
the recipients of such shares agree to be bound by the transfer restrictions set
forth herein.
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3. Terms of Public Offering. The Company is advised by you that the
Underwriters propose (i) to make a public offering of their respective portions
of the Securities as soon after the Registration Statement and this Agreement
have become effective as in your judgment is advisable and (ii) initially to
offer the Securities upon the terms set forth in the Prospectus.
In connection with the transactions contemplated by this Agreement,
the Company agrees to pay to the Underwriters an underwriting commission of
$1.29 per Security (the "UNDERWRITING COMMISSION") purchased by the
Underwriters.
4. Payment and Delivery. Delivery to you for the accounts of the
several Underwriters of the certificates for the Underwritten Securities, or
delivery to a securities intermediary designated by you of such certificates and
crediting to your securities account at such securities intermediary for the
account of the several Underwriters of security entitlements in respect of the
Underwritten Securities, against, in either case, crediting to the securities
account of the Collateral Agent of security entitlements in respect of the
Treasury Notes constituting a part of the Underwritten Securities as set forth
above, and payment to you of the Underwriting Commission with respect to the
Underwritten Securities by wire transfer in immediately available funds to an
account specified by you to the Company shall be made at 10:00 a.m., New York
City time, on the fourth business day after the date of this Agreement, or at
such other time on the same or such other date, not later than nine business
days after the date of this Agreement as shall be designated in writing by you.
The time and date of such payment are hereinafter referred to as the "CLOSING
DATE."
Delivery to the Representatives for the accounts of the several
Underwriters of the certificates for the Option Securities purchased by the
Underwriters, or delivery to a securities intermediary designated by the
Representatives of such certificates and crediting to your securities account at
such securities intermediary for the accounts of the several Underwriters of
security entitlements in respect of such Option Securities, against, in either
case, crediting to the securities account of the Collateral Agent of security
entitlements in respect of the Treasury Notes constituting a part of such Option
Securities as set forth above, and payment to the Representatives of the
Underwriting Commission with respect to such Option Securities in the manner set
forth above shall be made at 10:00 a.m., New York City time, on the date
specified in the notice described in Section 2 or at such other time on the same
or on such other date, in any event not later than 10 business days after the
expiration of the Underwriters' option to purchase Option Securities as shall be
designated in writing by you. The time and date of such payment are hereinafter
referred to as the "OPTION CLOSING DATE".
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The certificates, if any, for the Securities purchased by the
Underwriters shall be registered in such names and in such denominations as you
shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates,
if any, evidencing the Underwritten Securities or Option Securities shall be
delivered to you on the Closing Date or the Option Closing Date, as the case may
be, for the respective accounts of the several Underwriters, with any transfer
taxes payable in connection with the transfer of the Underwritten Securities or
Option Securities to the Underwriters duly paid, against payment of the Purchase
Price and the Additional Purchase Price therefor and the Underwriting Commission
with respect to such Securities.
5. Conditions to the Underwriters' Obligations. The obligations of
the Company to sell the Securities to the Underwriters and the several
obligations of the Underwriters to purchase and pay for the Securities on the
Closing Date are subject to the following further conditions:
(a) no stop order suspending the effectiveness of the Registration
Statement shall have been issued under the Securities Act and no
proceedings for that purpose shall have been instituted or shall be
pending or, to your knowledge or the knowledge of the Company, shall
be contemplated by the Commission, and any request on the part of
the Commission for additional information shall have been complied
with to the reasonable satisfaction of counsel for the Underwriters.
(b) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date:
(i) there shall not have occurred any downgrading, nor
shall any notice have been given of any intended or potential
downgrading or of any review for a possible change that is with
negative implications, in the rating accorded any of the Company's
securities by any "nationally recognized statistical rating
organization," as such term is defined for purposes of Rule
436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or operations
of the Company and its subsidiaries, taken as a whole, from that
set forth in the Prospectus (exclusive of any amendments or
supplements thereto effected subsequent to the execution and
delivery of this Agreement) that, in your judgment, is material
and
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adverse and that makes it, in your judgment, impracticable to
market the Securities on the terms and in the manner
contemplated in the Prospectus.
(c) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date, and signed by each of the chief
executive officer and the chief financial officer of the Company, to
the effect set forth in Section 5(b)(i) above and to the effect that
the representations and warranties of the Company contained in this
Agreement are true and correct as of the Closing Date and that the
Company has complied with all of the agreements and satisfied all of
the conditions on its part to be performed or satisfied hereunder on
or before the Closing Date.
(d) The Underwriters shall have received on the Closing Date an
opinion or opinions of Xxxxxxx Xxxxxxx & Xxxxxxxx, outside counsel
for the Company, to the effect set forth in Exhibit A-1, an opinion
of Xxxxxx Xxxxxx, Esq., Vice President, General Counsel and
Secretary of the Company, to the effect set forth in Exhibit A-2,
and an opinion of Polsinelli, White, Xxxxxxxx & Xxxxxxx, Kansas
counsel to the Company, to the effect set forth in Exhibit A-3, in
each case dated as of the Closing Date. Such opinions shall be
rendered to the Underwriters at the request of the Company and shall
so state therein.
(e) The Underwriters shall have received on the Closing Date an
opinion of Xxxxx Xxxx & Xxxxxxxx, counsel for the Underwriters,
dated the Closing Date, in form and substance satisfactory to the
Underwriters.
(f) The Underwriters shall have received on each of the date
hereof and on the Closing Date letters, dated the date hereof or the
Closing Date, as the case may be, in form and substance satisfactory
to the Underwriters, from Xxxxxx Xxxxxxxx LLP, the Company's
independent public accountants, containing statements and
information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements
and certain financial information relating to each of the Company
and MidCon contained in or incorporated by reference in the
Registration Statement and the Prospectus; provided that such
letters delivered on the Closing Date shall use a "cut-off" date not
earlier than the date hereof.
(g) The "lock-up" agreements, each substantially in the form of
Exhibit A hereto, between you and the executive officers and
directors of the Company relating to sales and certain other
dispositions of Common
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15
Stock or certain other securities, delivered to you on or before the
date hereof, shall be in full force and effect on the Closing Date.
(h) As of the Closing Date, the Securities and the shares of
Common Stock issuable upon settlement of the Purchase Contracts
constituting part of the Securities shall have been approved for
listing on the New York Stock Exchange, subject only to official
notice of issuance.
(i) The Company shall have obtained all consents, waivers and/or
amendments under the Bank Facility (as defined in the Prospectus)
necessary to consummate the Offering.
The several obligations of the Underwriters to purchase Option
Securities hereunder are subject to the delivery to you on the Option Closing
Date of such documents as you may reasonably request with respect to the good
standing of the Company, the due authorization and issuance of the Option
Securities and other matters related to the issuance of the Option Securities.
6. Covenants of the Company. In further consideration of the
agreements of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:
(a) To furnish to you, without charge, seven signed copies of the
Registration Statement (including exhibits and documents
incorporated by reference thereto) and for delivery to each other
Underwriter a conformed copy of the Registration Statement (without
exhibits thereto) and to furnish to you in New York City, without
charge, prior to 10:00 a.m. New York City time on the business day
next succeeding the date of this Agreement and, during the period
mentioned in Section 6(d) below, as many copies of the Prospectus,
any documents incorporated by reference therein and any supplements
and amendments thereto or to the Registration Statement as you may
reasonably request.
(b) During the period in which the Prospectus is required by law
to be delivered in connection with sales of the Securities, before
amending or supplementing the Registration Statement or the
Prospectus, (including by filing any document that would as a result
thereof be incorporated by reference in the Prospectus) to furnish
to you a copy of each such proposed amendment, supplement or other
document and not to file any such proposed amendment, supplement or
other document to which you reasonably object, and to file with the
Commission within the applicable period specified in Rule 424(b)
under the Securities Act any prospectus required to be filed
pursuant to such Rule.
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16
(c) During the period when the Prospectus is required by law to be
delivered in connection with sales of the Securities, to file
promptly all documents required to be filed with the Commission
pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(d) If, during such period after the first date of the public
offering of the Securities as in the reasonable opinion of counsel
for the Underwriters or counsel for the Company the Prospectus is
required by law to be delivered in connection with sales by an
Underwriter or dealer, any event shall occur or condition exist as a
result of which it is necessary to amend or supplement the
Prospectus in order to make the statements therein, in the light of
the circumstances existing when the Prospectus is delivered to a
purchaser, not misleading, or if in the reasonable opinion of
counsel for the Underwriters or counsel for the Company, it is
necessary to amend or supplement the Prospectus to comply with
applicable law, forthwith to prepare, file with the Commission and
furnish, at its own expense, to the Underwriters and to the dealers
(whose names and addresses you will furnish to the Company) to which
Securities may have been sold by you on behalf of the Underwriters
and to any other dealers upon request, either amendments or
supplements to the Prospectus, so that the statements in the
Prospectus as so amended or supplemented will not, in the light of
the circumstances when the Prospectus is delivered to a purchaser,
be misleading or so that the Prospectus, as so amended or
supplemented, will comply with law.
(e) To endeavor to qualify the Securities for offer and sale under
the securities or Blue Sky laws of such jurisdictions as you shall
reasonably request and to maintain such qualifications for as long
as the Underwriters shall reasonably request.
(f) To make generally available to the Company's security holders
and to you as soon as practicable an earning statement that
satisfies the provisions of Section 11(a) of the Securities Act and
the rules and regulations of the Commission thereunder.
(g) To use its best efforts to effect the listing of the
Securities and the shares of Common Stock issuable upon settlement
of the Purchase Contracts constituting a part of the Securities on
The New York Stock Exchange.
(h) For a period of five years after the Closing Date, to furnish
to you and, upon request, to each Underwriter, copies of all annual
reports,
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quarterly reports and current reports filed with the Commission on
Forms 10-K, 10-Q and 8-K, or such other similar forms as may be
designated by the Commission, and such other documents, reports and
information as shall be furnished by the Company to its stockholders
generally.
7. Expenses. Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, the Company agrees to
pay or cause to be paid all expenses incident to the performance of its
obligations under this Agreement, including: (i) the fees, disbursements and
expenses of the Company's counsel and the Company's accountants in connection
with the registration and delivery of the Securities under the Securities Act
and all other fees or expenses in connection with the preparation and filing of
the Registration Statement, any preliminary prospectus, the Prospectus and
amendments and supplements to any of the foregoing, including all printing costs
associated therewith, and the mailing and delivering of copies thereof to the
Underwriters and dealers, in the quantities hereinabove specified, (ii) all
costs and expenses related to the transfer and delivery of the Securities to the
Underwriters, including any transfer or other taxes payable thereon, (iii) the
cost of printing or producing any Blue Sky memorandum in connection with the
offer and sale of the Securities under state securities laws and all expenses in
connection with the qualification of the Securities for offer and sale under
state securities law as provided in Section 6(c) hereof, including filing fees
and the reasonable fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky
memorandum, (iv) all filing fees and the reasonable fees and disbursements of
counsel to the Underwriters, if any, incurred in connection with the review and
qualification of the offering of the Securities by the National Association of
Securities Dealers, Inc., (v) any fees charged by rating agencies for the rating
of the Securities, (vi) all costs and expenses incident to listing the
Securities and the shares of Common Stock issuable upon settlement of the
Purchase Contracts constituting part of the Securities on any national
securities exchanges, (vii) the cost of printing certificates representing the
Securities, (viii) the costs and charges of any transfer agent, registrar or
depositary for the Securities, (ix) the costs and expenses of the Company
relating to investor presentations on any "road show" undertaken in connection
with the marketing of the offering of the Securities, including, without
limitation, expenses associated with the production of road show slides and
graphics, fees and expenses of any consultants engaged in connection with the
road show presentations with the prior approval of the Company, travel and
lodging expenses of the representatives and officers of the Company and any such
consultants, and the cost of any aircraft chartered in connection with the road
show, and (x) all other costs and expenses incident to the performance of the
obligations of the Company hereunder for which provision is not otherwise made
in this Section. It is understood, however, that except as provided in this
Section,
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Section 8 entitled "Indemnity and Contribution", and the last paragraph of
Section 10 below, the Underwriters will pay all of their costs and expenses,
including fees and disbursements of their counsel, stock transfer taxes payable
on resale of any of the Securities by them and any advertising expenses
connected with any offers they may make.
8. Indemnity and Contribution. (a) The Company agrees to indemnify
and hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating any
such action or claim) caused by any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or any amendment
thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter through you or through
your counsel expressly for use therein; provided, however, that the foregoing
indemnity agreement with respect to any preliminary prospectus shall not inure
to the benefit of any Underwriter from whom the person asserting any such
losses, claims, damages or liabilities purchased Securities, or any person
controlling such Underwriter, if a copy of the Prospectus (as then amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) was not sent or given by or on behalf of such Underwriter to such
person, if required by law so to have been delivered, at or prior to the written
confirmation of the sale of the Securities to such person, and if the Prospectus
(as so amended or supplemented) would have cured the defect giving rise to such
losses, claims, damages or liabilities, unless such failure is the result of
noncompliance by the Company with Section 6(a) hereof.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, the directors of the Company, the officers of the
Company who signed the Registration Statement and each person, if any, who
controls the Company within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act to the same extent as the foregoing
indemnity from the Company to such Underwriters, but only with reference to
information relating to such Underwriter furnished to the Company in writing by
such Underwriter through you or through your counsel expressly for use in the
17
19
Registration Statement, any preliminary prospectus, the Prospectus or any
amendments or supplements thereto.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to Section 8(a) or 8(b), such person (the
"INDEMNIFIED PARTY") shall promptly notify the person against whom such
indemnity may be sought (the "INDEMNIFYING PARTY") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all such indemnified parties and that all such fees
and expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by Xxxxxx Xxxxxxx & Co. Incorporated in the case of
parties indemnified pursuant to Section 8(a), and by the Company, in the case of
parties indemnified pursuant to Section 8(b). The indemnifying party shall not
be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for reasonable fees and expenses of counsel as contemplated by the third
sentence of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
18
20
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
(d) To the extent the indemnification provided for in Section 8(a)
or 8(b) is unavailable to an indemnified party or insufficient in respect of any
losses, claims, damages or liabilities referred to therein, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters on the
other hand from the offering of the Securities or (ii) if the allocation
provided by clause 8(d)(i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause 8(d)(i) above but also the relative fault of the Company on the one
hand and of the Underwriters on the other hand in connection with the statements
or omissions that resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other hand
in connection with the offering of the Securities shall be deemed to be in the
same respective proportions as the total price to public less underwriting
discounts and commissions, and the total underwriting discounts and commissions
received by the Underwriters, in each case as set forth in the table on the
cover of the Prospectus, bear to the total price to public of the Securities.
The relative fault of the Company on the one hand and the Underwriters on the
other hand shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
(including information relating to MidCon) or by the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Underwriters' respective
obligations to contribute pursuant to this Section 8 are several in proportion
to the respective number of Securities they have purchased hereunder, and not
joint.
(e) The Company and the Underwriters agree that it would not be just
or equitable if contribution pursuant to this Section 8 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in Section 8(d). The amount paid or payable
by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such
19
21
action or claim. Notwithstanding the provisions of this Section 8, no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages that such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The remedies provided
for in this Section 8 are not exclusive and shall not limit any rights or
remedies which may otherwise be available to any indemnified party at law or in
equity.
(f) The indemnity and contribution provisions contained in this
Section 8 and the representations, warranties and other statements of the
Company contained in this Agreement shall remain operative and in full force and
effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter or by or on behalf of the Company, its officers or directors or
any person controlling the Company and (iii) acceptance of and payment for any
of the Securities.
9. Termination. This Agreement shall be subject to termination by
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, the New York
Stock Exchange or the National Association of Securities Dealers, Inc., (ii)
trading of any securities of the Company shall have been suspended on any
exchange or in any over-the-counter market, (iii) a general moratorium on
commercial banking activities in New York shall have been declared by either
Federal or New York State authorities or (iv) there shall have occurred any
outbreak or escalation of hostilities or any change in financial markets or any
calamity or crisis that, in your judgment, is material and adverse and (b) in
the case of any of the events specified in clauses 9(a)(i) through 9(a)(iv),
such event, singly or together with any other such event, makes it, in your
judgment, impracticable to market the Securities on the terms and in the manner
contemplated in the Prospectus.
10. Effectiveness; Defaulting Underwriters. This Agreement shall
become effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or the Option Closing Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase
Securities that it has or they have agreed to purchase hereunder on such date,
and the aggregate number of Securities which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase is not more than one-tenth
of the aggregate
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22
number of the Securities to be purchased on such date, the other Underwriters
shall be obligated severally in the proportions that the number of Underwritten
Securities set forth opposite their respective names in Schedule I bears to the
aggregate number of Underwritten Securities set forth opposite the names of all
such non-defaulting Underwriters, or in such other proportions as you may
specify, to purchase the Securities which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date; provided
that in no event shall the number of Securities that any Underwriter has agreed
to purchase pursuant to this Agreement be increased pursuant to this Section 10
by an amount in excess of one-ninth of such number of Securities without the
written consent of such Underwriter. If, on the Closing Date, any Underwriter or
Underwriters shall fail or refuse to purchase Underwritten Securities and the
aggregate number of Underwritten Securities with respect to which such default
occurs is more than one-tenth of the aggregate number of Underwritten Securities
to be purchased, and arrangements satisfactory to you and the Company for the
purchase of such Underwritten Securities are not made within 36 hours after such
default, this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter or the Company. In any such case you shall have the
right to postpone the Closing Date, but in no event for longer than seven days,
in order that the required changes, if any, in the Registration Statement and in
the Prospectus or in any other documents or arrangements may be effected. If, on
the Option Closing Date, any Underwriter or Underwriters shall fail or refuse to
purchase Option Securities and the aggregate number of Option Securities with
respect to which such default occurs is more than one-tenth of the aggregate
number of Option Securities to be purchased, the non-defaulting Underwriters
shall have the option to (i) terminate their obligation hereunder to purchase
Option Securities or (ii) purchase not less than the number of Option Securities
that such non-defaulting Underwriters would have been obligated to purchase in
the absence of such default. Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability in respect of any default of
such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the reasonable fees and disbursements of their
counsel) reasonably incurred by such Underwriters in connection with this
Agreement or the offering contemplated hereunder.
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23
11. Counterparts. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
12. Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.
13. Headings. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.
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24
Very truly yours,
K N ENERGY, INC.
By: s:\\ Xxxx X. Xxxxxxx
--------------------
Name: Xxxx X. Xxxxxxx
Title: Vice President and Treasurer
Accepted as of the date hereof
XXXXXX XXXXXXX & CO.
INCORPORATED
XXXXXXX LYNCH, PIERCE, XXXXXX
& XXXXX INCORPORATED
XXXXXXX, SACHS & CO.
XXXXXXX XXXXX XXXXXX INC.
XXXXXXXXX & COMPANY, INC.
NATIONSBANC XXXXXXXXXX SECURITIES LLC
XXXXXX XXXXXXX & CO., INC.
Acting severally on behalf of themselves and the
several Underwriters named in Schedule I
hereto.
By: Xxxxxx Xxxxxxx & Co. Incorporated
By: s:\\ Xxxxx Xxxxxxxxxxxx
----------------------
Xxxxx Xxxxxxxxxxxx
Vice President
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25
SCHEDULE I
NUMBER-OF
UNDERWRITTEN SECURITIES
UBDERWRITTERS TO BE PURCHASED
------------------------------------------------------------------------------
Xxxxxx Xxxxxxx & Co. Incorporated.................... 1,855,100
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx 1,855,100
Incorporated................................
Xxxxxxx, Sachs & Co.................................. 1,406,980
Xxxxxx Xxxxxxx & Co., Inc............................ 1,406,980
Xxxxxxx Xxxxx Barney Inc............................. 1,406,980
Xxxxxxxxx & Company, Inc............................. 464,430
NationsBanc Xxxxxxxxxx Securities LLC................ 464,430
Xxxxxx X. Xxxxx & Co., L.P........................... 150,000
X.X. Xxxxxxx & Sons, Inc............................. 150,000
Xxxx Xxxxxxxx Incorporated........................... 150,000
---------
Total:...................................... 9,310,000
=========
26
EXHIBIT A
LOCK-UP LETTER
_______________ __, 1998
Xxxxxx Xxxxxxx & Co. Incorporated
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated
Xxxxxxx Sachs & Co.
Xxxxxxx Xxxxx Xxxxxx Inc.
Xxxxxxxxx & Company, Inc.
NationsBanc Xxxxxxxxxx Securities LLC
Xxxxxx Xxxxxxx & Co., Inc.
c/o Morgan Xxxxxxx & Co. Incorporated
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Dear Sirs and Mesdames:
The undersigned understands that Xxxxxx Xxxxxxx & Co. Incorporated
("XXXXXX XXXXXXX") proposes to enter into an Underwriting Agreement (the
"UNDERWRITING AGREEMENT") with K N Energy, Inc., a Kansas corporation (the
"COMPANY"), providing for the public offering (the "PUBLIC OFFERING") by the
several Underwriters, including Xxxxxx Xxxxxxx (the "UNDERWRITERS"), of an
aggregate of 8,000,000 ___% Premium Equity Participating Security Units
-PEPS(SM) Units (each a, "SECURITY") which require any holder of a Security to,
among other things, purchase from the Company, on a future date, shares of the
Company's common stock (par value $5.00 per share) (the "COMMON STOCK").
To induce the Underwriters that may participate in the Public Offering
to continue their efforts in connection with the Public Offering, the
undersigned hereby agrees that, without the prior written consent of Xxxxxx
Xxxxxxx on behalf of the Underwriters, the undersigned will not, during the
period commencing on the date of the Underwriting Agreement and ending 90 days
after the date of the final prospectus supplement relating to the Public
Offering (except that none of the following shall limit the undersigned's rights
under any existing stock option or employee benefit plans (as such plans are in
effect on the date hereof)), it being understood that any shares of Common Stock
acquired pursuant to such plans shall otherwise be subject to the terms of this
lock-up letter), (1) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option
27
or contract to sell, grant any option, right or warrant to purchase or otherwise
transfer or dispose of, directly or indirectly, any Securities or shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for any Securities or shares of Common Stock or (2) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of the economic
consequences of ownership of the Securities or shares of Common Stock, whether
any such transaction described in clause (1) or (2) above is to be settled by
delivery of Securities, Common Stock or such other securities, in cash or
otherwise.
The undersigned hereby acknowledges that, notwithstanding the
foregoing, if the undersigned is an individual, he or she may transfer any or
all of his or her shares of Common Stock either during his or her lifetime or on
death by gift, will or intestacy (i) to his or her immediate family, (ii) to a
trust, partnership or other entity, the beneficiaries, partners or equity
holders of which are exclusively the undersigned and/or a member or members of
his or her immediate family or (iii) to his or her xxxx mater; provided,
however, that in any such case, it shall be a condition to the transfer that the
transferee execute an agreement stating that the transferee is receiving and
holding the shares of Common Stock subject to the provisions of this lock-up
letter, and there shall be no further transfer of such shares of Common Stock
except in accordance with this lock-up letter. For purposes of this paragraph,
"immediate family" shall mean a lineal descendant, spouse, adopted child,
father, mother, brother or sister of the transferor and the spouses, adopted
children and lineal descendants of any of the foregoing.
Whether or not the Public Offering actually occurs depends on a number
of factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Company and the Underwriters.
Very truly yours,
----------------------------------
(Name)
----------------------------------
(Address)
2
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EXHIBIT A-1
OPINION OF OUTSIDE COUNSEL FOR
THE COMPANY
The opinion of Xxxxxxx Xxxxxxx & Xxxxxxxx, outside counsel for the
Company to be delivered pursuant to Section 5(d) of the Underwriting Agreement,
shall be to the effect that:
(i) The Registration Statement has become effective under the Act and,
to such counsel's knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued or proceeding for that purpose has been
instituted or threatened by the Commission;
(ii) The issue and sale of the Securities by the Company and the
compliance by the Company with all of the provisions of the Underwriting
Agreement, the PEPS Agreements and the Securities will not violate any federal
or New York statute or any rule or regulation that has been issued pursuant to
any federal or New York statute or any order known to such counsel issued
pursuant to any federal or New York statute by any court or governmental agency
or body having jurisdiction over the Company or any of its subsidiaries or
properties, and no consent, approval, authorization, order, registration, or
qualification of or with, any federal or New York governmental body or agency
or, to our knowledge, any federal or New York court is required for the issue
and sale of the Securities by the Company and the compliance by the Company with
all of the provisions of this Agreement, the PEPS Agreements and the Securities
except for registration under the Act of the Securities and such as may be
required by the securities or Blue Sky laws of the various states in connection
with the purchase and distribution of the Securities by the Underwriters;
(iii) Assuming that the Purchase Contract Agreement, the Pledge
Agreement and the Purchase Contracts constituting a part of the Securities being
delivered at the Closing Date or Option Closing Date, as the case may be, and
the Securities have been duly authorized, executed and delivered by the Company,
each is a valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms, subject to applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally and general
principals of equity; provided, however, that the rights and remedies of the
Agent and the Collateral Agent provided in Sections 4.02 and 5.08 of the
Purchase Contract Agreement and Section 5(a) of the Pledge Agreement upon the
occurrence of a Termination Event will not be limited under the Bankruptcy Code
(11 U.S.C. 101 et seq.); provided, however, that procedural restrictions
respecting
A-1-1
29
relief from the automatic stay under Section 362 of the Bankruptcy Code may
affect the timing of the exercise of such rights and remedies;
(iv) Assuming that (1) the Pledge Agreement has been duly authorized,
executed and delivered by the Agent on behalf of each of the holders of the
Securities (the "HOLDERS"), (2) the Agent is duly incorporated and validly
existing under the laws of the jurisdiction of its incorporation, (3) the Agent
and each of the Holders has full power, authority and legal right (including,
without limitation, any legal right dependent upon there being no necessary
governmental approvals or filings and no conflict with laws, governing documents
or contracts) to make and perform its obligations under the Pledge Agreement,
(4) the Pledge Agreement is the legal, valid, binding and enforceable obligation
of the Agent on behalf of each of the Holders, and (5) the Agent and each Holder
have sufficient rights in the Treasury Notes (or security entitlements in
respect thereof) for the security interest of the Collateral Agent for the
benefit of the Company to attach, then (a) the Pledge Agreement creates a valid
security interest in such Treasury Notes (or security entitlements in respect
thereof) and, subject to Section 9-306 of the Uniform Commercial Code as in
effect in the State of New York on the date hereof (the "UCC"), the proceeds
thereof, to secure the obligations of the Holders under the Purchase Contracts
and (b) assuming that (i) the securities intermediary with whom the Collateral
Agent maintains the securities account to which such security entitlements have
been credited (x) has not and will not agree to comply with entitlement orders
originated by any person other than the Collateral Agent in respect of such
security entitlements and (y) has waived any security interest or lien on such
security entitlements in its favor (other than any such security interest or
lien arising under the Pledge Agreement) and (ii) none of the Collateral Agent,
the Agent or any Holder has any notice of any adverse claim thereto, upon the
crediting by such securities intermediary of security entitlements in respect of
such Treasury Notes to a securities account of the Collateral Agent on the books
of such securities intermediary, such security interest shall be a perfected
security interest (as to which the Collateral Agent shall have control), subject
to no prior security interest arising under the UCC or 31 C.F.R. Section 357,
subject to customary qualifications reasonably acceptable to the
Representatives;
(v) The statements in the Prospectus under the captions, "Description
of Stock Purchase Contracts and Stock Purchase Units", "Description of the PEPS
Units," "Description of the Purchase Contracts," and "Certain Provisions of the
Purchase Contract Agreement and the Pledge Agreement", insofar as they purport
to constitute summaries of the terms of the Securities or the PEPS Agreements,
constitute accurate summaries of the terms of the Securities or the PEPS
Agreements, as the case may be, in all material respects;
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30
(vi) The statements made in the Prospectus under the caption "United
States Federal Income Tax Consequences," insofar as they purport to constitute
summaries of matters of United States federal tax law and regulations or legal
conclusions with respect thereto, constitute accurate summaries of the matters
described therein in all material respects;
(vii) The Company is not an "investment company" within the meaning of,
or subject to regulation under, the Investment Company Act of 1940, as amended;
and
(viii) Such counsel (A) is of the opinion that the Registration
Statement, as of its effective date, and Prospectus, as of the date of the
Underwriting Agreement, (except for financial statements and schedules and other
financial or statistical data included therein as to which such counsel need not
express any opinion) comply as to form in all material respects with the
Securities Act and the applicable rules and regulations of the Commission
thereunder, (B) has no reason to believe that (except for financial statements
and schedules and other financial or statistical data as to which such counsel
need not express any belief) the Registration Statement at the time the
Registration Statement became effective or on the effective date of the most
recent post-effective amendment thereto, if any, contained any untrue statements
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading and (C) has
no reason to believe that (except for financial statements and schedules and
other financial or statistical data as to which such counsel need not express
any belief) the Prospectus at the time the Prospectus Supplement was issued or
at the Closing Date contained or contains any untrue statement of a material
fact or omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
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EXHIBIT A-2
OPINION OF GENERAL COUNSEL OF THE COMPANY
The opinion of Xxxxxx X. Xxxxxx, Esq., Vice President, General Counsel
and Secretary of the Company, to be delivered pursuant to Section 5(d) of the
Underwriting Agreement, shall be to the effect that:
(i) Each of the Company and the Significant Subsidiaries (i) is duly
qualified to do business as a foreign corporation and is in good standing under
the laws of each jurisdiction which requires such qualification wherein it owns
or leases material properties or conducts material business, except where the
failure to be so qualified or in good standing would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole, and (ii) holds all
material approvals, authorizations, orders, licenses, certificates and permits
from governmental authorities necessary for the conduct of its business as
described in the Prospectus, except where the failure to hold such approvals,
authorizations, orders, licenses, certificates and/or permits would not,
singularly or in the aggregate, have a material adverse effect on the Company
and its subsidiaries, taken as a whole;
(ii) Each of the Significant Subsidiaries has been duly incorporated
and is validly existing as a corporation in good standing under the laws of the
jurisdiction in which it is incorporated, with full corporate power and
authority to own its properties and conduct its business as described in the
Prospectus except to the extent that the failure to be in good standing would
not have a material adverse effect on the Company and its subsidiaries, taken as
a whole;
(iii) All the outstanding shares of capital stock of each Significant
Subsidiary have been duly and validly authorized and issued and are fully paid
and nonassessable, and, except as otherwise set forth in the Prospectus, all of
such shares are owned by the Company either directly or through one or more
subsidiaries free and clear of any pledge, security interest, claims, lien or
other encumbrance;
(iv) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus;
(v) The shares of Common Stock outstanding prior to the issuance of the
Securities, have been duly authorized and validly issued and are fully paid and
non-assessable and none of such shares of Common Stock was issued in violation
of the preemptive or other similar rights known to such counsel of any
securityholder of the Company;
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(vi) The shares of Common Stock issuable upon settlement of the
Purchase Contracts constituting a part of the Securities have been duly
authorized and reserved for issuance and such Common Stock, when issued and
delivered by the Company against payment therefor in accordance with the
provisions of the Purchase Contracts, will be validly issued, fully paid and
nonassessable and the issuance of such Common Stock is not subject to any
preemptive or other similar rights arising by law;
(vii) Each of the Securities, the Underwriting Agreement, the PEPS
Agreements and the Rights Agreement has been duly executed and delivered by the
Company;
(viii) Such counsel does not know of any statutes or regulations, or
any pending or threatened legal or governmental proceedings, required to be
described in the Prospectus that are not described as required, nor of any
contracts or documents of a character required to be described or referred to in
the Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not described, referred to or filed as required;
(ix) The descriptions included in or incorporated by reference in the
Prospectus of the statutes, regulations, legal or governmental proceedings,
contracts and other documents therein described are accurate and fairly
summarize the matters referred to therein;
(x) No consent, approval, authorization or order of any court or
governmental agency or body is required to be obtained by the Company or any
subsidiary for the consummation of the transactions contemplated herein in
connection with the purchase and sale of the Securities by the Underwriters,
except such approvals (specified in such opinion) as have been obtained;
(xi) The execution and delivery by the Company of the Underwriting
Agreement, the PEPS Agreements, the consummation by the Company of the
transactions contemplated therein and in the Registration Statement (including
the issuance and delivery of the Securities, and the use of the proceeds from
the sale of the Securities as described in the Prospectus under the caption "Use
of Proceeds") and compliance by the Company with the terms of the Underwriting
Agreement do not and will not result in any violation of the charter or by-laws
of the Company or any Significant Subsidiary, and do not and will not conflict
with, or result in a breach of any of the terms or provisions of, or constitute
a default under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or asset of the Company or any Significant
Subsidiary under (A) any indenture, mortgage or loan agreement, or any other
agreement or
A-2-2
33
instrument known to such counsel, to which the Company or any Significant
Subsidiary is a party or by which it may be bound or to which any of its
properties may be subject, (B) any existing applicable law, rule or regulation
(other than the securities or blue sky laws of the various states, as to which
such counsel need express no opinion), or (C) any judgment, order or decree of
any government, governmental instrumentality or court, domestic or foreign,
known to such counsel having jurisdiction over the Company or any Significant
Subsidiary or any of its properties (except, in the case of subclauses (A) and
(B) hereof, for such conflicts, breaches or defaults, liens, charges or
encumbrances that would not have a material adverse effect on the condition
(financial or otherwise), earnings, business affairs or business prospects of
the Company and its subsidiaries, considered as one enterprise or the
transactions contemplated by the Underwriting Agreement);
(xii) The Company and the Significant Subsidiaries hold all requisite
Certificates of Public Convenience and Necessity from the Federal Energy
Regulatory Commission to enable them to carry on the respective businesses in
which they are engaged;
(xiii) To the knowledge of such counsel (after due inquiry), none of
the Company or any Significant Subsidiary is in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any contract, indenture, loan agreement, note, lease or other
agreement or instrument that is described or referred to in the Registration
Statement or Prospectus or filed as an exhibit to the Registration Statement;
(xiv) To the knowledge of such counsel, after due inquiry, no person or
corporation which is a "holding company" or a "subsidiary of a holding company,"
within the meaning of such terms as defined in the Public Utility Holding
Company Act of 1935, directly or indirectly owns, controls or holds with power
to vote 10% or more of the outstanding voting securities of the Company; and the
Company is not a "holding company" or to the knowledge of such counsel, after
due inquiry, a "subsidiary of a holding company" as so defined; and
(xv) The documents incorporated by reference in the Prospectus (except
for the consolidated financial statements and other financial or statistical
data included therein or omitted therefrom, as to which such counsel need
express no opinion), as of the dates they were filed with the Commission or to
the extent such documents were subsequently amended prior to the date hereof, at
the time so amended, complied as to form in all material respects with the
requirements of the Exchange Act and the regulations thereunder.
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In addition, such counsel shall state that such counsel has
participated in the preparation of the Registration Statement and the Prospectus
(including the documents incorporated by reference therein) and participated in
conferences with representatives of your legal counsel and representatives of
the Underwriters at which the contents of the Registration Statement and the
Prospectus and related matters were discussed. Such counsel shall also state
that although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement and the Prospectus except as stated
above, such counsel advises you that, on the basis of the foregoing, no facts
have come to such counsel's attention which lead such counsel to believe that
(A) the Registration Statement or any amendments thereto (other than the
financial statements, the Statements of Eligibility and Qualification of the
Trustee on Form T-1s and other financial or statistical information included or
incorporated by reference therein as to which such counsel need not comment), at
the time the Registration Statement initially became effective or on the
effective date of the most recent post-effective amendment thereto, if any,
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or (B) the Prospectus or any amendment or supplement thereto
(other than the financial statements and other financial or statistical
information included or incorporated by reference therein as to which such
counsel need not comment), at the time the Prospectus Supplement was issued or
at the Closing Date contained or contains an untrue statement of a material fact
or omitted or omits to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
In rendering such opinions, such counsel may (A) state that her opinion
is limited to the laws of the State of Colorado, the General Corporation Law of
the State of Delaware and the federal laws of the United States and (B) rely as
to matters involving the application of laws of any jurisdiction other than the
State of Colorado or the United States, to the extent deemed proper and
specified in such opinion, upon the opinions of Polsinelli, White, Xxxxxxxx &
Xxxxxxx and other local counsel of good standing believed to be reliable and who
are satisfactory to counsel for the Underwriters and as to matters of fact, to
the extent deemed proper, on certificates of responsible officers of the Company
and public officials.
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EXHIBIT A-3
OPINION OF KANSAS COUNSEL OF THE COMPANY
The opinion of Polsinelli, White, Xxxxxxxx & Shalton, Kansas counsel to
the Company, to be delivered pursuant to Section 5(d) of the Underwriting
Agreement, shall be to the effect that:
(i) The Company is duly incorporated, validly existing and in good
standing under the laws of the State of Kansas, with corporate power and
authority under such laws to own, lease, and operate its properties and conduct
its business as described in the Prospectus;
(ii) The execution and delivery of each of the Securities, the PEPS
Agreements and the Underwriting Agreement has been duly authorized by the
Company;
(iii) The Rights Agreement has been duly authorized by the Company; the
Rights have been duly authorized by the Company and, when issued upon issuance
of the shares of Common Stock issuable upon settlement of the Purchase Contracts
constituting a part of the Securities, will be validly issued, and the shares of
Class B Junior Participating Series Preferred Stock issuable upon exercise of
the Rights have been duly authorized by the Company and, when issued upon such
exercise in accordance with the terms of the Rights Agreement, will be validly
issued, fully paid and non-assessable; and
(iv) No approval, authorization, consent or other action (other than
under the securities or blue sky laws of the State of Kansas) is required by any
regulatory authority or governmental body of the State of Kansas for the valid
issuance, sale, and delivery by the Company of the Securities pursuant to the
Underwriting Agreement and to the best of our knowledge, do not result in any
breach or violation of any judgment, order or decree of any governmental body,
agency or court located in Kansas having jurisdiction over the Company.
A-3-1
