- ----------------------------------------------------------------------------
The information in this pricing supplement is not complete and may be
changed. This pricing supplement and the accompanying prospectus and
prospectus supplement is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.
- ----------------------------------------------------------------------------
Subject to Completion
Preliminary Pricing Supplement dated January 21, 2000

PRICING SUPPLEMENT
- ------------------
(To Prospectus dated January 21, 2000 and
Prospectus Supplement dated January 21, 2000)

KeySpan Gas East Corporation

% Notes due January , 2010

Guaranteed Fully and Unconditionally by

KeySpan Corporation
-------------------

Interest on the notes will be payable on January and July of
each year beginning on July , 2000. The notes will mature on January ,
2010. KeySpan Gas East Corporation, doing business as Brooklyn Union of Long
Island, the Issuer, cannot redeem the notes prior to maturity. The notes
will be unsecured and unsubordinated obligations of the Issuer and will rank
equally with the Issuer's other unsecured and unsubordinated debt. Each note
will be issued in denominations of $1,000 and integral multiples of $1,000.
For more information on the notes, see "Description of the Notes" in the
accompanying prospectus supplement and "Description of Securities--
Description of Debt Securities" in the accompanying prospectus.

The payment of principal, premium, if any, and interest, if any, on
the notes will be guaranteed fully and unconditionally by KeySpan
Corporation, doing business as KeySpan Energy, the Guarantor. For more
information on the guarantees, see "Description of Securities--Description
of the Guarantees" in the accompanying prospectus.

Investing in the notes involves certain risks which are
described in the "Risk Factors" section beginning on page S-3 of the
accompanying prospectus supplement.

----------------

Per Note Total
Public offering price(1) . . . . . . . . . . % $
Underwriting discount . . . . . . . . . . . . % $
Proceeds, before expenses, to KeySpan Gas % $
East Corporation . . . . . . . . . . . . . .

(1) Plus accrued interest from January , 2000, if settlement occurs
after that date

Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved these securities or
determined if this preliminary pricing supplement is truthful or complete.
Any representation to the contrary is a criminal offense.

The notes will be ready for delivery in book-entry form only through
The Depository Trust Company on or about , 2000.

--------------------

Merrill Lynch & Co.
Chase Securities Inc.
J.P. Morgan & Co.
--------------------

The date of this pricing supplement is January , 2000.

PS-2

USE OF PROCEEDS

The net proceeds from the offering of the notes will be used to
reimburse the Guarantor for $397 million of indebtedness of the Guarantor
allocated to the Issuer, which was repaid by the Guarantor in July 1999. The
indebtedness had an interest rate of 7.3%. The balance of the proceeds, if
any, will be used for general corporate purposes.

TERMS OF THE NOTES

The notes are Fixed Rate Notes (as defined in the accompanying
prospectus supplement) and are part of a series of Medium-Term Notes Due Nine
Months or More from Date of Issue, Series A, of the Issuer described in the
accompanying prospectus and prospectus supplement. The notes will bear
interest at the rate per annum shown on the cover page of this pricing
supplement from January , 2000, or from the most recent date to which
interest has been paid. Interest will be payable on January and July
of each year, beginning on July , 2000, to the persons in whose names the
notes are registered at the close of business on the fifteenth calendar day,
whether or not a business day, immediately preceding the interest payment
date. Interest payable at maturity will be payable to the person to whom
principal is payable. Interest on the notes will be computed on the basis of
a 360-day year of twelve 30-day months. The notes will mature on January ,
2010, and cannot be redeemed at the option of the Issuer prior to maturity.

The notes will be unsecured and unsubordinated obligations of the
Issuer and will rank equally with all the Issuer's other unsecured and
unsubordinated debt.

The payment of principal, premium, if any, and interest, if any, on
the notes will be guaranteed fully and unconditionally by the Guarantor.

The notes will be issued in book-entry form through the facilities of
The Depository Trust Company in minimum denominations of $1,000 and integral
multiples of $1,000.

For further information regarding the terms of the notes, see
"Description of the Notes" in the accompanying prospectus supplement and
"Description of Securities--Description of Debt Securities" in the
accompanying prospectus. The guarantees are described under the caption
"Description of Securities--Description of the Guarantees" in the prospectus.

SUPPLEMENTAL PLAN OF DISTRIBUTION

The Issuer, the Guarantor and the underwriters named below have
entered into a distribution agreement dated January 21, 2000. Subject to
conditions, each of the underwriters has severally and not jointly agreed to

PS-3

purchase from the Issuer the principal amount of the notes indicated in the
following table:

Principal
Underwriter Amount
----------- ---------

Merrill Lynch, Pierce, Fenner & Smith
Incorporated . . . . . . . . . . . . . . . $
Chase Securities Inc. . . . . . . . . . . . . . . .

J.P. Morgan Securities Inc. . . . . . . . . . . . . -----------
$
Total . . . . . ===========

The underwriters have informed the Issuer that they propose initially
to offer the notes to the public at the public offering price set forth on
the cover page of this pricing supplement, and also to dealers at the public
offering price minus a concession not in excess of % of the principal
amount per note. The underwriters and the dealers they have sold notes to may
grant a discount not in excess of % of the principal amount per note to
other dealers. After the initial public offering, the public offering price,
concession and discount may be changed.

The Issuer estimates that the total expenses of the offering payable
by the Issuer, excluding underwriting discounts and commissions, will be
approximately $ .

Prior to the offering, there has been no public market for the notes.
The Issuer has been advised by the underwriters that they intend to make a
market in the notes but are not obligated to do so and may discontinue any
market making at any time without notice. The notes will not be listed on any
stock exchange and it is possible that there will be no secondary market for
the notes or that there will be little or no liquidity in a secondary market
if one develops.

The Issuer has agreed to indemnify the several underwriters against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended. For more information on how the notes will be distributed, see
"Plan of Distribution" in the accompanying prospectus and "Plan of
Distribution" in the accompanying prospectus supplement.

Merrill Lynch, Pierce, Fenner & Smith Incorporated, Chase Securities
Inc. and J.P. Morgan Securities Inc. may provide investment banking services

PS-4

to the Issuer and the Guarantor and their affiliates from time to time. Chase
Securities Inc. and J.P. Morgan Securities Inc. are affiliated with
commercial banking institutions that may from time to time in the ordinary
course of their business engage in general financing and banking transactions
with the Issuer and the Guarantor and their affiliates. Chase Securities Inc.
is an affiliate of the trustee.

PS-5

PROSPECTUS SUPPLEMENT
(To Prospectus dated January 21, 2000)

$600,000,000
[LOGO]
KEYSPAN GAS EAST CORPORATION
Medium-Term Notes, Series A
Due Nine Months or More from Date of Issue
Guaranteed Fully and Unconditionally by
KEYSPAN CORPORATION
_________________________
The Notes:

- - The Issuer will offer notes from time to time and specify the terms and
conditions of each issue of notes in a pricing supplement.

- - The notes will be senior unsecured debt securities of the Issuer.

- - The notes will have stated maturities of nine months or more from the
date they are originally issued.

- - The Issuer will pay amounts due on the notes in U.S. dollars or any
other consideration described in the applicable pricing supplement.

- - The notes may bear interest at fixed or floating rates or may not bear
any interest. If the notes bear interest at a floating rate, the
floating rate may be based on one or more indices or formulas plus or
minus a fixed amount or multiplied by a factor.

- - The Issuer will specify whether the notes can be redeemed or repaid
before their maturity and whether they are subject to mandatory
redemption, redemption at the option of the Issuer or repayment at the
option of the holder of the notes.

The Guarantees:

- The payment of principal, premium, if any, and interest, if any, on the
notes will be guaranteed fully and unconditionally by KeySpan
Corporation, as Guarantor.

INVESTING IN THE NOTES INVOLVES CERTAIN RISKS.
SEE "RISK FACTORS" ON PAGE S-3.

Per Note Total(1)
-------------------------- ---------------------------------

Public Offering Price . . . . . . . . . . . . . . . . . . . . . 100% $600,000,000
Agents' Discounts and Commissions . . . . . . . . . . . . . . . .125%-.750% $750,000-$4,500,000
Proceeds, before expenses, to KeySpan Gas East Corporation . . 99.875%-99.250% $599,250,000-$595,500,000

(1) Or the equivalent in one or more foreign currencies or currency units.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus supplement, the accompanying prospectus or any pricing
supplement is truthful or complete. Any representation to the contrary is a
criminal offense.

The Issuer may sell notes to the agents referred to below as principal
for resale at varying or fixed offering prices or through an agent as agent
using its reasonable efforts on the Issuer's behalf. The Issuer may also sell
notes without the assistance of any agent, whether acting as principal or as
agent.

If the Issuer sells other securities referred to in the accompanying
prospectus, the amount of notes that the Issuer may offer and sell under this
prospectus supplement may be reduced.
_________________________
Merrill Lynch & Co.
Chase Securities Inc.
J.P. Morgan & Co.
_________________________

The date of this prospectus supplement is January 21, 2000.

S-2

TABLE OF CONTENTS

Prospectus Supplement

Page
----
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-4
Description of the Notes . . . . . . . . . . . . . . . . . . . . . . . S-6
United States Federal Income Tax Consequences . . . . . . . . . . . . . S-33
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . S-43

Prospectus

Page
----
About this Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Where You Can Find More Information . . . . . . . . . . . . . . . . . . . . 1
Forward-looking Statements . . . . . . . . . . . . . . . . . . . . . . . . 2
The Issuer and the Guarantor . . . . . . . . . . . . . . . . . . . . . . . 3
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Ratio of Earnings to Fixed Charges . . . . . . . . . . . . . . . . . . . . 5
Description of Securities . . . . . . . . . . . . . . . . . . . . . . . . . 6
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

As used in this prospectus supplement, except as the context otherwise
requires, "Guarantor" means KeySpan Corporation, "Issuer" means KeySpan Gas
East Corporation and references to "we" "us" and "our" mean KeySpan
Corporation, together with its consolidated subsidiaries, including KeySpan
Gas East Corporation.

S-3

RISK FACTORS

Your investment in the notes involves certain risks. In consultation
with your own financial and legal advisers, you should carefully consider,
among other matters, the following discussion of risks before deciding
whether an investment in the notes is suitable for you. The notes are not an
appropriate investment for you if you are unsophisticated with respect to the
significant components of their relationships.

STRUCTURE RISKS OF NOTES INDEXED TO INTEREST RATE, CURRENCY OR OTHER INDICES
OR FORMULAS

If you invest in notes indexed to one or more interest rate, currency or
other indices or formulas, there will be significant risks not associated
with a conventional fixed rate or floating rate debt security. These risks
include fluctuation of the indices or formulas and the possibility that you
will receive a lower, or no, amount of principal, premium or interest and at
different times than you expected. We have no control over a number of
matters, including economic, financial and political events, that are
important in determining the existence, magnitude and longevity of these
risks and their results. In addition, if an index or formula used to
determine any amounts payable in respect of the notes contains a multiplier
or leverage factor, the effect of any change in that index or formula will be
magnified. In recent years, values of certain indices and formulas have been
volatile and volatility in those and other indices and formulas may be
expected in the future. However, past experience is not necessarily
indicative of what may occur in the future.

REDEMPTION MAY ADVERSELY AFFECT YOUR RETURN ON THE NOTES

If your notes are redeemable at the Issuer's option or are otherwise
subject to mandatory redemption, the Issuer may, in the case of optional
redemption, or must, in the case of mandatory redemption, choose to redeem
your notes at times when prevailing interest rates may be relatively low.
Accordingly, you generally will not be able to reinvest the redemption
proceeds in a comparable security at an effective interest rate as high as
that of the notes.

THERE MAY BE AN UNCERTAIN TRADING MARKET FOR YOUR NOTES; MANY FACTORS AFFECT
THE TRADING VALUE OF YOUR NOTES

We cannot assure you a trading market for your notes will ever develop
or be maintained. Many factors independent of our creditworthiness may affect
the trading market of your notes. These factors include:

- the complexity and volatility of the index or formula applicable to
the notes,

S-4

- the method of calculating the principal, premium and interest in
respect of the notes,

- the time remaining to the maturity of the notes,

- the outstanding amount of the notes,

- the redemption features of the notes,

- the amount of other securities linked to the index or formula
applicable to the notes, and

- the level, direction and volatility of market interest rates
generally.

In addition, because some notes were designed for specific investment
objectives or strategies, these notes will have a more limited trading market
and experience more price volatility. There may be a limited number of buyers
for these notes. This may affect the price you receive for these notes or
your ability to sell these notes at all. You should not purchase notes unless
you understand and know you can bear the related investment risks.

OUR CREDIT RATINGS MAY NOT REFLECT ALL RISKS OF AN INVESTMENT IN THE NOTES

The credit ratings of the Issuer and the Guarantor are an assessment of
their ability to pay their obligations. Consequently, real or anticipated
changes in these credit ratings will generally affect the market value of
your notes. These credit ratings, however, may not reflect the potential
impact of risks related to structure, market or other factors discussed above
on the value of your notes.

THE GUARANTOR'S HOLDING COMPANY STRUCTURE MAKES IT DEPENDENT ON CASH FLOW
FROM ITS SUBSIDIARIES, LIMITS ITS RIGHT TO PARTICIPATE IN DISTRIBUTIONS OF
ASSETS OF ITS SUBSIDIARIES AND SUBJECTS IT TO REGULATION WHICH LIMITS ITS
FLEXIBILITY

The Guarantor is a holding company with no business operations or source
of income of its own which conducts substantially all of its operations
through its subsidiaries. As a result, the Guarantor depends on the earnings
and cash flow of, and dividends or distributions from, its subsidiaries to
provide the funds necessary to meet its debt and contractual obligations.
Furthermore, a substantial portion of the Guarantor's consolidated assets,
earnings and cash flow is derived from the operation of its regulated utility
subsidiaries, whose legal authority to pay dividends or make other
distributions to the Guarantor is subject to regulation by the State of New
York Public Service Commission. In addition, upon consummation of the
acquisition of Eastern Enterprises, the Guarantor expects to register as a
holding company under the Public Utility Holding Company Act of 1935, as
amended. As a result, the corporate and financial activities of the Guarantor
and each of its subsidiaries (including their ability to pay dividends to the
Guarantor) will be subject to regulation by the SEC.

S-5

The Guarantor's holding company structure also means that the right of
the Guarantor to participate in any distribution of the assets of its any of
its subsidiaries upon liquidation, reorganization or otherwise is subject to
the prior claims of the creditors of each of the subsidiaries (except to the
extent that the claims of the Guarantor itself as a creditor of a subsidiary
may be recognized). Since this is true for the Guarantor, it is also true
for the creditors of the Guarantor (including the holders of the notes). The
right of the Guarantor's creditors (including the holders of the notes) to
participate in the distribution of the stock owned by the Guarantor in its
regulated subsidiaries would also be subject to approval by the State of
New York Public Service Commission and the Federal Energy Regulatory
Commission.

DESCRIPTION OF THE NOTES

The notes will be issued as a series of debt securities under an
indenture, dated as of December 1, 1999, between the Issuer, the Guarantor
and The Chase Manhattan Bank, as trustee. The term "debt securities," as used
in this prospectus supplement, refers to all securities issued and issuable
from time to time under the indenture and includes the notes. The debt
securities and the indenture are more fully described in the accompanying
prospectus. The following summary of the material provisions of the notes and
of the indenture is not complete and is qualified in its entirety by
reference to the indenture, a copy of which has been filed as an exhibit to
the registration statement of which this prospectus supplement and the
accompanying prospectus are a part.

You should rely only on the information contained or incorporated by
reference in this prospectus supplement, the accompanying prospectus and any
pricing supplement. Neither we nor the agents have authorized any other
person to provide you with different or additional information. If anyone
provides you with different or additional information, you should not rely on
it. Neither we nor any of the agents is making an offer to sell these
securities in any jurisdiction where the offer or sale is not permitted. You
should assume that the information contained or incorporated by reference in
this prospectus supplement, the accompanying prospectus and any pricing
supplement is accurate only as of the date on the front cover of the pricing
supplement.

The following description of notes will apply unless otherwise specified
in an applicable pricing supplement.

TERMS OF THE NOTES

All debt securities, including the notes, will be unsecured and
unsubordinated obligations of the Issuer and will rank equally with all the
Issuer's other unsecured and unsubordinated debt. The guarantees will be
unsecured and unsubordinated obligations of the Guarantor and will rank
equally with all the Guarantor's other unsecured and unsubordinated debt.

S-6

The indenture does not limit the aggregate principal amount of debt
securities which the Issuer may issue. The Issuer may issue its debt
securities from time to time as a single series or in two or more separate
series up to the aggregate principal amount from time to time authorized by
the Issuer for each series. The Issuer may, from time to time, without the
consent of the holders of the notes, provide for the issuance of notes or
other debt securities under the indenture in addition to the $600,000,000
aggregate principal amount of notes offered by this prospectus supplement. As
of January , 2000, the Issuer had no notes issued and outstanding. The
aggregate principal amount of notes which may be offered and sold by this
prospectus supplement may be reduced by the sale by the Issuer of other
securities under the registration statement of which this prospectus
supplement and the accompanying prospectus are a part.

The notes will be offered on a continuing basis and will mature on a day
nine months or more from the date of issue, as selected by the purchaser and
agreed to by the Issuer. Interest-bearing notes will bear interest at either
fixed or floating rates as specified in the applicable pricing supplement.
Notes may be issued at significant discounts from their principal amount
("OID notes") or, in the case of indexed notes, an amount determined by the
terms of that indexed note, due and payable at stated maturity, or due and
payable on any date before the stated maturity date, whether by the
declaration of acceleration, call for redemption, request for redemption,
repayment at the option of the holder, pursuant to any sinking fund or
otherwise (the stated maturity date or such prior date, as the case may be,
is referred to as a "Maturity"). Some notes may not bear interest.

Unless otherwise indicated in a note and in the applicable pricing
supplement, the notes will be denominated in United States dollars and the
Issuer will make payments of principal of, and premium, if any, and interest
on, the notes in United States dollars.

Interest rates, interest rate formulae and other variable terms of the
notes are subject to change by the Issuer from time to time, but no change
will affect any note already issued or as to which the Issuer has accepted an
offer to purchase.

Each note will be issued in fully registered book-entry form or
certificated form, in denominations of $1,000 and integral multiples of
$1,000, unless otherwise specified in the applicable pricing supplement.
Notes in book-entry form may be transferred or exchanged only through a
participating member of The Depository Trust Company, also known as DTC, or
any other depository as is identified in an applicable pricing supplement.
See "--Book-Entry Notes". Registration of transfer of notes in certificated
form will be made at the office or agency of the Issuer maintained for that
purpose. There will be no service charge for any registration of transfer or
exchange of notes, but the Issuer may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection with any
registration of transfer or exchange, other than exchanges pursuant to the
indenture not involving any transfer.

S-7

The Issuer will make payments of principal of, and premium and interest,
if any, on notes in book-entry form through the trustee to the depository or
its nominee. See "--Book-Entry Notes". Unless otherwise specified in the
applicable pricing supplement, a beneficial owner of notes in book-entry form
that are denominated in a currency or currency unit other than United States
dollars (a "Specified Currency") electing to receive payments of principal or
any premium or interest in that Specified Currency must notify the Trustee no
later than the close of business on the day specified in the applicable
pricing supplement immediately preceding the applicable payment date of the
beneficial owner's election to receive all or a portion of any payment in a
Specified Currency.

In the case of notes in certificated form, the Issuer will make payment
of principal or premium, if any, at the Maturity of each note in immediately
available funds upon presentation of the note and, in the case of any
repayment on an optional repayment date, upon submission of a duly completed
election form if and as required by the provisions described below, at the
corporate trust office of the trustee in the Borough of Manhattan, The City
of New York, or at any other place as the Issuer may designate. Payment of
interest due at Maturity will be made to the person to whom payment of the
principal of the note in certificated form will be made. Payment of interest
due on notes in certificated form other than at Maturity will be made at the
corporate trust office of the trustee or, at the option of the Issuer, may be
made by check mailed to the address of the person entitled to receive payment
as the address appears in the security register. Notwithstanding the
previous sentence, a holder of $1,000,000 or more in aggregate principal
amount of notes in certificated form, whether having identical or different
terms and provisions, having the same interest payment dates will, at the
option of the Issuer, be entitled to receive interest payments on any
interest payment date other than at Maturity by wire transfer of immediately
available funds if appropriate wire transfer instructions have been received
in writing by the trustee at least 15 days prior to the interest payment
date. Any wire instructions received by the trustee shall remain in effect
until revoked by the holder.

"Business Day" means any day, other than a Saturday or Sunday, that is:

- neither a legal holiday nor a day on which commercial banks are
authorized or required by law, regulation or executive order to
close in The City of New York;

- with respect to non-United States dollar-denominated notes, not a
day on which commercial banks are authorized or required by law,
regulation or executive order to close in the Principal Financial
Center, as defined below, of the country issuing the Specified
Currency;

- if the Specified Currency is euro, a day on which the
Trans-European Automated Real-time Gross Settlement Express
Transfer (TARGET) System is open; and

S-8

- with respect to notes as to which LIBOR is an applicable Interest
Rate Basis, a London Business Day.

"London Business Day" means a day on which commercial banks are open for
business, including dealings in the LIBOR Currency, as defined below, in
London.

"Principal Financial Center" means, unless otherwise specified in the
applicable pricing supplement,

- the capital city of the country issuing the Specified Currency,
except that with respect to United States dollars, Australian
dollars, Canadian dollars, Deutsche marks, Dutch guilders, South
African rand and Swiss francs, the "Principal Financial Center"
will be The City of New York, Sydney and Melbourne, Toronto,
Frankfurt, Amsterdam, Johannesburg and Zurich, respectively, or

- the capital city of the country to which the LIBOR Currency, as
defined below, relates, except that with respect to United States
dollars, Canadian dollars, Deutsche marks, Dutch guilders,
Portuguese escudos, South African rand and Swiss francs, the
"Principal Financial Center" will be The City of New York, Toronto,
Frankfurt, Amsterdam, London, Johannesburg and Zurich,
respectively.

TRANSACTION AMOUNT

Interest rates offered by the Issuer with respect to the notes may
differ depending upon, among other things, the aggregate principal amount of
notes purchased in any transaction. The Issuer may offer notes with similar
variable terms but different interest rates concurrently at any time. The
Issuer may also concurrently offer notes having different variable terms to
different investors.

REDEMPTION AT THE OPTION OF THE ISSUER

The notes will not be subject to any sinking fund. The Issuer may redeem
the notes at its option prior to their stated maturity only if an initial
redemption date is specified in the notes and in the applicable pricing
supplement. If so indicated in the applicable pricing supplement, the Issuer
may redeem the notes at its option on any date on and after the applicable
initial redemption date specified in the pricing supplement. On and after the
initial redemption date, if any, the Issuer may redeem the related note at
any time in whole or from time to time in part at its option at the
applicable redemption price referred to below together with interest on the
principal of the applicable note payable to the redemption date, on notice
given, unless otherwise specified in the applicable pricing supplement, not
more than 60 nor less than 30 days before the redemption date. The Issuer
will redeem the notes in increments of $1,000, so long as any remaining
principal amount will be an authorized denomination of the note. Unless
otherwise specified in the pricing supplement, the redemption price with
respect to a note will initially mean a percentage, the initial redemption

S-9

percentage, of the principal amount of the note to be redeemed specified in
the pricing supplement, which shall decline at each anniversary of the
initial redemption date by a percentage specified in the pricing supplement,
of the principal amount to be redeemed until the redemption price is 100% of
the principal amount.

REPAYMENT AT THE OPTION OF THE HOLDER

If so indicated in an applicable pricing supplement, the Issuer will
repay the notes in whole or in part at the option of the holders of the notes
on any optional repayment date specified in the applicable pricing
supplement. If no optional repayment date is indicated with respect to a
note, it will not be repayable at the option of the holder before its stated
maturity.

Any repayment in part will be in an amount equal to $1,000 or integral
multiples of $1,000, so long as any remaining principal amount will be an
authorized denomination of the note. The repurchase price for any note so
repurchased will be 100% of the principal amount to be repaid, together with
interest on the principal of the note payable to the date of repayment.

For any note to be repaid, the trustee must receive, at its office
maintained for such purpose in the Borough of Manhattan, The City of
New York, currently the corporate trust office of the trustee, not more than
60 nor less than 30 days before the optional repayment date:

- in the case of a note in certificated form, the note and the form
entitled "Option to Elect Repayment" duly completed, or

- in the case of a note in book-entry form, instructions to that
effect from the beneficial owner of the notes to the depository and
forwarded by the depository.

Notices of elections from a holder to exercise the repayment option must be
received by the trustee by 5:00 p.m., New York City time, on the last day for
giving notice. Exercise of the repayment option by the holder of a note will
be irrevocable.

Only the depository may exercise the repayment option in respect of
global securities representing notes in book-entry form. As a result,
beneficial owners of global securities that desire to have all or any portion
of the notes in book-entry form represented by global securities repaid must
instruct the participant through which they own their interest to direct the
depository to exercise the repayment option on their behalf by forwarding the
repayment instructions to the trustee as discussed above. To ensure that the
instructions are received by the trustee on a particular day, the beneficial
owner must instruct the participant through which it owns its interest before
that participant's deadline for accepting instructions for that day.
Different firms may have different deadlines for accepting instructions from
their customers. As a result, beneficial owners of notes in book-entry form
should consult the participants through which they own their interest for the
deadlines. All instructions given to participants from beneficial owners of

S-10

notes in book-entry form relating to the option to elect repayment will be
irrevocable. In addition, at the time instructions are given, each beneficial
owner will cause the participant through which it owns its interest to
transfer its interest in the global security or securities representing the
related notes in book-entry form, on the depository's records, to the
trustee. See "--Book-Entry Notes".

If applicable, the Issuer will comply with the requirements of
Section 14(e) of the Exchange Act and the rules promulgated under the
Exchange Act and any other securities laws or regulations in connection with
any repayment at the option of the holder.

The Issuer may at any time purchase notes at any price or prices in the
open market or otherwise. Notes so purchased by the Issuer may, at the
discretion of the Issuer, be held, resold or surrendered to the trustee for
cancellation.

INTEREST

Each note will bear interest from the date of issue at the rate per
annum or, in the case of a floating rate note, according to the interest rate
formula stated in that note and in the applicable pricing supplement until
the principal of the note is paid or made available for payment. Interest
will be payable in arrears on each interest payment date specified in the
pricing supplement on which an installment of interest is due and payable and
at Maturity. The first payment of interest on any note originally issued
between a regular record date and the related interest payment date will be
made on the interest payment date immediately following the next regular
record date to the registered holder on the next regular record date. The
regular record date will be the fifteenth calendar day, whether or not a
Business Day, immediately prior to the related interest payment date.

Fixed Rate Notes

Unless otherwise specified in an applicable pricing supplement, each
fixed rate note will bear interest from, and including, the date of issue, at
the rate per annum stated on the face of the note until its principal amount
is paid or made available for payment. Interest payments on fixed rate notes
will equal the amount of interest accrued from and including the immediately
preceding interest payment date on which interest has been paid or from and
including the date of issue, if no interest has been paid on the applicable
fixed rate notes, to, but excluding, the related interest payment date or
Maturity.

Unless otherwise specified in the applicable pricing supplement,
interest on fixed rate notes will be computed on the basis of a 360-day year
of twelve 30-day months.

Unless otherwise specified in the applicable pricing supplement,
interest on fixed rate notes will be payable semiannually on May 15 and
November 15 of each year and at Maturity. If any interest payment date or the
Maturity of a fixed rate note falls on a day that is not a Business Day, the

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related payment of principal, premium, if any, or interest will be made on
the next Business Day as if made on the date the payment was due. In that
event, no interest will accrue on the amount payable for the period from and
after the interest payment date or Maturity.

Floating Rate Notes

Interest on floating rate notes will be determined by reference to the
applicable Interest Rate Basis or Interest Rate Bases, which may be one or
more of:

- the CD Rate,

- the CMT Rate,

- the Commercial Paper Rate,

- the Eleventh District Cost of Funds Rate,

- the Federal Funds Rate,

- LIBOR,

- the Prime Rate,

- the Treasury Rate, or

- any other Interest Rate Basis or interest rate formula that is
specified in the applicable pricing supplement.

A floating rate note may bear interest with respect to two or more
Interest Rate Bases.

TERMS. Each applicable pricing supplement will specify the terms of the
floating rate note being delivered, including:

- whether the floating rate note is

- a "Regular Floating Rate Note",

- a "Inverse Floating Rate Note" or

- a "Floating Rate/Fixed Rate Note",

- the Interest Rate Basis or Bases,

- the Initial Interest Rate,

- the Interest Reset Dates,

- the interest payment dates,

- the period to maturity of the instrument or obligation with respect
to which the Interest Rate Basis or Bases will be calculated (the
"Index Maturity"),
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- the Maximum Interest Rate and Minimum Interest Rate, if any,

- the number of basis points to be added to or subtracted from the
related Interest Rate Basis or Bases (the "Spread"),

- the percentage of the related Interest Rate Basis or Bases by which
the Interest Rate Basis or Bases will be multiplied to determine
the applicable interest rate (the "Spread Multiplier"),

- if one or more of the specified Interest Rate Bases is LIBOR, the
LIBOR Currency, the Index Maturity and the Designated LIBOR Page,
and

- if one or more of the specified Interest Rate Bases is the CMT
Rate, the Designated CMT Telerate Page and Designated CMT Maturity
Index.

The interest rate borne by the floating rate Notes will be determined as
follows:

REGULAR FLOATING RATE NOTES. Unless a floating rate note is designated
as a Floating Rate/Fixed Rate Note, an Inverse Floating Rate Note or as
having an addendum attached or as having "Other Provisions" apply relating to
a different interest rate formula, it will be a "Regular Floating Rate Note"
and, except as described below or in an applicable pricing supplement, will
bear interest beginning on the first Interest Reset Date at the rate
determined by reference to the applicable Interest Rate Basis or Bases:

- plus or minus the applicable Spread, if any, and/or

- multiplied by the applicable Spread Multiplier, if any.

Commencing on the first Interest Reset Date, the rate at which interest on
the Regular Floating Rate Note will be payable will be reset as of each
Interest Reset Date. The interest rate in effect for the period from the
date of issue to the first Interest Reset Date will be the Initial Interest
Rate.

FLOATING RATE/FIXED RATE NOTES. If a floating rate note is designated
as a "Floating Rate/Fixed Rate Note", it will bear interest after the first
Interest Reset Date at the rate determined by reference to the applicable
Interest Rate Basis or Bases:

- plus or minus the applicable Spread, if any, and/or

- multiplied by the applicable Spread Multiplier, if any.

Commencing on the first Interest Reset Date, the rate at which interest on
the applicable Floating Rate/Fixed Rate Note will be payable will be reset as
of each Interest Reset Date. However, the interest rate in effect commencing
on, and including, the date on which interest begins to accrue on a fixed
rate basis to Maturity will be the Fixed Interest Rate, if the rate is
specified in the applicable pricing supplement, or if no Fixed Interest Rate
is specified, the interest rate in effect on the Floating Rate/Fixed Rate

S-13

Note on the day immediately preceding the date on which interest begins to
accrue on a fixed rate basis. The interest rate in effect for the period
from the date of issue to the first Interest Reset Date will be the Initial
Interest Rate.

INVERSE FLOATING RATE NOTES. If a floating rate note is designated as
an "Inverse Floating Rate Note", except as described below, it will bear
interest after the first Interest Rate Date equal to the Fixed Interest Rate
specified in the related pricing supplement minus the rate determined by
reference to the applicable Interest Rate Basis or Bases:

- plus or minus the applicable Spread, if any, and/or

- multiplied by the applicable Spread Multiplier, if any;

so long as, unless otherwise specified in the applicable pricing supplement,
the interest rate on the note will not be less than zero percent. Commencing
on the first Interest Reset Date, the rate at which interest on the note is
payable will be reset as of each Interest Reset Date. The interest rate in
effect for the period from the date of issue to the first Interest Reset Date
will be the Initial Interest Rate.

Each Interest Rate Basis will be the rate determined in accordance with
the applicable provisions below. Except as set forth above, the interest rate
in effect on each day will be:

- if the day is an Interest Reset Date, the interest rate determined
as of the Interest Determination Date (as defined below)
immediately prior to the Interest Reset Date, or

- if the day is not an Interest Reset Date, the interest rate
determined as of the Interest Determination Date immediately prior
to the Interest Reset Date.

INTEREST RESET DATES. The applicable pricing supplement will specify
the dates on which the interest rate on the related floating rate note will
be reset (each, an "Interest Reset Date"). Unless otherwise specified in the
pricing supplement, the Interest Reset Date will be, in the case of floating
rate notes which reset:

- daily - each Business Day;

- weekly - the Wednesday of each week, with the exception of weekly
reset Floating Rate Notes as to which the Treasury Rate is an
Interest Rate Basis, which will reset the Tuesday of each week,
except as described below;

- monthly - the third Wednesday of each month, with the exception of
monthly reset Floating Rate Notes as to which the Eleventh District
Cost of Funds Rate is an Interest Rate Basis, which will reset on
the first calendar day of the month;

S-14

- quarterly - the third Wednesday of March, June, September and
December of each year;

- semiannually - the third Wednesday of the two months specified in
the pricing supplement; and

- annually - the third Wednesday of the month specified in the
pricing supplement.

However, for Floating Rate/Fixed Rate Notes, the rate of interest will not
reset after the date on which interest on a fixed rate basis begins to
accrue.

If any Interest Reset Date for any floating rate note would otherwise be
a day that is not a Business Day, the Interest Reset Date will be postponed
to the next Business Day. However, in the case of a floating rate note as to
which LIBOR is an applicable Interest Rate Basis, if the next Business Day
falls in the next calendar month, then the Interest Reset Date will be the
immediately preceding Business Day. In addition, in the case of a floating
rate note for which the Treasury Rate is an Interest Rate Basis if the
Interest Determination Date would otherwise fall on an Interest Reset Date,
then the Interest Reset Date will be postponed to the next Business Day.

MAXIMUM AND MINIMUM INTEREST RATES. A floating rate note may also have
either or both of the following:

- a maximum numerical limitation, or ceiling, on the rate at
which interest may accrue during any interest period (a
"Maximum Interest Rate"), and

- a minimum numerical limitation, or floor, on the rate at which
interest may accrue during any period (a "Minimum Interest
Rate").

The indenture is, and any notes issued under the indenture will be,
governed by and construed in accordance with the laws of the State of New
York. Under present New York law, the maximum rate of interest is 25% per
annum on a simple interest basis. This limit may not apply to securities in
which $2,500,000 or more has been invested. While the Issuer believes that
New York law would be given effect by a state or federal court sitting
outside of New York, state laws frequently regulate the amount of interest
that may be charged to and paid by a borrower, including, in some cases,
corporate borrowers. Prospective investors should consult their personal
advisors with respect to the applicability of these laws. The Issuer has
agreed for the benefit of the beneficial owners of the notes, to the extent
permitted by law, not to claim voluntarily the benefits of any laws
concerning usurious rates of interest against a beneficial owner of the
notes.

INTEREST PAYMENTS. Each pricing supplement will specify the dates on
which interest will be payable. Each floating rate note will bear interest
from the date of issue at the rates specified in the note until the principal
of the note is paid or otherwise made available for payment. Except as

S-15

provided below or in the pricing supplement, the interest payment dates with
respect to floating rate notes will be, in the case of floating rate notes
which reset:

- daily, weekly or monthly - the third Wednesday of each month or on
the third Wednesday of March, June, September and December of each
year, as specified in the pricing supplement;

- quarterly - the third Wednesday of March, June, September and
December of each year;

- semiannually - the third Wednesday of the two months of each year
specified in the pricing supplement;

- annually - the third Wednesday of the month of each year specified
in the pricing supplement; and

- at Maturity.

If any interest payment date for any floating rate note, other than an
interest payment date at Maturity, would otherwise be a day that is not a
Business Day, the interest payment date will be postponed to the next
Business Day. However, in the case of a floating rate note as to which LIBOR
is an Interest Rate Basis, if the next Business Day falls in the next
calendar month, the interest payment date will be the immediately preceding
Business Day. If the Maturity of a floating rate note falls on a day that is
not a Business Day, the payment of principal, premium, if any, and interest
will be made on the next Business Day, and no interest on such payment will
accrue for the period from and after the Maturity.

All percentages resulting from any calculation on floating rate notes
will be rounded to the nearest one hundred-thousandth of a percentage point,
with five one-millionths of a percentage point rounded upwards. For example,
9.876545%, or .09876545, would be rounded to 9.87655%, or .0987655. All
dollar amounts used in or resulting from any calculation on floating rate
notes will be rounded to the nearest cent with one-half cent being rounded
upward.

Interest payments on floating rate notes will equal the amount of
interest accrued from and including the immediately preceding interest
payment date on which interest has been paid or from and including the date
of issue, if no interest has been paid, to but excluding the related interest
payment date or Maturity.

With respect to each floating rate note, accrued interest is calculated
by multiplying its face amount by an accrued interest factor. The accrued
interest factor is computed by adding the interest factor calculated for each
day in the period for which accrued interest is being calculated.

- In the case of notes for which the Interest Rate Basis is the CD
Rate, the Commercial Paper Rate, the Eleventh District Cost of
Funds Rate, the Federal Funds Rate, LIBOR or the Prime Rate, the

S-16

interest factor for each day will be computed by dividing the
interest rate applicable to each day by 360.

- In the case of notes for which the Interest Rate Basis is the CMT
Rate or the Treasury Rate, the interest factor for each day will be
computed by dividing the interest rate applicable to each day by
the actual number of days in the year.

- The interest factor for notes for which the interest rate is
calculated with reference to two or more Interest Rate Bases will
be calculated in each period in the same manner as if only one of
the applicable Interest Rate Bases applied.

Interest Determination Dates. The interest rate applicable to each
interest reset period commencing on the Interest Reset Date with respect to
that interest reset period will be the rate determined as of the applicable
"Interest Determination Date."

- The Interest Determination Date for the CD Rate, the CMT Rate and
the Commercial Paper Rate will be the second Business Day prior to
each Interest Reset Date for the related note.

- The Interest Determination Date for the Federal Funds Rate and the
Prime Rate will be the Business Day prior to each Interest Reset
Date.

- The Interest Determination Date for the Eleventh District Cost of
Funds Rate will be the last working day of the month prior to each
Interest Reset Date on which the Federal Home Loan Bank of San
Francisco publishes the Index, as defined below.

- The Interest Determination Date for LIBOR will be the second London
Business Day prior to each Interest Reset Date.

- The Interest Determination Date for the Treasury Rate will be the
day in the week in which the related Interest Reset Date falls on
which day Treasury Bills, as defined below, are normally auctioned.
Treasury Bills are normally sold at auction on Monday of each week,
unless that day is a legal holiday. In that case the auction is
normally held on the following Tuesday, except that the auction may
be held on the preceding Friday. However, if an auction is held on
the Friday of the week prior to the related Interest Reset Date,
the Interest Determination Date will be the preceding Friday. If an
auction falls on any Interest Reset Date, then the Interest Reset
Date will instead be the first Business Day following the auction.

- The Interest Determination Date pertaining to a floating rate note
the interest rate of which is determined with reference to two or
more Interest Rate Bases will be the latest Business Day that is at
least two Business Days before the Interest Reset Date for the
floating rate note on which each Interest Reset Basis is
determinable. Each Interest Rate Basis will be determined on the

S-17

Interest Determination Date, and the interest rate will take effect
on the related Interest Reset Date.

Calculation Date. Unless otherwise provided in the applicable pricing
supplement, the trustee will be the calculation agent. Upon the request of
the holder of any floating rate note, the calculation agent will provide the
interest rate then in effect and, if determined, the interest rate that will
become effective as a result of a determination made for the next Interest
Reset Date for that floating rate note. Unless otherwise specified in the
applicable pricing supplement, the calculation date (the "Calculation Date"),
if applicable, pertaining to any Interest Determination Date will be the
earlier of:

- the tenth calendar day after the Interest Determination Date, or,
if the tenth calendar day is not a Business Day, the next Business
Day or

- the Business Day prior to the applicable Interest Payment Date or
Maturity, as the case may be.

CD RATE. CD Rate Notes will bear interest at the rates, calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any,
specified in the applicable CD Rate Notes and in the applicable pricing
supplement.

"CD Rate" means:

- the rate on the Interest Determination Date for negotiable United
States dollar certificates of deposit having the Index Maturity
specified in the pricing supplement published in H.15(519) under
the heading "CDs (secondary market)", or

- if the rate referred to in the preceding clause is not so published
by 3:00 P.M., New York City time, on the Calculation Date, the rate
on the Interest Determination Date for negotiable United States
dollar certificates of deposit of the Index Maturity specified in
the pricing supplement as published in H.15 Daily Update, or other
recognized electronic source used for the purpose of displaying the
applicable rate, under the caption "CDs (secondary market)", or

- if the rate referred to in the immediately preceding clause is not
so published by 3:00 P.M., New York City time, on the Calculation
Date, the rate on the Interest Determination Date calculated by the
calculation agent as the arithmetic mean of the secondary market
offered rates as of 10:00 A.M., New York City time, on the Interest
Determination Date, of three leading non-bank dealers in negotiable
United States dollar certificates of deposit in The City of New
York selected by the calculation agent for negotiable United States
dollar certificates of deposit of major United States money center
banks for negotiable certificates of deposit with a remaining
maturity closest to the Index Maturity specified in the pricing

S-18

supplement in an amount that is representative for a single
transaction in that market at that time, or

- if the dealers selected by the calculation agent are not quoting as
mentioned in the immediately preceding clause, the CD rate in
effect on the Interest Determination Date.

"H.15(519)" means the weekly statistical release designated as
H.15(519), or any successor publication, published by the Board of Governors
of the Federal Reserve System.

"H.15 Daily Update" means the daily update of H.15(519), available
through the world-wide-web site of the Board of Governors of the Federal
Reserve System at http://www.bog.frb.fed.us/releases/h15/update, or any
successor site or publication.

CMT RATE. CMT Rate Notes will bear interest at the rates, calculated
with reference to the CMT Rate and the Spread and/or Spread Multiplier, if
any, specified in the applicable CMT Rate Notes and in the applicable pricing
supplement.

"CMT Rate" means:

- the rate displayed on the Designated CMT Telerate Page under the
caption "...Treasury Constant Maturities... Federal Reserve Board
Release H.15... Mondays Approximately 3:45 P.M.", under the column
for the Designated CMT Maturity Index for:

- if the Designated CMT Telerate Page is 7051, the rate on the
Interest Determination Date, and

- if the Designated CMT Telerate Page is 7052, the weekly or the
monthly average, as specified in the pricing supplement, for
the week or the month, as applicable, ended immediately prior
to the week or the month, as applicable, in which the Interest
Determination Date falls, or

- if the rate referred to in the immediately preceding clause is no
longer displayed on the relevant page or is not so displayed by
3:00 P.M., New York City time, on the Calculation Date, the
treasury constant maturity rate for the Designated CMT Maturity
Index published in H.15(519), or

- if the rate referred to in the immediately preceding clause is no
longer published or is not published by 3:00 P.M., New York City
time, on the Calculation Date, the treasury constant maturity rate
for the Designated CMT Maturity Index, or other United States
Treasury rate for the Designated CMT Maturity Index, for the
Interest Determination Date for the applicable Interest Reset Date
as may then be published by either the Board of Governors of the
Federal Reserve System or the United States Department of the
Treasury that the calculation agent determines to be comparable to

S-19

the rate formerly displayed on the Designated CMT Telerate Page and
published in H.15(519), or

- if the rate referred to in the immediately preceding clause is not
so published by 3:00 P.M., New York City time, on the Calculation
Date, the rate on the Interest Determination Date calculated by the
calculation agent as a yield to maturity, based on the arithmetic
mean of the secondary market bid rates as of approximately
3:30 P.M., New York City time, on the Interest Determination Date
reported, according to their written records, by three leading
primary United States government securities dealers in The City of
New York, which may include the agent or its affiliates (each, a
"Reference Dealer"), selected by the calculation agent from five
Reference Dealers selected by the calculation agent after
eliminating the highest quotation, or, in the event of equality,
one of the highest, and the lowest quotation or, in the event of
equality, one of the lowest, for the most recently issued direct
noncallable fixed rate obligations of the United States ("Treasury
Notes") with an original maturity of approximately the Designated
CMT Maturity Index and a remaining term to maturity of not less
than such Designated CMT Maturity Index minus one year, or

- if the calculation agent is unable to obtain three applicable
Treasury Note quotations as referred to in the immediately
preceding clause, the rate on the Interest Determination Date
calculated by the calculation agent as a yield to maturity based on
the arithmetic mean of the secondary market bid rates as of
approximately 3:30 P.M., New York City time, on the Interest
Determination Date of three Reference Dealers in The City of New
York selected by the calculation agent from five Reference Dealers
selected by the calculation agent after eliminating the highest
quotation or, in the event of equality, one of the highest and the
lowest quotation or, in the event of equality, one of the lowest,
for Treasury Notes with an original maturity of the number of years
that is the next highest to the Designated CMT Maturity Index and a
remaining term to maturity closest to the Designated CMT Maturity
Index and in an amount of at least $100 million, or

- if three or four and not five of the Reference Dealers are quoting
as referred to in the immediately preceding clause, the rate will
be calculated by the calculation agent as the arithmetic mean of
the bid rates obtained and neither the highest nor the lowest of
quotes will be eliminated, or

- if fewer than three Reference Dealers selected by the calculation
agent are quoting as mentioned in the immediately preceding clause,
the rate in effect on the Interest Determination Date.

If two Treasury Notes with an original maturity as described in the
third preceding clause have remaining terms to maturity equally close to
the Designated CMT Maturity Index, the calculation agent will obtain

S-20

from five Reference Dealers quotations for the Treasury Notes with the
shorter remaining term to maturity.

"Designated CMT Telerate Page" means the display on Bridge
Telerate, Inc. or any successor service on the page specified in the pricing
supplement or any other page as may replace the specified page on that
service for the purpose of displaying Treasury Constant Maturities as
reported in H.15(519), or, if no page is specified in the pricing supplement,
page 7052.

"Designated CMT Maturity Index" means the original period to maturity of
the U.S. Treasury securities, either 1, 2, 3, 5, 7, 10, 20 or 30 years,
specified in the pricing supplement with respect to which the CMT Rate will
be calculated.

COMMERCIAL PAPER RATE. Commercial Paper Rate Notes will bear interest
at the rates, calculated with reference to the Commercial Paper Rate and the
Spread and/or Spread Multiplier, if any, specified in the applicable
Commercial Paper Rate Notes and in the applicable pricing supplement.

"Commercial Paper Rate" means:

- the Money Market Yield on the Interest Determination Date of the
rate for commercial paper having the Index Maturity specified in
the pricing supplement published in H.15(519) under the caption
"Commercial Paper-Nonfinancial", or

- if the rate described in the preceding clause is not so published
by 3:00 P.M., New York City time, on the Calculation Date, the rate
on the Interest Determination Date for commercial paper having the
Index Maturity specified in the pricing supplement published in
H.15 Daily Update, or other recognized electronic source used for
the purpose of displaying the applicable rate, under the caption
"Commercial Paper-Nonfinancial", or

- if the rate is referred to in the preceding clause is not so
published by 3:00 P.M., New York City time, on the Calculation
Date, the rate on the Interest Determination Date calculated by the
calculation agent as the Money Market Yield of the arithmetic mean
of the offered rates at approximately 11:00 A.M., New York City
time, on the Interest Determination Date of three leading dealers
of United States dollar commercial paper in The City of New York,
which may include the calculation agent and its affiliates,
selected by the calculation agent for commercial paper having the
Index Maturity specified in the pricing supplement placed for
industrial issuers whose bond rating is "Aa", or the equivalent,
from a nationally recognized statistical rating organization, or

- if the dealers selected by the calculation agent are not quoting as
mentioned in the immediately preceding clause, the rate in effect
on the Interest Determination Date.

S-21

"Money Market Yield" means a yield calculated in accordance with the
following formula and expressed as a percentage:

D x 360
Money Market Yield = ----------------- x 100
360 - ( D x M )

where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days in the interest period for which interest is being
calculated.

ELEVENTH DISTRICT COST OF FUNDS RATE. Eleventh District Cost of Funds
Rate Notes will bear interest at the rates, calculated with reference to the
Eleventh District Cost of Funds Rate and the Spread and/or Spread Multiplier,
if any, specified in the applicable Eleventh District Cost of Funds Rate
Notes and in the applicable pricing supplement.

"Eleventh District Cost of Funds Rate" means:

- the rate equal to the monthly weighted average cost of funds for
the calendar month immediately prior to the month in which the
Interest Determination Date falls as set forth under the caption
"11th District" on the display on Bridge Telerate, Inc. or any
successor service on page 7058 or any other page as may replace the
specified page on that service ("Telerate Page 7058") as of
11:00 A.M., San Francisco time, on the Interest Determination Date,
or

- if the rate referred to in the immediately preceding clause does
not appear on Telerate Page 7058 on the Interest Determination
Date, the monthly weighted average cost of funds paid by member
institutions of the Eleventh Federal Home Loan Bank District that
was most recently announced (the "Index") by the Federal Home Loan
Bank of San Francisco as the cost of funds for the calendar month
immediately prior to the Interest Determination Date, or

- if the Federal Home Loan Bank of San Francisco fails to announce
the Index on or before the Interest Determination Date for the
calendar month immediately prior to the Interest Determination
Date, the rate in effect on the Interest Determination Date.

FEDERAL FUNDS RATE. Federal Funds Rate Notes will bear interest at the
rates, calculated with reference to the Federal Funds Rate and the Spread
and/or Spread Multiplier, if any, specified in the applicable Federal Funds
Rate Notes and in the applicable pricing supplement.

"Federal Funds Rate" means:

- the rate on the Interest Determination Date for United States
dollar federal funds as published in H.15(519) under the heading
"Federal Funds (Effective)", as displayed on Bridge Telerate, Inc.

S-22

or any successor service on page 120 or any other page as may
replace the applicable page on that service ("Telerate Page 120"),
or

- if the rate referred to in the preceding clause does not appear on
Telerate Page 120 or is not so published by 3:00 P.M., New York
City time, on the Calculation Date, the rate on the Interest
Determination Date for United States dollar federal funds published
in H.15 Daily Update, or other recognized electronic source used
for the purpose of displaying the applicable rate, under the
caption "Federal Funds/Effective Rate", or

- if the rate referred to in the immediately preceding clause is not
so published by 3:00 P.M., New York City time, on the Calculation
Date, the rate on the Interest Determination Date calculated by the
calculation agent as the arithmetic mean of the rates for the last
transaction in overnight United States dollar federal funds
arranged by three leading brokers of United States dollar federal
funds transactions in The City of New York, which may include the
agent or its affiliates, selected by the calculation agent before
9:00 A.M., New York City time, on the Interest Determination Date,
or

- if the brokers selected by the calculation agent are not quoting as
mentioned in the immediately preceding clause, the rate in effect
on the Interest Determination Date.

LIBOR. LIBOR Notes will bear interest at the rates, calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any, specified
in the applicable LIBOR Notes and in any applicable pricing supplement.

"LIBOR" means:

- if "LIBOR Telerate" is specified in the pricing supplement or if
neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the
pricing supplement as the method for calculating LIBOR, LIBOR will
be the rate for deposits in the LIBOR Currency, as defined below,
having the Index Maturity specified in the pricing supplement,
commencing on the second London Business Day after that Interest
Determination Date that appears on the Designated LIBOR Page as of
11:00 A.M., London time, on the Interest Determination Date, or

- if "LIBOR Reuters" is specified in the pricing supplement, LIBOR
will be the arithmetic mean of the offered rates for deposits in
the LIBOR Currency having the Index Maturity specified in the
pricing supplement, commencing on the second London Business Day
immediately after that Interest Determination Date, that appear, on
the Designated LIBOR Page specified in the pricing supplement as of
11:00 A.M., London time, on the Interest Determination Date. If the
Designated LIBOR Page by its terms provides only for a single rate,
then the single rate will be used, or

S-23

- with respect to a LIBOR Interest Determination Date on which fewer
than two offered rates appear, or no rate appears, as the case may
be, on the designated LIBOR Page as specified in the two
immediately preceding clauses (except a Designated LIBOR Page which
by its terms provides only for a single rate), respectively, the
rate calculated by the calculation agent as the arithmetic mean of
at least two quotations obtained by the calculation agent after
requesting the principal London offices of each of four major
reference banks, which may include affiliates of the agent, in the
London interbank market to provide the calculation agent with its
offered quotation for deposits in the LIBOR Currency for the period
of the Index Maturity specified in the pricing supplement,
commencing on the second London Business Day immediately after the
Interest Determination Date, to prime banks in the London interbank
market at approximately 11:00 A.M., London time, on the Interest
Determination Date and in a principal amount that is representative
for a single transaction in the applicable LIBOR Currency in that
market at that time, or

- if fewer than two quotations referred to in the immediately
preceding clause are so provided, the rate on the Interest
Determination Date calculated by the calculation agent as the
arithmetic mean of the rates quoted at approximately 11:00 A.M., in
the applicable Principal Financial Center(s), on the Interest
Determination Date by three major banks, which may include
affiliates of the agent, in the Principal Financial Center selected
by the calculation agent for loans in the LIBOR Currency to leading
European banks, having the Index Maturity specified as designated
in the pricing supplement and in a principal amount that is
representative for a single transaction in the applicable LIBOR
Currency in that market at that time, or

- if the banks so selected by the calculation agent are not quoting
as mentioned in the immediately preceding clause, the rate in
effect on the applicable Interest Determination Date.

"LIBOR Currency" means the currency specified in the pricing supplement
as to which LIBOR will be calculated or, if no currency is specified in the
pricing supplement, United States dollars.

"Designated LIBOR Page" means either:

- if "LIBOR Telerate" is designated in the pricing supplement or
neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the
pricing supplement as the method for calculating LIBOR, the display
on Bridge Telerate, Inc. or any successor service on the page
specified in that pricing supplement or any page as may replace the
specified page on that service for the purpose of displaying the
London interbank rates of major banks for the applicable LIBOR
Currency, or

S-24

- if "LIBOR Reuters" is specified in the pricing supplement, the
display on the Reuters Monitor Money Rates Service or any successor
service on the page specified in the pricing supplement or any
other page as may replace the specified page on that service for
the purpose of displaying the London interbank rates of major banks
for the applicable LIBOR Currency.

PRIME RATE. Prime Rate Notes will bear interest at the rates,
calculated with reference to the Prime Rate and the Spread and/or Spread
Multiplier, if any, specified in the applicable Prime Rate Notes and the
applicable pricing supplement.

"Prime Rate" means:

- the rate on the applicable Interest Determination Date as published
in H.15(519) under the heading "Bank Prime Loan", or

- if the rate referred to in the preceding clause is not so published
by 3:00 P.M., New York City time, on the Calculation Date, the rate
on the Interest Determination Date published in H.15 Daily Update,
or such other recognized electronic source used for the purpose of
displaying the applicable rate under the caption "Bank Prime Loan",
or

- if the rate referred to in the immediately preceding clause is not
so published by 3:00 P.M., New York City time, on the Calculation
Date, the rate calculated by the calculation agent as the
arithmetic mean of the rates of interest publicly announced by at
least four banks that appear on the Reuters Screen US PRIME 1 Page
as the particular bank's prime rate or base lending rate as of
11:00 A.M., New York City time, on the Interest Determination Date,
or

- if fewer than four rates described in the immediately preceding
clause by 3:00 P.M., New York City time, on the Calculation Date as
shown on Reuters Screen US PRIME 1, the rate on the Interest
Determination Date calculated by the calculation agent as the
arithmetic mean of the prime rates or base lending rates quoted on
the basis of the actual number of days in the year divided by a
360-day year as of the close of business on the Interest
Determination Date by three major banks, which may include
affiliates of the agent, in The City of New York selected by the
calculation agent, or

- if the banks selected by the calculation agent are not quoting as
mentioned in the immediately preceding clause, the rate in effect
on the Interest Determination Date.

"Reuters Screen US PRIME 1 Page" means the display on the Reuter Monitor
Money Rates Service or any successor service on the "US PRIME 1" Page or
other page as may replace the US PRIME 1 Page on such service for the purpose
of displaying prime rates or base lending rates of major United States banks.

S-25

TREASURY RATE. Treasury Rate Notes will bear interest at the rates,
calculated with reference to the Treasury Rate and the Spread and/or Spread
Multiplier, if any, specified in the applicable Treasury Rate Notes and in
the applicable pricing supplement.

"Treasury Rate" means:

- the rate from the auction held on the Interest Determination Date
(the "Auction") of direct obligations of the United States
("Treasury Bills") having the Index Maturity specified in the
pricing supplement under the caption "INVESTMENT RATE" on the
display on Bridge Telerate, Inc. or any successor service on page
56 or any other page as may replace page 56 on that service
("Telerate Page 56") or page 57 or any other page as may replace
page 57 on that service ("Telerate Page 57"), or

- if the rate described in the preceding clause is not so published
by 3:00 P.M., New York City time, on the Calculation Date, the Bond
Equivalent Yield of the rate for the applicable Treasury Bills as
published in H.15 Daily Update, or other recognized electronic
source used for the purpose of displaying the applicable rate,
under the caption "U.S. Government Securities/Treasury
Bills/Auction High", or

- if the rate described in the immediately preceding clause is not so
published by 3:00 P.M., New York City time, on the related
Calculation Date, the Bond Equivalent Yield of the auction rate of
the applicable Treasury Bills announced by the United States
Department of the Treasury, or

- in the event that the rate referred to in the immediately preceding
clause is not announced by the United States Department of the
Treasury, or if the Auction is not held, the Bond Equivalent Yield
of the rate on the Interest Determination Date of Treasury Bills
having the Index Maturity specified in the pricing supplement
published in H.15(519) under the caption "U.S. Government
Securities/Treasury Bills/Secondary Market", or

- if the rate referred to in the immediately preceding clause is not
so published by 3:00 P.M., New York City time, on the Calculation
Date, the rate on the Interest Determination Date of the applicable
Treasury Bills as published in H.15 Daily Update, or other
recognized electronic source used for the purpose of displaying the
applicable rate, under the caption "U.S. Government
Securities/Treasury Bills/Secondary Market", or

S-26

of three primary United States government securities dealers, which
may include the agent or its affiliates, selected by the
calculation agent, for the issue of Treasury Bills with a remaining
maturity closest to the Index Maturity specified in the pricing
supplement, or

- if the dealers selected by the calculation agent are not quoting as
mentioned in the immediately preceding clause, the rate in effect
on the Interest Determination Date.

"Bond Equivalent Yield" means a yield calculated in accordance with the
following formula and expressed as a percentage:

D x N
Bond Equivalent Yield = ------------------ x 100
360 - ( D x M )

where "D" refers to the applicable per annum rate for Treasury Bills quoted
on a bank discount basis, "N" refers to 365 or 366, as the case may be, and
"M" refers to the actual number of days in the interest period for which
interest is being calculated.

OTHER PROVISIONS; ADDENDA

Any provisions with respect to an issue of notes, including the
determination of one or more Interest Rate Bases, the specification of one or
more Interest Rate Bases, the calculation of the interest rate applicable to
a floating rate note, the applicable interest payment dates, the stated
maturity date, any redemption or repayment provisions or any other matter
relating to the applicable notes may be modified by the terms as specified
under "Other Provisions" on the face of the applicable notes or in an
addendum relating to the applicable notes, if so specified on the face of
those notes and in the applicable pricing supplement.

ORIGINAL ISSUE DISCOUNT NOTES

The Issuer may from time to time issue notes as original issue discount
("OID"). OID notes bear no interest or bear interest at below-market rates
and are sold at a discount below their stated principal amount. If the
Issuer issues OID notes, the pricing supplement will contain the issue price,
the rate at which interest will accrete, and the date from which such
interest will accrete on the OID notes.

AMORTIZING NOTES

The Issuer may from time to time offer notes ("Amortizing Notes"), with
amounts of principal and interest payable in installments over the term of
the notes. Unless otherwise specified in the applicable pricing supplement,
interest on each Amortizing Note will be computed on the basis of a 360-day
year of twelve 30-day months. Payments with respect to Amortizing Notes will
be applied first to interest due and payable on the Amortizing Notes and then
to the reduction of the unpaid principal amount of the Amortizing Notes.

S-27

Further information concerning additional terms and conditions of any issue
of Amortizing Notes will be provided in the pricing supplement. A table
setting forth repayment information in respect of each Amortizing Note will
be included in the note and the pricing supplement.

INDEXED NOTES

The Issuer may from time to time offer notes ("Indexed Notes") the
principal value of which at Maturity will be determined by reference to:

- one or more equity or debt securities, including, but not limited
to, the price or yield of such securities,

- any statistical measure of economic or financial performance,
including, but not limited to, any currency, consumer price or
mortgage index, or

- the price or value of any commodity or any other item or index or
any combination,

(collectively, the "Indexed Securities"). The payment or delivery of any
consideration on any Indexed Note at Maturity will be determined by the
decrease or increase, as applicable, in the price or value of the applicable
Indexed Securities. The terms of and any additional considerations, including
any material tax consequences, relating to any Indexed Notes will be
described in the applicable pricing supplement.

BOOK-ENTRY NOTES

DESCRIPTION OF THE GLOBAL SECURITIES

Upon issuance, all notes in book-entry form having the same date of
issue, Maturity and otherwise having identical terms and provisions will be
represented by one or more fully registered global notes. Each global note
will be deposited with, or on behalf of, DTC as depository registered in the
name of the depository or a nominee of the depository. Unless and until it is
exchanged in whole or in part for notes in certificated form, no global note
may be transferred except as a whole by the depository to a nominee of the
depository or by a nominee of the depository to the depository or another
nominee of the depository or by the depository or any such nominee to a
successor of the depository or a nominee of the successor.

DTC PROCEDURES

The following is based on information furnished by DTC:

The depository will act as securities depository for the notes in
book-entry form. The notes in book-entry form will be issued as fully
registered securities registered in the name of Cede & Co., DTC's partnership
nominee. One fully registered global note will be issued for each issue of
notes in book-entry form, each in the aggregate principal amount of the
issue, and will be deposited with DTC. If, however, the aggregate principal
amount of any issue exceeds $400,000,000, one global note will be issued with

S-28

respect to each $400,000,000 of principal amount and an additional global
note will be issued with respect to any remaining principal amount of the
issue.

DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. DTC holds securities that its participants deposit with DTC. DTC also
facilitates the settlement among participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
participants of DTC include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. DTC is
owned by a number of its direct participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc., and the National
Association of Securities Dealers, Inc. Access to DTC's system is also
available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a
direct participant, either directly or indirectly. The rules applicable to
DTC and its participants are on file with the Securities and Exchange
Commission.

Purchasers of notes in book-entry form under DTC's system must be made
by or through direct participants, which will receive a credit for those
notes in book-entry form on DTC's records. The ownership interest of each
actual purchaser of each note in book-entry form represented by a global note
is, in turn, to be recorded on the records of direct participants and
indirect participants. Beneficial owners in book-entry form will not receive
written confirmation from DTC of their purchase, but beneficial owners are
expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the
direct participants or indirect participants through which the beneficial
owner entered into the transaction. Transfers of ownership interests in a
global note representing notes in book-entry form are to be accomplished by
entries made on the books of participants acting on behalf of beneficial
owners. Beneficial owners of a global note representing notes in book-entry
form will not receive notes in certificated form representing their ownership
interests therein, except if use of the book-entry system for notes in
book-entry form is discontinued or if any of the events set forth below under
"Exchange for Notes in Certificated Form" occurs.

To facilitate subsequent transfers, all global notes representing notes
in book-entry form which are deposited with, or on behalf of, the depository
are registered in the name of DTC's nominee, Cede & Co. The deposit of global
notes with, or on behalf of, DTC and their registration in the name of Cede &
Co. effect no change in beneficial ownership. DTC has no knowledge of the
actual beneficial owners of the global notes representing the notes in
book-entry form; DTC's records reflect only the identity of the direct

S-29

participants to whose accounts such notes in book-entry form are credited,
which may or may not be the beneficial owners. The participants will remain
responsible for keeping account of their holdings on behalf of their
customers.

Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants, and by direct
participants and indirect participants to beneficial owners, will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.

Neither DTC nor Cede & Co. will consent or vote with respect to the
global notes representing the notes in book-entry form. Under its usual
procedures, DTC mails an omnibus proxy to the Issuer as soon as possible
after the applicable record date. The omnibus proxy assigns Cede & Co.'s
consenting or voting rights to those direct participants, identified in a
listing attached to the omnibus proxy, to whose accounts the notes in
book-entry form are credited on the applicable record date.

The Issuer will make principal, premium, if any, and/or interest, if
any, payments on the global notes representing the notes in book-entry form
in immediately available funds to DTC. DTC's practice is to credit direct
participants' accounts on the applicable payment date in accordance with
their respective holdings shown on DTC's records unless DTC has reason to
believe that it will not receive payment on the applicable payment date.
Payments by participants to beneficial owners will be governed by standing
instructions and customary practices, as is the case with securities held for
the accounts of customers in bearer form or registered in "street name", and
will be the responsibility of the applicable participant and not of DTC, the
trustee or the Issuer, subject to any statutory or regulatory requirements as
may be in effect from time to time. Payment of principal, premium, if any,
and/or interest, if any, to DTC is the responsibility of the Issuer and the
trustee, disbursement of payments to direct participants will be the
responsibility of DTC, and disbursement of payments to the beneficial owners
will be the responsibility of direct participants and indirect participants.

If applicable, redemption notices shall be sent to Cede & Co. If less
than all of the notes in book-entry form of like tenor and terms are being
redeemed, DTC's practice is to determine by lot the amount of the interest of
each direct participant in the issue to be redeemed.

A beneficial owner will give notice of any option to elect to have its
notes in book-entry form repaid by the Issuer, through its participant, to
the trustee, and will effect delivery of its notes in book-entry form by
causing the direct participant to transfer the participant's interest in the
global note notes in book-entry form, on DTC's records, to the trustee.

DTC may discontinue providing its services as securities depository with
respect to the notes in book-entry form at any time by giving reasonable
notice to the Issuer or the trustee. If a successor securities depository is
not obtained, notes in certificated form are required to be printed and
delivered.

S-30

The Issuer may decide to discontinue use of the system of book-entry
transfers through DTC or a successor securities depository. In that event,
notes in certificated form will be printed and delivered.

The laws of some states may require that certain purchasers of
securities take physical delivery of securities in definitive form. Such
limits and such laws may impair the ability to own, transfer or pledge
beneficial interests in global notes.

So long as DTC, or its nominee, is the registered owner of a global
note, DTC or its nominee, as the case may be, will be considered the sole
owner or holder of the notes represented by that global note for all purposes
under the indenture. Except as provided below, beneficial owners of a global
note will not be entitled to have the notes represented by a global note
registered in their names, will not receive or be entitled to receive
physical delivery of the notes in definitive form and will not be considered
the owners or holders thereof under the indenture. Accordingly, each person
owning a beneficial interest in a global note must rely on the procedures of
DTC and, if that person is not a participant, on the procedures of the
participant through which that person owns its interest, to exercise any
rights of a holder under the indenture. The Issuer understands that under
existing industry practices, in the event that the Issuer requests any action
of holders or that an owner of a beneficial interest in a global note desires
to give or take any action which a holder is entitled to give or take under
the indenture, DTC would authorize the participants holding the relevant
beneficial interests to give or take the desired action, and the participants
would authorize beneficial owners owning through the participants to give or
take the desired action or would otherwise act upon the instructions of
beneficial owners.

EXCHANGE FOR NOTES IN CERTIFICATED FORM

If:

- DTC is at any time unwilling or unable to continue as depository
and a successor depository is not appointed by the Issuer within
90 days,

- The Issuer executes and delivers to the trustee a company order to
the effect that the global notes shall be exchangeable, or

- an Event of Default has occurred and is continuing with respect to
the notes,

the global note or global notes will be exchangeable for notes in
certificated form with the same terms and of an equal aggregate principal
amount, in denominations of $1,000 and integral multiples of $1,000. The
certificated notes will be registered in the name or names as the depository
instructs the trustee. The Issuer expects that instructions may be based upon
directions received by DTC from participants with respect to ownership of
beneficial interests in global notes.

S-31

The information in this section concerning the depository and the
depository's system has been obtained from sources that the Issuer believes
to be reliable, but the Issuer takes no responsibility for the accuracy of
the information.

S-32

UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of certain United States federal income tax
consequences of the purchase, ownership and disposition of notes as of the
date hereof. Except where noted, this summary deals only with notes that are
held as capital assets and does not deal with special situations. In
addition, it does not represent a detailed description of the United States
federal income tax consequences applicable to you if you are subject to
special treatment under the United States federal income tax laws, including
if you are a dealer in securities or currencies, a financial institution, an
insurance company, a tax exempt organization, a person holding the notes as
part of a hedging, integrated or conversion transaction, constructive sale or
straddle, a trader in securities that has elected the mark-to-market method
of accounting for your securities or a United States person whose "functional
currency" is not the United States dollar.

The discussion below is based upon the provisions of the Internal
Revenue Code of 1986, as amended, and regulations, rulings and judicial
decisions as of the date of this hereof. Those authorities may be changed,
perhaps retroactively, so as to result in United States federal income tax
consequences different from those discussed below. The discussion below
assumes that all notes issued under the program will be classified for United
States federal income tax purposes as our indebtedness and you should note
that in the event of an alternative characterization, the tax consequences
would differ from those discussed below. The Issuer will summarize any
special United States federal tax considerations relevant to a particular
issue of the notes in the applicable pricing supplement.

IF YOU ARE CONSIDERING THE PURCHASE OF NOTES, YOU SHOULD CONSULT YOUR
OWN TAX ADVISORS CONCERNING THE FEDERAL INCOME TAX CONSEQUENCES TO YOU AND
ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION.

CONSEQUENCES TO UNITED STATES HOLDERS

The following is a summary of certain United States federal tax
consequences that will apply to you if you are a United States Holder of
notes.

Certain consequences to "Non-United States Holders" of notes, which are
beneficial owners of notes that are not United States Holders, are described
under "--Non-United States Holders" below.

"United States Holder" means a beneficial owner of a note that is:

- a citizen or resident of the United States;

- a corporation or partnership created or organized in or under the
laws of the United States or any political subdivision of the
United States;

- an estate the income of which is subject to United States federal
income taxation regardless of its source; or

S-33

- a trust that (1) is subject to the supervision of a court within
the United States and the control of one or more United States
persons or (2) has a valid election in effect under applicable
United States Treasury regulations to be treated as a United States
person.

PAYMENTS OF INTEREST

Except as set forth below, interest on a note will generally be taxable
to you as ordinary income from domestic sources at the time it is paid or
accrued in accordance with your method of accounting for tax purposes.

ORIGINAL ISSUE DISCOUNT

If you own OID notes, you will be subject to special tax accounting
rules, as described in greater detail below. In that case, you should be
aware that you generally must include OID in gross income in advance of the
receipt of cash attributable to that income. However, you generally will not
be required to include separately in income cash payments received on the
notes, even if denominated as interest, to the extent those payments do not
constitute qualified stated interest, as defined below. Notice will be given
in the applicable pricing supplement when we determine that a particular note
will be an OID note.

A note with an issue price that is less than the "stated redemption
price at maturity" (the sum of all payments to be made on the note other than
"qualified stated interest") generally will be issued with OID if that
difference is at least 0.25% of the stated redemption price at maturity
multiplied by the number of complete years to maturity. The "issue price" of
each note in a particular offering will be the first price at which a
substantial amount of that particular offering is sold to the public. The
term "qualified stated interest" means stated interest that is
unconditionally payable in cash or in property, other than debt instruments
of the issuer, and meets all of the following conditions:

- it is payable at least once per year;

- it is payable over the entire term of the note; and

- it is payable at a single fixed rate or, subject to certain
conditions, based on one or more interest indices.

The Issuer will give you notice in the applicable pricing supplement
when we determine that a particular note will bear interest that is not
qualified stated interest.

If you own a note issued with de minimis OID, which is discount that is
not OID because it is less than 0.25% of the stated redemption price at
maturity multiplied by the number of complete years to maturity, you
generally must include the de minimis OID in income at the time payments,
other than qualified stated interest, on the notes are made in proportion to
the amount paid. Any amount of de minimis OID that you have included in
income will be treated as capital gain.

S-34

Certain of the notes may contain provisions permitting them to be
redeemed prior to their stated maturity at our option and/or at your option.
OID notes containing those features may be subject to rules that differ from
the general rules discussed herein. If you are considering the purchase of
OID notes with those features, you should carefully examine the applicable
pricing supplement and should consult your own tax advisors with respect to
those features since the tax consequences to you with respect to OID will
depend, in part, on the particular terms and features of the notes.

If you own OID notes with a maturity upon issuance of more than one year
you generally must include OID in income in advance of the receipt of some or
all of the related cash payments using the "constant yield method" described
in the following paragraph. This method takes into account the compounding of
interest. The accruals of OID on an OID note will generally be less in the
early years and more in the later years.

The amount of OID that you must include in income if you are the initial
United States Holder of an OID note is the sum of the "daily portions" of OID
with respect to the note for each day during the taxable year or portion of
the taxable year in which you held that note ("accrued OID"). The daily
portion is determined by allocating to each day in any "accrual period" a pro
rata portion of the OID allocable to that accrual period. The "accrual
period" for an original issue discount note may be of any length and may vary
in length over the term of the note, provided that each accrual period is no
longer than one year and each scheduled payment of principal or interest
occurs on the first day or the final day of an accrual period. The amount of
OID allocable to any accrual period is an amount equal to the excess, if any,
of:

- the note's adjusted issue price at the beginning of the accrual
period times its yield to maturity, determined on the basis of
compounding at the close of each accrual period and properly
adjusted for the length of the accrual period, over

- the aggregate of all qualified stated interest allocable to the
accrual period.

OID allocable to a final accrual period is the difference between the
amount payable at maturity, other than a payment of qualified stated
interest, and the adjusted issue price at the beginning of the final accrual
period. The "adjusted issue price" of a note at the beginning of any accrual
period is equal to its issue price increased by the accrued OID for each
prior accrual period, determined without regard to the amortization of any
acquisition or bond premium, as described below, and reduced by any payments
made on the note (other than qualified stated interest) on or before the
first day of the accrual period. Under these rules, you will have to include
in income increasingly greater amounts of OID in successive accrual periods.
The Issuer is required to provide information returns stating the amount of
OID accrued on notes held of record by persons other than corporations and
other exempt holders.

S-35

Floating rate notes that are OID notes are subject to special OID rules.
In the case of an OID note that is a floating rate note, both the "yield to
maturity" and "qualified stated interest" will be determined solely for
purposes of calculating the accrual of OID as though the note will bear
interest in all periods at a fixed rate generally equal to the rate that
would be applicable to interest payments on the note on its date of issue or,
in the case of certain floating rate notes, the rate that reflects the yield
to maturity that is reasonably expected for the note. Additional rules may
apply if

- the interest on a floating rate note is based on more than one
interest index; or

- the principal amount of the note is indexed in any manner.

You should refer to the discussion below under "Foreign Currency Notes"
for additional rules applicable to original issue discount notes which are
denominated in or determined by reference to a Specified Currency. The
discussion above generally does not address notes providing for contingent
payments. You should carefully examine the applicable pricing supplement
regarding the United States federal income tax consequences of the holding
and disposition of any notes providing for contingent payments.

You may elect to treat all interest on any note as OID and calculate the
amount includible in gross income under the constant yield method described
above. For purposes of this election, interest includes stated interest,
acquisition discount, OID, de minimis OID, market discount, de minimis market
discount and unstated interest, as adjusted by any amortizable bond premium
or acquisition premium. You must make this election for the taxable year in
which you acquired the note, and you may not revoke the election without the
consent of the Internal Revenue Service. You should consult with your own tax
advisors about this election.

SHORT-TERM NOTES

In the case of notes having a term of one year or less, all payments,
including all stated interest, will be included in the stated redemption
price at maturity and will not be qualified stated interest. As a result, you
will generally be taxed on the discount instead of stated interest. The
discount will be equal to the excess of the stated redemption price at
maturity over the issue price of a short-term note, unless you elect to
compute this discount using tax basis instead of issue price. In general,
individual and certain other cash method United States Holders of short-term
notes are not required to include accrued discount in their income currently
unless they elect to do so, but may be required to include stated interest in
income as the income is received. United States Holders that report income
for United States federal income tax purposes on the accrual method and
certain other United States Holders are required to accrue discount on short-
term notes (as ordinary income) on a straight-line basis, unless an election
is made to accrue the discount according to a constant yield method based on
daily compounding. If you are not required, and do not elect, to include
discount in income currently, any gain you realize on the sale, exchange or

S-36

retirement of a short-term note will generally be ordinary income to you to
the extent of the discount accrued by you through the date of sale, exchange
or retirement. In addition, if you do not elect to currently include accrued
discount in income you may be required to defer deductions for a portion of
your interest expense with respect to any indebtedness attributable to the
short-term notes.

MARKET DISCOUNT

If you purchase a note, other than an OID note, for an amount that is
less than its stated redemption price at maturity, or, in the case of an OID
note, its adjusted issue price, the amount of the difference will be treated
as "market discount" for United States federal income tax purposes, unless
that difference is less than a specified de minimis amount. Under the market
discount rules, you will be required to treat any payment, other than
qualified stated interest, on, or any gain on the sale, exchange, retirement
or other disposition of, a note as ordinary income to the extent of the
market discount that you have not previously included in income and are
treated as having accrued on the note at the time of its payment or
disposition. In addition, you may be required to defer, until the maturity of
the note or its earlier disposition in a taxable transaction, the deduction
of all or a portion of the interest expense on any indebtedness attributable
to the note.

Any market discount will be considered to accrue ratably during the
period from the date of acquisition to the maturity date of the note, unless
you elect to accrue on a constant interest method. You may elect to include
market discount in income currently as it accrues, on either a ratable or
constant interest method, in which case the rule described above regarding
deferral of interest deductions will not apply. Your election to include
market discount in income currently, once made, applies to all market
discount obligations acquired by you on or after the first taxable year to
which your election applies and may not be revoked without the consent of the
IRS. You should consult your own tax advisor before making this election.

ACQUISITION PREMIUM, AMORTIZABLE BOND PREMIUM

If you purchase an OID note for an amount that is greater than its
adjusted issue price but equal to or less than the sum of all amounts payable
on the note after the purchase date other than payments of qualified stated
interest, you will be considered to have purchased that note at an
"acquisition premium." Under the acquisition premium rules, the amount of OID
that you must include in gross income with respect to the note for any
taxable year will be reduced by the portion of the acquisition premium
properly allocable to that year.

If you purchase a note (including an OID note) for an amount in excess
of the sum of all amounts payable on the note after the purchase date other
than qualified stated interest, you will be considered to have purchased the
note at a "premium" and, if it is an OID note, you will not be required to
include any OID in income. You generally may elect to amortize the premium
over the remaining term of the note on a constant yield method as an offset

S-37

to interest when includible in income under your regular accounting method.
In the case of instruments that provide for alternative payment schedules,
bond premium is calculated by assuming that:

- you will exercise or not exercise options in a manner that
maximizes your yield, and

- the Issuer will exercise or not exercise options in a manner that
minimizes your yield (except that the Issuer will be assumed to
exercise call options in a manner that maximizes your yield).

If you do not elect to amortize bond premium, that premium will decrease the
gain or increase the loss you would otherwise recognize on disposition of the
note. Your election to amortize premium on a constant yield method will also
apply to all debt obligations held or subsequently acquired by you on or
after the first day of the first taxable year to which the election applies.
You may not revoke the election without the consent of the IRS. You should
consult your own tax advisor before making this election.

SALE, EXCHANGE AND RETIREMENT OF NOTES

Your tax basis in a note will, in general, be your cost for that note,
increased by OID, market discount or any discount with respect to a short-
term note that you previously included in income, and reduced by any
amortized premium and any cash payments on the note other than qualified
stated interest. Upon the sale, exchange, retirement or other disposition of
a note, you will recognize gain or loss equal to the difference between the
amount you realize upon the sale, exchange, retirement or other disposition
(less an amount equal to any accrued qualified stated interest that you did
not previously include in income, which will be taxable as such) and the
adjusted tax basis of the note. Except as described above with respect to
certain short-term notes or with respect to market discounts or with respect
to gain or loss attributable to changes in exchange rates as discussed below
with respect to foreign currency notes, that gain or loss will be capital
gain or loss. Capital gains of individuals derived in respect of capital
assets held for more than one year are eligible for reduced rates of
taxation. The deductibility of capital losses is subject to limitations.

FOREIGN CURRENCY NOTES

PAYMENTS OF INTEREST. If you receive interest payments made in a
foreign currency or currency unit and you use the cash basis method of
accounting, you will be required to include in income the United States
dollar value of the amount received, determined by translating the foreign
currency or currency unit received at the "spot rate" for such foreign
currency or currency unit on the date such payment is received regardless of
whether the payment is in fact converted into United States dollars. You will
not recognize exchange gain or loss with respect to the receipt of such
payment.

If you use the accrual method of accounting, you may determine the
amount of income recognized with respect to such interest in accordance with

S-38

either of two methods. Under the first method, you will be required to
include in income for each taxable year the United States dollar value of the
interest that has accrued during such year, determined by translating such
interest at the average rate of exchange for the period or periods during
which such interest accrued. Under the second method, you may elect to
translate interest income at the spot rate on:

- the last day of the accrual period

- the last day of the taxable year if the accrual period straddles
your taxable year, or

- on the date the interest payment is received if such date is within
five days of the end of the accrual period.

Upon receipt of an interest payment on such note, you will recognize
ordinary gain or loss in an amount equal to the difference between the United
States dollar value of the payment (determined by translating the foreign
currency received at the "spot rate" for such foreign currency on the date
such payment is received) and the United States dollar value of the interest
income you previously included in income with respect to the payment.

ORIGINAL ISSUE DISCOUNT. OID on a note that is paid in a foreign
currency or currency unit note will be determined for any accrual period in
the applicable currency or currency unit and then translated into United
States dollars, in the same manner as interest income accrued by a holder on
the accrual basis, as described above. You will recognize exchange gain or
loss when OID is paid to the extent of the difference between the United
States dollar value of the accrued OID (determined in the same manner as for
accrued interest) and the United States dollar value of such payment
(determined by translating the foreign currency or currency unit received at
the "spot rate" for such foreign currency or currency unit on the date such
payment is received). For these purposes, all receipts on a note will be
viewed:

- first, as the receipt of any stated interest payments called for
under the terms of the note,

- second, as receipts of previously accrued OID (to the extent
thereof), with payments considered made for the earliest accrual
periods first, and

- third, as the receipt of principal.

MARKET DISCOUNT AND BOND PREMIUM. The amount of market discount on
foreign currency or currency unit notes includible in income will generally
be determined by translating the market discount determined in the foreign
currency or currency unit into United States dollars at the spot rate on the
date the note is retired or otherwise disposed of. If you have elected to
accrue market discount currently, then the amount which accrues is determined
in the foreign currency or currency unit and then translated into United
States dollars on the basis of the average exchange rate in effect during
such accrual period. You will recognize exchange gain or loss with respect to

S-39

market discount which is accrued currently using the approach applicable to
the accrual of interest income as described above.

Bond premium on a foreign currency note paid in a foreign currency or
currency unit will be computed in the applicable foreign currency or currency
unit. If you have elected to amortize the premium, the amortizable bond
premium will reduce interest income in the applicable foreign currency or
currency unit. At the time bond premium is amortized, exchange gain or loss,
which is generally ordinary gain or loss, will be realized based on the
difference between spot rates at such time and the time of acquisition of the
note.

If you elect not to amortize bond premium, you must translate the bond
premium computed in the foreign currency or currency unit into United States
dollars at the spot rate on the maturity date and bond premium will
constitute a capital loss which may be offset or eliminated by exchange gain.

SALE, EXCHANGE OR RETIREMENT. Your tax basis in a note payable in a
foreign currency or currency unit will be the United States dollar value of
the foreign currency or currency unit amount paid for the note determined at
the time of your purchase. If you purchased the note with previously owned
foreign currency, you will recognize exchange gain or loss at the time of the
purchase attributable to the difference at the time of purchase, if any,
between your tax basis in the foreign currency or currency unit and the fair
market value of the note in United States dollars on the date of purchase.
Such gain or loss will be ordinary income or loss.

For purposes of determining the amount of any gain or loss you recognize
on the sale, exchange retirement or other disposition of a note payable in a
foreign currency or currency unit, the amount realized on such sale,
exchange, retirement or other disposition will be the United States dollar
value of the amount realized in foreign currency or currency units (other
than amounts attributable to accrued but unpaid interest not previously
included in your income), determined at the time of the sale, exchange,
retirement or other disposition.

You may also recognize exchange gain or loss attributable to the
movement in exchange rates between the time of purchase and the time of
disposition (including the sale, exchange, retirement or other disposition)
of a note. Such gain or loss will be treated as ordinary income or loss. The
realization of such gain or loss will be limited to the amount of overall
gain or loss realized on the disposition of the note.

Under proposed Treasury Regulations issued on March 17, 1992, if a note
is denominated in one of certain hyperinflationary currencies, generally:

- exchange gain or loss would be realized with respect to movements
in the exchange rate between the beginning and end of each taxable
year (or such shorter period) the note was held, and

S-40

- such exchange gain or loss would be treated as an addition or
offset, respectively, to the accrued interest income on, and an
adjustment to the holder's tax basis in, the foreign currency note.

Your tax basis in foreign currency received as interest on (or OID with
respect to), or received on the sale, exchange, retirement or other
disposition of, a note will be the United States dollar value thereof at the
spot rate at the time you receive such foreign currency or currency unit. Any
gain or loss recognized by you on a sale, exchange or other disposition of
foreign currency or currency unit will be ordinary income or loss and will
not be treated as interest income or expense, except to the extent provided
in Treasury Regulations or administrative pronouncements of the IRS.

INDEXED NOTES

The tax treatment of a United States Holder of an indexed note will
depend on factors including the specific index or indices used to determine
indexed payments on the note and the amount and timing of any contingent
payments of principal and interest. Persons considering the purchase of
indexed notes should carefully examine the applicable pricing supplement and
should consult their own tax advisors regarding the United States federal
income tax consequences of the holding and disposition of those notes.

CONSEQUENCES TO NON-UNITED STATES HOLDERS

The following is a summary of certain United States federal income tax
consequences that will apply to you if you are a Non-United States Holder of
notes.

UNITED STATES FEDERAL WITHHOLDING TAX

United States federal withholding tax will not apply to any payment of
principal or interest, including OID, on notes provided that:

- you do not actually or constructively own 10% or more of the total
combined voting power of all classes of our voting stock within the
meaning of the Code and United States Treasury Regulations;

- you are not a controlled foreign corporation that is related to us
through stock ownership;

- you are not a bank whose receipt of interest on the notes is
described in section 881(c)(3)(A) of the Code;

- the interest is not considered contingent interest under Section
871(h)(4)(A) of the Code and the regulations thereunder; and

- either

- you provide your name and address on an IRS Form W-8 (or
successor form), and certify, under penalty of perjury, that
you are not a United States person or

S-41

- a financial institution holding the notes on your behalf
certifies, under penalty of perjury, that it has received an
IRS Form W-8 (or successor form) from you as the beneficial
owner and provides the Issuer with a copy.

If you cannot satisfy the requirements described above, payments of
premium, if any, and interest, including OID, made to you will be subject to
the 30% United States federal withholding tax, unless you provide the Issuer
with a properly executed

- IRS Form 1001 (or successor form) claiming an exemption from, or
reduction in, withholding under the benefit of a tax treaty; or

- IRS Form 4224 (or successor form) stating that interest paid on the
notes is not subject to withholding tax because it is effectively
connected with your conduct of a trade or business in the United
States.

Except as discussed below, United States federal withholding tax will
not apply to any gain or income that you realize on the sale, exchange,
retirement or other disposition of notes.

UNITED STATES FEDERAL INCOME TAX
If you are engaged in a trade or business in the United States and
premium, if any, or interest, including OID, on the notes is effectively
connected with the conduct of that trade or business, you will be subject to
United States federal income tax on that interest and OID on a net income
basis (although exempt from the 30% withholding tax) in the same manner as if
you were a United States Holder. In addition, if you are a foreign
corporation, you may be subject to a branch profits tax equal to 30% (or
lower applicable treaty rate) of your earnings and profits for the taxable
year, subject to adjustments. For this purpose, any premium and interest,
including OID, on notes will be included in your earnings and profits.

You will generally not be subject to United States federal income tax on
the disposition of a note unless:

- the gain is effectively connected with your conduct of a trade or
business in the United States; or

- you are an individual who is present in the United States for 183
days or more in the taxable year of that disposition, and certain
other conditions are met.

UNITED STATES FEDERAL ESTATE TAX

Your estate will not be subject to United States federal estate tax on
notes beneficially owned by you at the time of your death, provided that:

- you do not own 10% or more of the total combined voting power of
all classes of our voting stock, within the meaning of the Code and
United States Treasury Regulations, and

S-42

- interest on those notes would not have been, if received at the
time of your death, effectively connected with the conduct by you
of a trade or business in the United States.

INFORMATION REPORTING AND BACKUP WITHHOLDING

UNITED STATES HOLDERS

In general, information reporting requirements will apply to certain
payments of principal, interest, OID and premium paid on notes and to the
proceeds of sale of a note made to you (unless you are an exempt recipient
such as a corporation). A 31% backup withholding tax will apply to those
payments if you fail to provide a taxpayer identification number, a
certification of exempt status, or fail to report in full dividend and
interest income.

NON-UNITED STATES HOLDERS

In general, information reporting and backup withholding will not apply
to payments that the Issuer makes to you provided that we do not have actual
knowledge that you are a United States person and the Issuer has received
from you the statement described above under "United States Federal
Withholding Tax."

In addition, information reporting and backup withholding will not apply
to the proceeds of the sale of a note made within the United States or
conducted through certain United States related financial intermediaries, if
the payor receives the statement described above and does not have actual
knowledge that you are a United States person or you otherwise establish an
exemption.

Final United States Treasury regulations generally modify the
information reporting and backup withholding rules applicable to certain
payments made after December 31, 2000. In general, the new United States
Treasury Regulations would not significantly alter the present rules
discussed above, except in certain special situations.

Any amounts withheld under the backup withholding rules will be allowed
as a refund or a credit against your United States federal income tax
liability provided the required information is furnished to the IRS.

PLAN OF DISTRIBUTION

The Issuer is offering the notes for sale on a continuing basis through
agents, Merrill Lynch, Pierce, Fenner & Smith ("MLPF&S"), Chase Securities
Inc. and J.P. Morgan Securities Inc., who will purchase the notes, as
principal, from the Issuer, for resale to investors and other purchasers at
varying prices relating to prevailing market prices at the time of resale as
determined by a particular agent, or, if so specified in an applicable
pricing supplement, for resale at a fixed public offering price. Unless
otherwise specified in an applicable pricing supplement, any note sold to an
agent as principal will be purchased by the agent at a price equal to 100% of

S-43

the principal amount of the note less a percentage of the principal amount
equal to the commission applicable to an agency sale as described below of a
note of identical maturity. If agreed to by the Issuer and an agent, the
agent may utilize its reasonable efforts on an agency basis to solicit offers
to purchase the notes at 100% of the principal amount of the notes, unless
otherwise specified in an applicable pricing supplement. The Issuer will pay
a commission to the agent, ranging from .125% to .750% of the principal
amount of a note, depending upon its stated maturity or, with respect to a
note for which the stated maturity is in excess of 30 years, a commission as
agreed upon by the Issuer and the agent at the time of sale, sold through the
agent.

An agent may sell notes it has purchased from the Issuer as principal to
other dealers for resale to investors, and may allow any portion of the
discount received in connection with such purchases from the Issuer to such
dealers. After the initial public offering of notes, the public offering
price, in the case of notes to be resold at a fixed public offering price,
the concession and the discount allowed to dealers may be changed.

The Issuer reserves the right to withdraw, cancel or modify the offer
made by this prospectus supplement without notice and may reject orders, in
whole or in part, whether placed directly with the Issuer or through an
agent. Each agent will have the right, in its discretion reasonably
exercised, to reject in whole or in part any offer to purchase notes received
by that agent.

Unless otherwise specified in an applicable pricing supplement, payment
of the purchase price of the notes will be required to be made in immediately
available funds in United States dollars or the Specified Currency, as the
case may be, in New York City on the date of settlement.

No note will have an established trading market when issued. Unless
specified in the applicable pricing supplement, the Issuer will not list the
notes on any securities exchange. An agent may from time to time purchase and
sell notes in the secondary market, but none of the agents is obligated to do
so, and there can be no assurance that there will be a secondary market for
the notes or liquidity in the secondary market if one develops. From time to
time, an agent may make a market in the notes.

Each of the agents may be deemed to be an "underwriter" within the
meaning of the Securities Act of 1933, as amended. The Issuer has agreed to
indemnify each agent against or to make contributions relating to certain
civil liabilities, including liabilities under the Securities Act, or to
contribute to payments the agent may be required to make in respect thereof.
The Issuer has agreed to reimburse the agents for certain expenses.

From time to time, the Issuer may issue and sell other securities
described in the accompanying prospectus, and the amount of notes that the
Issuer may offer and sell under this prospectus supplement may be reduced as
a result of such sales.

S-44

In connection with the offering of notes purchased by an agent as
principal on a fixed price basis, the agent is permitted to engage in certain
transactions that stabilize the price of the notes. These transactions may
consist of bids or purchases for the purpose of pegging, fixing or
maintaining the price of the notes. If the agent creates a short position in
the notes in connection with the offering, i.e., if it sells notes in an
aggregate principal amount exceeding that set forth in the applicable pricing
supplement, then the agent may reduce that short position by purchasing notes
in the open market. In general, purchases of notes for the purpose of
stabilization or to reduce a short position could cause the price of the
notes to be higher than in the absence of these purchases.

Neither the Issuer nor any agent makes any representation or prediction
as to the direction or magnitude of any effect that the transactions
described above may have on the price of the notes. In addition, neither the
Issuer nor any agent makes any representation that the agents will engage in
any such transactions or that such transactions, once commenced, will not be
discontinued without notice.

In the ordinary course of their respective businesses, the agents and
their affiliates engage in transactions with and perform services for the
Issuer, the Guarantor and their affiliates. The commercial banking affiliates
of certain of the Agents may have credit facilities in place with the Issuer,
the Guarantor or their affiliates and may receive all or a portion of the
proceeds from the sale of certain of the notes to repay all or a portion of
these credit facilities. If required, the offering of the notes will be
conducted in accordance with Rule 2710(c)(8) of the Conduct Rules of the
National Association of Securities Dealers, Inc. if any of the agents or
their affiliates receive proceeds from the sale of the notes to repay such
credit facilities. The Chase Manhattan Bank, the Trustee, is an affiliate of
Chase Securities Inc.

S-45

PROSPECTUS

KEYSPAN GAS EAST CORPORATION

$600,000,000
DEBT SECURITIES

Guaranteed Fully and Unconditionally by

KEYSPAN CORPORATION

The Issuer: issue and offer up to
$600,000,000 of its debt
- - KeySpan Gas East Corporation securities.
d/b/a Brooklyn Union of Long
Island sells, distributes - The debt securities may be
and transports natural gas offered as separate series,
to approximately 467,000 in amounts, prices and on
customers in Nassau and terms to be determined at
Suffolk Counties on Long the time of the sale. When
Island and a portion of the Issuer offers debt
Queens County in New York securities, it will provide
City. The Issuer is a you with a prospectus
wholly-owned subsidiary of supplement or a term sheet
KeySpan Corporation, which describing the terms of the
is the guarantor of the debt specific issue of debt
securities. securities including the
offering price of the
The Guarantor: securities.

- - KeySpan Corporation d/b/a - The Issuer may sell the
KeySpan Energy, with its debt securities to agents,
subsidiaries, is the fourth underwriters or dealers, or
largest gas distribution may sell them directly to
company in the United other purchasers.
States, with 1.6 million
customers in New York City - You should read this
and on Long Island. It also prospectus and the
provides power, electric prospectus supplement or
transmission and the term sheet relating to
distribution services and a the specific issue of debt
broad range of related securities carefully before
services in the gas and you invest.
electric power industries.
The Guarantees:
The Debt Securities and the
Offering: - The payment of principal,
premium, if any, and
- - By this prospectus, the interest, if any, on the
Issuer may from time to time debt securities will be
guaranteed fully and
unconditionally by KeySpan
Corporation d/b/a KeySpan
Energy, as Guarantor.

Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved these securities or
determined if this prospectus is truthful or complete. Any representation
to the contrary is a criminal offense.

The date of this prospectus is January __, 2000.

TABLE OF CONTENTS

Page

ABOUT THIS PROSPECTUS . . . . . . . . . . . . . . . . . . . . . . . . 1

WHERE YOU CAN FIND MORE INFORMATION . . . . . . . . . . . . . . . . . 1

FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . 2

THE ISSUER AND THE GUARANTOR . . . . . . . . . . . . . . . . . . . . 4

USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

RATIO OF EARNINGS TO FIXED CHARGES . . . . . . . . . . . . . . . . . 7

DESCRIPTION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . 8

PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . 24

LEGAL OPINIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

ABOUT THIS PROSPECTUS

As used in this prospectus and any prospectus supplement or term
sheet, except as the context otherwise requires, "Guarantor" means
KeySpan Corporation doing business as KeySpan Energy, "Issuer" means
KeySpan Gas East Corporation doing business as Brooklyn Union of Long
Island, and references to "we" "us" and "our" mean KeySpan Corporation
doing business as KeySpan Energy, together with its consolidated
subsidiaries, including KeySpan Gas East Corporation doing business as
Brooklyn Union of Long Island.

RISK FACTORS

Each time that the Issuer issues a new series of debt securities,
risk factors, if appropriate, will be included in the prospectus
supplement relating to that new series.

WHERE YOU CAN FIND MORE INFORMATION

The Guarantor files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
of these documents at the SEC's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the SEC at 1-
800-SEC-0330 for further information on the public reference rooms. The
Guarantor's SEC filings are also available to the public on the SEC's web
site at http://www.sec.gov.

The Issuer and the Guarantor have filed a joint registration
statement on Form S-3 with the SEC covering the debt securities. For
further information on us and the debt securities, you should refer to
the registration statement and its exhibits. This prospectus summarizes
material provisions of the indenture, including the guarantees. Because
the prospectus may not contain all the information that you may find
important, you should review the full text of these documents. We have
included copies of these documents in an exhibit to our registration
statement of which this prospectus is a part.

The SEC allows the Guarantor to "incorporate by reference" the
information the Guarantor files with the SEC, which means that we can
disclose important information to you by referring you to those
documents. The information incorporated by reference is considered to be
part of this prospectus, and later information that the Guarantor files
with the SEC will automatically update and supersede this information.
The Guarantor incorporates by reference the documents listed below and
any future filings made with the SEC under Sections 13(a), 13(c), 14, or
15(d) of the Securities Exchange Act of 1934 until the Issuer sells all
the debt securities.

- Annual Report on Form 10-K of KeySpan Corporation (formerly known
as MarketSpan Corporation) for the transition period from April
1, 1998 to December 31, 1998;

- Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1999;

- Quarterly Report on Form 10-Q for the quarterly period ended June
30, 1999;

- Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1999;

- Current Reports on Form 8-K dated February 4, 1999, February 12,
1999, March 31, 1999, May 20, 1999, June 22, 1999, September 16,
1999, November 5, 1999, December 2, 1999 and January 19, 2000.

You may request a copy of these filings, at no cost, over the
Internet at our web site at http://www.keyspanenergy.com or by writing or
telephoning us at the following address:

Investor Relations
KeySpan Corporation
One MetroTech Center
Brooklyn, New York, 11201
(718) 403-3265

You should rely only on the information incorporated by reference
or provided in this prospectus or any supplement or term sheet. We have
not authorized anyone else to provide you with different information. We
are not making an offer of these securities in any state where the offer
is not permitted. You should not assume that the information in this
prospectus or any supplement is accurate as of any date other than the
date on the front of these documents.

FORWARD-LOOKING STATEMENTS

Some of the information included in this prospectus, any prospectus
supplement or term sheet and the documents we have incorporated by
reference contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, as amended. Such
statements relate to future events or our future financial performance.
We use words such as "anticipate", "believe", "expect", "may", "project",
"will" or other similar words to identify forward-looking statements.

Without limiting the foregoing, all statements relating to our

- anticipated capital expenditures,

- future cash flows and borrowings,

- pursuit of potential future acquisition opportunities, and

- sources of funding

are forward-looking statements. These forward-looking statements are
based on numerous assumptions that we believe are reasonable, but they
are open to a wide range of uncertainties and business risks and actual
results may differ materially from those discussed in these statements.

Among the factors that could cause actual results to differ
materially are:

- available sources and costs of fuel;

- federal and state regulatory initiatives that increase
competition, threaten cost and investment recovery and impact
rate structure;

- our ability to successfully reduce our cost structures;

- the successful integration of our subsidiaries;

- the degree to which we develop unregulated business ventures;

- our ability to identify and make complementary acquisitions, as
well as the successful integration of those acquisitions; and

- inflationary trends and interest rates.

When considering these forward-looking statements, you should keep
in mind the cautionary statements in this document, any prospectus
supplement or term sheet and the documents incorporated by reference. We
will not update these statements unless the securities laws require us to
do so.

THE ISSUER AND THE GUARANTOR

The Issuer

The Issuer, KeySpan Gas East Corporation, does business under the
name Brooklyn Union of Long Island. It is a wholly owned subsidiary of
KeySpan Corporation, which does business under the name KeySpan Energy.

The Issuer conducts the gas distribution business formerly carried
on by the Long Island Lighting Company. It sells, distributes and
transports natural gas in a service territory of approximately 1,230
square miles in the Long Island counties of Nassau and Suffolk and the
Rockaway peninsula of Queens County. It owns and operates gas
distribution, transmission and storage systems that consist of
approximately 6,292 miles of distribution pipelines, 333 miles of
transmission pipelines and a gas storage facility. The Issuer serves
approximately 467,000 customers, of which approximately 418,000, or 90%,
are residential.

The Issuer offers gas for sale to residential customers on a "firm"
basis, and to commercial and industrial customers on a "firm" or
"interruptible" basis. The Issuer offers "firm" service to customers
under rate schedules or contracts that anticipate no interruptions. It
offers "interruptible" service to customers under rate schedules or
contracts that anticipate and permit interruption on short notice,
generally in peak-load seasons. Gas is available at any time of the year
on an "interruptible" basis, if the supply is sufficient and the supply
system is adequate.

The Issuer also participates in the interstate markets by releasing
pipeline capacity or bundling pipeline capacity with gas for "off-system"
sales. An "off-system" customer consumes gas at facilities located
outside the Issuer's service territory, by connecting to the Issuer's
facilities or one of its transporter's facilities, at a point of delivery
agreed to by the Issuer and the customer.

The Issuer purchases its natural gas for sale to its customers
under long-term supply contracts and short-term spot contracts. This
gas is transported under both firm and interruptible transportation
contracts. In addition, the Issuer has commitments from third parties for
the provision of gas storage capability and peaking supplies.

The Issuer was incorporated in 1998 when all of the assets used in
the gas distribution business formerly owned by the Long Island Lighting
Company were transferred to it. The principal address of the Issuer is
175 East Old Country Road, Hicksville, New York 11801.

The Guarantor

The Guarantor was formed in connection with a business combination
in May 1998 of KeySpan Energy Corporation, the parent of The Brooklyn
Union Gas Company, and certain businesses of the Long Island Lighting
Company. Our core business is gas distribution, conducted by our two
subsidiaries, Brooklyn Union of New York and the Issuer, which together
distribute gas to approximately 1.6 million customers.

We are also a major, and growing, generator of electricity. We own
and operate five large generating plants and 42 smaller facilities in
Nassau and Suffolk Counties on Long Island and a major facility in Queens
County in New York City. Under contractual arrangements, we provide
power, electric transmission-and-distribution services, billing and
other customer services for approximately one million electric customers
of the Long Island Power Authority. Our other subsidiaries are involved
in gas storage, wholesale and retail gas and electric marketing,
appliance service, and large energy-system ownership, installation and
management. We also invest in, and participate in the development of,
pipelines and other energy projects, domestically and internationally.

In November 1999, the Guarantor and Eastern Enterprises ("Eastern")
announced that they had signed a definitive merger agreement under which
we will acquire all of the common stock of Eastern for $64.00 per share
in cash. The transaction has a total value of approximately $2.5 billion
($1.7 billion in equity and $0.8 billion in assumed debt and preferred
stock). The Guarantor expects to raise $1.7 billion of initial financing
for the transaction in short-term markets which will ultimately be
replaced with long-term financing. The transaction will be accounted for
as a purchase.

Eastern owns and operates Boston Gas Company, Colonial Gas Company,
Essex Gas Company, Midland Enterprises Inc., Transgas Inc. and ServicEdge
Partners, Inc. The following table shows Eastern's revenues, operating
earnings and net earnings for the years 1996 through 1998 and the nine
months ended September 30, 1998 and 1999:

Nine Months Ended
Years Ended December 31, September 30,
1996 1997 1998 1998 1999(1)
($ in thousands)

Revenues . . . . . $1,057,271 $1,023,740 $935,264 $677,228 $660,327
Operating earnings $ 130,234 $ 115,317 $100,405 $ 62,902 $ 54,813
Net earnings . . . $ 64,501 $ 55,916 $105,981<F2> $$86,348<F2> $ 26,905

<FN>
<F1> Eastern acquired Colonial Gas Company on August 31, 1999 in a
transaction accounted for as a purchase.
<F2> Includes reversal of reserves resulting in an extraordinary gain of
$48.4 million on an after-tax basis.

At September 30, 1999, Eastern had total assets of $1.9 billion, long-
term debt and preferred stock of $0.5 billion and shareholders' equity of
$0.7 billion.

In July 1999, Eastern announced it had entered into an agreement to
acquire EnergyNorth Inc., owner of New Hampshire's largest natural gas
distributor. EnergyNorth is located across the border from, but
contiguous to, areas served by Eastern's gas distribution subsidiaries.
In connection with our acquisition of Eastern, Eastern has amended its
agreement with EnergyNorth to provide for an all cash acquisition of
EnergyNorth shares at a price per share of $61.13. The restructured
EnergyNorth merger is expected to close contemporaneously with the
KeySpan/Eastern transaction.

The merger of KeySpan Corporation and Eastern is conditioned, among
other things, upon the approval of Eastern's shareholders, the SEC and
the New Hampshire Public Utility Commission. We anticipate that the
transaction can be completed in 6 to 9 months but we are unable to
determine when or if all of the required approvals will be obtained.

The increased size and scope of the combined organization should
enable the combined company to provide enhanced, cost-effective customer
service and to capitalize on the above-average growth opportunities for
natural gas in the Northeast and provide additional resources to our
unregulated businesses. The combined company will serve approximately 2.4
million customers.

USE OF PROCEEDS

The Issuer plans to use the proceeds of the offering for the
satisfaction of outstanding obligations, the construction of utility
plants, for reimbursement of the Issuer's treasury, and for any other
proper corporate purposes, including investment in short-term securities.

RATIO OF EARNINGS TO FIXED CHARGES

The following table shows our consolidated ratio of earnings to
fixed charges for the periods indicated.

Nine Months Nine Months
Years Ended Ended Ended
- --------------------------------------------------------------------------
December December March September
31, 31, March 31, 31, December 31, 30,
1995 1996 1997 1998 1998 1999
- --------------------------------------------------------------------------
2.06 2.15 2.21 2.44 <F1> 3.31

<F1> For the nine months ended December 31, 1998, earnings were
insufficient to cover fixed charges by $365.0 million. During the
nine months ended December 31, 1998, the Guarantor incurred the
following special charges (after tax): charges associated with the
transaction with the Long Island Power Authority of $107.9 million;
charges associated with the combination of Long Island Lighting
Company's gas and electric services businesses with KeySpan Energy
Corporation of $83.5 million; an impairment charge of $54.1 million
to write-down the value of proved gas reserves; and a charge of
$13.0 million to establish a not-for-profit philanthropic
foundation.

DESCRIPTION OF SECURITIES

The debt securities and the guarantees will be issued under an
indenture, dated as of December 1, 1999, among the Issuer, the Guarantor
and The Chase Manhattan Bank, as trustee. The indenture provides for the
issuance from time to time of debt securities in an unlimited dollar
amount and an unlimited number of series. The debt securities will be
guaranteed by the Guarantor under the guarantees described below.

The following description of the terms of the debt securities and
the guarantees summarizes the material terms that will apply to the debt
securities and the guarantees. The description is not complete, and we
refer you to the indenture, a copy of which is an exhibit to the
registration statement of which this prospectus is a part. For your
reference, in several cases below we have noted the section in the
indenture that the paragraph summarizes. Capitalized terms have the
meanings assigned to them in the indenture. The referenced sections of
the indenture and the definitions of capitalized terms are incorporated
by reference in the following summary.

Prospective purchasers of debt securities should be aware that
special U.S. Federal income tax, accounting and other considerations may
be applicable to instruments such as the debt securities. The prospectus
supplement or term sheet relating to an issue of debt securities will
describe these considerations, if they apply.

Description of Debt Securities

Specific terms of each series

Each time that the Issuer issues a new series of debt securities,
the prospectus supplement or term sheet relating to that new series will
specify the particular amount, price and other terms of those debt
securities. These terms may include:

- the title of the debt securities;

- any limit on the total principal amount of the debt securities;

- the date or dates on which the principal of the debt securities
will be payable or their manner of determination;

- the interest rate or rates of the debt securities; the date or
dates from which interest will accrue on the debt securities; and
the interest payment dates and the regular record dates for the
debt securities; or, in each case, their manner of determination;

- the place or places where the principal of and premium and
interest on the debt securities will be paid;

- the period or periods within which, the price or prices at which
and the terms on which any of the debt securities may be
redeemed, in whole or in part at our option, and any remarketing
arrangements;

- the terms on which the Issuer would be required to redeem, repay
or purchase debt securities required by any sinking fund,
mandatory redemption or similar provision; and the period or
periods within which, the price or prices at which and the terms
and conditions on which the debt securities will be so redeemed,
repaid or purchased in whole or in part;

- the denomination in which the debt securities will be issued, if
other than denominations of $1,000 and any whole multiple
thereof;

- the portion of the principal amount of the debt securities that
is payable on the declaration of acceleration of the maturity, if
other than their principal amount; these debt securities could
include OID debt securities or indexed debt securities, which are
each described below;

- whether and under what circumstances the Issuer or the Guarantor
will pay additional amounts under any debt securities held by a
person who is not a U.S. person for tax payments, assessments or
other governmental charges and whether the Issuer or the
Guarantor has the option to redeem the debt securities which are
affected by the additional amounts instead of paying the
additional amounts;

- the form in which the Issuer will issue the debt securities,
whether registered, bearer or both, and any restrictions on the
exchange of one form of debt securities for another and on the
offer, sale and delivery of the debt securities in either form;

- whether the debt securities will be issuable as global
securities;

- whether the amounts of payments of principal of, premium, if any,
and interest, if any, on the debt securities are to be determined
with reference to an index, formula or other method, and if so,
the manner in which such amounts will be determined;

- if the debt securities are issuable in definitive form upon the
satisfaction of certain conditions, the form and terms of such
conditions;

- any trustees, paying agents, transfer agents, registrars,
depositories or similar agents with respect to the debt
securities;

- any additions or deletions to the terms of the debt securities
with respect to the events of default or covenants governing the
debt securities;

- the foreign currency or units of two or more foreign currencies
in which payment of the principal of and premium and interest on
any debt securities will be made, if other than U.S. dollars, and
holders' right, if any, to elect payment in a foreign currency or
foreign currency unit other than that in which the debt
securities are payable;

- whether and to what extent the debt securities are subject to
defeasance on terms different from those described under
"Defeasance of indenture"; and

- any other terms of the debt securities that are not inconsistent
with the indenture.

(section 301)

The Issuer may issue debt securities as original issue discount
("OID") debt securities. OID debt securities bear no interest or bear
interest at below-market rates and are sold at a discount below their
stated principal amount. If the Issuer issues OID debt securities, the
prospectus supplement or term sheet will contain the issue price, the
rate at which interest will accrete, and the date from which such
interest will accrete on the OID debt securities.

The Issuer may also issue indexed debt securities. Payments of
principal of, and premium and interest on, indexed debt securities are
determined with reference to the rate of exchange between the currency or
currency unit in which the debt security is denominated and any other
currency or currency unit specified by the Issuer, to the relationship
between two or more currencies or currency units or by other similar
methods or formulas specified in the prospectus supplement or term sheet.

Ranking

The debt securities will be unsecured and unsubordinated
obligations of the Issuer and will rank equally with all the Issuer's
other unsecured and unsubordinated debt. The guarantees will be unsecured
and unsubordinated obligations of the Guarantor and will rank equally
with all the Guarantor's other unsecured and unsubordinated debt.

Form and denomination

The prospectus supplement or term sheet will describe the form
which the debt securities and the guarantees will have, including
insertions, omissions, substitutions and other variations permitted by

the indenture and any legends required by any laws, rules or regulations.
(section 201)

The Issuer will issue debt securities in denominations of $1,000
and whole multiples thereof, unless the prospectus supplement or term
sheet states otherwise. (section 302)

Payment

The Issuer will pay principal of and premium and interest on its
registered debt securities at the place and time described in the debt
securities. The Issuer will pay installments of interest on any
registered debt security to the person in whose name the registered debt
security is registered at the close of business on the regular record
date for these payments. The Issuer will pay principal and premium on
registered debt securities only against surrender of these debt
securities. (section 1001). If the Issuer issues debt securities in
bearer form, the prospectus supplement or term sheet will describe where
and how payment will be made.

Material covenants

The indenture includes the following material covenants:

Lien on assets

If the Issuer mortgages, pledges or otherwise subjects to any lien
the whole or any part of any property or assets which it now owns or
acquires in the future, then the Issuer will secure the debt securities
to the same extent and in the same proportion as the debt or other
obligation that is secured by that mortgage, pledge or other lien. The
debt securities will remain secured for the same period as the other debt
remains secured. This restriction does not apply, however, to any of the
following:

- purchase-money mortgages or liens;

- liens on any property or asset that existed at the time when the
Issuer acquired that property or asset;

- any deposit or pledge to secure public or statutory obligations;

- any deposit or pledge with any governmental agency required to
qualify the Issuer to conduct its business, or any part of its
business, or to entitle it to maintain self-insurance or to
obtain the benefits of any law relating to workmen's
compensation, unemployment insurance, old age pensions or other
social security;

- any deposit or pledge with any court, board, commission or
governmental agency as security related to the proper conduct of
any proceeding before it;

- any mortgage, pledge or lien on any property or asset of any of
the Issuer's affiliates, even if the affiliate may have acquired
that property or asset from the Issuer;

- liens for taxes, assessments or governmental charges or levies
not yet delinquent or being contested in good faith by the
Issuer, if the Issuer has made appropriate reserves;

- liens of landlords and liens of mechanics and materialmen
incurred in the ordinary course of business for sums not yet due
or being contested in good faith by the Issuer, if the Issuer has
made appropriate reserves;

- leases or subleases which the Issuer has granted to others in the
ordinary course of business;

- easements, rights-of-way, restrictions and other similar
encumbrances which the Issuer has incurred in the ordinary course
of business and which do not interfere with the ordinary conduct
of the Issuer's business;

- liens incurred in connection with the issuance by a state or a
political subdivision of a state of any securities the interest
on which is exempt from federal income taxes under Section 103 of
the Internal Revenue Code or any other laws or regulations in
effect at the time of the issuance; or

- liens for the sole purpose of extending, renewing or replacing
all or a part of the indebtedness secured by any lien referred to
in the foregoing clauses or in this clause.

(section 1007)

Limitation on merger, consolidation and sales of assets

Neither the Issuer nor the Guarantor may consolidate with or merge
into any other entity or transfer or lease substantially all of its
properties and assets to any person unless:

- the successor is organized under the laws of the United States or
a state thereof;

- the successor assumes by supplemental indenture the obligations
of its predecessor (that is, all the Issuer's obligations under
the debt securities and the indenture or all the Guarantor's
obligations under the guarantees and the indenture); and

- after giving effect to the transaction, there is no default under
the indenture.

The surviving transferee or lessee corporation will be the Issuer's
or the Guarantor's successor, and the Issuer will be relieved of all
obligations under the debt securities and the indenture or the Guarantor
will be relieved of all obligations under the guarantees and the
indenture. (sections 801 and 802)

Registration of transfer and exchange

All debt securities issued upon any registration of transfer or
exchange of debt securities will be valid obligations of the Issuer,
evidencing the same debt and entitled to the same rights under the
indenture and the guarantees as the debt securities surrendered in the
registration of transfer or exchange.

Registration of transfer

Holders of registered debt securities may present their securities
for registration of transfer at the office of one or more security
registrars designated and maintained by the Issuer. (section 305)

The Issuer will not be required to register the transfer of or
exchange debt securities under the following conditions:

- The Issuer will not be required to register the transfer of or
exchange any debt securities during a period of 15 days before
any selection of those debt securities to be redeemed.

- The Issuer will not be required to register the transfer of or
exchange any debt securities selected for redemption, in whole or
in part, except the unredeemed portion of any debt securities
being redeemed in part.

- The Issuer will not be required to register the transfer of or
exchange debt securities of any holder who has exercised an
option to require the repurchase of those debt securities prior
to their stated maturity date, except the portion not being
repurchased.

(section 305)

Exchange

At your option, you may exchange your registered debt securities of
any series (except a global security, as set forth below) for an equal
principal amount of other registered debt securities of the same series
having authorized denominations upon surrender to the designated agency
of the Issuer.
16

The Issuer may at any time exchange debt securities issued as one
or more global securities for an equal principal amount of debt
securities of the same series in definitive registered form. In this case
the Issuer will deliver to the holders new debt securities in definitive
registered form in the same aggregate principal amount as the global
securities being exchanged.

The depositary of the global securities may also decide at any time
to surrender one or more global securities in exchange for debt
securities of the same series in definitive registered form, in which
case the Issuer will deliver the new debt securities in definitive form
to the persons specified by the depositary, in an aggregate principal
amount equal to, and in exchange for, each person's beneficial interest
in the global securities. (section 305)

Notwithstanding the above, the Issuer will not be required to
exchange any debt securities if, as a result of the exchange, the Issuer
would suffer adverse consequences under any United States law or
regulation. (section 305)

Global securities

If the Issuer decides to issue debt securities in the form of one
or more global securities, then the Issuer will register the global
securities in the name of the depositary for the global securities or the
nominee of the depositary and the global securities will be delivered by
the trustee to the depositary for credit to the accounts of the holders
of beneficial interests in the debt securities.

The prospectus supplement or term sheet will describe the specific
terms of the depositary arrangement for debt securities of a series that
are issued in global form. None of the Issuer, the trustee, any paying
agent or the security registrar will have any responsibility or liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests in a global debt security or for
maintaining, supervising or reviewing any records relating to these
beneficial ownership interests.

Defeasance of indenture

The Issuer and the Guarantor can terminate all of their obligations
under the Indenture with respect to the debt securities and the
guarantees, other than the obligation to pay interest on and the
principal of the debt securities and certain other obligations, at any
time by:

- depositing money or U.S. government obligations with the trustee
in an amount sufficient to pay the principal of and interest on
the debt securities to their maturity; and

- complying with certain other conditions, including delivery to
the trustee of an opinion of counsel to the effect that holders
of debt securities will not recognize income, gain or loss for
federal income tax purposes as a result of the Issuer's and the
Guarantor's defeasance.

In addition, the Issuer and the Guarantor can terminate all of
their obligations under the Indenture with respect to the debt securities
and the guarantees, including the obligation to pay interest on and the
principal of the debt securities, at any time by:

- depositing money or U.S. government obligations with the trustee
in an amount sufficient to pay the principal of and interest on
the debt securities to their maturity, and

- complying with certain other conditions, including delivery to
the trustee of an opinion of counsel stating that there has been
a ruling by the Internal Revenue Service, or a change in the
federal tax law since the date of the indenture, to the effect
that holders of debt securities will not recognize income, gain
or loss for federal income tax purposes as a result of the
Issuer's and the Guarantor's defeasance.

(sections 402-404)

Payments of unclaimed moneys

Moneys deposited with the trustee or any paying agent for the
payment of principal of or premium and interest on any debt security that
remain unclaimed for two years will be repaid to the Issuer at the
Issuer's request, unless the law requires otherwise. If this happens and
you want to claim these moneys, you must look to the Issuer and not to
the trustee or paying agent. (section 409)

Events of default, notices, and waiver

Events of default

An "event of default" regarding any series of debt securities is
any one of the following events:

- default for 30 days in the payment of any interest installment
when due and payable;

- default in the payment of principal or premium when due at its
stated maturity, by declaration, when called for redemption or
otherwise;

- default in the performance of any covenant in the debt securities
or in the indenture by the Issuer or the Guarantor for 60 days

after notice to the Issuer and the Guarantor by the trustee or by
holders of 25% in principal amount of the outstanding debt
securities of that series;

- acceleration of debt securities of another series or any other
indebtedness for borrowed money of the Issuer or the Guarantor,
in an aggregate principal amount exceeding $10.0 million under
the terms of the instrument or instruments under which the
indebtedness is issued or secured, if the acceleration is not
annulled within 30 days after written notice as provided in the
indenture;

- certain events of bankruptcy, insolvency and reorganization of
the Issuer or the Guarantor; and

- any other event of default of that series that is specified in
the prospectus supplement or term sheet.

(section 501)

A default regarding a single series of debt securities will not
necessarily constitute a default regarding any other series.

If an event of default for any series of debt securities occurs and
is continuing (other than an event of default involving the bankruptcy,
insolvency or reorganization of the Issuer or Guarantor), either the
trustee or the holders of 25% in principal amount of the outstanding debt
securities of that series may declare the principal (or, in the case of
(a) OID debt securities, a lesser amount as provided in those OID debt
securities or (b) indexed debt securities, an amount determined by the
terms of those indexed debt securities), of all the debt securities of
that series, together with any accrued interest on the debt securities,
to be immediately due and payable by notice in writing to the Issuer and
the Guarantor. If it is the holders of debt securities who give notice of
that declaration of acceleration to the Issuer and the Guarantor, then
they must also give notice to the trustee. (section 502)

If an event of default occurs which involves the bankruptcy,
insolvency or reorganization of the Issuer or the Guarantor, as set forth
above, then all unpaid principal amounts (or, if the debt securities are
(a) OID debt securities, then the portion of the principal amount that is
specified in those OID debt securities or (b) indexed debt securities, an
amount determined by the terms of those indexed debt securities) and
accrued interest on all debt securities of each series will immediately
become due and payable, without any action by the trustee or any holder
of debt securities. (section 502)

In order for holders of debt securities to initiate proceedings for
a remedy under the indenture, 25% in principal amount must first give
notice to the Issuer and the Guarantor as provided above, must request
that the trustee initiate a proceeding in its own name and must offer the
trustee a reasonable indemnity against costs and liabilities. If the
trustee still refuses for 60 days to initiate the proceeding, and no

inconsistent direction has been given to the trustee by holders of a
majority of the debt securities of the same series, the holders may
initiate a proceeding as long as they do not adversely affect the rights
of any other holders of that series. (section 507)

The holders of a majority in principal amount of the outstanding
debt securities of a series may rescind a declaration of acceleration if
all events of default, besides the failure to pay principal or interest
due solely because of the declaration of acceleration, have been cured or
waived. (section 502)

If the Issuer or the Guarantor defaults on the payment of any
installment of interest and fails to cure the default within 30 days, or
if the Issuer or the Guarantor defaults on the payment of principal when
it becomes due, then the trustee may require the Issuer or the Guarantor
to pay all amounts due to the trustee, with interest on the overdue
principal or interest payments, in addition to the expenses of
collection. (section 503)

A judgment for money damages by courts in the United States,
including a money judgment based on an obligation expressed in a foreign
currency, will ordinarily be rendered only in U.S. dollars. New York
statutory law provides that a court shall render a judgment or decree in
the foreign currency of the underlying obligation and that the judgment
or decree shall be converted into U.S. dollars at the exchange rate
prevailing on the date of entry of the judgment or decree. The indenture
requires the Issuer to pay additional amounts necessary to protect
holders if a court requires a conversion to be made on a date other than
a judgment date.

Notices

The trustee is required to give notice to holders of a series of
debt securities of a default, which remains uncured or has not been
waived, that is known to the trustee within 90 days after the default has
occurred. In the event of a default in the performance of any covenant in
the debt securities or the indenture which results under the indenture in
notice to the Issuer and the Guarantor by the trustee after 90 days, the
trustee shall not give notice to the holders of debt securities until 60
days after the giving of notice to the Issuer and the Guarantor. The
trustee may not withhold the notice in the case of a default in the
payment of principal of and premium or interest on any of the debt
securities. (section 602)

Waiver

The holders of a majority in principal amount of the outstanding
debt securities of a series may waive any past default or event of
default except a default in the payment of principal of or premium or
interest on the debt securities of that series or a default relating to a

provision that cannot be amended without the consent of each affected
holder. (section 513)

Reports

The Issuer and the Guarantor are each required to file every year
with the trustee an officer's certificate confirming that it is complying
with all conditions and covenants in the indenture. (section 1005)

The Issuer and the Guarantor must each file with the trustee copies
of the annual reports and of the information and other documents which
the Issuer and the Guarantor may be required to file with the SEC under
Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as
amended. These documents must be filed with the trustee within 15 days
after they are required to be filed with the SEC. If either the Issuer or
the Guarantor is not required to file the information, documents or
reports under either of these Sections, then the Issuer or the Guarantor
must file with the trustee and the SEC, in accordance with the rules and
regulations of the SEC, the supplementary and periodic information,
documents and reports which may be required by Section 13 of the Exchange
Act, in respect of a debt security listed and registered on a national
securities exchange, as may be required by the rules and regulations of
the SEC.

Within 30 days of filing the information, documents or reports
referred to above with the trustee, the Issuer and the Guarantor must
mail to the holders of the debt securities any summaries of the
information, documents or reports which are required to be sent to the
holders by the rules and regulations of the SEC. (section 704)

Rights and duties of the trustee

The holders of a majority in principal amount of outstanding debt
securities of any series may direct the time, method and place of
conducting any proceeding for any remedy available to the trustee or
exercising any trust or other power conferred on the trustee. The trustee
may decline to follow that direction if it would involve the trustee in
personal liability or would be illegal. (section 512) During a default,
the trustee is required to exercise the standard of care and skill that a
prudent man would exercise under the circumstances in the conduct of his
own affairs. (section 601) The trustee is not obligated to exercise any
of its rights or powers under the indenture at the request or direction
of any of the holders of debt securities unless those holders have
offered to the trustee reasonable security or indemnity. (section 603)

The trustee is entitled, in the absence of bad faith on its part,
to rely on an officer's certificate of the Issuer or the Guarantor before
taking action under the indenture. (section 603)

Supplemental indentures

Supplemental indentures not requiring consent of holders

Without the consent of any holders of debt securities, the Issuer,
the Guarantor and the trustee may supplement the indenture, among other
things, to:

- pledge property to the trustee as security for the debt
securities;

- reflect that another entity has succeeded the Issuer or the
Guarantor and assumed the covenants and obligations of the Issuer
under the debt securities and the indenture or of the Guarantor
under the guarantees and the indenture;

- cure any ambiguity or inconsistency in the indenture or in the
debt securities or the guarantees or make any other provisions
the Issuer and the Guarantor consider necessary or desirable, as
long as the interests of the holders of the debt securities are
not adversely affected in any material respect;

- issue and establish the form and terms of any series of debt
securities or the guarantees as provided in the indenture;

- add to the covenants of the Issuer or the Guarantor further
covenants for the benefit of the holders of debt securities (and
if the covenants are for the benefit of less than all series of
debt securities, stating which series are entitled to benefit);

- add any additional event of default (and if the new event of
default applies to fewer than all series of debt securities,
stating to which series it applies);

- change the trustee or provide for an additional trustee;

- provide additional provisions for bearer debt securities so long
as the action does not adversely affect the interests of holders
of any debt securities in any material respect; or

- modify the indenture in order to continue its qualification under
the Trust Indenture Act of 1939 or as may be necessary or
desirable in accordance with amendments to that Act.

(section 901)

Supplemental indentures requiring consent of holders

With the consent of the holders of at least a majority in principal
amount of the series of the debt securities that would be affected by a

modification of the indenture, the indenture permits the Issuer, the
Guarantor and the trustee to supplement the indenture or modify in any
way the terms of the indenture or the rights of the holders of the debt
securities. However, without the consent of each holder of all of the
debt securities affected by that modification, the Issuer, the Guarantor
and trustee may not:

- reduce the principal of or premium on or change the stated final
maturity of any debt security;

- reduce the rate of or change the time for payment of interest on
any debt security (or, in the case of OID debt securities, reduce
the rate of accretion of the OID);

- change any obligation of the Issuer or the Guarantor to pay
additional amounts under the indenture;

- reduce or alter the method of computation of any amount payable
upon redemption, repayment or purchase of any debt security by
the Issuer or the Guarantor (or the time when the redemption,
repayment or purchase may be made);

- make the principal or interest on any debt security payable in a
currency other than that stated in the debt security or change
the place of payment;

- reduce the amount of principal due on an OID debt security upon
acceleration of maturity or provable in bankruptcy or reduce the
amount payable under the terms of an indexed debt security upon
acceleration of maturity or provable in bankruptcy;

- impair any right of repayment or purchase at the option of any
holder of debt securities;

- modify the right of any holder of debt securities to receive or
sue for payment of the principal or interest on a debt security
that would be due and payable at the maturity thereof or upon
redemption;

- modify the Guarantor's obligation under the guarantees to pay all
amounts due under the debt securities in any way adverse to the
interest of any holders of debt securities; or

- reduce the principal amount of the outstanding debt securities of
any series required to supplement the indenture or to waive any
of its provisions.

(section 902)

A supplemental indenture which modifies or eliminates a provision
intended to benefit the holders of one series of debt securities will not
affect the rights under the indenture of holders of other series of debt
securities.
23

Redemption

The specific terms of any redemption of a series of debt securities
will be contained in the prospectus supplement or term sheet for that
series. Generally, the Issuer must send notice of redemption to the
holders at least 30 days but not more than 60 days prior to the
redemption date. The notice will specify:

- the principal amount being redeemed;

- the redemption date;

- the redemption price;

- the place or places of payment;

- the CUSIP number of the debt securities being redeemed;

- whether the redemption is pursuant to a sinking fund;

- that on the redemption date, interest (or, in the case of OID
debt securities, original issue discount) will cease to accrue;
and

- if bearer debt securities are being redeemed, that those bearer
debt securities must be accompanied by all coupons maturing after
the redemption date or the amount of the missing coupons will be
deducted from the redemption price, or indemnity must be
furnished, and whether those bearer debt securities may be
exchanged for registered debt securities not being redeemed.

(section 1104)

On or before any redemption date, the Issuer or the Guarantor will
deposit an amount of money with the trustee or with a paying agent
sufficient to pay the redemption price. (section 1103)

If less than all the debt securities are being redeemed, the
trustee shall select the debt securities to be redeemed using a method it
considers fair. (section 1103) After the redemption date, holders of debt
securities which were redeemed will have no rights with respect to the
debt securities except the right to receive the redemption price and any
unpaid interest to the redemption date. (section 1106)

Description of the Guarantees

The Guarantor has unconditionally guaranteed to each holder of debt
securities and to the trustee and its successors the due and punctual
payment of the principal of and premium, if any, and interest, if any, on
the debt securities. The guarantees apply whether the payment is due at

the maturity date of the debt securities, on an interest payment date,
or as a result of acceleration, an offer to purchase or otherwise. The
guarantees include payment of interest on the overdue principal of and
interest, if any, on the debt securities (if lawful) and all other
obligations of the Issuer under the indenture.

The guarantees will remain valid even if the indenture is found to
be invalid. The Guarantor is obligated under the guarantees to pay any
guaranteed amount immediately after the Issuer's failure to do so.

The Guarantor is a holding company with no independent business
operations or source of income of its own. It conducts substantially all
of its operations through its subsidiaries and, as a result, the
Guarantor depends on the earnings and cash flow of, and dividends or
distributions from, its subsidiaries to provide the funds necessary to
meet its debt and contractual obligations. Furthermore, a substantial
portion of the Guarantor's consolidated assets, earnings and cash flow is
derived from the operation of its regulated utility subsidiaries, whose
legal authority to pay dividends or make other distributions to the
Guarantor is subject to regulation by the State of New York Public
Service Commission. In addition, upon consummation of the merger with
Eastern Enterprises, the Guarantor expects to register as a holding
company under the Public Utility Holding Company Act of 1935, as amended.
As a result, the corporate and financial activities of the Guarantor and
each of its subsidiaries (including their ability to pay dividends to the
Guarantor) will be subject to regulation by the SEC.

The Guarantor's holding company status also means that the right of
the Guarantor to participate in any distribution of the assets of any of
its subsidiaries upon liquidation, reorganization or otherwise is subject
to the prior claims of the creditors of each of the subsidiaries (except
to the extent that the claims of the Guarantor itself as a creditor of a
subsidiary may be recognized). Since this is true for the Guarantor, it
is also true for the creditors of the Guarantor (including the holders of
the debt securities). The right of the Guarantor's creditors (including
the holders of the debt securities) to participate in the distribution
of the stock owned by the Guarantor in its regulated subsidiaries would
also be subject to approval by the State of New York Public Service
Commission and the Federal Energy Regulatory Commission.

Concerning the Trustee

We have customary banking relationships with the trustee, The Chase
Manhattan Bank. Among other services, The Chase Manhattan Bank provides
us with cash management and credit services, including payroll account,
lockbox, foreign exchange and investment custody account services. The
Chase Manhattan Bank also serves or has served as administrative agent
and trustee with respect to several other loans and issuances of debt of
the Guarantor or its subsidiaries and is a member of a syndicate of banks

which is party to a $700 million line of credit facility with the
Guarantor. In addition, Chase Securities Inc., an affiliate of The Chase
Manhattan Bank, acts as a placement agent for a commercial paper program
which the Guarantor initiated in November 1999.

Governing Law

The laws of the State of New York govern the indenture and will
govern the debt securities and the guarantees. (section 112)

PLAN OF DISTRIBUTION

The Issuer may sell the debt securities in any of three ways:

- through underwriters or dealers;

- through agents; or

- directly to purchasers.

The prospectus supplement or term sheet for each series of debt
securities will describe that offering, including:

- the name or names of any underwriters, dealers or agents;

- the purchase price and the proceeds to the Issuer from that sale;

- any underwriting discounts and other items constituting
underwriters' compensation;

- any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers; and

- any securities exchanges on which the debt securities of that
series may be listed.

Underwriters

If underwriters are used in the sale, we will execute an
underwriting agreement with those underwriters. Unless otherwise set
forth in the prospectus supplement or term sheet, the obligations of the
underwriters to purchase debt securities will be subject to certain
conditions. The underwriters will be obligated to purchase all the debt
securities of a series if any are purchased.

The debt securities will be acquired by the underwriters for their
own account and may be resold by them from time to time in one or more
transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale.

Underwriters may be deemed to have received compensation from us in the
form of underwriting discounts or commissions and may also receive
commissions from the purchasers of debt securities for whom they may act
as agent. Underwriters may also sell debt securities to or through
dealers. These dealers may receive compensation in the form of discounts,
concessions or commissions from the underwriters and/or commissions from
the purchasers for whom they may act as agent. Any initial public
offering price and any discounts or concessions allowed or reallowed or
paid to dealers may be changed from time to time.

The Issuer may authorize underwriters to solicit offers by certain
types of institutions to purchase debt securities from us at the public
offering price stated in the prospectus supplement or term sheet required
by delayed delivery contracts providing for payment and delivery on a
specified date in the future. If the Issuer sells debt securities under
these delayed delivery contracts, the prospectus supplement or term sheet
will state that as well as the conditions to which these delayed delivery
contracts will be subject and the commissions payable for that
solicitation.

Agents

The Issuer may also sell debt securities through agents designated
by us from time to time. We will name any agents involved in the offer or
sale of the debt securities and will list commissions payable by the
Issuer to these agents in the prospectus supplement or term sheet. These
agents will be acting on a best efforts basis to solicit purchases for
the period of their appointment, unless we state otherwise in the
prospectus supplement or term sheet.

Direct sales

The Issuer may sell debt securities directly to purchasers. In this
case, the Issuer will not engage underwriters or agents in the offer and
sale of debt securities.

Remarketing transactions

The Issuer may also sell debt securities that we have purchased,
redeemed or repaid through one or more remarketing firms acting as
principals for their own accounts or as our agents. The applicable
prospectus supplement or term sheet will identify any remarketing firms
and describe the terms of our agreement with them and their compensation.
Remarketing firms may be deemed to be underwriters of the debt securities
under the Securities Act of 1933, as amended.

Indemnification

We may indemnify underwriters, dealers or agents who participate in
the distribution of debt securities against certain liabilities,
including liabilities under the Securities Act, and agree to contribute
to payments which these underwriters, dealers or agents may be required
to make.

No assurance of liquidity

Each series of debt securities will be a new issue of securities
with no established trading market. Any underwriters that purchase debt
securities from the Issuer may make a market in these debt securities.
The underwriters will not be obligated, however, to make a market in the
debt securities and may discontinue market-making at any time without
notice to holders of debt securities. We cannot assure you that there
will be liquidity in the trading market for any debt securities of any
series.

LEGAL OPINIONS

The validity of the debt securities offered by the Issuer and the
guarantees offered by the Guarantor in this prospectus will be passed
upon for the Issuer and the Guarantor by Steven L. Zelkowitz, Senior Vice
President and Deputy General Counsel of the Guarantor. Mr. Zelkowitz has
been granted options to purchase up to 146,000 shares of common stock of
the Guarantor. Certain other legal matters will be passed upon for the
Issuer and the Guarantor by Dickstein Shapiro Morin & Oshinsky LLP,
Washington, D.C., or other counsel identified in the prospectus
supplement or term sheet. Frederick M. Lowther, a partner of Dickstein
Shapiro Morin & Oshinsky LLP, serves as the General Counsel of the
Guarantor and has been granted options to purchase up to 45,000 shares of
the Guarantor's common stock. In addition, other Dickstein Shapiro Morin
& Oshinsky LLP attorneys may be deemed to be beneficial owners of the
Guarantor's common stock having a fair market value of approximately
$50,000. Certain legal matters will be passed upon for any agents or
underwriters by Simpson Thacher & Bartlett, New York, New York, or other
counsel identified in the prospectus supplement or term sheet. Simpson
Thacher & Bartlett also acts as counsel for us from time to time.

EXPERTS

Arthur Andersen LLP, independent accountants, audited certain
financial statements for the nine months ended December 31, 1998 and
related schedules incorporated by reference in this prospectus and
elsewhere in the registration statement. These documents are incorporated
by reference herein in reliance upon the authority of Arthur Andersen
LLP, as experts in accounting and auditing in giving the report.

Ernst & Young LLP, independent auditors, have audited the financial
statements of Long Island Lighting Company as of March 31, 1998 and for
the twelve months ended March 31, 1998, the three months ended March 31,
1997 and the twelve months ended December 31, 1996 and related schedule
included in our Annual Report on Form 10-K, as amended, for the
Transition Period from April 1, 1998 to December 31, 1998, as set forth
in their Report, which is incorporated by reference, in this prospectus
and elsewhere in the registration statement. These financial statements
and schedule are incorporated by reference herein in reliance upon Ernst
& Young LLP's report, given upon their authority, as experts in
accounting and auditing.

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KeySpan Gas East
Corporation

% Notes due January , 2010

Guaranteed Fully and Unconditionally by

KeySpan Corporation

------------------------------
PRELIMINARY PRICING SUPPLEMENT
------------------------------

Merrill Lynch & Co.

Chase Securities Inc.

J.P. Morgan & Co.

January , 2000

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