As Filed with the Securities and Exchange Commission on October 1, 2004
Registration No. 333-______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
KEYSPAN CORPORATION NEW YORK 11-3431358
KEYSPAN TRUST I DELAWARE 11-6563698
KEYSPAN TRUST II DELAWARE 11-3622443
KEYSPAN TRUST III DELAWARE 11-6563239
(Exact Name of Registrant as Specified in (State or Other Jurisdiction of (I.R.S. Employer Identification
its Charter) Incorporation or Organization) Number)
---------------------------
JOHN J. BISHAR, ESQ.
ONE METROTECH CENTER, BROOKLYN, NEW YORK 11201
175 EAST OLD COUNTRY ROAD, HICKSVILLE, NEW YORK 11801
(718) 403-1000 (BROOKLYN)
(516) 755-6650 (HICKSVILLE)
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices and agent for service)
COPY TO:
WILLIAM R. DOUGHERTY, ESQ.
SIMPSON THACHER & BARTLETT LLP
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017-3954
---------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: From
time to time after this Registration Statement becomes effective as determined
by market conditions.
If the only securities being registered on this form are being
offered pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ] _________
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ] ______
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [ ]
---------------------------
CALCULATION OF REGISTRATION FEE
(SEE FOLLOWING PAGE)
---------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE OFFERING PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO BE PRICE PER AGGREGATE OFFERING REGISTRATION
REGISTERED REGISTERED (1) SECURITY (2) PRICE (3)(4)(5) FEE(1)
---------- -------------- ------------ --------------- ------
Debt Securities of KeySpan Corporation (5)
Trust Preferred Securities of the Trusts (6)
Guarantees of Trust Preferred Securities of
the Trusts and certain back-up
obligations (7)............................
Preferred Stock, par value $.01 per share, of
KeySpan Corporation (8)....................
Depositary Shares (9)..........................
Common Stock, par value $.01 per share, of
KeySpan Corporation (10)...................
Stock Purchase Contracts of KeySpan
Corporation (11)...........................
Stock Purchase Units (12)......................
Warrants of KeySpan
Corporation (13)...........................
Warrant Units (14).............................
Total...................................... $3,000,000,000 $3,000,000,000 $380,100
(1) Pursuant to General Instruction II.D to Form S-3, the Amount to be
Registered, Proposed Maximum Aggregate Offering Price Per Security and
Proposed Maximum Aggregate Offering Price have been omitted for each class
of securities that is registered hereby.
(2) The Proposed Maximum Aggregate Offering Price Per Security will be
determined from time to time by the relevant Registrant in connection with
the issuance by that Registrant of the securities registered hereunder.
(3) The Proposed Maximum Aggregate Offering Price has been estimated solely
for purposes of calculating the registration fee pursuant to Rule 457(o)
under the Securities Act of 1933 and reflects the maximum offering price
of securities issued, rather than the principal amount of securities that
may be issued at a discount and shall not exceed $3,000,000,000 or the
equivalent thereof, based on the exchange rate on the applicable offering
date, in one or more currencies or currency units identified by the
applicable Registrant at the time of offering.
(4) Excluding accrued interest, distributions and dividends, if any.
(5) An indeterminate number of debt securities of KeySpan Corporation are
covered by this registration statement. Debt securities may be issued (a)
separately, (b) as part of stock purchase units or warrant units which are
registered hereby or (c) upon exercise of warrants to purchase debt
securities which are registered hereby.
(6) An indeterminate number of trust preferred securities of KeySpan Trust I,
KeySpan Trust II and KeySpan Trust III (each a "Trust") are covered by
this registration statement. Trust preferred securities may be issued
separately or as part of stock purchase units or warrant units which are
registered hereby. Debt securities of KeySpan may be issued to any Trust
in exchange for trust preferred securities, in which event such debt
securities may later be distributed to the holders of trust preferred
securities upon a dissolution of such Trust and the distribution of the
assets thereof.
(7) Includes the rights of holders of the trust preferred securities under any
guarantees and certain back-up undertakings, comprised of the obligations
of KeySpan Corporation to provide certain indemnities in respect of, and
pay and be responsible for certain costs, expenses, debts and liabilities
of, each Trust (other than with respect to the trust preferred securities)
and such obligations of KeySpan Corporation as set forth in the amended
and restated declaration of trust of each Trust and the related indenture,
in each case as further described in the registration statement. The
guarantees, when taken together with KeySpan Corporation's obligations
under the debt securities, the related indenture and the amended and
restated declaration of trust, will provide a full and unconditional
guarantee by KeySpan Corporation of payments due on the trust preferred
securities. No separate consideration will be received for any guarantees
or such back-up obligations. Pursuant to Rule 457(n) under the Securities
Act of 1933, no separate fee for the guarantees is payable.
(8) An indeterminate number of shares of preferred stock of KeySpan
Corporation are covered by this registration statement. Preferred stock
may be issued (a) separately, (b) as part of stock purchase units which
are registered hereby or (c) upon exercise of warrants to purchase
preferred stock which are registered hereby.
(9) An indeterminate number of depositary shares, representing fractional
interests in the preferred stock of KeySpan Corporation, are covered by
this registration statement. In the event KeySpan Corporation elects to
offer to the public such fractional interests, the depositary shares will
be issued to a depositary under a deposit agreement. Depositary shares may
be issued (a) separately, (b) as part of stock purchase units or warrant
units which are registered hereby or (c) upon exercise of warrants to
purchase depositary shares which are registered hereby.
(10) An indeterminate number of shares of common stock, par value $.01 per
share, of KeySpan Corporation are covered by this registration statement.
Common stock may be issued (a) separately, (b) upon the conversion of
either the debt securities or
the shares of preferred stock of KeySpan Corporation, or trust preferred
securities of a Trust, each of which are registered hereby, (c) upon
settlement of stock purchase contracts of KeySpan Corporation or stock
purchase units, each of which are registered hereby, or (d) upon exercise
of warrants to purchase common stock, each of which are registered hereby.
Shares of common stock issued upon conversion of debt securities,
preferred stock or trust preferred securities will be issued without the
payment of additional consideration.
(11) An indeterminate number of stock purchase contracts of KeySpan Corporation
are covered by this registration statement. Each stock purchase contract
may be issued separately or as part of a stock purchase unit. A stock
purchase contract obligates the holder, upon settlement, to purchase an
indeterminate number of shares of common stock of KeySpan Corporation. If
a stock purchase contract is issued as part of a stock purchase unit, no
separate consideration will be received for the stock purchase contract.
(12) An indeterminate number of stock purchase units are covered by this
registration statement. Each stock purchase unit consists of (a) a stock
purchase contract, under which the holder, upon settlement, will purchase
an indeterminate number of shares of common stock of KeySpan Corporation
and (b) a debt security of KeySpan Corporation, a share of preferred stock
of KeySpan Corporation or a depositary share relating to that preferred
stock, a trust preferred security of a Trust or a debt obligation of a
third party, including a U.S. Treasury security. Each debt security, share
of preferred stock or depositary share relating to preferred stock or debt
obligation of a third party may be pledged to secure the obligation of the
holder to purchase common stock.
(13) An indeterminate number of warrants, representing rights to purchase
preferred stock, depositary shares, common stock or debt securities of
KeySpan Corporation, each of which is registered hereby, are covered by
this registration statement.
(14) An indeterminate number of warrant units are covered by this registration
statement. Each warrant unit consists of (a) a warrant under which the
holder, upon exercise, will purchase an indeterminate number of shares of
common stock of KeySpan Corporation and (b) a debt security of KeySpan
Corporation, a share of preferred stock of KeySpan Corporation or
depositary shares relating to that preferred stock, or a trust preferred
security of a Trust.
As permitted by Rule 429 under the Securities Act of 1933, the prospectus
included herein is a combined prospectus, which also relates to the same classes
of securities of the Registrants previously registered under the Registration
Statements on Form S-3 (Registration No. 333-60294) of the Registrants, Form S-3
(No. 333-82230) of the Registrants and Form S-3 (No. 333-104230) of KeySpan
Corporation. This Registration Statement constitutes Post-Effective Amendment
No. 1 of Registration Statement No. 333-104230, Post-Effective Amendment No. 2
of the Registration Statement No. 333-82230 and Post-Effective Amendment No. 3
of Registration Statement No. 60294, each of which shall become effective
concurrently with this registration statement in accordance with 8(c) of the
Securities Act. A filing fee of $44,384.40 was paid in connection with
$485,450,000 of securities that remain eligible to be sold under such
Registration Statements.
SUBJECT TO COMPLETION, DATED OCTOBER 1, 2004
PROSPECTUS
[KEYSPAN LOGO]
KEYSPAN CORPORATION
$3,000,000,000
DEBT SECURITIES
PREFERRED STOCK
DEPOSITARY SHARES
COMMON STOCK
STOCK PURCHASE UNITS
STOCK PURCHASE CONTRACTS
WARRANTS
WARRANT UNITS
KEYSPAN TRUST I
KEYSPAN TRUST II
KEYSPAN TRUST III
TRUST PREFERRED SECURITIES
GUARANTEED, TO THE EXTENT SET FORTH HEREIN, BY
KEYSPAN CORPORATION
KeySpan Corporation will provide the specific terms of these securities in
supplements to this prospectus. You should read this prospectus and the
applicable prospectus supplement carefully before you invest.
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 ________, 2004.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus 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.
TABLE OF CONTENTS
PAGE
----
About This Prospectus........................................................... i
Risk Factors.................................................................... 1
Forward-Looking Statements...................................................... 3
Keyspan Corporation............................................................. 4
The Trusts...................................................................... 5
Use of Proceeds................................................................. 5
Ratio of Earnings to Fixed Charges and of Earnings to Combined Fixed
Charges and Preferred Stock Dividends...................................... 6
Description of Debt Securities.................................................. 7
Description of Preferred Stock.................................................. 21
Description of Depositary Shares................................................ 24
Description of the Trust Preferred Securities................................... 27
Description of Common Stock..................................................... 39
Description of Stock Purchase Contracts and Stock Purchase Units................ 42
Description of Warrants and Warrant Units....................................... 43
United States Federal Income Tax Consequences................................... 45
Certain ERISA Considerations.................................................... 63
Plan of Distribution............................................................ 66
Legal Opinions.................................................................. 67
Experts......................................................................... 67
Where You Can Find More Information............................................. 68
ABOUT THIS PROSPECTUS
As used in this prospectus and any prospectus supplement or term sheet,
"KeySpan" generally means KeySpan Corporation, together with its consolidated
subsidiaries. However, in the descriptions of the securities offered in this
prospectus and related risk factors, "KeySpan" means KeySpan Corporation and not
any of its subsidiaries.
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement or term sheet. KeySpan has not
authorized anyone else to provide you with different information. KeySpan is 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.
i
RISK FACTORS
In addition to the risk factors discussed below relating to trust
preferred securities, if appropriate, we will include risk factors relating to
securities offered using this prospectus in the prospectus supplement relating
to the offered securities.
RISK FACTORS RELATING TO THE TRUST PREFERRED SECURITIES
Your investment in the trust preferred securities will involve
several risks. You should carefully consider the following discussion of risks,
and the other information in this prospectus, before deciding whether an
investment in the trust preferred securities is suitable for you.
KEYSPAN IS NOT REQUIRED TO PAY YOU UNDER THE GUARANTEE AND THE
SUBORDINATED DEBT SECURITIES UNLESS IT FIRST MAKES OTHER REQUIRED
PAYMENTS.
KeySpan's obligations under the subordinated debt securities will
rank junior to all of its senior debt. This means that KeySpan cannot make any
payments on the subordinated debt securities if it defaults on a payment of
senior debt and does not cure the default within the applicable grace period or
if the senior debt becomes immediately due because of a default and has not yet
been paid in full. In addition, KeySpan's obligations under the subordinated
debt securities will be effectively subordinated to all of the existing and
future liabilities of its subsidiaries. KeySpan's obligations under the
guarantee are subordinated to all of its other liabilities. This means that
KeySpan cannot make any payments on the guarantee if it defaults on a payment on
any of its other liabilities. In addition, in the event of the bankruptcy,
liquidation or dissolution of KeySpan, its assets would be available to pay
obligations under the guarantee only after it has made all payments on its other
liabilities.
Neither the trust preferred securities, the subordinated debt
securities nor the guarantee limit KeySpan's ability to incur additional
indebtedness, including indebtedness that ranks senior in priority of payment to
the subordinated debt securities and the guarantee.
KEYSPAN IS NOT REQUIRED TO PAY YOU UNDER THE GUARANTEE IF THE RELEVANT
TRUST DOES NOT HAVE CASH AVAILABLE.
The ability of each trust to make payments on the trust preferred
securities is solely dependent upon KeySpan making the related payments on the
subordinated debt securities when due.
If KeySpan defaults on its obligations to make payments on the
subordinated debt securities, the trusts will not have sufficient funds to make
payments on the trust preferred securities. In those circumstances, you will not
be able to rely upon the guarantee for payment of these amounts.
DEFERRAL OF DISTRIBUTIONS WOULD HAVE ADVERSE TAX CONSEQUENCES FOR YOU AND
MAY ADVERSELY AFFECT THE TRADING PRICE OF THE TRUST PREFERRED SECURITIES.
If distributions on the subordinated debt securities and trust
preferred securities are deferred, you will be required to recognize interest
income for United States federal income tax purposes in respect of your ratable
share of the accrued interest on the subordinated debt securities held by the
trust before you receive any cash distributions relating to this interest. In
addition, you will not receive this cash if you sold the trust preferred
securities before the end of any deferral period or before the record date
relating to distributions which are paid.
KeySpan has no current intention of deferring interest payments on
the subordinated debt securities and believes that such deferral is a remote
possibility. However, if KeySpan exercises its right to do so in the future, the
trust preferred securities may trade at prices that do not fully reflect the
value of accrued but unpaid interest on the subordinated debt securities. If you
sell the trust preferred securities during an interest deferral period, you
1
may not receive the same return on investment as someone else who continues to
hold the trust preferred securities. In addition, the existence of KeySpan's
right to defer payments of interest on the subordinated debt securities may mean
that the market price for the trust preferred securities, which represent an
undivided beneficial interest in the subordinated debt securities, may be more
volatile than other securities that do not have these rights.
YOU SHOULD NOT RELY ON THE DISTRIBUTIONS FROM THE TRUST PREFERRED
SECURITIES THROUGH THEIR MATURITY DATE--THEY MAY BE REDEEMED AT ANY TIME
IF SPECIFIED CHANGES IN TAX OR INVESTMENT COMPANY LAW OCCUR.
If specified changes in tax or investment company law occur and
other specified conditions are satisfied, the trust preferred securities could
be redeemed by the trusts at a redemption price equal to their issue price plus
any accrued and unpaid distributions.
YOU SHOULD NOT RELY ON THE DISTRIBUTIONS FROM THE TRUST PREFERRED
SECURITIES THROUGH THEIR MATURITY DATE--THEY MAY BE REDEEMED AT
KEYSPAN'S OPTION.
The trust preferred securities may be redeemed in whole, at any
time, or in part, from time to time, at a redemption price equal to their issue
price plus any accrued and unpaid distributions. You should assume that this
redemption option will be exercised if KeySpan is able to refinance at a lower
interest rate or it is otherwise in its interest to redeem the subordinated debt
securities. If KeySpan redeems the subordinated debt securities, the trusts must
redeem the trust preferred securities and common securities in an aggregate
liquidation amount equal to the aggregate principal amount of subordinated debt
securities redeemed.
YOU MAY SUFFER A LOSS IF SUBORDINATED DEBT SECURITIES ARE DISTRIBUTED TO
YOU IN EXCHANGE FOR PREFERRED SECURITIES BECAUSE MARKET PRICES FOR THE
PREFERRED SECURITIES AND THE SUBORDINATED DEBT SECURITIES MAY NOT BE
EQUAL.
KeySpan cannot give you any assurance as to the market prices for
the preferred securities or the subordinated debt securities that may be
distributed in exchange for preferred securities. Accordingly, the preferred
securities that an investor may purchase, whether pursuant to the offer made by
this prospectus or in the secondary market, or the subordinated debt securities
that a holder of preferred securities may receive in exchange for preferred
securities, may trade at a discount to the price that the investor paid to
purchase the preferred securities.
YOU COULD SUFFER ADVERSE TAX CONSEQUENCES IF KEYSPAN TERMINATES THE TRUSTS
AND DISTRIBUTES THE SUBORDINATED DEBT SECURITIES TO HOLDERS.
KeySpan has the right to terminate the trust at any time. If KeySpan
decides to exercise this right, the trust will redeem the trust preferred
securities by distributing subordinated debt securities to holders of the trust
preferred securities on a proportionate basis.
Under current United States federal income tax law, a distribution
of subordinated debt securities to you on the dissolution of the trust should
not be a taxable event to you. However, if the trust is characterized for United
States federal income tax purposes as an association taxable as a corporation at
the time it is dissolved or if there is a change in law, the distribution of
subordinated debt securities to you may be a taxable event to you.
BECAUSE YOU HAVE LIMITED VOTING RIGHTS, YOU MAY NOT BE ABLE TO PREVENT THE
TRUSTS FROM TAKING ACTIONS YOU MAY NOT AGREE WITH.
You will have limited voting rights. In particular, except for the
limited exceptions described below, only KeySpan can elect or remove any of the
trustees.
2
FORWARD-LOOKING STATEMENTS
Some of the information included in this prospectus, any prospectus
supplement or term sheet and the documents KeySpan has incorporated by reference
contain forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, as amended. Such statements relate to future
events or KeySpan's future financial performance. KeySpan uses 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 KeySpan's
- future outlook,
- 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 KeySpan believes 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:
- general economic conditions, especially in the Northeast
United States;
- available sources and costs of fuel;
- volatility of energy prices in a deregulated market
environment as well as in the source of natural gas and fuel
used to generate electricity;
- potential write-down of our investment in natural gas
properties when natural gas prices are depressed or if we have
significant downward revisions in our estimated proved gas
reserves;
- federal and state regulatory initiatives that increase
competition, threaten cost and investment recovery and impact
rate structure;
- KeySpan's ability to successfully reduce its cost structures;
- the exercise by LIPA of its right to acquire our Long Island
generation operations and the deployment of the proceeds
received in connection therewith;
- implementation of new accounting standards;
- the successful integration of KeySpan's subsidiaries,
including Eastern, EnergyNorth and their subsidiaries;
- the degree to which KeySpan develops unregulated business
ventures, as well as federal and state regulatory policies
affecting KeySpan's ability to retain and operate those
business ventures;
- KeySpan's ability to identify and make complementary
acquisitions, as well as the successful integration of those
acquisitions; and
3
- 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. KeySpan will not update
these statements unless the securities laws require it to do so.
KEYSPAN CORPORATION
KeySpan Corporation, a New York corporation, is a member of the
Standard and Poor's 500 Index and a registered holding company under the Public
Utility Holding Company Act of 1935, as amended, or PUHCA. KeySpan was formed in
May 1998, as a result of the business combination of KeySpan Energy Corporation,
the parent of The Brooklyn Union Gas Company, and certain businesses of the Long
Island Lighting Company. On November 8, 2000, we acquired Eastern Enterprises,
now known as KeySpan New England, LLC, a Massachusetts limited liability
company, which primarily owns Boston Gas Company, Colonial Gas Company and Essex
Gas Company, gas utilities operating in Massachusetts, as well as EnergyNorth
Natural Gas, Inc., a gas utility operating principally in central New Hampshire.
KeySpan has assets of more than $13.0 billion.
Under our holding company structure, we have no independent
operations and conduct substantially all of our operations through our
subsidiaries. Our subsidiaries operate in the following four businesses: Gas
Distribution, Electric Services, Energy Services and Energy Investments.
The Gas Distribution segment consists of our six regulated gas
distribution subsidiaries, which operate in New York, Massachusetts and New
Hampshire and serve approximately 2.5 million customers.
The Electric Services segment consists of subsidiaries that manage
the electric transmission and distribution system owned by the Long Island Power
Authority, or LIPA; provide generating capacity and, to the extent required,
energy conversion services for LIPA from our approximately 4,200 megawatts of
generating facilities located on Long Island; and manage fuel supplies for LIPA
to fuel our Long Island generating facilities. The Electric Services segment
also includes subsidiaries that own, lease and operate the 2,200 megawatt
Ravenswood electric generation facility, located in Queens County in New York
City, as well as recently completed 250 megawatt expansion unit at Ravenswood.
The Energy Services segment provides energy-related services to
customers primarily located within New York, New Jersey, Connecticut,
Massachusetts, New Hampshire, Rhode Island and Pennsylvania through various
subsidiaries that operate under the following principal two lines of business:
- home energy services and
- business solutions.
The Energy Investments segment includes:
- gas exploration and production activities;
- domestic pipelines and gas storage facilities;
- midstream natural gas processing activities in Canada;
and
- natural gas pipeline activities in the United Kingdom.
4
KeySpan's vision is to be the premier energy company in the
Northeastern United States. Following the acquisition of Eastern and EnergyNorth
in November 2000, KeySpan became the largest gas distribution company in the
Northeast and the fifth largest in the United States. KeySpan's increased size
and scope is enabling us to provide enhanced cost-effective customer service; to
offer our existing customers other services and products by building upon our
existing customer relationships; and to capitalize on the above-average growth
opportunities for natural gas expansion in the Northeast by expanding our
infrastructure, primarily on Long Island and in New England. The key element of
our business strategy is the continued focus and growth of our core businesses.
We also continue to explore the monetization of some or all of our non-core
assets in the Energy Investments segment.
As a registered holding company under PUHCA, KeySpan's corporate and
financial activities and those of its subsidiaries, including their ability to
pay dividends to KeySpan, are subject to regulation by the Securities and
Exchange Commission. Under KeySpan's holding company structure, KeySpan has no
independent operations or source of income of its own and conducts substantially
all of its operations through its subsidiaries and, as a result, KeySpan 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 KeySpan's consolidated
assets, earnings and cash flow is derived from the operations of its regulated
utility subsidiaries, whose legal authority to pay dividends or make other
distributions to KeySpan is subject to regulation by state regulatory
authorities.
KeySpan's principal executive offices are located at One Metro Tech
Center, Brooklyn, New York 11201 and 175 East Old Country Road, Hicksville, New
York 11801, and its telephone numbers are (718) 403-1000 (Brooklyn) and (516)
755-6650 (Hicksville).
THE TRUSTS
KeySpan Trust I, KeySpan Trust II and KeySpan Trust III are Delaware
statutory trusts. Their principal place of business is c/o KeySpan Corporation,
One Metro Tech Center, Brooklyn, New York 11201, and their telephone number is
(718) 403-1000.
All of the common securities of the trusts will be owned by KeySpan.
KeySpan will issue a series of subordinated debt securities to the trust in
exchange for the trust common securities and the trust preferred securities.
KeySpan will simultaneously sell the trust preferred securities to the public.
The subordinated debt securities will have the same financial terms as the trust
preferred securities.
There are five trustees of each trust. Three of them, referred to as
regular trustees, are officers of KeySpan. JPMorgan Chase Bank will act as the
property trustee of each trust, and Chase Manhattan Bank USA, National
Association will act as the Delaware trustee.
USE OF PROCEEDS
Unless otherwise specified in the applicable prospectus supplement,
the net proceeds from the sale of the offered securities will be used for
KeySpan's general corporate purposes.
5
RATIO OF EARNINGS TO FIXED CHARGES AND OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
The following table shows KeySpan's consolidated ratio of earnings
to fixed charges and of earnings to combined fixed charges and preferred stock
dividends for the periods indicated.
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------------------------------------- --------------
1999 2000 2001 2002 2003 2004
---- ---- ---- ---- ---- ----
Ratio of Earnings to Fixed Charges 3.23x 3.04x 2.10x 2.71x 2.95x 4.31x
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends 2.40x 2.72x 2.04x 2.63x 2.86x 4.20x
For purposes of computing the above ratios, earnings represent net
income plus income tax, interest charges, the portion of rentals representing
interest and adjustments related to equity investments. Fixed charges include
interest charges and the portion of rentals representing interest.
6
DESCRIPTION OF DEBT SECURITIES
The debt securities offered by this prospectus will be unsecured
obligations of KeySpan and will be either senior or subordinated debt. The
senior debt will be issued under a senior debt indenture and the subordinated
debt will be issued under a subordinated debt indenture. The senior debt
indenture and the form of subordinated debt indenture are filed with the SEC as
exhibits to one of the registration statements to which this prospectus relates.
"Debt securities" in this prospectus refers to both the senior debt securities
and the subordinated debt securities.
The following briefly summarizes the material provisions of the
indentures and the debt securities, other than pricing and related terms
disclosed in the accompanying prospectus supplement or term sheet. The
prospectus supplement will also state whether any of the terms summarized below
do not apply to the series of debt securities being offered. You should read the
more detailed provisions of the indentures, including the defined terms, for
provisions that may be important to you. You should also read the particular
terms of a series of debt securities, which will be described in more detail in
the applicable prospectus supplement. Copies of the indentures may be obtained
from KeySpan or the applicable trustee. So that you may easily locate the more
detailed provisions, the numbers in parentheses below refer to sections in both
indentures (or in only one indenture, if so indicated). Wherever particular
sections or defined terms of the indentures are referred to, those sections or
defined terms are incorporated into this prospectus by reference, and the
statement in this prospectus is qualified by that reference.
Unless otherwise provided in the applicable prospectus supplement,
the trustee under each indenture will be JPMorgan Chase Bank.
Capitalized terms used below are defined under "--Material
covenants - Defined terms."
SPECIFIC TERMS OF EACH SERIES
Each time that KeySpan issues a new series of debt securities, the
prospectus supplement or term sheet relating to that new series will specify the
particular amount, price, whether the debt securities are senior or subordinated
debt 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 KeySpan's option, and any
remarketing arrangements;
- the terms on which KeySpan 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
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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 original issue discount, or OID, debt
securities or indexed debt securities, which are each
described below;
- whether and under what circumstances KeySpan 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 KeySpan 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 KeySpan 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 the 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 the indenture;" and
- any other terms of the debt securities that are not
inconsistent with the applicable indenture.
KeySpan may issue debt securities as 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 KeySpan 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.
KeySpan 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 KeySpan, 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.
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The terms on which a series of debt securities may be convertible
into or exchangeable for other securities of KeySpan or another party will be
set forth in the prospectus supplement relating to that series. The terms will
include provisions as to whether conversion or exchange is mandatory, at the
option of the holder or at KeySpan's option. The terms may include provisions
under which the number of other securities to be received by the holders of a
series of debt securities may be adjusted. (section 301)
We may issue debt securities upon the exercise of warrants or upon
exchange or conversion of exchangeable or convertible debt securities. The
prospectus supplement will describe the specific terms of any of those warrants
or exchangeable or convertible securities. It will also describe the specific
terms of the debt securities issuable upon the exercise, exchange or conversion
of those securities.
SENIOR DEBT
The senior debt securities will rank on an equal basis with all of
KeySpan's other unsecured senior indebtedness.
SUBORDINATED DEBT
Unless the prospectus supplement provides otherwise, the following
provisions will apply to the subordinated debt securities.
Direct holders of subordinated debt securities should recognize that
contractual provisions in the subordinated debt indenture may prohibit us from
making payments on those securities. Subordinated debt securities are
subordinate and junior in right of payment, to the extent and in the manner
stated in the subordinated debt indenture, to all of our senior indebtedness, as
defined in the subordinated debt indenture, including all debt securities we
have issued and will issue under the senior debt indenture or other indenture
identified in the subordinated debt indenture. (subordinated debt indenture,
section 1401)
Under the subordinated debt indenture, "senior indebtedness"
includes all of our obligations to pay principal, premium, interest, penalties,
fees and other charges:
- for borrowed money;
- in the form of or evidenced by other instruments, including
obligations incurred in connection with our purchase of
property, assets or businesses;
- under capital leases;
- under letters of credit, bankers' acceptances or similar
facilities;
- issued or assumed in the form of a deferred purchase price of
property or services, such as master leases;
- under swaps and other hedging arrangements;
- pursuant to our guarantee of another entity's obligations and
all dividend obligations guaranteed by us; and
- to satisfy the expenses and fees of the subordinated debt
indenture trustee under the subordinated debt indenture.
The following types of our indebtedness will not be senior
indebtedness:
- indebtedness we owe to a subsidiary of ours;
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- indebtedness which, by its terms, expressly provides that it
does not rank senior to the subordinated debt securities;
- indebtedness incurred in the form of trade accounts payable or
accrued liabilities arising in the ordinary course of
business;
- indebtedness we owe to any trust (other than the trusts that
are issuers of the preferred securities described in this
prospectus), or a trustee of such trust, partnership or other
entity affiliated with us, that is our financing vehicle, and
which has issued equity securities or other securities that
are similar to the preferred securities; and
- indebtedness we may incur in violation of the subordinated
debt indenture.
The subordinated debt indenture provides that, unless all principal
of and any premium or interest on the senior indebtedness has been paid in full,
no payment or other distribution may be made in respect of any subordinated debt
securities in the following circumstances:
- in the event of any insolvency or bankruptcy proceedings, or
any receivership, liquidation, reorganization, assignment for
creditors or other similar proceedings or events involving us
or our assets; (subordinated debt indenture, section 1402) or
- (a) in the event and during the continuation of any default in
the payment of principal, premium, if any, or interest on any
senior indebtedness beyond any applicable grace period or (b)
in the event that any event of default with respect to any
senior indebtedness has occurred and is continuing, permitting
the direct holders of that senior indebtedness (or a trustee)
to accelerate the maturity of that senior indebtedness;
whether or not the maturity is in fact accelerated (unless, in
the case of (a) or (b), the payment default or event of
default has been cured or waived or ceases to exist and any
related acceleration has been rescinded) or (c) in the event
that any judicial proceeding is pending with respect to a
payment default or event of default described in (a) or (b).
(subordinated debt indenture, section 1403)
If the trustee under the subordinated debt indenture or any direct
holders of the subordinated debt securities receive any payment or distribution
that is prohibited under the subordination provisions, then the trustee or the
direct holders will have to repay that money to the direct holders of the senior
indebtedness. (subordinated debt indenture, section 1403)
Even if the subordination provisions prevent us from making any
payment when due on the subordinated debt securities of any series, we will be
in default on our obligations under that series if we do not make the payment
when due. This means that the trustee under the subordinated debt indenture and
the direct holders of that series can take action against us, but they will not
receive any money until the claims of the direct holders of senior indebtedness
have been fully satisfied. (subordinated debt indenture, section 501)
The prospectus supplement may include a description of additional
terms implementing the subordination feature.
FORM AND DENOMINATION
The prospectus supplement or term sheet will describe the form which
the debt securities will have, including insertions, omissions, substitutions
and other variations permitted by the applicable indenture and any legends
required by any laws, rules or regulations. (section 201)
KeySpan will issue debt securities in denominations of $1,000 and
whole multiples thereof, unless the prospectus supplement or term sheet states
otherwise. (section 302)
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PAYMENT
KeySpan will pay principal of and premium and interest on its
registered debt securities at the place and time described in the debt
securities. KeySpan 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. KeySpan
will pay principal and premium on registered debt securities only against
surrender of these debt securities. (section 1001) If KeySpan issues debt
securities in bearer form, the prospectus supplement or term sheet will describe
where and how payment will be made.
MATERIAL COVENANTS
The senior debt indenture includes each of the material covenants
discussed below. The subordinated debt indenture includes the material covenant
discussed below under "-- Limitation on merger, consolidation and sales of
assets."
LIEN ON ASSETS
If KeySpan or any of its Gas Utility Subsidiaries mortgages, pledges
or otherwise subjects to any lien the whole or any part of any Property which
they now own or acquire in the future, then KeySpan or that Gas Utility
Subsidiary will secure the debt securities to the same extent and in the same
proportion as the debt or other obligation that is secured by each of those
mortgages, pledges or other liens. 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
KeySpan or that Gas Utility Subsidiary acquired that property
or asset;
- any deposit or pledge to secure public or statutory
obligations or contractual obligations to Long Island Power
Authority;
- any deposit or pledge with any governmental agency required in
order to qualify KeySpan or that Gas Utility Subsidiary 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
affiliate of KeySpan other than Gas Utility Subsidiaries, even
if the affiliate may have acquired that property or asset from
KeySpan or a Gas Utility Subsidiary;
- any lien granted over receivables or other monetary or
regulatory assets granted in connection with a securitization
arrangement for those assets to secure KeySpan or one of its
Gas Utility Subsidiaries' monetary or regulatory obligations
incurred in relation to such securitization arrangements, so
long as the principal amount of those obligations does not
exceed the aggregate face amount of such receivables or
monetary assets;
- liens for taxes, assessments or governmental charges or levies
not yet delinquent or being contested in good faith by
KeySpan, if appropriate reserves have been made;
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- 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 KeySpan, if
appropriate reserves have been made;
- leases or subleases granted to others in the ordinary course
of business;
- easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and
which do not interfere with the ordinary conduct of 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.
Notwithstanding the foregoing, KeySpan and its Gas Utility
Subsidiaries may create, incur or permit to exist any lien to secure
Indebtedness in addition to those permitted by the preceding sentence, and
renew, extend or replace such liens, provided that at the time of such creation,
incurrence, renewal, extension or replacement, after giving effect thereto, the
aggregate amount of all such Indebtedness of KeySpan and the Gas Utility
Subsidiaries and the aggregate Attributable Value of all Sales and Leaseback
Transactions of KeySpan and the Gas Utility Subsidiaries at any one time
outstanding together shall not exceed 10% of Consolidated Tangible Assets. As of
December 31, 2003, Consolidated Tangible Assets were $12.8 billion. (senior debt
indenture, section 1007)
SALE AND LEASEBACK TRANSACTIONS
Neither KeySpan nor any of its Gas Utility Subsidiaries may enter
into any Sale and Leaseback unless either:
- KeySpan and its Gas Utility Subsidiaries would be entitled
pursuant to the "--Liens on assets" covenant to create
Indebtedness secured by a lien on the Principal Property to be
leased back in an amount equal to the Attributable Value of
such Sale and Leaseback Transaction without the debt
securities being equally and ratably secured with, or, at
KeySpan's option, prior to, that Indebtedness; or
- KeySpan or the relevant Gas Utility Subsidiary, within 270
days after the sale or transfer of the relevant assets shall
have been made, applies, in the case of a sale or transfer for
cash, an amount equal to the net proceeds from the sale or, in
the case of a sale or transfer otherwise than for cash, an
amount equal to the fair market value of the Principal
Property so leased, as determined by any two directors of
KeySpan or the relevant Gas Utility Subsidiary, to:
- the retirement of Indebtedness of KeySpan ranking
prior to or on a parity with the debt securities,
incurred or assumed by KeySpan or that Gas Utility
Subsidiary which by its terms matures at, or is
extendible or renewable at the option of the
obligor to, a date more than twelve months after
the date of incurring, assuming or guaranteeing
such Indebtedness, or
- the investment in any Principal Property used in
the ordinary course of business. (senior debt
indenture, section 1008)
LIMITATION ON MERGER, CONSOLIDATION AND SALES OF ASSETS
KeySpan may not consolidate with or merge into any other entity or
transfer or lease substantially all of its properties and assets to any Person
unless:
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- 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 of KeySpan's
obligations under the debt securities and the applicable
indenture; and
- after giving effect to the transaction, there is no default
under the applicable indenture.
The surviving transferee or lessee corporation will be KeySpan's
successor, and KeySpan will be relieved of all obligations under the debt
securities and the applicable indenture. (sections 801 and 802)
DEFINED TERMS
"Attributable Value" means, as to any particular lease under which
KeySpan or any of its Gas Utility Subsidiaries is at any time liable as lessee
and at any date as of which the amount thereof is to be determined, the total
net obligations of the lessee for rental payments during the remaining term of
the lease (including any period for which such lease has been extended or may,
at the option of the lessor, be extended) discounted from the respective due
dates thereof to such date at a rate per annum equivalent to the interest rate
inherent in such lease (as determined in good faith by KeySpan in accordance
with generally accepted financial practice) compounded semi-annually.
"Capital Stock" of any Person means shares, interests, rights to
purchase, warrants, options, participation or other equivalents of or interests
in, however designed, equity of such Person, including any preferred stock, but
excluding any debt securities convertible into such equity.
"Consolidated Tangible Assets" means, as of the date of any
determination thereof, the total of all assets which would appear on a
consolidated balance sheet of KeySpan and its subsidiaries, prepared in
accordance with U.S. generally accepted accounting principles, or U.S. GAAP, at
their net book values (after deducting related depreciation, depletion and
amortization which, in accordance with U.S. GAAP, should be set aside in
connection with the business conducted), but excluding goodwill, trade names,
trademarks, patents, unamortized debt discount and all other intangible assets
all as determined in accordance with U.S. GAAP.
"Gas Utility Subsidiaries" means the following subsidiaries of
KeySpan engaged in the distribution and sale at retail of natural gas: The
Brooklyn Union Gas Company d/b/a KeySpan Energy Delivery New York, KeySpan Gas
East Corporation d/b/a KeySpan Energy Delivery Long Island and Boston Gas
Company, Colonial Gas Company, Essex Gas Company and EnergyNorth Natural Gas,
Inc. each d/b/a KeySpan Energy Delivery New England; and any other subsidiary of
KeySpan engaged in such activity, provided such subsidiary would be, at any
particular time, a Significant Subsidiary.
"Indebtedness" means, with respect to any Person, without
duplication:
(1) any liability of that Person:
- for borrowed money or under any reimbursement obligation
relating to a letter of credit or similar instrument;
- evidenced by a bond, note, debenture or similar
instrument;
- to pay the deferred purchase price of property or
services, except trade accounts payable arising in the
ordinary course of business; or
- for the payment of money relating to any obligations
under any capital lease of real or personal property
which has been recorded as a capitalized lease
obligation;
(2) any liability of others described in the preceding clause (1)
that the Person has guaranteed or that is otherwise its legal
liability or which is secured by a lien on that Person's
Property;
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(3) any amendment, supplement, modification, deferral, renewal,
extension or refunding of any liability of the types referred
to in clauses (1) or (2) above; and
(4) in the case of any of KeySpan's subsidiaries, the aggregate
preference in respect of amounts payable on the issued and
outstanding shares of preferred stock of any such subsidiary
in the event of any voluntary or involuntary liquidation,
dissolution or winding up, excluding any such preference
attributable to such shares of preferred stock that are owned
by such Person or any of its subsidiaries.
"Person" means any individual, firm, corporation, partnership,
association, joint venture, tribunal, limited liability company, trust,
government or political subdivision or agency or instrumentality thereof, or any
other entity or organization.
"Principal Property" means the real estate, fixtures, pipelines,
mains, meters, pipes, valves, compressors and other related personal property
primarily used in connection with the transportation, distribution or retail
sale of gas by the Gas Utility Subsidiaries.
"Property" means any asset, revenue or any other property, including
capital stock, whether tangible or intangible, real or personal, including,
without limitation, any right to receive income.
"Sale and Leaseback Transaction" means any transaction or series of
related transactions relating to Principal Property now owned or hereafter
acquired whereby KeySpan or one of its Gas Utility Subsidiaries transfers the
Principal Property to a Person and KeySpan or one of its Gas Utility
Subsidiaries leases it from that Person for a period, including renewals, in
excess of three years.
"Significant Subsidiary" has the meaning specified, as of the date
of the indenture, in Rule 1-02 of Regulation S-X promulgated under the
Securities Act.
REGISTRATION OF TRANSFER AND EXCHANGE
All debt securities issued upon any registration of transfer or
exchange of debt securities will be valid obligations of KeySpan, evidencing the
same debt and entitled to the same rights under the applicable indenture 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 KeySpan. (section 305)
KeySpan will not be required to register the transfer of or exchange
debt securities under the following conditions:
- KeySpan 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.
- KeySpan 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.
- KeySpan 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)
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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 KeySpan's designated agent.
KeySpan 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 KeySpan 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 KeySpan 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, KeySpan will not be required to exchange
any debt securities if, as a result of the exchange, KeySpan would suffer
adverse consequences under any United States law or regulation. (section 305)
GLOBAL SECURITIES
If KeySpan decides to issue debt securities in the form of one or
more global securities, then KeySpan 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 KeySpan, 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 THE INDENTURE
Unless otherwise specified in the prospectus supplement or term
sheet, KeySpan can terminate all of its obligations under the applicable
indenture with respect to the debt securities, 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 KeySpan's
defeasance.
In addition, unless otherwise specified in the prospectus supplement
or term sheet, KeySpan can terminate all of its obligations under the applicable
indenture with respect to the debt securities, 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
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- 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 applicable
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 KeySpan'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 debenture that remains
unclaimed for two years will be repaid to KeySpan at its request, unless the law
requires otherwise. If this happens and you want to claim these moneys, you must
look to KeySpan 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 applicable indenture by KeySpan for 60
days after notice to KeySpan 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 of KeySpan or one of its Significant Subsidiaries
for borrowed money, in an aggregate principal amount exceeding
$25 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 applicable indenture;
- a final, non-appealable judgment or order for the payment of
money in excess of $25 million rendered against KeySpan or one
of its Significant Subsidiaries that is not paid or discharged
within 60 days following entry of such judgment or order;
- certain events of bankruptcy, insolvency and reorganization
involving KeySpan; 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 KeySpan), 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 KeySpan.
If it is the holders of debt securities who give notice of that declaration of
acceleration to KeySpan, then they must also give notice to the trustee.
(section 502)
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If an event of default occurs which involves the bankruptcy,
insolvency or reorganization of KeySpan, 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 applicable indenture, holders of 25% in principal amount of
those debt securities must:
- first give notice to KeySpan as provided above;
- request that the relevant trustee initiate a proceeding in its
own name; and
- offer that 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 KeySpan defaults on the payment of any installment of interest
and fails to cure the default within 30 days, or if KeySpan defaults on the
payment of principal when it becomes due, then the trustee may require KeySpan
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. Each indenture requires KeySpan 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 and
that is known to the trustee, within 90 days after the default has occurred. If
a default occurs in the performance of any covenant in the debt securities or
the applicable indenture, other than a default in the payment of principal of
and premium or interest on any of the debt securities, the trustee shall not
give notice to the holders of debt securities until 60 days after the occurrence
of the default. The trustee may withhold notice of a default if KeySpan and the
trustee determine that doing so is in the best interests of the holders, but 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 or the deposit of any
sinking fund payment. (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)
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REPORTS
KeySpan is required under each indenture to file an officer's
certificate with the trustee every year confirming it is complying with all
conditions and covenants in that indenture. (section 1005)
KeySpan must also file with the trustee copies of its annual reports
and the information and other documents which KeySpan 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 KeySpan is not required to
file the information, documents or reports under either of these Sections, then
KeySpan 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, KeySpan 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 applicable
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 before taking action under the applicable
indenture. (section 603)
SUPPLEMENTAL INDENTURES
SUPPLEMENTAL INDENTURES NOT REQUIRING CONSENT OF HOLDERS
Without the consent of any holders of debt securities, KeySpan and
the trustee may supplement the applicable indenture, among other things, to:
- pledge property to the trustee as security for the debt
securities;
- reflect that another entity has succeeded KeySpan and assumed
its covenants and obligations under the debt securities and
the applicable indenture;
- cure any ambiguity or inconsistency in the applicable
indenture or in the debt securities or make any other
provisions 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 as provided in the applicable indenture;
- add to KeySpan's covenants 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;
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- 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 applicable 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
Each indenture permits KeySpan and the trustee, with the consent of
the holders of at least a majority in principal amount of each series of the
debt securities that would be affected by a modification of the applicable
indenture, to supplement that indenture or modify in any way the terms of that
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, KeySpan and the 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 of KeySpan's obligations to pay additional amounts
under the applicable indenture;
- reduce or alter the method of computation of any amount
payable upon redemption, repayment or purchase of any debt
security by KeySpan, 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;
- in the case of subordinated debt securities, modify the
subordination provisions in the subordinated debt indenture in
a manner adverse to the holders of the subordinated debt
securities;
- impair the conversion rights 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; or
- reduce the principal amount of the outstanding debt securities
of any series required to supplement the applicable 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 applicable indenture of holders of other series of debt
securities.
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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, KeySpan 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, KeySpan 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)
CONCERNING THE TRUSTEE
KeySpan has customary banking relationships with the trustee under
each indenture, JPMorgan Chase Bank. Among other services, JPMorgan Chase Bank
provides KeySpan with cash management and credit services, including payroll
account, accounts payable account, electronic funds transfer, demand deposit
accounts, foreign exchange and investment custody account services. JPMorgan
Chase Bank also serves or has served as administrative agent and trustee with
respect to other issuances of debt by KeySpan and its subsidiaries and is a
member of a syndicate of banks which is party to several credit facilities with
KeySpan in a total amount of $1.3 billion. In addition, JPMorgan Securities Inc.
acts as a placement agent for KeySpan's commercial paper program, JPMorgan Chase
Bank acts as trustee under several financing trusts that hold certain of our
assets and JPMorgan Securities Inc. acts as remarketing agent for our MEDS. J.P.
Morgan Trust Company, National Association and JPMorgan Securities Inc. are
affiliates of JPMorgan Chase Bank.
GOVERNING LAW
The laws of the State of New York govern each indenture and will
govern the debt securities. (section 112)
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DESCRIPTION OF PREFERRED STOCK
The following briefly summarizes the material terms of KeySpan's
preferred stock, other than pricing and related terms disclosed in the
accompanying prospectus supplement or term sheet. You should read the particular
terms of any series of preferred stock offered by KeySpan, which will be
described in more detail in any prospectus supplement or term sheet relating to
that series, together with the more detailed provisions of KeySpan's certificate
of incorporation and the certificate of amendment relating to each particular
series of preferred stock for provisions that may be important to you. The
certificate of amendment relating to the particular series of preferred stock
offered by the applicable prospectus supplement and this prospectus will be
filed as an exhibit to a document incorporated by reference in the registration
statement. The prospectus supplement will also state whether any of the terms
summarized below do not apply to the series of preferred stock being offered.
GENERAL
As of December 31, 2003, KeySpan was authorized to issue 83,000,000
shares of preferred stock, par value $.01 per share, 16,000,000 shares of
preferred stock, par value $25 per share and 1,000,000 shares of preferred
stock, par value $100 per share.
At December 31, 2003, KeySpan had 85,676 shares of 6.00% Series A
ESOP Convertible Preferred Stock, par value $100 per share, outstanding; 553,000
shares of 7.07% Preferred Stock Series B, par value $100 per share, outstanding;
and 197,000 shares of 7.17% Preferred Stock Series C, par value $100 per share,
outstanding. Shares of both the Series B and Series C Preferred Stock are
currently redeemable at KeySpan's option, and mandatorily redeemable on May 28,
2005, in the case of the Series B Preferred Stock, and on May 28, 2008, in the
case of the Series C Preferred Stock. Additionally, if KeySpan fails to pay
dividends on either the Series B or Series C Preferred Stock for four
consecutive quarterly dividend periods, holders of both series will have the
right to appoint two directors to KeySpan's board or directors, who shall remain
on the board as long as all dividends on the Series B and Series C Preferred
Stock remain unpaid. You should read the more detailed provisions of KeySpan's
certificate of incorporation or the certificate of amendment relating to a
series of outstanding preferred stock for provisions that may be important to
you. We redeemed all of the shares of Class A Preferred Stock as of July 29,
2004.
Under KeySpan's certificate of incorporation, its board of directors
is authorized to issue shares of preferred stock in one or more series, and to
establish from time to time a series of preferred stock with the following terms
specified:
- the number of shares to be included in the series;
- the designation, powers, preferences and rights of the shares
of the series; and
- the qualifications, limitations or restrictions of that
series, except as otherwise stated in the certificate of
incorporation.
Prior to the issuance of any series of preferred stock, KeySpan's
board of directors will create and designate the series as a series of preferred
stock in a certificate of amendment to the certificate of incorporation. The
term "board of directors" includes any duly authorized committee of the board.
The rights of holders of the preferred stock offered may be
adversely affected by the rights of holders of any shares of preferred stock
that may be issued in the future. The board of directors may cause shares of
preferred stock to be issued in public or private transactions for any proper
corporate purpose. Examples of proper corporate purposes include issuances to
obtain additional financing in connection with acquisitions or otherwise, and
issuances to officers, directors and employees of KeySpan and its subsidiaries
pursuant to benefit
21
plans or otherwise. Shares of preferred stock issued by KeySpan may have the
effect of rendering more difficult or discouraging an acquisition of KeySpan
that is deemed undesirable by its board of directors.
The preferred stock will be, when issued, fully paid and
nonassessable. Holders of preferred stock will not have any preemptive or
subscription rights to acquire more stock of KeySpan.
The transfer agent, registrar, dividend disbursing agent and
redemption agent for shares of each series of preferred stock will be named in
the prospectus supplement relating to that series.
RANK
Unless otherwise specified in the prospectus supplement relating to
the shares of any series of preferred stock, those shares will rank on an equal
basis with each other series of preferred stock and prior to the common stock as
to dividends and distributions of assets.
DIVIDENDS
Each series of preferred stock may provide that holders of that
series are entitled to receive cash dividends, when, as and if declared by
KeySpan's board of directors out of funds legally available for dividends. The
rates and dates of payment of dividends will be set forth in the prospectus
supplement relating to each series of preferred stock. Dividends will be payable
to holders of record of preferred stock as they appear on KeySpan's books or, if
applicable, the records of the depositary referred to below under "Description
of Depositary Shares," on the record dates fixed by the board of directors.
Dividends on any series of preferred stock may be cumulative or noncumulative.
KeySpan may not declare, pay or set apart for payment dividends on
the preferred stock unless full cumulative dividends on any other series of
preferred stock that ranks on an equal or senior basis have been paid or
sufficient funds have been or are simultaneously set apart for payment for all
of the other series of preferred stock that pay dividends on a cumulative basis;
or the immediately preceding dividend period of the other series of preferred
stock that pay dividends on a noncumulative basis.
Partial dividends declared on shares of preferred stock and any
other series of preferred stock ranking on an equal basis as to dividends will
be declared pro rata. A pro rata declaration means that the ratio of dividends
declared per share to accrued dividends per share will be the same for both
series of preferred stock.
Similarly, KeySpan may not declare, pay or set apart for payment
non-stock dividends or make other payments on the common stock or any other
stock of KeySpan ranking junior to the preferred stock until full dividends on
the preferred stock have been paid or set apart for payment for
- all prior dividend periods if the preferred stock pays
dividends on a cumulative basis; or
- the immediately preceding dividend period if the preferred
stock pays dividends on a noncumulative basis.
CONVERSION AND EXCHANGE
The prospectus supplement for any series of preferred stock will
state the terms, if any, on which shares of that series are convertible into or
exchangeable for shares of KeySpan common stock or common stock of a third
party.
REDEMPTION
If so specified in the applicable prospectus supplement, a series of
preferred stock may be redeemable at KeySpan's or the holder's option and/or may
be mandatorily redeemed. Any partial redemptions of preferred stock will be made
in a way that the board of directors decides is equitable.
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Unless KeySpan defaults in the payment of the redemption price,
dividends will cease to accrue after the redemption date on shares of preferred
stock called for redemption and all rights of holders of those shares will
terminate except for the right to receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or
winding up of KeySpan, holders of each series of preferred stock will be
entitled to receive distributions upon liquidation in the amount set forth in
the prospectus supplement relating to that series of preferred stock, plus an
amount equal to any accrued and unpaid dividends. Those distributions will be
made before any distribution is made on any securities ranking junior relating
to liquidation, including common stock.
If the liquidation amounts payable relating to the preferred stock
of any series and any other securities ranking on a parity regarding liquidation
rights are not paid in full, the holders of the preferred stock of that series
and other securities will share in any distribution of KeySpan's available
assets on a ratable basis in proportion to the full liquidation preferences.
Holders of that series of preferred stock will not be entitled to any other
amounts from KeySpan after they have received their full liquidation preference.
VOTING RIGHTS
The holders of shares of preferred stock will have no voting rights,
except:
- as otherwise stated in the prospectus supplement;
- as otherwise stated in the certificate of amendment
establishing that series; or
- as required by applicable law.
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DESCRIPTION OF DEPOSITARY SHARES
The following briefly summarizes the material provisions of the
deposit agreement and of the depositary shares and depositary receipts, other
than pricing and related terms disclosed in the accompanying prospectus
supplement or term sheet. You should read the particular terms of any depositary
shares and any depositary receipts that are offered by KeySpan and any deposit
agreement relating to a particular series of preferred stock which will be
described in more detail in a prospectus supplement or term sheet. The
prospectus supplement or term sheet will also state whether any of the
generalized provisions summarized below do not apply, or additional provisions
apply, to the depositary shares or depositary receipts being offered. A copy of
the form of deposit agreement, including the form of depositary receipt, is
incorporated by reference as an exhibit in the registration statement of which
this prospectus forms a part. You should read the more detailed provisions of
the deposit agreement and the form of depositary receipt for provisions that may
be important to you. So that you may easily locate the more detailed provisions,
the numbers in parentheses below refer to sections in the form of deposit
agreement.
GENERAL
KeySpan may, at its option, elect to offer fractional shares of
preferred stock, rather than full shares of preferred stock. If KeySpan does so,
it will issue receipts for depositary shares, each of which will represent a
fraction of a share of a particular series of preferred stock.
The shares of any series of preferred stock represented by
depositary shares will be deposited under a deposit agreement between KeySpan
and a bank or trust company selected by KeySpan having its principal office in
the United States and having a combined capital and surplus of at least
$50,000,000, as preferred stock depositary. Each owner of a depositary share
will be entitled to all the rights and preferences of the underlying preferred
stock, including dividend, voting, redemption, conversion and liquidation
rights, in proportion to the applicable fraction of a share of preferred stock
represented by that depositary share.
The depositary shares will be evidenced by depositary receipts
issued under the deposit agreement. Depositary receipts will be distributed to
those persons purchasing the fractional shares of preferred stock in accordance
with the terms of the applicable prospectus supplement.
DIVIDENDS AND OTHER DISTRIBUTIONS
The preferred stock depositary will distribute all cash dividends or
other cash distributions received in respect of the deposited preferred stock to
the record holders of depositary shares relating to that preferred stock in
proportion to the number of depositary shares owned by those holders. (section
4.01)
The preferred stock depositary will distribute any property received
by it other than cash to the record holders of depositary shares entitled
thereto. If the preferred stock depositary determines that it is not feasible to
make distributions, it may, with KeySpan's approval, sell that property and
distribute the net proceeds from that sale to those holders. (section 4.02)
REDEMPTION OF PREFERRED STOCK
If a series of preferred stock represented by depositary shares is
to be redeemed, the depositary shares will be redeemed from the proceeds
received by the preferred stock depositary resulting from the redemption, in
whole or in part, of that series of preferred stock. The depositary shares will
be redeemed by the preferred stock depositary at a price per depositary share
equal to the applicable fraction of the redemption price per share payable in
respect of the shares of preferred stock so redeemed.
Whenever KeySpan redeems shares of preferred stock held by the
preferred stock depositary, the preferred stock depositary will redeem as of the
same date the number of depositary shares representing shares of
24
preferred stock so redeemed. If fewer than all the depositary shares are to be
redeemed, the depositary shares to be redeemed will be selected by the preferred
stock depositary by lot or ratably or by any other equitable method as the
preferred stock depositary may decide. (section 2.03)
CONVERSION OF DEPOSITARY SHARES
The depositary shares, as such, are not convertible into shares of
common stock or any other securities or property of KeySpan. Nevertheless, if so
provided in the applicable prospectus supplement, holders may surrender their
depositary receipts to the depositary with written instructions to the
depositary to instruct KeySpan to convert the preferred stock represented by the
depositary shares evidenced by those depositary receipts into whole shares of
common stock. Upon receipt of instructions and any amounts payable in respect of
the conversion, KeySpan will cause the delivery of:
- a certificate or certificates evidencing the number of whole
shares of common stock into which the preferred stock
represented by the depositary shares evidenced by those
depositary receipt or depositary receipts has or have been
converted; and
- any money or other property to which the holder is entitled.
If the depositary shares represented by a depositary receipt are to
be converted in part only, a new depositary receipt or depositary receipts will
be issued for any depositary shares not to be converted. No fractional shares of
common stock will be issued upon conversion, and if any conversion would
otherwise result in a fractional share being issued, an amount will be paid in
cash by KeySpan equal to the value of the fractional interest based on the
closing price of the common stock on the last business day prior to the
conversion. (section 2.04)
VOTING DEPOSITED PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of any
series of deposited preferred stock are entitled to vote, the preferred stock
depositary will mail the information contained in that notice of meeting to the
record holders of the depositary shares relating to that series of preferred
stock. Each record holder of depositary shares on the record date will be
entitled to instruct the preferred stock depositary to vote the amount of the
preferred stock represented by that holder's depositary shares. The preferred
stock depositary will try to vote the amount of that series of preferred stock
represented by the depositary shares in accordance with those instructions.
KeySpan will agree to take all actions that the preferred stock
depositary determines as necessary to enable the preferred stock depositary to
vote as instructed. The preferred stock depositary will abstain from voting
shares of any series of preferred stock held by it for which it does not receive
specific instructions from the holders of depositary shares representing those
shares. (section 4.05)
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of depositary receipt evidencing the depositary shares and
any provision of the deposit agreement may at any time be amended by agreement
between KeySpan and the preferred stock depositary. However, any amendment that
materially and adversely alters any existing right of the holders of depositary
shares will not be effective unless the amendment has been approved by the
holders of at least a majority of the depositary shares then outstanding. Every
holder of an outstanding depositary receipt at the time any amendment becomes
effective will be deemed, by continuing to hold the depositary receipt, to
consent and agree to the amendment and to be bound by the deposit agreement,
which has been amended thereby. (section 6.01) The deposit agreement may be
terminated only if:
- all outstanding depositary shares have been redeemed; or
- final distribution in respect of the preferred stock has been
made to the holders of depositary shares in connection with
any liquidation, dissolution or winding up of KeySpan.
(section 6.02)
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CHARGES OF PREFERRED STOCK DEPOSITARY; TAXES AND OTHER GOVERNMENTAL CHARGES
KeySpan will pay all transfer and other taxes and governmental
charges arising solely from the existence of the depositary arrangements.
KeySpan will also pay charges of the depositary in connection with the initial
deposit of preferred stock and any redemption of preferred stock. Holders of
depositary receipts will pay other transfer and other taxes and governmental
charges and other charges, including a fee for the withdrawal of shares of
preferred stock upon surrender of depositary receipts, as are expressly provided
in the deposit agreement to be for their accounts. (section 5.07)
RESIGNATION AND REMOVAL OF DEPOSITARY
The preferred stock depositary may resign at any time by delivering
to KeySpan notice of its intent to do so, and KeySpan may at any time remove the
preferred stock depositary, any resignation or removal to take effect upon the
appointment of a successor preferred stock depositary and its acceptance of the
appointment. The successor preferred stock depositary must be appointed within
60 days after delivery of the notice of resignation or removal and must be a
bank or trust company having its principal office in the United States and
having a combined capital and surplus of at least $50,000,000. (section 5.04)
MISCELLANEOUS
The preferred stock depositary will forward all reports and
communications from KeySpan which are delivered to the preferred stock
depositary and which KeySpan is required to furnish to the holders of the
deposited preferred stock. (section 5.05)
Neither the preferred stock depositary nor KeySpan will be liable if
it is prevented or delayed by law or any circumstances beyond its control in
performing its obligations under the deposit agreement. KeySpan's obligations
and those of the preferred stock depositary under the deposit agreement will be
limited to performance in good faith of their duties thereunder and neither
KeySpan nor the preferred stock depositary will be obligated to prosecute or
defend any legal proceeding in respect of any depositary shares, depositary
receipts or shares of preferred stock unless satisfactory indemnity is
furnished. KeySpan and the preferred stock depositary may rely upon written
advice of counsel or accountants, or upon information provided by holders of
depositary receipts or other persons believed to be competent and on documents
believed to be genuine. (section 5.03)
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DESCRIPTION OF THE TRUST PREFERRED SECURITIES
The trust preferred securities will be issued pursuant to amended
and restated declarations of trust. Each declaration will be qualified under the
Trust Indenture Act of 1939. JPMorgan Chase Bank will act as trustee under the
declaration of trust for purposes of the Trust Indenture Act. The terms of the
trust preferred securities will include those stated in the relevant amended and
restated declaration of trust and those made part of the declaration of trust by
the Trust Indenture Act. The declarations will be filed as exhibits to a
document incorporated by reference in the registration statement of which this
prospectus forms a part.
The following briefly summarizes the material provisions of the
amended and restated declarations of trust and the trust preferred securities,
other than the pricing and related terms disclosed in an applicable prospectus
supplement. You should also read the particular terms of a series of trust
preferred securities, which will be described in more detail in the applicable
prospectus supplement. The prospectus supplement will also state whether any of
the generalized provisions summarized below do not apply, or additional
provisions apply, to the trust preferred securities being offered. So that you
may easily locate the more detailed provisions, the numbers in parenthesis below
refer to sections in the amended and restated declarations of trust. Wherever
particular sections or defined terms of the amended and restated declaration of
trust are referred to, those sections or defined terms are incorporated into
this prospectus by reference, and the statement in this prospectus is qualified
by their reference.
GENERAL
The declaration authorizes the regular trustees to issue both common
and trust preferred securities representing undivided beneficial interests in
the assets of the trust. (section 3.6) KeySpan will own all of the common
securities directly or indirectly. (section 5.2) The common securities will rank
equally, and payments will be made on the common securities on a ratable basis,
with the trust preferred securities. If an event of default under the
declaration occurs and continues, however, the rights of the holders of the
common securities to receive payment of periodic distributions and payments upon
liquidation, redemption and otherwise will be subordinated to the rights of the
holders of the trust preferred securities. (section 7.1) The declaration does
not permit the issuance of any other securities or the incurrence of any
indebtedness by the trust. (section 3.7)
Under the declaration, the property trustee will hold title to the
subordinated debt securities issued to the trust for the benefit of the holders
of the trust securities. (section 3.8) The payment of distributions out of money
held by the trust, and payments upon redemption of the trust securities or
liquidation of the trust out of money held by the trust, are guaranteed by
KeySpan to the extent described under "Description of the guarantee." The
guarantee will be held by JPMorgan Chase Bank, the guarantee trustee, for the
benefit of the holders of the trust preferred securities. The guarantee does not
cover payment of distributions when the trust does not have sufficient available
funds to pay distributions. In that event, the remedy of a holder of trust
preferred securities is to:
- vote to direct the property trustee to enforce the property
trustee's rights under the subordinated debt securities
(section 7.5); or
- if the failure of the trust to pay distributions is
attributable to KeySpan's failure to pay interest or principal
on the subordinated debt securities, sue KeySpan for
enforcement of payment to the holder of an amount equal to the
aggregate liquidation amount of its trust preferred
securities. (section 3.8)
The terms, if any, on which the subordinated debt securities and,
therefore, the trust preferred securities may be convertible into common stock
of KeySpan will be set forth in the prospectus supplement relating to those
trust preferred securities. These terms will include provisions as to whether
conversion is mandatory, at the option of the holder or at KeySpan's or the
trust's option. These terms may include provisions under which the number of
shares of common stock to be received by the holders upon conversion may be
adjusted.
27
DISTRIBUTIONS
Distributions on the trust preferred securities will accrue at the
rate specified in the applicable prospectus supplement. The amount of
distributions payable for any period will be computed on the basis of a 360-day
year of twelve 30-day months.
Distributions on the trust preferred securities will be cumulative,
will accrue from the date the trust issues the trust preferred securities and
will be paid in arrears on the dates specified in the applicable prospectus
supplement, unless they are deferred as described below. (section 7.2)
DEFERRAL OF DISTRIBUTIONS
KeySpan has the right under the subordinated debt indenture to defer
interest payments on the subordinated debt securities for a period not exceeding
five years during which no interest will be due and payable. A deferral of
interest payments cannot extend, however, beyond the maturity of the
subordinated debt securities. As a consequence of any deferral, distributions on
the trust preferred securities also would be deferred. During a deferral period,
the amount of distributions due to you would continue to accumulate and deferred
distributions will themselves accrue additional distributions. When this
prospectus refers to any payment of distributions, distributions include any of
those additional distributions unless otherwise stated. (section 7.2)
Upon the termination of any deferral period and the payment of all
amounts then due, KeySpan may commence a new deferral period as discussed above.
Consequently, there could be several deferral periods of varying lengths
throughout the term of the subordinated debt securities. The regular trustees
will give the holders of the trust preferred securities notice of any deferral
period upon their receipt of notice from KeySpan. (section 3.6) If distributions
are deferred, the deferred distributions on those distributions will be paid to
holders of record of the trust preferred securities as they appear on the
securities register of the trust on the record date following the termination of
the deferral period. (section 7.2) See "--Description of the subordinated debt
securities."
PAYMENT OF DISTRIBUTIONS
Distributions on the trust preferred securities will be payable to
the holders named on the securities register of the trust at the close of
business on the relevant record dates. As long as the trust preferred securities
remain in book-entry only form, the record dates will be one business day before
the distribution dates. Distributions will be paid through the property trustee
who will hold amounts received on the subordinated debt securities in a property
account for the benefit of the holders of the trust securities. Unless any
applicable laws and regulations and the provisions of the declaration state
otherwise, each payment will be made in accordance with book-entry procedures to
be described in the applicable prospectus supplement.
If the trust preferred securities do not continue to remain in
book-entry only form, the relevant record dates will conform to the rules of any
securities exchange on which the trust preferred securities are listed. If any
date on which distributions are to be made on the trust preferred securities is
not a business day, then payment of the distributions payable on that date will
be made on the next day that is a business day, and without any interest or
other payment in respect of any delay. However, if that business day is in the
next calendar year, the payment will be made on the immediately preceding
business day. A "business day" means any day other than Saturday, Sunday or any
other day on which banking institutions in New York City are permitted or
required by law to close. (section 7.2)
REDEMPTION
The trust preferred securities will be redeemed upon the maturity of
the subordinated debt securities or to the extent the subordinated debt
securities are redeemed. The subordinated debt securities will mature on the
date specified in the applicable prospectus supplement, and may be redeemed, in
whole or in part, at any time on or after the date specified in the applicable
prospectus supplement. The subordinated debt securities can also be redeemed at
any time, in whole or in part, in certain circumstances upon the occurrence of a
tax event or an investment company event.
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Upon the maturity of the subordinated debt securities, the proceeds
of their repayment will simultaneously be applied to redeem all outstanding
trust securities at the redemption price. Upon the redemption of the
subordinated debt securities, whether in whole or in part, either at KeySpan's
option or pursuant to a tax or investment company event, the trust will use the
cash it receives upon the redemption to redeem trust securities having an
aggregate liquidation amount equal to the aggregate principal amount of the
subordinated debt securities so redeemed at the redemption price. Holders of
trust securities will be given not less than 30 days' notice, before any
redemption. (section 7.3)
SPECIAL EVENT REDEMPTION
"Tax event" means that the regular trustees will have received an
opinion of an independent tax counsel experienced in such matters which states
that, as a result of any:
- amendment to, or change in, or announced proposed change in,
the laws or associated regulations of the United States or any
political subdivision or taxing authority of the United
States; or
- official administrative pronouncement, action or judicial
decision interpreting or applying those laws or regulations,
there is more than an insubstantial risk currently or within
the 90 days following that opinion that:
- the trust would be required to pay United States
federal income tax relating to income accrued or
received on the subordinated debt securities;
- interest payable to the trust on the subordinated
debt securities would not be deductible by KeySpan
for United States federal income tax purposes; or
- the trust would be required to pay more than a
minimal amount of other taxes, duties or other
governmental charges. (section 1.1)
"Investment company event" means that the regular trustees will have
received an opinion of a nationally recognized independent counsel which states
that, as a result of the occurrence of a change in law or regulation or a
written change in interpretation or application of law or regulation by any
legislative body, court, governmental agency or regulatory authority, there is
more than an insubstantial risk that the trust is or will be considered an
"investment company" which is required to be registered under the Investment
Company Act of 1940. (section 1.1)
This prospectus refers to a tax event and an investment company
event as "special events." If a special event occurs and continues, KeySpan may,
upon not less than 30 days' notice, redeem the subordinated debt securities, in
whole or in part, for cash within 90 days following the occurrence of the
special event.
REDEMPTION PROCEDURES
The trust may not redeem fewer than all of the outstanding trust
preferred securities unless all accrued and unpaid distributions thereon have
been paid.
Once notice of redemption is given and funds are irrevocably
deposited, distributions will cease to accrue and all rights of holders of trust
preferred securities called for redemption will cease, except the right of the
holders to receive the redemption price, but without interest on the redemption
price. If any redemption date is not a business day, then payment of the
redemption price payable on such date will be made on the succeeding day that is
a business day, without any interest or other payment in respect of any such
delay. However, if that business day falls in the next calendar year, payment
will be made on the preceding business day.
If payment of the redemption price for any trust preferred
securities is improperly withheld or refused and not paid either by the trust or
by KeySpan under the guarantee, distributions on those trust preferred
securities will
29
continue to accrue at the then applicable rate from the original redemption date
to the date of payment. In this case, the actual payment date will be the
redemption date for purposes of calculating the redemption price.
In the event that fewer than all of the outstanding trust preferred
securities are to be redeemed, the trust preferred securities will be redeemed
in accordance with the depositary's standard procedures.
KeySpan or its subsidiaries may, at any time, and from time to time,
purchase outstanding trust preferred securities by tender, in the open market or
by private agreement, provided that it complies with United States federal
securities laws and any other applicable laws. (section 7.4)
DISTRIBUTION OF THE SUBORDINATED DEBT SECURITIES
KeySpan will have the right at any time to dissolve the trust. After
satisfying the liabilities of its creditors, the trust may distribute
subordinated debt securities in exchange for the trust preferred securities.
(section 8.2)
There can be no assurance as to the market prices for either the
trust preferred securities or the subordinated debt securities that may be
distributed in exchange for the trust preferred securities if a dissolution and
liquidation of the trust were to occur. This means that the trust preferred
securities that an investor may purchase, whether pursuant to the offer made by
this prospectus or in the secondary market, or the subordinated debt securities
that an investor may receive if a dissolution and liquidation of the trust were
to occur, may trade at a discount to the price that the investor paid to
purchase the trust preferred securities offered by this prospectus.
TRUST ENFORCEMENT EVENTS
Upon the occurrence of an indenture event of default (as described
below), the property trustee as the sole holder of the subordinated debt
securities will have the right under the indenture to declare the principal of
and interest on the subordinated debt securities to be immediately due and
payable.
If the property trustee fails to enforce its rights under the
subordinated debt securities, any holder of trust preferred securities may
directly institute a legal proceeding against KeySpan to enforce these rights
without first suing the property trustee or any other person or entity. If a
trust enforcement event has occurred and is continuing and the event is
attributable to KeySpan's failure to pay interest or principal on the
subordinated debt securities on the date that interest or principal is otherwise
payable, then a holder of trust preferred securities may also bring a direct
action against KeySpan.
An "indenture event of default" is an event of default under the
subordinated debt indenture and also constitutes a "trust enforcement event,"
which is an event of default under the declaration relating to the trust
securities. Under the declaration, however, the holder of the common securities
will be deemed to have waived any trust enforcement event relating to the common
securities until all trust enforcement events relating to the trust preferred
securities have been cured, waived or otherwise eliminated. Until any trust
enforcement events relating to the trust preferred securities have been so
cured, waived, or otherwise eliminated, the property trustee will be deemed to
be acting solely on behalf of the holders of the trust preferred securities.
Only the holders of the trust preferred securities will have the right to direct
the property trustee as to matters under the declaration, and therefore the
subordinated debt indenture. (section 2.6)
VOTING RIGHTS
Except as described in this prospectus under "Description of the
guarantee - Modification of guarantee; assignment," and except as required by
law, the holders of the trust preferred securities will have no voting rights.
The holders of a majority in aggregate liquidation amount of the
trust preferred securities have the right to direct any proceeding for any
remedy available to the property trustee, including to:
- exercise the remedies available to it under the subordinated
debt indenture;
30
- waive any past indenture event of default and its consequences
that is waivable under the subordinated debt indenture; or
- consent to any amendment, modification or termination where
consent is required.
Any required approval or direction of holders of trust preferred
securities may be given at a separate meeting of holders of trust preferred
securities convened for that purpose, at a meeting of all of the holders of
trust securities or by written consent.
If an indenture event of default has occurred and not been cured,
the holders of 25% of the aggregate liquidation amount of the trust preferred
securities may direct the property trustee to declare the principal and interest
on the subordinated debt securities due and payable. However, where a consent or
action under the subordinated debt indenture would require the consent of more
than a majority of the aggregate principal amount of debt securities affected
thereby, consent from the holders of that greater percentage would be required.
See "--Description of the subordinated debt securities--Modifications and
amendments."
Despite the fact that holders of trust preferred securities are
entitled to vote or consent under the circumstances described above, any of the
trust preferred securities that are owned at the time by KeySpan or any entity
directly or indirectly controlling or controlled by, or under direct or indirect
common control with, KeySpan, will not be entitled to vote or consent. Instead,
these trust preferred securities will be treated as if they were not
outstanding.
The procedures by which holders of trust preferred securities held
in book-entry form may exercise their voting rights will be described in the
applicable prospectus supplement.
Holders of the trust preferred securities generally will have no
rights to appoint or remove the regular trustees. Instead, the trustees may be
appointed, removed or replaced solely by KeySpan as the indirect or direct
holder of all of the common securities. (section 7.5)
MODIFICATION OF THE DECLARATION
The declaration may be amended from time to time without the consent
of the holders of the trust preferred securities:
- to cure any ambiguity or correct or supplement any provisions
that may be defective or inconsistent with any other
provision;
- to add to the covenants, restrictions or obligations of
KeySpan in its capacity as sponsor of the trust;
- to conform to any change in Rule 3a-5 under the Investment
Company Act of 1940 or written change in interpretation or
application of than rule by any legislative body, court,
government agency or regulatory authority; or
- to modify, eliminate or add to any provisions as necessary to
ensure that the trust will be classified for United States
federal income tax purposes as a grantor trust at all times or
to ensure that the trust will not be required to register as
an investment company under the Investment Company Act of
1940.
Amendments made without the consent of the trust preferred
securities cannot adversely affect in any material respect the rights of the
holders of preferred or common securities.
The declaration of trust may also be amended as to other matters
with the consent of holders of at least 66 2/3% of the outstanding trust
preferred securities. However, without the consent of each affected holder of
preferred or common securities, the declaration of trust may not be amended to:
31
- change the amount or timing of any distribution or otherwise
adversely affect the amount of any distribution required to be
made; or
- restrict the right of a holder to institute suit for the
enforcement of any payment.
Despite the foregoing, no amendment or modification may be made to
the declaration if such amendment or modification would
- cause the trust to be classified for United States federal
income tax purposes as other than a grantor trust, or
- cause the trust to be deemed an "investment company" which is
required to be registered under the Investment Company Act of
1940. (section 11.1)
GLOBAL SECURITIES
If a trust issues trust preferred securities in the form of one or
more global securities, then that trust 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 trust preferred securities.
The prospectus supplement will describe the specific terms of the
depositary arrangement for trust preferred securities that are issued in global
form. None of KeySpan, the trusts, the relevant trustees, 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 trust preferred security or for maintaining, supervising
or reviewing any records relating to these beneficial ownership interests.
(section 7.12)
INFORMATION CONCERNING THE PROPERTY TRUSTEE
Prior to the occurrence of a default relating to the trust
securities, the property trustee undertakes to perform only those duties as are
specifically set forth in the declaration. After a default, the property trustee
will exercise the same degree of care as a prudent individual would exercise in
the conduct of his or her own affairs. The property trustee is under no
obligation to exercise any of the powers vested in it by the declaration at the
request of any holder of trust preferred securities unless offered reasonable
indemnity by the holder against the costs, expenses and liabilities which might
be incurred thereby. (section 6.3)
PAYING AGENT
If the trust preferred securities do not remain in book-entry only
form, the following provisions will apply:
- the property trustee will act as paying agent; and
- registration of transfers of trust preferred securities will
be effected without charge (other than in respect of any tax
or other government charge). (section 7.7)
DESCRIPTION OF SUBORDINATED DEBT SECURITIES
The subordinated debt securities which KeySpan will issue to the
trust in exchange for its common and preferred securities will be issued
pursuant to the subordinated debt indenture between KeySpan and JPMorgan Chase
Bank, as the indenture trustee, described in "Description of Debt Securities"
above. The subordinated debt indenture will be qualified under the Trust
Indenture Act of 1939. The terms of the subordinated debt securities will
include those stated in the subordinated debt indenture and those made a part of
that indenture by the Trust Indenture Act. The following summary of the material
terms of the subordinated debt securities is not intended to be complete and is
qualified by the applicable prospectus supplement, the subordinated debt
indenture, the Trust
32
Indenture Act and other applicable law. The form of subordinated debt indenture
(including all amendments) has been filed with the SEC as an exhibit to, and is
incorporated by reference in, the registration statement of which this
prospectus forms a part.
GENERAL
The subordinated debt securities will be issued as unsecured debt
under the subordinated debt indenture. The subordinated debt securities will be
limited in aggregate principal amount to the sum of the aggregate stated
liquidation amount of the trust preferred securities and the common securities
and will be subordinated and junior in right of payment to all of KeySpan's
senior debt and may be subordinated to some of KeySpan's subordinated debt.
The entire principal amount of the subordinated debt securities will
mature and become due and payable, together with any accrued and unpaid interest
thereon, on the date specified in the applicable prospectus supplement.
If subordinated debt securities are distributed to holders of trust
preferred securities in liquidation of the holders' interests in the trust, the
subordinated debt securities will initially be issued in the form of one or more
global securities under depositary arrangements similar to those in effect for
the trust preferred securities. In the event subordinated debt securities are
issued in certificated form, principal and interest will be payable, the
transfer of the subordinated debt securities will be registrable and
subordinated debt securities will be exchangeable for securities of other
denominations of a like aggregate principal amount at the corporate trust office
of the indenture trustee in New York, New York. (section 7.2)
REDEMPTION
KeySpan shall have the right to redeem the subordinated debt
securities as described above under "Description of the Trust Preferred
Securities--Redemption." The redemption price will be specified in the
applicable prospectus supplement.
INTEREST
The subordinated debt securities will bear interest at the rate
specified in the applicable prospectus supplement, payable in arrears on the
dates specified in the applicable prospectus supplement, unless interest is
deferred as described below. Interest will be paid to the person in whose name
the subordinated debt security is registered, with limited exceptions, at the
close of business on the business day next preceding the interest payment date.
In the event the subordinated debt securities shall not continue to remain in
book-entry only form, KeySpan will select appropriate record dates.
The amount of interest payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months. The amount of interest
payable for any period shorter than a full period will be computed on the basis
of the actual number of days elapsed per 30-day month. If any date on which
interest is payable on the subordinated debt securities is not a business day,
then payment of the interest payable on that date will be made on the succeeding
day that is a business day, and without any interest or other payment in respect
of any delay. However, if that business day is in the succeeding calendar year,
then the payment shall be made on the preceding business day, in each case with
the same force and effect as if made on that date.
OPTION TO DEFER INTEREST PAYMENTS
KeySpan can defer interest payments for up to five years. However,
no deferral period may extend beyond the maturity of the subordinated debt
securities. At the end of the deferral period, KeySpan will pay all interest
then accrued and unpaid.
During any deferral period, neither KeySpan nor any of its
subsidiaries will be permitted to:
- pay a dividend or make any other payment or distribution on
its capital stock;
33
- redeem, purchase or make a liquidation payment on any of its
capital stock;
- make an interest, principal or premium payment, or repay,
repurchase or redeem, any of its debt securities that rank
equal with or junior to the subordinated debt securities; or
- make any guarantee payment with respect to any guarantee by
KeySpan of debt securities of any of its subsidiaries, if the
guarantee ranks equal to or junior to the subordinated debt
securities.
During any deferral period, however, KeySpan will be permitted to:
- pay dividends or distributions by way of issuance of its
common stock;
- make payments under the guarantee in respect of the preferred
and common securities;
- declare or pay a dividend in connection with any shareholders'
rights plan, or the issuing of stock under such a plan or
repurchase those rights; and
- purchase common stock relating to the issuing of common stock
or rights under any of its benefit plans.
KeySpan has no present intention of exercising its right to defer
payments of interest by extending the interest payment period on the
subordinated debt securities.
If the property trustee is the sole holder of the subordinated debt
securities, KeySpan will give the regular trustees and the property trustee
notice of its election to defer interest payments one business day prior to the
earlier of:
- the date distributions on the trust preferred securities would
be payable, if not for the deferral period, or
- the date the regular trustees are required to give notice to
the NYSE or other applicable self-regulatory organization or
to holders of the trust preferred securities of the record
date or the date the distribution would be payable, if not for
the deferral period,
but in any event one business day prior to such record date. The regular
trustees will give notice of KeySpan's selection of the deferral period to the
holders of the trust preferred securities.
If the property trustee is not the sole holder of the subordinated
debt securities, KeySpan shall give the holders of the subordinated debt
securities notice of its election to defer interest payments ten business days
prior to the earlier of:
- the next succeeding interest payment date or
- the date upon which KeySpan is required to give notice to the
NYSE or other applicable self-regulatory organization or to
holders of the subordinated debt securities of the record or
payment date of such related interest payment,
but in any event two business days prior to the record date.
INDENTURE EVENTS OF DEFAULT
If any indenture event of default shall occur and be continuing, the
property trustee, as the holder of the subordinated debt securities, will have
the right to declare the principal of and the interest on the subordinated debt
securities and any other amounts payable under the subordinated debt indenture
to be immediately due and payable. An indenture event of default also
constitutes a trust enforcement event. The holders of trust preferred
34
securities in limited circumstances have the right to direct the property
trustee to exercise its rights as the holder of the subordinated debt
securities. See "Description of the trust preferred securities--Trust
enforcement events" and "--Voting rights." (section 7.6)
Despite the foregoing, if a trust enforcement event has occurred and
is continuing and that event is attributable to KeySpan's failure to pay
interest or principal on the subordinated debt securities when interest or
principal is payable, KeySpan acknowledges that, in that event, a holder of
trust preferred securities may sue for payment. KeySpan may not amend the
subordinated debt indenture to remove this right to bring a direct action
without the prior written consent of all of the holders of trust preferred
securities.
MISCELLANEOUS
The subordinated debt indenture provides that KeySpan will pay all
fees and expenses related to:
- the issuance and exchange of the trust securities and the
subordinated debt securities;
- the organization, maintenance and dissolution of the trust;
- the retention of the trustees; and
- the enforcement by the property trustee of the rights of the
holders of the trust preferred securities.
DESCRIPTION OF THE GUARANTEE
The guarantee to be executed and delivered by KeySpan for the
benefit of the holders of trust preferred securities will be qualified as an
indenture under the Trust Indenture Act of 1939. JPMorgan Chase Bank will act as
guarantee trustee for purposes of the Trust Indenture Act. The terms of the
guarantee will include those set forth in the guarantee and those made part of
the guarantee by the Trust Indenture Act. The guarantee will be filed as an
exhibit to a document incorporated by reference in the registration statement of
which this prospectus forms a part.
The following briefly summarizes the material provisions of the
guarantee. You should also read the particular terms of a guarantee, which will
be described in more detail in the applicable prospectus supplement. The
prospectus supplement will also state whether any of the generalized provisions
summarized below do not apply, or additional provisions apply, to the trust
preferred securities being offered. Wherever particular sections or defined
terms of the guarantee are referred to, those sections or defined terms are
incorporated into this prospectus by reference, and the statement in this
prospectus is qualified by their reference.
GENERAL
Under, and to the extent set forth in, the guarantee, KeySpan will
irrevocably and unconditionally agree to pay in full to the holders of the trust
preferred securities, as and when due, regardless of any defense, right of
set-off or counterclaim which the trust may have or assert, the following
payments without duplication:
- any accrued and unpaid distributions that are required to be
paid on the trust preferred securities, to the extent the
trust has funds available for distributions;
- the redemption price per trust preferred security, to the
extent the trust has funds available for redemptions; and
- upon a voluntary or involuntary dissolution, winding-up or
liquidation of the trust, other than in connection with the
distribution of subordinated debt securities to the holders of
trust preferred securities, the lesser of:
35
- the aggregate liquidation amount of the trust preferred
securities and all accrued and unpaid distributions thereon,
or
- the amount of assets of the trust remaining for distribution
to holders of the trust preferred securities upon a
liquidation of the trust. (section 5.1)
STATUS OF THE GUARANTEE
The guarantee will constitute an unsecured obligation of KeySpan and
will rank:
- subordinate and junior in right of payment to all of KeySpan's
other liabilities,
- on a parity with the most senior preferred or preference stock
now or hereafter issued by KeySpan and with any guarantee now
or hereafter entered into by KeySpan in respect of any trust
preferred securities of any of its affiliates, and
- senior to KeySpan common stock. (section 6.2)
The guarantee will not place a limitation on the amount of
additional senior debt that KeySpan may incur.
The guarantee will constitute a guarantee of payment and not of
collection -- that is, the guaranteed party may institute a legal proceeding
directly against KeySpan to enforce its rights under the guarantee without first
instituting a legal proceeding against any other person or entity. (section 5.5)
The guarantee will not be discharged except by payment of the guarantee payments
in full to the extent not paid by the trust or upon distribution of the
subordinated debt securities to the holders of the trust preferred securities in
exchange for all their trust preferred securities. (section 7.1)
The guarantee, when taken together with KeySpan's obligations under
the subordinated debt securities, the subordinated debt indenture and the
declaration, including KeySpan's obligations to pay costs, expenses, debts and
liabilities of the trust, other than those relating to trust securities, will
provide a full and unconditional guarantee on a subordinated basis by KeySpan of
payments due on the trust preferred securities. See "Effect of obligations under
the subordinated debt securities and the guarantee."
IMPORTANT COVENANTS
In the guarantee, KeySpan will covenant that, so long as any trust
securities remain outstanding, if:
- there shall have occurred any event of default under the
subordinated debt indenture,
- KeySpan shall be in default with respect to its payment of any
obligations under the guarantee, or
- KeySpan shall have given notice of its election to defer
interest payments and shall not have rescinded that notice,
and while interest is deferred,
then KeySpan will not, and will not permit any subsidiary to:
- declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect
to, any of KeySpan's capital stock, or
- make any payment of principal, interest or premium, if any, on
or repay, repurchase or redeem any of its debt securities that
rank on a parity with or junior in interest to the
subordinated debt securities or make any guarantee payments
with respect to any guarantee by KeySpan of the debt
securities of any of its subsidiaries if the guarantee ranks
on a parity with or junior in interest to the subordinated
debt securities, other than:
36
- dividends or distributions in common stock of KeySpan,
- payments under the guarantee made by KeySpan in respect of the
trust securities of the trust,
- any declaration of a dividend in connection with the
implementation of a shareholders' rights plan, or the issuance
of stock under any rights plan in the future, or the
redemption or repurchase of any rights under a rights plan,
and
- purchases of common stock related to the issuance of common
stock or rights under any of its benefit plans. (section 6.1)
EVENTS OF DEFAULT
An event of default under the guarantee will occur upon KeySpan's
failure to perform any of its payment or other obligations required by the
guarantee. The holders of a majority in aggregate liquidation amount of the
trust preferred securities have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the guarantee trustee
in respect of the guarantee or to direct the exercise of any trust or power
conferred upon the guarantee trustee under the guarantee.
If the guarantee trustee fails to enforce its rights under the
guarantee, any holder of related trust preferred securities may directly sue
KeySpan to enforce the guarantee trustee's rights under the guarantee without
first suing the trust, the guarantee trustee or any other person or entity.
(section 5.4)
KeySpan, as guarantor, will be required to file annually with the
guarantee trustee a certificate as to whether or not it is in compliance with
all the conditions and covenants applicable to it under the guarantee.
(section 2.4)
MODIFICATION OF GUARANTEE; ASSIGNMENT
The guarantee may be amended only with the prior approval of the
holders of not less than 66 2/3% in aggregate liquidation amount of the
outstanding trust preferred securities and common securities. No vote will be
required, however, for any changes that do not materially adversely affect the
rights of holders of the securities. All guarantees and agreements contained in
the guarantee shall bind KeySpan's successors, assignees, receivers, trustees
and representatives and shall inure to the benefit of the holders of the trust
preferred securities then outstanding. (section 9.2)
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
Prior to the occurrence of a default relating to the guarantee, the
guarantee trustee undertakes to perform only the duties as are specifically set
forth in the guarantee. After a default, the guarantee trustee will exercise the
same degree of care as a prudent individual would exercise in the conduct of his
or her own affairs. Provided that the foregoing requirements have been met, the
guarantee trustee is under no obligation to exercise any of the powers vested in
it by the guarantee at the request of any holder of trust preferred securities
unless it is offered reasonable indemnity against the costs, expenses and
liabilities that might be incurred in doing so. (section 3.1)
TERMINATION OF THE GUARANTEE
The guarantee will terminate as to the trust preferred securities
upon full payment of the redemption price of all trust preferred securities,
upon distribution of the subordinated debt securities to the holders of the
trust preferred securities or upon full payment of the amounts payable upon
liquidation of the trust. The guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of trust preferred
securities must restore payment of any sums paid under the trust preferred
securities or the guarantee. (section 7.1)
37
GOVERNING LAW
The guarantee will be governed by and construed in accordance with
the laws of New York. (section 9.5)
EFFECT OF OBLIGATIONS UNDER THE SUBORDINATED DEBT SECURITIES AND THE GUARANTEE
The sole purpose of the trust is to issue the trust securities in
exchange for KeySpan's subordinated debt securities. As long as payments of
interest and other payments are made when due on the subordinated debt
securities, those payments will be sufficient to cover the distributions and
payments due on the trust securities. This is due to the following factors:
- the aggregate principal amount of subordinated debt securities
will be equal to the sum of the aggregate stated liquidation
amount of the trust securities;
- the interest rate and the interest and other payment dates on
the subordinated debt securities will match the distribution
rate and distribution and other payment dates for the trust
preferred securities;
- under the subordinated debt indenture, KeySpan will pay, and
the trust will not be obligated to pay, directly or
indirectly, all costs, expenses and obligations of the trust
other than those relating to the trust securities; and
- the declaration further provides that the trustees may not
cause or permit the trust to engage in any activity that is
not consistent with the purposes of the trust.
Payments of distributions, to the extent there are available funds,
and other payments due on the trust preferred securities, to the extent there
are available funds, are guaranteed by KeySpan to the extent described in this
prospectus. If KeySpan does not make interest payments on the subordinated debt
securities, the trust will not have sufficient funds to pay distributions on the
trust preferred securities. The guarantee is a subordinated guarantee in
relation to the trust preferred securities. The guarantee does not apply to any
payment of distributions unless and until the trust has sufficient funds for the
payment of those distributions. See "Description of the guarantee."
The guarantee covers the payment of distributions and other payments
on the trust preferred securities only if and to the extent that KeySpan has
made a payment of interest or principal or other payments on the subordinated
debt securities. The guarantee, when taken together with KeySpan's obligations
under the subordinated debt securities and the subordinated debt indenture and
its obligations under the declaration, will provide a full and unconditional
guarantee of distributions and all other amounts due on the trust preferred
securities.
KeySpan acknowledges that the guarantee trustee shall enforce the
guarantee on behalf of the holders of the trust preferred securities. If KeySpan
fails to make payments under the guarantee, the guarantee allows the holders of
the trust preferred securities to direct the guarantee trustee to enforce its
rights under the guarantee. If the guarantee trustee fails to enforce the
guarantee, any holder of trust preferred securities may directly sue KeySpan to
enforce the guarantee trustee's rights under the guarantee. Holders do not need
to first sue the trust, the guarantee trustee, or any other person or entity. A
holder of trust preferred securities may also directly sue KeySpan to enforce
its right to receive payment under the guarantee. Holders do not first need to:
- direct the guarantee trustee to enforce the terms of the
guarantee; or
- sue the trust or any other person or entity. (guarantee,
section 5.4)
38
DESCRIPTION OF COMMON STOCK
GENERAL
KeySpan's certificate of incorporation presently authorizes the
issuance of 450,000,000 shares of common stock, par value $0.01 per share. As of
July 14, 2004, there were 160,176,033 shares of common stock outstanding. As of
such date, KeySpan had approximately 82,300 shareholders of record. The
outstanding shares of common stock are, and the additional shares of common
stock that may be offered hereby upon issuance will be, fully paid and
nonassessable.
The following briefly summarizes material provisions of KeySpan's
common stock, KeySpan's certificate of incorporation and the related rights
agreement and anti-takeover provisions of New York law.
DIVIDENDS
The holders of KeySpan common stock are entitled to dividends and
other distributions out of assets legally available at such times and in such
amounts as KeySpan's directors may determine from time to time. Although KeySpan
contemplates the payment of dividends, the payment of future dividends is
dependent upon, among other factors, action by its board of directors, its
financial condition, future earnings and the availability of cash.
DIVIDEND LIMITATIONS
No dividends may be declared on common stock unless all cumulative
dividends on outstanding preferred stock have been paid or declared and set
apart for payment.
VOTING RIGHTS
Each share of common stock is entitled to one vote on all matters to
be voted on by shareholders. Ordinarily, the holders of KeySpan common stock
have sole voting power to elect KeySpan's directors; however, holders of KeySpan
preferred stock could have the power to elect directors. KeySpan's certificate
of incorporation provides that the board of directors may, from time to time,
determine the extent of the voting rights, if any, of the shares of each series
of preferred stock and determine whether the shares of any series having voting
rights shall have multiple votes per share. The common stock does not have
cumulative voting rights.
PREEMPTIVE RIGHTS
Holders of KeySpan common stock do not have preemptive rights to
purchase additional shares of common stock or securities convertible into shares
of common stock.
LIQUIDATION RIGHTS
In the event of liquidation, the holders of KeySpan common stock are
entitled to all assets that remain after satisfaction of creditors and the
liquidation preferences of outstanding preferred stock.
The number, designation, relative rights, preferences and
limitations of the shares of the preferred stock, and of KeySpan common stock,
are stated in full in its certificate of incorporation.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF NEW YORK LAW AND KEYSPAN'S CERTIFICATE OF
INCORPORATION
Certain provisions of New York law and KeySpan's certificate of
incorporation could make more difficult or delay the acquisition of KeySpan by
means of a tender offer, a proxy contest or otherwise and the removal of
incumbent directors. These provisions are intended to discourage certain types
of coercive takeover practices and
39
inadequate takeover bids, even though such a transaction may offer KeySpan's
shareholders the opportunity to sell their stock at a price above the prevailing
market price. KeySpan's board of directors believes that these provisions are
appropriate to protect the interests of KeySpan and of its shareholders.
NEW YORK ANTI-TAKEOVER STATUTE
KeySpan is subject to the business combination provisions of Section
912 of the New York Business Corporation Law and expects to continue to be so
subject if and for so long as it has a class of securities registered under
Section 12 of the Securities Exchange Act of 1934, as amended. Section 912
provides, with specified exceptions, that a New York corporation may not engage
in a business combination, such as a merger, consolidation, recapitalization or
disposition of stock, with any "interested shareholder" for a period of five
years from the date that person first became an interested shareholder unless:
- the transaction resulting in a person becoming an interested
shareholder was approved by the board of directors of the
corporation prior to that person becoming an interested
shareholder;
- the business combination is approved by the holders of a
majority of the outstanding voting stock not beneficially
owned by an interested shareholder;
- the business combination is approved by the disinterested
shareholders at a meeting called no earlier than five years
after the date that the interested shareholder first became an
interested shareholder; or
- the business combination meets certain valuation requirements
for the capital stock of the New York corporation.
An interested shareholder is defined as any person that is the
beneficial owner of 20% or more of the outstanding voting stock of a New York
corporation or is an affiliate or associate of the corporation that at any time
during the prior five years was the beneficial owner, directly or indirectly, of
20% or more of the then outstanding voting stock. A business combination
includes mergers, asset sales and other transactions resulting in a financial
benefit to the interested shareholder.
This statute could prohibit or delay the accomplishment of mergers,
tender offers or other takeover or change in control attempts with respect to
KeySpan and, accordingly, may discourage attempts to acquire it.
"ANTI-GREENMAIL"
KeySpan is subject to Section 513 of New York's Business Corporation
Law, which provides that no domestic corporation may purchase or agree to
purchase more than 10% of its stock from a shareholder who has held the shares
for less than two years at any price that is higher than the market price unless
the transaction is approved by both the corporation's board of directors and a
majority of the votes of all outstanding shares entitled to vote thereon at a
meeting of shareholders, unless the certificate of incorporation requires a
greater percentage or the corporation offers to purchase shares from all the
holders on the same terms. KeySpan's certificate of incorporation does not
currently provide for a higher percentage.
NO SHAREHOLDER ACTION BY WRITTEN CONSENT
KeySpan's certificate of incorporation eliminates the ability of
shareholders to act by written consent. It further provides that special
meetings of KeySpan shareholders may be called only by its board of directors.
ADVANCE NOTICE REQUIREMENTS FOR SHAREHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS
KeySpan's by-laws include advance notice and informational
requirements and time limitations on any director nomination or any new proposal
that a shareholder wishes to make at an annual meeting of shareholders. In
general, a shareholder's notice of a director nomination or proposal will be
timely if delivered to the secretary of KeySpan at its principal executive
offices not less than 60 days nor more than 90 days prior to the scheduled
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date of the annual meeting. These provisions may preclude shareholders from
bringing matters before an annual meeting or from making nominations for
directors at these meetings.
DIRECTOR VACANCIES AND REMOVAL
KeySpan's certificate of incorporation provides that vacancies in
its board of directors may be filled only by the affirmative vote of a majority
of the remaining directors. The certificate of incorporation also provides that
directors may be removed from office only with cause and only by the affirmative
vote of holders of a majority of the shares then entitled to vote at an election
of directors.
LIMITATIONS OF LIABILITY AND INDEMNIFICATION MATTERS
As permitted by the New York Business Corporation Law, KeySpan's
certificate of incorporation provides that a director is not personally liable
to KeySpan or its shareholders for damages for any breach of duty in his
capacity as a director unless a judgment or other final adjudication adverse to
such director establishes that:
- his acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of law;
- such director personally gained a financial profit or other
advantage to which he was not legally entitled; or
- his acts violated Section 719 of the New York Business
Corporation Law.
The provisions of KeySpan's certificate of incorporation are
intended to afford directors protection, and limit their potential liability, to
the fullest extent permitted by New York law. As a result of the inclusion of
such provisions, shareholders may be unable to recover monetary damages against
directors for actions taken by them that constitute negligence or gross
negligence or that are in violation of certain of their fiduciary duties. This
provision does not affect a director's responsibilities under any other laws,
such as the federal securities laws. In addition, KeySpan's certificate of
incorporation provides that it will indemnify its directors and officers to the
fullest extent permitted by New York law.
KeySpan has obtained directors' and officers' insurance for its
directors and officers for specified liabilities.
LISTING
The outstanding shares of common stock are listed on the New York
Stock Exchange and the Pacific Stock Exchange and application will be made to
list the additional common stock offered under this prospectus on those
exchanges.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is The Bank of
New York, Shareholder Services Dept., Church Street Station, P.O. Box 11258, New
York, New York 10286-1258.
41
DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS
KeySpan may issue stock purchase contracts, including contracts
obligating holders to purchase from KeySpan, and KeySpan to sell to the holders,
a specified number of shares of common stock at a future date or dates. The
price per share of common stock and the number of shares of common stock may be
fixed at the time the stock purchase contracts are issued or may be determined
by reference to a specific formula set forth in the stock purchase contracts.
The stock purchase contracts may be issued separately or as part of units
consisting of a stock purchase contract and beneficial interests in debt
securities or preferred stock of KeySpan, trust preferred securities of a trust
or debt obligations of third parties, including U.S. treasury securities,
securing the holders' obligations to purchase the common stock under the stock
purchase contracts. The stock purchase contracts may require KeySpan to make
periodic payments to the holders of the stock purchase units or vice versa, and
these payments may be unsecured or refunded on some basis. The stock purchase
contracts may require holders to secure their obligations under those contracts
in a specified manner.
The applicable prospectus supplement will describe the terms of the
stock purchase contracts or stock purchase units, including, if applicable,
collateral or depositary arrangements, relating to the stock purchase contracts
or stock purchase units.
42
DESCRIPTION OF WARRANTS AND WARRANT UNITS
KeySpan may issue warrants, including debt warrants, which are
warrants to purchase debt securities, and equity warrants, which include
warrants to purchase common stock, preferred stock or depositary shares. KeySpan
may issue warrants independently of or together with any other securities,
including as part of a warrant unit, and warrants may be attached to or separate
from those securities.
Each series of warrants will be issued under a separate warrant
agreement to be entered into between KeySpan and a warrant agent. The warrant
agent will act solely as KeySpan's agent in connection with a series of warrants
and will not assume any obligation or relationship of agency for or with holders
or beneficial owners of warrants. The following describes the general terms and
provisions of the warrants offered by this prospectus. The applicable prospectus
supplement will describe any other terms of the warrant and the applicable
warrant agreement. The warrant agreement for a particular series of warrants
will be filed as an exhibit to a document incorporated by reference in the
registration statement of which this prospectus forms a part.
Each warrant unit will consist of a warrant under which the holder,
upon exercise, will purchase (a) a specified number of shares of common stock
and (b) any of a debt security, share of preferred stock or depositary share
relating to preferred stock.
DEBT WARRANTS
The applicable prospectus supplement will describe the terms of any
debt warrants, including the following:
- the title and aggregate number of the debt warrants;
- any offering price of the debt warrants;
- whether the debt warrants are to be issued with any debt
securities, and, if so, the title, total principal amount and
terms;
- the number of debt warrants and debt securities that will be
separately transferable;
- any date on and after the debt warrants and debt securities
will be separately transferable;
- the title, total principal amount, ranking and terms,
including subordination and conversion provisions, of the
underlying debt securities that may be purchased upon exercise
of the debt warrants;
- the time or period when the debt warrants are exercisable, the
minimum or maximum amount of debt warrants which may be
exercised at any one time, and the final date on which the
debt warrants may be exercised;
- the principal amount of underlying debt securities that may be
purchased upon exercise of each debt warrant and the price, or
the manner of determining the price, at which the principal
amount may be purchased upon exercise;
- the terms of any right to redeem or call the debt warrants;
- any book-entry procedure information;
- any currency or currency units in which the offering price and
the exercise price are payable; and
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- any other terms of the debt warrants not inconsistent with the
provisions of the debt warrant agreement.
EQUITY WARRANTS
The applicable prospectus supplement will describe the terms of any
equity warrants, including the following:
- the title and aggregate number of the equity warrants;
- any offering price of the equity warrants;
- the designation and terms of any preferred shares that are
purchasable upon exercise of the equity warrants or that
underlie depositary shares purchasable upon this exercise;
- if applicable, the designation and terms of the securities
with which the equity warrants are issued and the number of
the equity warrants issued with each security;
- if applicable, the date from and after the equity warrants and
any securities issued with them will be separately
transferable;
- the number of shares of common stock, preferred stock or
depositary shares purchasable upon exercise of an equity
warrant and the price;
- the time or period when the equity warrants are exercisable
and the final date on which the equity warrants may be
exercised and terms regarding any right of KeySpan to
accelerate this final date;
- if applicable, the minimum or maximum amount of the equity
warrants exercisable at any one time;
- any currency or currency units in which the offering price and
the exercise price are payable;
- any applicable anti-dilution provisions of the equity
warrants;
- any applicable redemption or call provisions; and
- any additional terms of the equity warrants not inconsistent
with the provisions of the equity warrant agreement.
WARRANT UNITS
The applicable prospectus supplement will describe the specific
terms of any warrant units.
44
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 debt securities,
trust preferred securities, preferred stock and common stock as of the date
hereof.
Except where noted, this summary deals only with debt securities,
trust preferred securities, preferred stock and common stock purchased on
original issue at their issue price and held as capital assets and does not deal
with holders subject to special treatment under the United States federal income
tax laws, including:
- dealers in securities or currencies;
- financial institutions;
- regulated investment companies;
- real estate investment trusts;
- tax-exempt organizations;
- insurance companies;
- persons holding the debt securities, trust preferred
securities, preferred stock or common stock as part of a
hedging, integrated, conversion or constructive sale
transaction or a straddle;
- traders in securities that have elected to use the
mark-to-market method of accounting for their
securities;
- persons liable for alternative minimum tax;
- persons who are investors in partnerships or other
pass-through entities;
- United States holders whose "functional currency" is not
the U.S. dollar;
- controlled foreign corporations;
- foreign personal holding companies;
- passive foreign investment companies; or
- United States expatriates.
This summary is based upon the provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), and regulations, rulings and judicial
decisions as of the date 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 set forth below also
assumes that all debt securities issued under this prospectus constitute debt
for United States federal income tax purposes. If any debt security does not
constitute debt for United States federal income tax purposes, the tax
consequences of the ownership of that debt security could differ materially from
the tax consequences described herein. KeySpan will summarize any special United
States federal income tax considerations relevant to a particular issue of debt
securities, trust preferred securities, preferred stock or common stock in the
applicable prospectus supplement. KeySpan will also summarize certain United
States federal income tax consequences, if any, applicable to any offering of
depositary shares, stock purchase contracts, stock purchase units, warrants or
warrant units in the applicable prospectus supplement.
For the purposes of this summary, a "United States holder" means a
beneficial owner of the debt securities, trust preferred securities, preferred
stock or common stock (other than a partnership) offered in this prospectus that
is:
- an individual citizen or resident of the United States;
- a corporation (or any other entity treated as a
corporation for United States federal income tax
purposes) created or organized in or under the laws of
the United States, any state thereof or the District of
Columbia;
- an estate the income of which is subject to United
States federal income taxation regardless of its source;
or
45
- a trust if it (1) is subject to the primary supervision
of a court within the United States and one or more
United States persons have the authority to control all
substantial decisions of the trust or (2) has a valid
election in effect under applicable United States
Treasury regulations to be treated as a United States
person.
A "non-United States holder" means a beneficial owner of the debt
securities, trust preferred securities, preferred stock or common stock that is
not a United States holder.
If a partnership holds the debt securities, trust preferred
securities, preferred stock or common stock offered in this prospectus, the tax
treatment of a partner will generally depend upon the status of the partner and
the activities of the partnership. If you are a partner of a partnership holding
the offered debt securities, trust preferred securities, preferred stock or
common stock, you should consult your tax advisors.
IF YOU ARE CONSIDERING THE PURCHASE OF DEBT SECURITIES, TRUST
PREFERRED SECURITIES, PREFERRED STOCK OR COMMON STOCK, YOU SHOULD CONSULT YOUR
OWN TAX ADVISORS CONCERNING THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO
YOU AND ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING
JURISDICTION.
DEBT SECURITIES
CONSEQUENCES TO 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 United States holder of
debt securities.
Payments of interest
Except as set forth below, interest on a debt security 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 debt securities issued with original issue discount
("OID"), 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 debt securities, 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 prospectus
supplement when KeySpan determines that a particular debt security will be an
original issue discount debt security.
Additional rules applicable to debt securities with OID that are
denominated in or determined by reference to a currency other than the U.S.
dollar are described under "Foreign Currency Debt Securities" below.
A debt security with an issue price that is less than the "stated
redemption price at maturity" (the sum of all payments to be made on the debt
security 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 debt security 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, provided the interest to be paid meets all of the following
conditions:
- it is payable at least once per year;
- it is payable over the entire term of the debt security; and
46
- it is payable at a single fixed rate or, subject to certain
conditions, based on one or more interest indices.
KeySpan will give you notice in the applicable prospectus supplement
when it determines that a particular debt security will bear interest that is
not qualified stated interest.
If you own a debt security 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 debt securities 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.
Certain of the debt securities may contain provisions permitting
them to be redeemed prior to their stated maturity at KeySpan's option and/or at
your option. OID debt securities containing those features may be subject to
rules that differ from the general rules discussed herein. If you are
considering the purchase of OID debt securities with those features, you should
carefully examine the applicable prospectus 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 debt securities.
If you own OID debt securities 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 paragraphs. This method takes into account
the compounding of interest. The accruals of OID on an OID debt security 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 debt security is the sum of the "daily
portions" of OID with respect to the debt security for each day during the
taxable year or portion of the taxable year in which you held that debt security
("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 OID debt security may be of any length and
may vary in length over the term of the debt security, 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 debt security's "adjusted issue price" at the beginning of
the accrual period multiplied by 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. Special rules will apply for calculating OID for an initial short
accrual period. The "adjusted issue price" of a debt security 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 debt security (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.
KeySpan is required to provide information returns stating the amount of OID
accrued on debt securities held of record by persons other than corporations and
other exempt holders.
Floating rate debt securities are subject to special OID rules. In
the case of an OID debt security that is a floating rate debt security, both the
"yield to maturity" and "qualified stated interest" will be determined, solely
for purposes of calculating the accrual of OID, as though the debt security will
bear interest in all periods at a fixed rate generally equal to the rate that
would be applicable to interest payments on the debt security on its date
47
of issue or, in the case of certain floating rate debt securities, the rate that
reflects the yield to maturity that is reasonably expected for the debt
security. Additional rules may apply if
- the interest on a floating rate debt security is based on more
than one interest index; or
- the principal amount of the debt security is indexed in any
manner.
You may elect to treat all interest on any debt security 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 debt security, and you may not revoke the election
without the consent of the Internal Revenue Service (the "IRS"). You should
consult with your own tax advisors about this election.
Short-term debt securities
In the case of debt securities 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 debt security, 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 debt securities 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 interest 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 debt securities (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 retirement of a short-term debt security
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 debt securities.
Market discount
If you purchase a debt security, other than an OID debt security,
for an amount that is less than its stated redemption price at maturity, or, in
the case of an OID debt security, 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 debt security 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 debt security at the time of its
payment or disposition.
In addition, you may be required to defer, until the maturity of the
debt security 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 debt security. You may elect, on a bond-by-bond basis, to deduct the
deferred interest expense in a tax year prior to the year of maturity or
disposition. You should consult with your own tax advisors before making this
election.
Any market discount will be considered to accrue ratably during the
period from the date of acquisition to the maturity date of the debt security,
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
48
market discount in income currently, once made, applies to all market discount
obligations acquired by you on or after the first day of the first taxable year
to which your election applies and may not be revoked without the consent of the
IRS. You should consult with your own tax advisors before making this election.
Acquisition premium, amortizable bond premium
If you purchase an OID debt security 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 debt security after the purchase date other than payments of
qualified stated interest, you will be considered to have purchased that debt
security at an "acquisition premium." Under the acquisition premium rules, the
amount of OID that you must include in gross income with respect to the debt
security for any taxable year will be reduced by the portion of the acquisition
premium properly allocable to that year.
If you purchase a debt security (including an OID debt security) for
an amount in excess of the sum of all amounts payable on the debt security after
the purchase date other than qualified stated interest, you will be considered
to have purchased the debt security at a "premium" and, if it is an OID debt
security, 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 debt security
on a constant yield method as an offset to interest when includible in income
under your regular accounting method. Special rules limit the amortization of
premium in the case of convertible debt securities. In the case of instruments
that provide for alternative payment schedules, bond premium is calculated by
assuming that (a) you will exercise or not exercise options in a manner that
maximizes your yield, and (b) KeySpan will exercise or not exercise options in a
manner that minimizes your yield (except that KeySpan will be assumed to
exercise or not 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 debt
security. 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 with
your own tax advisors before making this election.
Sale, exchange and retirement of debt securities
Your tax basis in a debt security will, in general, be your cost for
that debt security, increased by OID, market discount or any discount with
respect to a short-term debt security that you previously included in income,
and reduced by any amortized premium and any cash payments on the debt security
other than qualified stated interest. Upon the sale, exchange, retirement or
other disposition of a debt security, 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
taxed as a payment of interest for United States federal income tax purposes)
and the adjusted tax basis of the debt security. Except as described above with
respect to certain short-term debt securities or with respect to market
discount, or as described below with respect to foreign currency debt securities
or with respect to contingent payment debt securities, 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.
Extendible debt securities, renewable debt securities and reset debt
securities
If so specified in an applicable prospectus supplement relating to a
debt security, KeySpan may have the option to extend the maturity of a debt
security. In addition, KeySpan may have the option to reset the interest rate,
the spread or the spread multiplier.
The United States federal income tax treatment of a debt security
with respect to which such an option has been exercised is unclear and will
depend, in part, on the terms established for such debt securities by KeySpan
pursuant to the exercise of the option. You may be treated for United States
federal income tax purposes as having exchanged your debt securities for new
debt securities with revised terms. If this is the case, you would realize gain
or loss equal to the difference between the issue price of the new debt
securities and your tax basis in
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the old debt securities, which would be recognized subject to certain possible
exceptions. Furthermore, the new debt securities might be subject to
withholding, backup withholding and/or information reporting and might be deemed
to be issued with OID.
Even though federal income tax on the deemed exchange may be imposed
on you, you would not receive any cash until the maturity or an earlier
redemption of the new debt securities, except for any current interest payments.
If the exercise of the option is not treated as an exchange of old
debt securities for new debt securities, you will not recognize gain or loss as
a result of such exchange.
The presence of these options may also affect the calculation of
OID, among other things. Solely for purposes of the accrual of OID, if KeySpan
issues a debt security and has an option or combination of options to extend the
term of the debt security, KeySpan will be presumed to exercise such option or
options in a manner that minimizes the yield on the debt security. Conversely,
if you are treated as having a put option, such an option will be presumed to be
exercised in a manner that maximizes the yield on the debt security. If KeySpan
exercises such option or options to extend the term of the debt security, or
your option to put does not occur (contrary to the assumptions made), then
solely for purposes of the accrual of OID, the debt security will be treated as
reissued on the date of the change in circumstances for an amount equal to its
adjusted issue price on that date.
You should carefully examine the applicable prospectus supplement
and should consult your own tax advisor regarding the United States federal
income tax consequences of the holding and disposition of such debt securities.
Foreign currency debt securities
Payments of interest
If you receive interest payments made in a foreign currency and you
use the cash basis method of accounting, you will be required to include in
income the U.S. dollar value of the amount received, determined by translating
the foreign currency received at the "spot rate" for such foreign currency on
the date such payment is received regardless of whether the payment is in fact
converted into U.S. 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
either of two methods. Under the first method, you will be required to include
in income for each taxable year the U.S. 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
- 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 debt security
(including, upon the sale of such debt security, the receipt of proceeds which
include amounts attributable to accrued interest previously included in income),
you will recognize ordinary gain or loss in an amount equal to the difference
between the U.S. dollar value of such 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 U.S. dollar value of the interest income you
previously included in income with respect to such payment.
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Original issue discount
OID on a debt security that is also a foreign currency debt security
will be determined for any accrual period in the applicable foreign currency and
then translated into U.S. 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 (including, upon the sale of such debt
security, the receipt of proceeds which include amounts attributable to OID
previously included in income) to the extent of the difference between the U.S.
dollar value of such 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 U.S. dollar value of the accrued OID (determined in the same
manner as for accrued interest). For these purposes, all receipts on a debt
security will be viewed:
- first, as the receipt of any stated interest payment called
for under the terms of the debt security;
- 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 debt securities
includible in income will generally be determined by translating the market
discount determined in the foreign currency into U.S. dollars at the spot rate
on the date the foreign currency debt security 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 and then translated into
U.S. 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 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 debt security will be computed in
the applicable foreign currency. If you have elected to amortize the premium,
the amortizable bond premium will reduce interest income in the applicable
foreign currency. 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
foreign currency debt security.
If you elect not to amortize bond premium, you must translate the
bond premium computed in the foreign currency into U.S. dollars at the spot rate
on the maturity date and such bond premium will constitute a capital loss which
may be offset or eliminated by exchange gain.
Sale, exchange and retirement
Upon the sale, exchange, retirement or other taxable disposition of
a foreign currency debt security, you will recognize gain or loss equal to the
difference between the amount realized upon the sale, exchange, retirement or
other disposition (less an amount equal to any accrued and unpaid interest not
previously reported in income, which will be treated as a payment of interest
for United States federal income tax purposes) and your adjusted tax basis in
the foreign currency debt security. Your tax basis in a foreign currency debt
security generally will be your U.S. dollar cost. If you purchased a foreign
currency debt security with foreign currency, your cost will be the U.S. dollar
value of the foreign currency amount paid for such foreign currency debt
security determined at the time of such purchase. If your foreign currency debt
security is sold, exchanged or retired for an amount denominated in foreign
currency, then your amount realized generally will be based on the spot rate of
the foreign currency on the date of sale, exchange or retirement. If you are a
cash method taxpayer and the foreign currency debt securities are traded on an
established securities market, foreign currency paid or received is translated
into U.S. dollars at the spot rate on the settlement date of the purchase or
sale. An accrual method taxpayer may elect the same treatment with respect to
the purchase and sale of foreign currency debt securities traded on an
established securities market, provided that the election is applied
consistently.
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Subject to the foreign currency rules discussed below, such gain or
loss will be capital gain or loss and will be long-term capital gain or loss if
at the time of sale, exchange, retirement or other disposition, the foreign
currency debt security has been held for more than one year. Capital gains of
individuals derived with respect to capital assets held for more than one year
are eligible for reduced rates of taxation. The deductibility of capital losses
is subject to limitations. Gain or loss realized by you on the sale, exchange or
retirement of a foreign currency debt security would generally be treated as
U.S. source gain or loss.
A portion of your gain or loss with respect to the principal amount
of a foreign currency debt security may be treated as exchange gain or loss.
Exchange gain or loss will be treated as ordinary income or loss and generally
will be U.S. source gain or loss. For these purposes, the principal amount of
the foreign currency debt security is your purchase price for the foreign
currency debt security calculated in the foreign currency on the date of
purchase, and the amount of exchange gain or loss recognized is equal to the
difference between (i) the U.S. dollar value of the principal amount determined
on the date of the sale, exchange, retirement or other disposition of the
foreign currency debt security and (ii) the U.S. dollar value of the principal
amount determined on the date you purchased the foreign currency debt security.
The amount of exchange gain or loss will be limited to the amount of overall
gain or loss realized on the disposition of the foreign currency debt security.
Exchange gain or loss with respect to foreign currency
Your tax basis in foreign currency received as interest on a foreign
currency debt security will be the U.S. dollar value thereof at the spot rate in
effect on the date the foreign currency is received. Your tax basis in foreign
currency received on the sale, exchange, retirement or other disposition of a
foreign currency debt security will be equal to the U.S. dollar value of the
foreign currency, determined at the time of the sale, exchange, retirement or
other disposition. As discussed above, if the foreign currency debt securities
are traded on an established securities market, a cash basis United States
holder (or, upon election, an accrual basis United States holder) will determine
the U.S. dollar value of the foreign currency by translating the foreign
currency received at the spot rate of exchange on the settlement date of the
sale, exchange, retirement or other disposition. Accordingly, in such case, no
foreign currency gain or loss will result from currency fluctuations between the
trade date and settlement date of a sale, exchange, retirement or other
disposition. Any gain or loss recognized by you on a sale, exchange, retirement
or other disposition of foreign currency will be ordinary income or loss and
generally will be United States source gain or loss.
Dual currency debt securities
If so specified in an applicable prospectus supplement relating to a
foreign currency debt security, KeySpan may have the option to make all payments
of principal and interest scheduled after the exercise of such option in a
currency other than the specified currency. Final United States Treasury
regulations were issued on August 27, 2004, which generally (i) apply the
principles contained in the regulations governing contingent debt instruments to
dual currency debt securities in the "predominant currency" of the dual currency
debt securities and (ii) apply the rules discussed above with respect to foreign
currency debt securities with OID for the translation of interest and principal
into U.S. dollars. These final regulations are effective August 30, 2004 and
apply to debt instruments issued on or after October 29, 2004. If you are
considering the purchase of dual currency debt securities, you should carefully
examine the applicable pricing supplement and should consult with your own tax
advisors regarding the United States federal income tax consequences of the
holding and disposition of such debt securities.
Reportable transactions
Treasury regulations issued under the Code meant to require the
reporting of certain tax shelter transactions could be interpreted to cover
transactions generally not regarded as tax shelters, including certain foreign
currency transactions. Under the Treasury regulations, certain transactions are
required to be reported to the IRS, including, in certain circumstances, a sale,
exchange, retirement or other taxable disposition of a foreign currency debt
security to the extent that such sale, exchange, retirement or other taxable
disposition results in a tax loss in excess of a threshold amount. If you are
considering the purchase of a foreign currency debt security, you should consult
with your own tax advisors to determine the tax return obligations, if any, with
respect to an
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investment in the debt securities, including any requirement to file IRS Form
8886 (Reportable Transaction Disclosure Statement).
Contingent payment debt securities
The OID regulations contain special rules for determining the timing
and amount of OID to be accrued with respect to certain debt securities
providing for one or more contingent payments. Under these rules, you will
accrue OID each year based on the "comparable yield" of the debt securities. The
comparable yield of the debt securities will generally be the rate at which
KeySpan would issue a fixed rate debt instrument with terms and conditions
similar to the debt securities.
KeySpan is required to provide the comparable yield to you and,
solely for tax purposes, is also required to provide a projected payment
schedule that includes the actual interest payments on the debt securities and
estimates the amount and timing of contingent payments on the debt securities.
Pursuant to the terms of the subordinated debt indenture, you will be bound by
KeySpan's determination. For United States federal income tax purposes, you must
use the comparable yield and the schedule of projected payments in determining
your interest accruals, and the adjustments thereto described below, in respect
of the contingent payment debt securities. KeySpan will give notice in the
applicable prospectus supplement when it determines that a particular debt
security will be treated as contingent debt.
The amount of OID on a contingent payment debt security for each
accrual period is determined by multiplying the comparable yield of the
contingent payment debt security (adjusted for the length of the accrual period)
by the debt security's adjusted issue price at the beginning of the accrual
period (determined in accordance with the rules set forth in the OID regulations
relating to contingent payment debt instruments). The amount of OID so
determined will then be allocated on a ratable basis to each day in the accrual
period that you hold the contingent payment debt security.
If the actual payments made on the contingent payment debt
securities in a taxable year differ from the projected contingent payments,
adjustments will be made for such differences. A positive adjustment, for the
amount by which an actual payment exceeds a projected contingent payment, will
be treated as additional interest. A negative adjustment will:
- first, reduce the amount of interest required to be
accrued in the current year;
- second, any negative adjustments that exceed the amount
of interest accrued in the current year will be treated
as ordinary loss to the extent that your total interest
inclusions exceed the total amount of net negative
adjustments treated as ordinary loss in prior taxable
years; and
- third, any excess negative adjustments will be carried
forward to offset future income or the amount realized
on disposition.
Gain on the sale, exchange or retirement of a contingent payment
debt security generally will be treated as ordinary income. Loss from the
disposition of a contingent payment debt security will be treated as ordinary
loss to the extent of your prior net interest inclusions (reduced by the total
net negative adjustments previously allowed as an ordinary loss). Any loss in
excess of such amount will be treated as capital loss.
For special treatment of foreign currency debt securities that are
also contingent payment debt securities, see the applicable prospectus
supplement.
The rules regarding contingent payment debt securities are complex.
If you are considering the purchase of debt securities providing for one or more
contingent payments, you should carefully examine the applicable prospectus
supplement and consult your own tax advisors regarding the United States federal
income tax consequences of the ownership and disposition of such debt
securities.
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CONSEQUENCES TO NON-UNITED STATES HOLDERS
The following is a summary of certain United States federal income
and estate tax consequences that will apply to you if you are a non-United
States holder of debt securities.
United States federal withholding tax
The 30% United States federal withholding tax will not apply to any
payment of principal and, under the "portfolio interest rule," interest
(including OID) on the debt securities, provided that:
- interest paid on the debt securities is not effectively
connected with your conduct of a trade or business in
the United States;
- you do not actually (or constructively) own 10% or more
of the total combined voting power of all classes of
KeySpan voting stock within the meaning of the Code and
applicable United States Treasury regulations;
- you are not a controlled foreign corporation that is
related to KeySpan through stock ownership;
- you are not a bank whose receipt of interest on the debt
securities is described in Section 881(c)(3)(A) of the
Code;
- the interest on the debt securities is not considered
contingent interest under Section 871(h)(4)(A) of the
Code and the United States Treasury regulations
thereunder; and
- in the case of debt securities in registered form,
either (a) you provide your name and address on an IRS
Form W-8BEN (or other applicable form), and certify,
under penalties of perjury, that you are not a United
States person or (b) you hold your debt securities
through certain foreign intermediaries and satisfy the
certification requirements of applicable United States
Treasury regulations.
Special certification rules apply to certain non-United States
holders that are pass-through entities rather than corporations or individuals.
If you cannot satisfy the requirements described above, payments of interest,
including OID, made to you will be subject to the 30% United States federal
withholding tax, unless you provide KeySpan with a properly executed:
- IRS Form W-8BEN (or other applicable form) claiming an
exemption from, or reduction in, withholding under the
benefit of an applicable income tax treaty; or
- IRS Form W-8ECI (or other applicable form) stating that
interest paid on the debt securities is not subject to
withholding tax because it is effectively connected with
your conduct of a trade or business in the United States
as discussed below under "United States federal income
tax."
The 30% United States federal withholding tax will generally not
apply to any gain that you realize on the sale, exchange, retirement or other
disposition of debt securities.
United States federal income tax
If you are engaged in a trade or business in the United States and
interest, including OID, on the debt securities is effectively connected with
the conduct of that trade or business (and, if required by an applicable income
tax treaty, is attributable to a United States permanent establishment), you
will be subject to United States federal income tax on that interest, including
OID, on a net income basis (although you will be exempt from the 30% United
States federal withholding tax, provided the certification requirements
discussed above are satisfied) 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, that are
effectively connected with your conduct of a trade or business in the United
States. For this purpose, interest on the debt securities will be included in
earnings and profits.
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You will generally not be subject to United States federal income
tax on the disposition of a debt security unless:
- the gain is effectively connected with your conduct of a
trade or business in the United States (and, if required
by an applicable income tax treaty, is attributable to a
United States permanent establishment); 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 debt securities beneficially owned by you at the time of your death, provided
that any payment to you on the debt securities, including OID, would be eligible
for exemption from the 30% United States federal withholding tax under the
"portfolio interest rule" described above under "United States federal
withholding tax," without regard to the certification requirement described in
the first sentence of that section.
INFORMATION REPORTING AND BACKUP WITHHOLDING
United States holders
In general, information reporting requirements will apply to certain
payments of principal, interest (including OID) and premium paid on debt
securities and to the proceeds of sale of a debt security paid to you (unless
you are an exempt recipient such as a corporation). A backup withholding tax may
apply to such payments if you fail to provide a taxpayer identification number
or a certification of exempt status, or if you fail to report in full dividend
and interest income.
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.
Non-United States holders
Generally, KeySpan must report to the IRS and to you the amount of
interest (including OID) on the debt securities paid to you and the amount of
tax, if any, withheld with respect to those payments if the debt securities are
in registered form. Copies of the information returns reporting such interest
payments and any withholding may also be made available to the tax authorities
in the country in which you reside under the provisions of an applicable income
tax treaty.
In the case of debt securities in bearer form, in general, no
information reporting or backup withholding will be required with respect to
payments KeySpan makes outside the United States to non-United States holders.
In the case of debt securities in registered form, in general, you will not be
subject to backup withholding with respect to payments on the debt securities
that KeySpan makes to you provided that KeySpan does not have actual knowledge
or reason to know that you are a United States holder, and KeySpan has received
from you the certification described above in the first sentence of
"Consequences to non-United States holders - United States federal withholding
tax."
In addition, no information reporting or backup withholding will be
required regarding the proceeds of the sale of a debt security made within the
United States or conducted through certain United States-related financial
intermediaries, if the payor receives the certification described above and does
not have actual knowledge or reason to know that you are a United States holder,
or you otherwise establish an exemption.
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.
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TRUST PREFERRED SECURITIES
CLASSIFICATION OF THE TRUSTS
KeySpan intends to take the position that each trust will be
classified as a grantor trust for United States federal income tax purposes and
not as an association taxable as a corporation. As a condition to the issuance
of the trust preferred securities, Simpson Thacher & Bartlett LLP, special tax
counsel to KeySpan, will deliver an opinion that under current law and assuming
full compliance with the terms of the trust's amended and restated declaration,
and based upon certain facts and assumptions contained in such opinion, the
trust will be classified as a grantor trust for United States federal income tax
purposes. As a result, for United States federal income tax purposes, you
generally will be treated as owning an undivided beneficial ownership interest
in the subordinated debt securities. Thus, you will be required to include in
your gross income your pro rata share of the interest income or OID that is paid
or accrued on the subordinated debt securities. See "Consequences to United
States holders--Interest income and original issue discount" below.
CLASSIFICATION OF THE SUBORDINATED DEBT SECURITIES
KeySpan, the trust and you (by your acceptance of a beneficial
ownership interest in a trust preferred security) will agree to treat the
subordinated debt securities as indebtedness for all United States tax purposes.
As a condition to the issuance of the subordinated debt securities, Simpson
Thacher & Bartlett LLP, special tax counsel to KeySpan, will deliver an opinion
that under current law, and based upon certain representations and facts and
assumptions contained in such opinion, the subordinated debt securities will be
classified as indebtedness for United States federal income tax purposes.
CONSEQUENCES TO UNITED STATES HOLDERS
Interest income and original issue discount
KeySpan anticipates that the subordinated debt securities will not
be issued with an issue price that is less than their stated redemption price at
maturity. In this case, subject to the discussion below, the subordinated debt
securities will not be subject to the special OID rules, at least upon initial
issuance, so that you will generally be taxed on the stated interest on the
subordinated debt securities as ordinary income at the time it is paid or
accrued in accordance with your regular method of tax accounting.
If, however, KeySpan exercises its right to defer payments of
interest on the subordinated debt securities, the subordinated debt securities
will become OID instruments at such time. In such case, you will be subject to
the special OID rules described below. Once the subordinated debt securities
become OID instruments, they will be taxed as OID instruments for as long as
they remain outstanding.
Under the OID economic accrual rules, the following occurs:
- regardless of your method of accounting, you would accrue an
amount of interest income each year that approximates the
stated interest payments called for under the terms of the
subordinated debt securities using the
constant-yield-to-maturity method of accrual described in
Section 1272 of the Code;
- the actual cash payments of interest you receive on the
subordinated debt securities would not be reported separately
as taxable income;
- any amount of OID included in your gross income (whether or
not during a deferral period) with respect to the trust
preferred securities would increase your tax basis in such
trust preferred securities; and
- the amount of distributions that you receive in respect of
such accrued OID would reduce your tax basis in such trust
preferred securities.
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The United States Treasury regulations dealing with OID and the
deferral of interest payments have not yet been addressed in any rulings or
other interpretations by the IRS. It is possible that the IRS could assert that
the subordinated debt securities were issued initially with OID merely because
of KeySpan's right to defer payments of interest. If the IRS were successful in
this regard, you would be subject to the special OID rules described above
regardless of whether KeySpan exercises its option to defer payments of interest
on such subordinated debt securities.
If you are a corporate holder of trust preferred securities, you
will not be entitled to a dividends received deduction with respect to any
income you recognize with respect to the trust preferred securities. If you are
a non-corporate holder of trust preferred securities, you will not be entitled
to treat any income you recognize with respect to the trust preferred securities
as qualified dividend income eligible for taxation at preferential rates.
Distribution of subordinated debt securities or cash
As described under the caption "Description of the Trust Preferred
Securities--Distribution of the subordinated debt securities", the subordinated
debt securities held by the trust may be distributed to you in exchange for your
trust preferred securities when the trust is dissolved. Under current law,
except as described below, this type of distribution from a grantor trust would
not be taxable. Upon a distribution, you will receive your pro rata share of the
subordinated debt securities previously held indirectly through the trust. Your
holding period and aggregate tax basis in the subordinated debt securities will
equal the holding period and aggregate tax basis that you had in your trust
preferred securities before the distribution. If, however, the trust would be
required to pay United States federal income tax relating to income accrued or
received on the subordinated debt securities, a tax event will occur. See
"Description of the Trust Preferred Securities--Special event redemption". If
KeySpan elects to distribute the subordinated debt securities to you at this
time, the distribution would be taxable to the trust and to you.
If you receive subordinated debt securities in exchange for your
trust preferred securities, you would accrue interest in respect of the
subordinated debt securities received from the trust in the manner described
above under "--Interest income and original issue discount."
In certain circumstances described above under the captions
"Description of the Trust Preferred Securities--Redemption" and "Description
of the Trust Preferred Securities--Special event redemption", KeySpan may
redeem the subordinated debt securities, in whole or in part, and the trust will
use the cash it receives upon the redemption to redeem trust securities having
an aggregate liquidation amount equal to the aggregate principal amount of the
subordinated debt securities so redeemed. The distribution of cash to holders of
trust preferred securities would be taxable as described below under "--Sales
of trust preferred securities or redemption of subordinated debt securities."
Sales of trust preferred securities or redemption of subordinated debt
securities
If you sell your trust preferred securities or receive cash upon
redemption of the subordinated debt securities, you will recognize gain or loss
equal to the difference between:
- your amount realized on the sale or redemption of the trust
preferred securities or subordinated debt securities (less an
amount equal to any accrued but unpaid qualified stated
interest that you did not previously include in income, which
will taxable interest); and
- your adjusted tax basis in your trust preferred securities or
subordinated debt securities sold or redeemed.
Your gain or loss will be a capital gain or loss, provided that you
held the trust preferred securities or junor subordinated debt securities as a
capital asset. The gain or loss will generally be a long-term capital gain or
loss if you have held your trust preferred securities or subordinated debt
securities for more than one year. Long-term capital gains of individual derived
with respect to capital assets held for more than one year are currently
57
subject to tax at a maximum rate of 15% for taxable years beginning on or before
December 31, 2008, after which the maximum rate will increase to 20%. The
deductibility of capital losses is subject to limitations.
CONSEQUENCES TO NON-UNITED STATES HOLDERS
The following discussion only applies to you if you are a non-United
States holder of trust preferred securities. As discussed above, the trust
preferred securities will be treated by the parties as evidence of undivided
beneficial ownership interests in the subordinated debt securities. See above
under "--Classification of the trusts". The following discussion assumes that
the subordinated debt securities will be treated as indebtedness for all United
States tax purposes.
United States federal withholding tax
The 30% United States federal withholding tax will generally not
apply to any payment of principal or, under the "portfolio interest rule",
interest (including OID) on the trust preferred securities (or the subordinated
debt securities), provided that:
- interest on the trust preferred securities (or the
subordinated debt securities) is not effectively connected
with your conduct of a trade or business in the United States;
- you do not actually (or constructively) own 10% or more of the
total combined voting power of all classes of KeySpan voting
stock within the meaning of the Code and applicable United
States Treasury regulations;
- you are not a controlled foreign corporation that is related
to KeySpan through stock ownership;
- you are not a bank whose receipt of interest on the trust
preferred securities (or the subordinated debt securities) is
described in Section 881(c)(3)(A) of the Code;
- the interest on the trust preferred securities (and the
subordinated debt securities) is not considered contingent
interest under Section 871(h)(4)(A) of the Code and the United
States Treasury regulations thereunder; and
- either (a) you provide your name and address on an IRS Form
W-8BEN (or other applicable form), and certify, under
penalties of perjury, that you are not a United States person
or (b) you hold your trust preferred securities (or
subordinated debt securities) through certain foreign
intermediaries and satisfy the certification requirements of
applicable United States Treasury regulations.
Special certification rules apply to certain non-United States
holders that are pass-through entities rather than corporations or individuals.
If you cannot satisfy the requirements described above, payments of interest,
including OID, made to you will be subject to the 30% United States federal
withholding tax, unless you provide KeySpan with a properly executed:
- IRS Form W-8BEN (or other applicable form) claiming an
exemption from, or reduction in, withholding under the benefit
of an applicable income tax treaty; or
- IRS Form W-8ECI (or other applicable form) stating that
interest paid on the trust preferred securities (or the
subordinated debt securities) is not subject to withholding
tax because it is effectively connected with your conduct of a
trade or business in the United States as discussed below
under "United States federal income tax."
The 30% United States federal withholding tax will generally not
apply to any gain that you realize on the sale, exchange, retirement or other
disposition of trust preferred securities or subordinated debt securities.
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United States federal income tax
If you are engaged in a trade or business in the United States and
interest, including OID, on the trust preferred securities (or the subordinated
debt securities) is effectively connected with the conduct of that trade or
business (and, if required by an applicable income tax treaty, is attributable
to a United States permanent establishment), you will be subject to United
States federal income tax on that interest, including OID, on a net income basis
(although you will be exempt from the 30% United States federal withholding tax,
provided the certification requirements discussed above are satisfied) 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, that are effectively connected with your conduct of a
trade or business in the United States. For this purpose, interest on the trust
preferred securities (or the subordinated debt securities) will be included in
earnings and profits.
Any gain realized on the disposition of a trust preferred security
(or a subordinated debt security) generally will not be subject to United States
federal income tax unless:
- that gain is effectively connected with your conduct of a
trade or business in the United States (and, if required by an
applicable income tax treaty, is attributable to a United
States permanent establishment); 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 the trust preferred securities (or the subordinated debt securities)
beneficially owned by you at the time of your death, provided that any payment
to you on the trust preferred securities (or the subordinated debt securities)
would be eligible for exemption from the 30% federal withholding tax under the
"portfolio interest rule" described above under "-United States federal
withholding tax" without regard to the certification requirement described in
the first sentence of that section.
INFORMATION REPORTING AND BACKUP WITHHOLDING
United States holders
In general, information reporting requirements will apply to certain
payments of principal, interest (including OID) and premium paid on the trust
preferred securities (or the subordinated debt securities) and to the proceeds
of sale of trust preferred securities (or subordinated debt securities) paid to
you (unless you are an exempt recipient such as a corporation). A backup
withholding tax may apply to such payments if you fail to provide a taxpayer
identification number or a certification of exempt status, or if you fail to
report in full dividend and interest income.
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.
Non-United States holders
Generally, KeySpan must report to the IRS and to you the amount of
interest (including OID) on the trust preferred securities (or the subordinated
debt securities) paid to you and the amount of tax, if any, withheld with
respect to those payments. Copies of the information returns reporting such
interest payments and any withholding may also be made available to the tax
authorities in the country in which you reside under the provisions of an
applicable income tax treaty.
In general, you will not be subject to backup withholding with
respect to payments on the trust preferred securities (or the subordinated debt
securities) that KeySpan makes to you provided that KeySpan does not have actual
knowledge or reason to know that you are a United States holder and KeySpan has
received from you the
59
certification described above in the first sentence under "Consequences to
non-United States holders - United States federal withholding tax."
In addition, no information reporting or backup withholding will be
required regarding the proceeds of the sale of a trust preferred security (or a
subordinated debt security) made within the United States or conducted through
certain United States-related financial intermediaries, if the payor receives
the certification described above and does not have actual knowledge or reason
to know that you are a United States holder, or you otherwise establish an
exemption.
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.
COMMON AND PREFERRED STOCK
CONSEQUENCES TO UNITED STATES HOLDERS
The consequences of the purchase, ownership or disposition of
KeySpan stock depend on a number of factors including:
- the term of the stock;
- any put or call option or redemption provisions with respect
to the stock;
- any conversion or exchange features with respect to the stock;
and
- the price at which the stock is sold.
United States holders should carefully examine the applicable
prospectus supplement regarding the material United States federal income tax
consequences, if any, of the ownership and disposition of stock with such
provisions or features.
CONSEQUENCES TO NON-UNITED STATES HOLDERS
Dividends
In general, dividends paid to you (including any deemed dividends
that may arise from the excess of the redemption price over the issue price or
certain adjustments to the conversion ratio of convertible instruments) will be
subject to withholding of United States federal income tax at a 30% rate or a
lower rate if so specified by an applicable income tax treaty. However,
dividends that are effectively connected with your conduct of a trade or
business within the United States and, where a tax treaty applies, are
attributable to a United States permanent establishment, are not subject to the
withholding tax. Instead, these dividends are subject to United States federal
income tax on a net income basis at applicable graduated individual or corporate
rates. You must comply with certification and disclosure requirements in order
for effectively connected income to be exempt from withholding. If you are a
foreign corporation, any effectively connected dividends you receive may also be
subject to an additional branch profits tax at a 30% rate or a lower rate if so
specified by an applicable income tax treaty.
A non-United States holder of common or preferred stock who wishes
to claim the benefit of an applicable treaty rate, and avoid backup withholding
as discussed below, will be required to satisfy the certification requirements
of applicable United States Treasury regulations. Special rules apply to claims
for treaty benefits made by non-United States persons that are entities rather
than individuals.
If you are eligible for a reduced rate of United States withholding
tax pursuant to an income tax treaty, you may obtain a refund of any excess
amounts withheld by filing an appropriate claim for refund with the IRS.
60
Gain on disposition of common or preferred stock
You generally will not be subject to United States federal income
tax with respect to gain recognized on a sale or other disposition of common or
preferred stock unless:
- the gain is effectively connected with your conduct of a trade
or business in the United States, and, where a tax treaty
applies, is attributable to a United States permanent
establishment;
- you are an individual holding the common or preferred stock as
a capital asset and are present in the United States for 183
or more days in the taxable year of the sale or other
disposition and certain other conditions are met; or
- KeySpan is or has been a "United States real property holding
corporation" for United States federal income tax purposes.
If you are an individual non-United States holder described in the
first of the three clauses above, you will be subject to United States federal
income tax on the net gain derived from the sale under regular graduated United
States federal income tax rates. If you are an individual non-United States
holder described in the second clause above, you will be subject to a flat 30%
United States federal income tax on the gain derived from the sale, which may be
offset by United States source capital losses, even though you are not
considered a resident of the United States. If you are a non-United States
holder that is a foreign corporation and you are described in the first clause
above, you will be subject to tax on your gain under regular graduated United
States federal income tax rates and, in addition, may be subject to a branch
profits tax at a 30% rate or a lower rate if so specified by an applicable
income tax treaty.
KeySpan believes that it is currently a "United States real property
holding corporation" for United States federal income tax purposes. So long as
the common or preferred stock sold or otherwise disposed of is "regularly traded
on an established securities market", however, only a non-United States holder
who holds or held (at any time during the shorter of the five-year period
preceding the date of disposition or the holder's holding period) more than 5%
of such class of stock will be subject to United States federal income tax on
the disposition of such stock.
Federal estate tax
If you are an individual, common or preferred stock held by you at
the time of your death will be included in your gross estate for United States
federal estate tax purposes, unless an applicable estate tax treaty provides
otherwise.
Information reporting and backup withholding
KeySpan will be required to report annually to the IRS and to you
the amount of dividends paid to you and the tax withheld from dividend payments
made to you, regardless of whether withholding was required. KeySpan may make
copies of the information returns reporting the dividends and withholding
available to the tax authorities in the country in which you reside under the
provisions of an applicable income tax treaty.
Backup withholding generally will apply to dividends paid to you
unless you satisfy the certification requirements of applicable United States
Treasury regulations.
Information reporting and, depending on the circumstances, backup
withholding will apply to the proceeds of a sale of the common or preferred
stock made within the United States or conducted through certain United
States-related financial intermediaries, unless (1)(a) you certify under
penalties of perjury that you are a non-United States holder and (b) the payor
does not have actual knowledge or reason to know that you are a United States
holder or (2) you otherwise establish an exemption.
61
Any amounts withheld under the backup withholding rules will be
allowed as a refund or credit against your United States federal income tax
liability provided the required information is provided to the IRS.
PREFERRED STOCK, DEPOSITARY SHARES, STOCK PURCHASE CONTRACTS, STOCK PURCHASE
UNITS, WARRANTS AND WARRANT UNITS
If you are considering the purchase of preferred stock, depositary
shares, stock purchase contracts, stock purchase units, warrants or warrant
units, you should carefully examine the applicable prospectus supplement
regarding the special United States federal income tax consequences, if any, of
the ownership and disposition of the preferred stock, depositary shares, stock
purchase contracts, stock purchase units, warrants or warrant units, including
any tax considerations relating to the specific terms of the preferred stock,
depositary shares, stock purchase contracts, stock purchase units, warrants or
warrant units.
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CERTAIN ERISA CONSIDERATIONS
The following is a summary of certain considerations associated with
the purchase of the debt securities, preferred stock, depositary shares, common
stock, stock purchase units, stock purchase contracts, trust preferred
securities, warrants or warrants units by employee benefit plans that are
subject to Title I of the U.S. Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), plans, individual retirement accounts and other
arrangements that are subject to Section 4975 of the Code or provisions under
any federal, state, local, non-U.S. or other laws or regulations that are
similar to such provisions of ERISA or the Code ("similar laws"), and entities
whose underlying assets are considered to include "plan assets" of such plans,
accounts and arrangements (each, a "covered plan").
GENERAL FIDUCIARY MATTERS
ERISA and the Code impose duties on fiduciaries of a covered plan
subject to Title I of ERISA or Section 4975 of the Code ("ERISA plans") and
prohibit transactions involving the assets of an ERISA plan and its fiduciaries
or other interested parties. Under ERISA and the Code, any person who exercises
any discretionary authority or control over the administration of an ERISA plan
or the management or disposition of the assets of an ERISA plan, or who renders
investment advice for compensation to an ERISA plan, is generally considered a
fiduciary of the ERISA plan.
In considering investing assets of any covered plan in the offered
securities, a fiduciary should determine whether the investment complies with
the documents and instruments governing the covered plan and the applicable
provisions of ERISA, the Code or any similar law relating to a fiduciary's
duties to the covered plan, including, the prudence, diversification, delegation
of control and prohibited transaction provisions of ERISA, the Code and any
other applicable similar laws.
PROHIBITED TRANSACTION ISSUES
Section 406 of ERISA and Section 4975 of the Code prohibit ERISA
plans from engaging in specified transactions with "parties in interest," within
the meaning of ERISA, or "disqualified persons," within the meaning of Section
4975 of the Code, unless an exemption is available. A party in interest or
disqualified person who engages in a non-exempt prohibited transaction may be
subject to excise taxes and other penalties and liabilities under ERISA and/or
the Code. In addition, the fiduciary of an ERISA plan that engages in such a
non-exempt prohibited transaction may be subject to penalties and liabilities
under ERISA and the Code.
The acquisition and/or holding of the offered securities by an ERISA
plan with respect to which KeySpan, the trusts, an underwriter or an agent is
considered a party in interest or a disqualified person may result in a
prohibited transaction under Section 406 of ERISA and/or Section 4975 of the
Code, unless the investment is acquired and is held in accordance with an
applicable exemption. The U.S. Department of Labor has issued prohibited
transaction class exemptions, or "PTCEs," that may apply to the offered
securities. These class exemptions include, without limitation:
- PTCE 84-14 respecting transactions determined by independent
qualified professional asset managers;
- PTCE 90-1 respecting insurance company pooled separate
accounts;
- PTCE 91-38 respecting bank collective investment funds;
- PTCE 95-60 respecting life insurance company general accounts;
and
- PTCE 96-23 respecting transactions determined by in-house
asset managers,
63
although there can be no assurance that all of the conditions of any such
exemptions will be satisfied.
PLAN ASSET ISSUES
ERISA and the Code do not define "plan assets." However, the "Plan
Asset Regulations" under ERISA provide that when an ERISA plan acquires an
equity interest in an entity that is neither a "publicly-offered security" nor a
security issued by an investment company registered under the Investment Company
Act of 1940, the ERISA plan's assets include both the equity interest and an
undivided interest in each of the underlying assets of the entity unless that
equity participation by "benefit plan investors" is not significant or the
entity is an "operating company," in each case as defined in the plan asset
regulations. The plan asset regulations define an "equity interest" as any
interest, other than an instrument that is treated as indebtedness under
applicable local law and which has no substantial equity features. Equity
participation in an entity by benefit plan investors will not be significant if
they hold, in the aggregate, less than 25% of the value of any class of such
entity's equity, excluding equity interests held by persons (other than benefit
plan investors) with discretionary authority or control over the assets of the
entity or who provide investment advice for a fee with respect to such assets,
and any affiliates thereof. For purposes of this 25% test, "benefit plan
investors" include all employee benefit plans, including "Keogh" plans,
individual retirement accounts and pension plans maintained by foreign
corporations, as well as any entity whose underlying assets are deemed to
include "plan assets" under the plan asset regulations. The Department of Labor
has stated that in determining whether equity participation in an entity by
benefit plan investors is "significant," only the proportion of an insurance
company general account's equity investment in the entity that represents plan
assets should be taken into account and, therefore, the proportion of that
investment that represents plan assets would equal the proportion of the
insurance company general account as a whole that constitutes plan assets.
For purposes of the plan asset regulations, a "publicly offered
security" is a security that is:
- "freely transferable,"
- "widely held," and
- either (1) sold as part of an offering of securities to the
public pursuant to an effective registration statement under
the Securities Act of 1933 and the class of securities to
which such security is a part is registered under the
Securities Exchange Act of 1934 within 120 days after the end
of the fiscal year of the issuer during which the offering of
such securities to the public has occurred, or (2) part of a
class of securities that is registered under Section 12 of the
Exchange Act.
KeySpan expects to qualify as an operating company within the
meaning of the plan asset regulations. KeySpan does not anticipate that the
trust preferred securities will constitute "publicly offered securities" for
purposes of the plan asset regulations, that any of the trusts will be an
investment company registered under the Investment Company Act of 1940 or that
any of the trusts will qualify as an operating company within the meaning of the
plan asset regulations. In addition, if benefit plan investors invested in the
trust preferred securities, the trusts would not be in a position to monitor
whether those investments would be "significant" for purposes of the plan asset
regulations.
PLAN ASSET CONSEQUENCES
If the assets of KeySpan or the trusts were deemed to be "plan
assets" under ERISA, this would result, among other things, in:
- the application of the prudence and other fiduciary
responsibility standards of ERISA to investments made by
KeySpan and the trusts; and
- the possibility that certain transactions in which KeySpan and
the trusts might seek to engage could constitute "prohibited
transactions" under ERISA and the Code.
64
Because of the foregoing, the offered securities other than trust
preferred securities should not be purchased or held by any person investing
"plan assets" of any covered plan, if the purchase and holding will constitute a
non-exempt prohibited transaction under ERISA and the Code or will violate any
applicable similar laws.
Because of the foregoing, the trust preferred securities should not
be purchased or held by any person investing "plan assets" of any Plan (as
defined below), except that an insurance company general account may purchase or
hold the trust preferred securities if:
- such purchase and holding will not constitute a non-exempt
prohibited transaction under ERISA and the Code and will not
violate any applicable similar laws; and
- less than 25% of the assets of such insurance company general
account will constitute "plan assets" of any Plan.
REPRESENTATION
Accordingly, by accepting the offered securities other than trust
preferred securities, each purchaser and subsequent transferee of those
securities will be deemed to have represented and warranted that either:
- no assets used to acquire those securities constitutes assets
of any covered plan; or
- the purchase and holding of those securities by such purchaser
or transferee will not constitute a non-exempt prohibited
transaction under Section 406 of ERISA or Section 4975 of the
Code and will not violate any applicable similar laws.
By accepting the trust preferred securities, each purchaser and
subsequent transferee of the trust preferred securities will be deemed to have
represented and warranted either that:
- for the entire period during which it holds its interest in
the trust preferred securities, no portion of such assets
constitutes assets of any "employee benefit plan" within the
meaning of Section 3(3) of ERISA, whether or not subject to
Title I of ERISA, including any U.S. governmental or non-U.S.
pension plan, or any "plan" subject to Section 4975 of the
Code (each a "Plan") or
- (x) the assets used to acquire the trust preferred
securities constitute assets of an insurance company
general account,
(y) for the entire period during which such purchaser or
transferee holds its interest in the trust preferred
securities, less than 25% of the assets of such
insurance company general account will constitute "plan
assets" of any Plan, and
(z) the acquisition and holding of the trust preferred
securities will satisfy the requirements of the
Department of Labor's Prohibited Transaction Class
Exemption 95-60 and will not constitute a non-exempt
prohibited transaction under Section 406 of ERISA or
Section 4975 of the Code.
Due to the complexity of these rules and the penalties that may be
imposed upon persons involved in non-exempt prohibited transactions, it is
particularly important that fiduciaries, or other persons purchasing on behalf
of, or with the assets of, any employee benefit plan, consult with their counsel
to determine whether such employee benefit plan is subject to Title I of ERISA,
Section 4975 of the Code or any similar laws.
65
PLAN OF DISTRIBUTION
KeySpan may sell the offered securities as follows:
- through underwriters or dealers; or
- through agents; or
- directly to purchasers.
The prospectus supplement or term sheet for each offering of
securities will describe that offering, including:
- the name or names of any underwriters, dealers or agents
- the purchase price and the proceeds to KeySpan 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
Unless otherwise set forth in the prospectus supplement or term
sheet, the obligations of the underwriters to purchase offered securities will
be subject to certain conditions. The underwriters will be obligated to purchase
all the offered securities if any are purchased.
The offered 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 KeySpan in the form of underwriting
discounts or commissions and may also receive commissions from the purchasers of
offered securities for whom they may act as agent. Underwriters may also sell
offered 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.
KeySpan may authorize underwriters to solicit offers by certain
types of institutions to purchase offered securities from it 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 KeySpan 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
KeySpan may also sell offered securities through agents designated
by it from time to time. KeySpan will name any agents involved in the offer or
sale of the offered securities and will list commissions payable by it to these
agents in the prospectus supplement or term sheet. These agents will be acting
on a best efforts basis to
66
solicit purchases for the period of their appointment, unless KeySpan states
otherwise in the prospectus supplement or term sheet.
DIRECT SALES
KeySpan may sell offered securities directly to purchasers. In this
case, KeySpan will not engage underwriters or agents in the offer and sale of
offered securities.
REMARKETING TRANSACTIONS
KeySpan may also sell offered securities that it has purchased,
redeemed or repaid or which are being remarketed on behalf of holders through
one or more remarketing firms acting as principals for their own accounts or as
KeySpan's agents. The applicable prospectus supplement or term sheet will
identify any remarketing firms and describe the terms of KeySpan's agreement
with them and their compensation. Remarketing firms may be deemed to be
underwriters of the offered securities under the Securities Act.
INDEMNIFICATION
KeySpan may indemnify underwriters, dealers or agents who
participate in the distribution of offered 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
Some of the offered securities will be new issues of securities with
no established trading market. Any underwriters that purchase offered securities
from KeySpan may make a market in these debt securities. The underwriters will
not be obligated, however, to make a market in the offered securities and may
discontinue market-making at any time without notice to holders of those
securities. KeySpan cannot assure you that there will be liquidity in the
trading market for any offered securities of any series.
LEGAL OPINIONS
The validity of the securities offered by KeySpan in this prospectus
will be passed upon for it by Simpson Thacher & Bartlett LLP, New York, New York
and the validity of the trust preferred securities offered by the trusts will be
passed upon by Richards, Layton & Finger, P.A. Certain legal matters will be
passed upon for any agents or underwriters by other counsel identified in the
prospectus supplement or term sheet.
EXPERTS
The consolidated financial statements and the related financial
statement schedule as of and for the year ended December 31, 2003
incorporated in this prospectus by reference from the Company's Annual Report on
Form 10-K for the years ended December 31, 2003 and 2002 have been audited by
Deloitte & Touche LLP, an independent registered public accounting firm, as
stated in their report, which is incorporated herein by reference (which report
expresses an unqualified opinion and includes explanatory paragraphs related to
the adoption of Statement of Financial Accounting Standards (SFAS) No.142,
"Goodwill and Other Intangible Assets" as discussed in Note 1(G), the adoption
of SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and
Disclosure" as discussed in Note 1(N) and Note 7, the adoption of SFAS No. 143
"Accounting for Asset Retirement Obligations" as discussed in Note 1(P) and the
adoption of Financial Accounting Standards Board Interpretation No. 46,
"Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51"
as
67
discussed in Note 1(O), and to the application of procedures relating to certain
disclosures and reclassifications of financial statement amounts related to the
2001 consolidated financial statements that were audited by other auditors who
have ceased operations and for which we have expressed no opinion or other form
of assurance other than with respect to such disclosures and reclassifications),
and has been so incorporated in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
The consolidated financial statements for the year ended December
31, 2001 incorporated by reference in this prospectus from our annual report on
Form 10-K for the year ended December 31, 2003 have been audited by Arthur
Andersen LLP, independent public accountants, as stated in their report, which
is incorporated herein by reference, and has been so incorporated in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing. Arthur Andersen, which has ceased operations, has not consented to
the inclusion of their report in the most recent registration statement on Form
S-3 filed with SEC covering the securities. Holders of securities may have no
effective remedy against Arthur Andersen in connection with a material
misstatement or omission in those financial statements.
Information related to the estimated proved reserves attributable to
certain oil and gas properties of our subsidiaries as of December 31, 2003 and
estimates of future net cash flows and present value of the reserves have been
incorporated by reference in our Annual Report on Form 10-K for the year ended
December 31, 2003, which is incorporated herein by reference, in reliance on the
reserve report, dated January 20, 2004, prepared by Netherland, Sewell &
Associates, Inc., independent petroleum consultants, and the reserve report,
dated January 27, 2004 prepared by Miller and Lents, Ltd., independent oil and
gas consultants.
WHERE YOU CAN FIND MORE INFORMATION
KeySpan files annual, quarterly and special reports, proxy
statements and other information with the SEC. KeySpan's SEC filings are
available to the public on the website maintained by the SEC at
<http://www.sec.gov>. KeySpan's filings can also be inspected and printed or
copied, for a fee, at the SEC's Office of Public Reference, 450 Fifth Street,
N.W., Room 1300, Washington, D.C. 20549, or you can contact that office by
phone: (202) 942-8090, fax: (202) 628-9001 or e-mail: publicinfo@sec.gov. Please
call the SEC at 1-800-SEC-0330 for further information on the public reference
rooms.
KeySpan and the trusts filed a registration statement on Form S-3
with the SEC covering the offered securities. For further information on KeySpan
and the offered securities, you should refer to the registration statement and
its exhibits. This prospectus summarizes material provisions of the offered
securities. Because the prospectus may not contain all the information that you
may find important, you should review the full text of these documents. KeySpan
and the trusts have included copies of these documents in an exhibit to its
registration statement of which this prospectus is a part.
The SEC allows KeySpan to "incorporate by reference" the information
that it files with the SEC, which means that KeySpan 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 KeySpan files with the SEC will automatically update and
supersede this information. KeySpan 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 all of the
securities are sold.
- KeySpan's Annual Report on Form 10-K for the fiscal year ended
December 31, 2003;
- Quarterly Reports on Form 10-Q for the quarters ended March 31
and June 30, 2004; and
- KeySpan's Current Reports on Form 8-K filed February 5, 2004,
April 30, 2004, May 24, 2004, May 27, 2004, June 2, 2004,
August 5, 2004 and September 24, 2004.
68
You may request a copy of these filings, or any of KeySpan's or the
trusts' SEC filings, at no cost, over the Internet at its web site at
http://www.keyspanenergy.com or by writing or telephoning KeySpan at the
following address:
Investor Relations
KeySpan Corporation
One MetroTech Center
Brooklyn, New York, 11201
(718) 403-3385
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses in connection with the issuance and distribution of the
securities being registered, other than the underwriting discounts and
commissions, are as follows:
Securities and Exchange Commission Registration Fee.. $380,100
New York Stock Exchange Listing Fee ................. $100,000*
Legal Fees and Expenses ............................. $250,000*
Accountants Fees and Expenses ....................... $ 50,000*
Blue sky fees and expenses .......................... $ 10,000*
Trustee Fees and Expenses ........................... $ 20,000*
Rating Agency Fees .................................. $100,000*
Printing and Delivery Expenses ...................... $ 75,000*
Miscellaneous Expenses .............................. $ 4,600*
--------
Total* ........................................ $989,700
- ------------------------
* All of the above expenses are estimated except for the SEC filing fee.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The New York Business Corporation Law ("BCL"), Article 7, Sections
721-726 provide for the indemnification and advancement of expenses to officers
and directors. Section 721 provides that indemnification and advancement
pursuant to the BCL are not exclusive of any other rights an officer or director
may be entitled to, provided that no indemnification may be made to or on behalf
of any director or officer if a judgment or other final adjudication adverse to
the director or officer establishes that his acts were committed in bad faith or
were the result of active and deliberate dishonesty and were material to the
cause of action so adjudicated, or that the director personally gained a
financial profit or other advantage to which he or she was not legally entitled.
Section 722 of the BCL provides that a corporation may indemnify an
officer or director, in the case of third party actions, against judgments,
fines, amounts paid in settlement and reasonable expenses and, in the case of
derivative actions, against amounts paid in settlement and reasonable expenses,
provided that the director or officer acted in good faith, for a purpose which
he or she reasonably believed to be in the best interests of the corporation
and, in the case of criminal actions, had no reasonable cause to believe his
conduct was unlawful. In addition, statutory indemnification may not be provided
in derivative actions (i) which are settled or otherwise disposed of or (ii) in
which the director or officer is adjudged liable to the corporation, unless and
only to the extent a court determines that the person is fairly and reasonably
entitled to indemnity.
Section 723 of the BCL provides that statutory indemnification is
mandatory where the director or officer has been successful, on the merits or
otherwise, in the defense of a civil or criminal action or proceeding. Section
723 also provides that expenses of defending a civil or criminal action or
proceeding may be advanced by the corporation upon receipt of an undertaking to
repay them if and to the extent the recipient is ultimately found not to be
entitled to indemnification. Section 725 provides for repayment of such expenses
when the recipient is ultimately found not to be entitled to indemnification.
Section 726 provides that a corporation may obtain indemnification insurance
indemnifying itself and its directors and officers. KeySpan Corporation has in
effect insurance policies providing both directors and officers liability
coverage and corporate reimbursement coverage.
Section 402(b) of the BCL provides that a corporation may include in
its certificate of incorporation a provision limiting or eliminating, with
certain exceptions, the personal liability of directors to a corporation or its
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shareholders for damages for any breach of duty in such capacity. The
certificate of incorporation of KeySpan Corporation contains provisions
eliminating the personal liability of directors to the extent permitted by New
York law.
The KeySpan Corporation's certificate of incorporation provides
generally that it shall, except to the extent expressly prohibited by the BCL,
indemnify each of its officers and directors made or threatened to be made a
party to any action, suit or proceeding, or appeal thereof, whether civil or
criminal by reason of the fact that such person is or was an officer or director
against all expense, liability and loss (including, but not limited to all
attorneys' fees, judgments, fines, pension plan taxes or penalties and amounts
paid or to be paid in settlement) reasonably incurred or suffered by such person
in connection therewith. The certificate of incorporation further provides for
advancement and reimbursement of such expenses incurred by an officer or
director in defending any action or proceeding in advance of the final
disposition thereof upon receipt of an undertaking by such person to repay such
amount if, and to the extent that, such person is ultimately found not to be
entitled to indemnification.
ITEM 16. LIST OF EXHIBITS.
See Exhibit Index
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
Registration Statement is on Form S-3, Form S-8, or Form F-3 and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Securities and
Exchange Commission by the registrant pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
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(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or Section 15(d)
of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference in
the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(c) The undersigned registrant hereby undertakes to supplement the
prospectus, after the expiration of any subscription period relating to
warrants or rights offered under this registration statement, to set forth
the results of such subscription offer, the transactions by the
underwriters during any such subscription period, any amount of
unsubscribed securities to be purchased by the underwriters, and the terms
of any subsequent reoffering thereof. If any public offering by the
underwriters is to be made on terms differing from those set forth on the
cover page of the prospectus, a post-effective amendment will be filed to
set forth the terms of such offering.
(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of such registrant pursuant to the provisions referred
to in Item 15 of this registration statement, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in
such Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by such
registrants of expenses incurred or paid by a director, officer or
controlling person of such registrants in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, KeySpan
Corporation certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Brooklyn, State of New York, on this 1st day of
October, 2004.
KEYSPAN CORPORATION
Issuer of Securities
(Registrant)
By: /s/ Gerald Luterman
-------------------------------------------
Gerald Luterman
Chief Financial Officer and Executive Vice-President
(Principal Financial Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Date:
/s/ Robert B. Catell October 1, 2004
- ----------------------------------------------------
Robert B. Catell
Chairman, Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Gerald Luterman October 1, 2004
- ----------------------------------------------------
Gerald Luterman
Executive Vice-President and Chief Financial Officer
(Principal Financial Officer)
/s/ Joseph P. Bodanza October 1, 2004
- ----------------------------------------------------
Joseph P. Bodanza
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
* October 1, 2004
- ----------------------------------------------------
Andrea S. Christensen
Director
* October 1, 2004
- ----------------------------------------------------
Alan H. Fishman
Director
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* October 1, 2004
- ----------------------------------------------------
James R. Jones
Director
* October 1, 2004
- ----------------------------------------------------
James L. Larocca
Director
* October 1, 2004
- ----------------------------------------------------
Gloria C. Larson
Director
* October 1, 2004
- ----------------------------------------------------
Stephen W. McKessy
Director
* October 1, 2004
- ----------------------------------------------------
Edward D. Miller
Director
* October 1, 2004
- ----------------------------------------------------
Vikki L. Pryor
Director
* By: /s/ Gerald Luterman
------------------------------------
Gerald Luterman, as Attorney-in-Fact
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Pursuant to the requirements of the Securities Act of 1933, KeySpan
Trust I, KeySpan Trust II and KeySpan Trust III each certifies that it has
reasonable grounds to believe that it meets all of the requirements for filing
on Form S-3 and has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Brooklyn,
State of New York, on the 1st of October, 2004.
KEYSPAN TRUST I
/s/ John J. Bishar
-------------------------------------------
John J. Bishar
Trustee
/s/ Theresa A. Balog
-------------------------------------------
Theresa A. Balog
Trustee
/s/ Michael J. Taunton
-------------------------------------------
Michael J. Taunton
Trustee
KEYSPAN TRUST II
/s/ John J. Bishar
-------------------------------------------
John J. Bishar
Trustee
/s/ Theresa A. Balog
-------------------------------------------
Theresa A. Balog
Trustee
/s/ Michael J. Taunton
-------------------------------------------
Michael J. Taunton
Trustee
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KEYSPAN TRUST III
/s/ John J. Bishar
-------------------------------------------
John J. Bishar
Trustee
/s/ Theresa A. Balog
-------------------------------------------
Theresa A. Balog
Trustee
/s/ Michael J. Taunton
-------------------------------------------
Michael J. Taunton
Trustee
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EXHIBIT INDEX
1.1 Form of underwriting agreement for debt securities (filed as Exhibit
1.1 to the Registrants' registration statement on Form S-3 on February
6, 2002 and incorporated herein by reference)
1.2* Form of underwriting agreement for preferred stock
1.3* Form of underwriting agreement for depositary shares
1.4* Form of underwriting agreement for trust preferred securities
1.5* Form of underwriting agreement for common stock
1.6* Form of underwriting agreement for stock purchase contracts
1.7* Form of underwriting agreement for stock purchase units
4.1 Certificate of Incorporation of KeySpan Corporation effective April 16,
1998, Amendment to the Certificate of Incorporation of KeySpan
Corporation effective May 26, 1998, Amendment to the Certificate of
Incorporation of KeySpan Corporation effective June 1, 1998, Amendment
to the Certificate of Incorporation of KeySpan Corporation effective
April 7, 1999 and Amendment to the Certificate of Incorporation of
KeySpan Corporation effective May 20, 1999 (filed as Exhibit 3.1 to
KeySpan Corporation's 10-Q for the quarterly period ended June 30, 1999
and incorporated herein by reference)
4.2 ByLaws of KeySpan Corporation in effect as of June 25, 2003, as amended
(filed as Exhibit 3.1 to KeySpan Corporation's Form 10-Q for the
quarterly period ended June 30, 2003 and incorporated herein by
reference)
4.3 Form of Common Stock Certificate (filed as Exhibit 4.3 to the
Registrants' registration statement on Form S-3 on February 6, 2002 and
incorporated herein by reference)
4.4 Indenture, dated as of November 1, 2000, between KeySpan Corporation
and JPMorgan Chase Bank (successor to The Chase Manhattan Bank), as
trustee, with respect to the senior debt securities (filed as Exhibit
4.4 to KeySpan Corporation's registration statement on Form S-3/A,
Amendment No.1, on May 17, 2001 and incorporated herein by reference).
The forms of senior debt securities with respect to each particular
series of senior debt securities registered hereunder will be filed as
an exhibit to a Current Report on Form 8-K and shall be deemed to the
incorporated herein by reference
4.5 Form of Subordinated Indenture between KeySpan Corporation and JPMorgan
Chase Bank, as trustee, with respect to the subordinated debt
securities (filed as Exhibit 4.5 to KeySpan Corporation's registration
statement on Form S-3 on February 6, 2002 and incorporated herein by
reference). The forms of subordinated debt securities with respect to
each particular series of subordinated debt securities registered
hereunder will be filed as an exhibit to a Current Report on Form 8-K
and shall be deemed to be incorporated herein by reference.
4.6 Form of First Supplemental Indenture, between the KeySpan Corporation
and JPMorgan Chase Bank, as trustee, with respect to the senior debt
securities (filed as Exhibit 4.6 to the Registrants' registration
statement on Form S-3 on February 6, 2002 and incorporated herein by
reference)
4.7 Form of Supplemental Indenture relating to subordinated debentures for
trust preferred securities issuance (filed as Exhibit 4.7 to the
Registrants' registration statement on Form S-3 on February 6, 2002 and
incorporated herein by reference)
4.8 Certificate of Trust of KeySpan Trust I (filed as Exhibit 4.7 to
KeySpan Corporation's registration statement on Form S-3/A, Amendment
No.1, on May 17, 2001 and incorporated herein by reference)
4.9 Certificate of Trust of KeySpan Trust II (filed as Exhibit 4.8 to
KeySpan Corporation's registration statement on Form S-3/A, Amendment
No.1, on May 17, 2001 and incorporated herein by reference)
4.10 Certificate of Trust of KeySpan Trust III (filed as Exhibit 4.9 to
KeySpan Corporation's registration statement on Form S-3/A, Amendment
No.1, on May 17, 2001 and incorporated herein by reference)
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4.11 Declaration of Trust of KeySpan Trust I (filed as Exhibit 4.10 to
KeySpan Corporation's registration statement on Form S-3/A, Amendment
No.1, on May 17, 2001 and incorporated herein by reference)
4.12 Declaration of Trust of KeySpan Trust II (filed as Exhibit 4.11 to
KeySpan Corporation's registration statement on Form S-3/A, Amendment
No.1, on May 17, 2001 and incorporated herein by reference)
4.13 Declaration of Trust of KeySpan Trust III (filed as Exhibit 4.12 to
KeySpan Corporation's registration statement on Form S-3/A, Amendment
No.1, on May 17, 2001 and incorporated herein by reference)
4.14** Form of Amended and Restated Declaration of Trust for each trust
(including the forms of preferred security and common security to be
issued thereunder)
4.15 Form of Guarantee with respect to the preferred securities of each
trust (filed as Exhibit 4.15 to the Registrants' registration statement
on Form S-3 on February 6, 2002 and incorporated herein by reference)
4.16 Form of Certificate of Amendment with respect to the preferred stock
(filed as Exhibit 4.17 to the Registrants' registration statement on
Form S-3 on February 6, 2002 and incorporated herein by reference)
4.17 Form of deposit agreement with respect to the depository shares
(including form of depository receipts to be issued thereunder) (filed
as Exhibit 4.18 to the Registrants' registration statement on Form S-3
on February 6, 2002 and incorporated herein by reference)
4.18 Form of Purchase Contract Agreement (filed as Exhibit 4.19 to the
Registrants' registration statement on Form S-3 on February 6, 2002 and
incorporated herein by reference)
4.19 Form of Debt Warrant Agreement (filed as Exhibit 4.20 to the
Registrants' registration statement on Form S-3 on February 6, 2002 and
incorporated herein by reference)
4.20 Form of Stock Warrant Agreement (filed as Exhibit 4.21 to the
Registrants' registration statement on Form S-3 on February 6, 2002 and
incorporated herein by reference)
4.21 Form of Unit Agreement (filed as Exhibit 4.22 to the Registrants'
registration statement on Form S-3 on February 6, 2002 and incorporated
herein by reference)
4.22 Form of subordinated debt security to be issued to each trust (filed as
Exhibit 4.23 to the Registrants' registration statement on Form S-3 on
February 6, 2002 and incorporated herein by reference)
4.23 Form of senior debt security to be issued (filed as Exhibit 4.24 to the
Registrants' registration statement on Form S-3 on February 6, 2002 and
incorporated herein by reference)
5.1** Opinion and consent of Simpson Thacher & Bartlett LLP as to the
validity of the debt securities, preferred stock, depositary shares,
guarantees, common stock, stock purchase units, stock purchase
contracts, warrants and warrant units of KeySpan Corporation being
registered
5.2** Opinion and consent of Richards, Layton & Finger, P.A. as to the
validity of the trust preferred securities being registered
8.1** Opinion and consent of Simpson Thacher & Bartlett LLP regarding certain
tax matters
12.1** Computation in support of ratio of earnings to fixed charges and ratio
of combined fixed charges and preferred dividends
23.1 Consent of Simpson Thacher & Bartlett LLP (Included in Exhibit 5.1
above)
23.2 Consent of Richards, Layton & Finger, P.A. (Included in Exhibit 5.2
above)
23.3** Consent of Deloitte & Touche LLP
23.4 Consent of Simpson Thacher & Bartlett LLP (Included in Exhibit 8.1
above)
23.5** Consent of Netherland, Sewell & Associates, Inc., Independent Petroleum
Consultants
23.6** Consent of Miller and Lents, Ltd., Independent Petroleum Consultants
II-9
24.1** Power of attorney of Robert B. Catell
24.2** Power of attorney of Andrea S. Christensen
24.3** Power of attorney of Alan H. Fishman
24.4** Power of attorney of James R. Jones
24.5** Power of attorney of James L. Larocca
24.6** Power of attorney of Gloria C. Larson
24.7** Power of attorney of Stephen W. McKessy
24.8** Power of attorney of Edward D. Miller
24.9** Power of attorney of Vikki L. Pryor
25.1 Form T-1 statement of eligibility and qualification under the Trust
Indenture Act of 1939 (a "Form T-1") of JPMorgan Chase Bank ("Chase"),
as trustee under the indenture with respect to the senior debt
securities (filed as Exhibit 25.1 to the Registrants' registration
statement on Form S-3 on February 6, 2002 and incorporated herein by
reference)
25.2 Form T-1 of Chase as trustee under the indenture with respect to the
subordinated debt securities (filed as Exhibit 25.2 to the Registrants'
registration statement on Form S-3 on February 6, 2002 and incorporated
herein by reference)
25.3 Form T-1 of Chase as trustee under the declaration of trust of KeySpan
Trust I (filed as Exhibit 25.3 to the Registrants' registration
statement on Form S-3 on February 6, 2002 and incorporated herein by
reference)
25.4 Form T-1 of Chase as trustee under the declaration of trust of KeySpan
Trust II (filed as Exhibit 25.4 to the Registrants' registration
statement on Form S-3 on February 6, 2002 and incorporated herein by
reference)
25.5 Form T-1 of Chase as trustee under the declaration of trust of KeySpan
Trust III (filed as Exhibit 25.5 to the Registrants' registration
statement on Form S-3 on February 6, 2002 and incorporated herein by
reference)
25.6 Form T-1 of Chase as trustee under the guarantee for the benefit of
holders of trust preferred securities of KeySpan Trust I (filed as
Exhibit 25.6 to the Registrants' registration statement on Form S-3 on
February 6, 2002 and incorporated herein by reference)
25.7 Form T-1 of Chase as trustee under the guarantee for the benefit of
holders of trust preferred securities of KeySpan Trust II (filed as
Exhibit 25.7 to the Registrants' registration statement on Form S-3 on
February 6, 2002 and incorporated herein by reference)
25.8 Form T-1 of Chase as trustee under the guarantee for the benefit of
holders of trust preferred securities of KeySpan Trust III (filed as
Exhibit 25.8 to the Registrants' registration statement on Form S-3 on
February 6, 2002 and incorporated herein by reference)
- ------------------------
* To be filed as an Exhibit to a Current Report on Form 8-K
** Filed herewith.
II-10