As Filed with the Securities and Exchange Commission on February 6, 2002
Registration No. 333-______
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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)
Steven L. Zelkowitz, 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:
Raymond W. Wagner, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954
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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. / /
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CALCULATION OF REGISTRATION FEE
(See following page)
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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
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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)
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Debt Securities of KeySpan Corporation (5).
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Trust Preferred Securities of the Trusts (6)
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Guarantees of Trust Preferred Securities of
the Trusts and certain back-up
obligations (7)........................
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Preferred Stock, par value $.01 per share, of
KeySpan Corporation (8)................
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Depositary Shares (9)......................
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Common Stock, par value $.01 per share, of
KeySpan Corporation (10)...............
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Rights to purchase Series D Preferred Stock,
par value $.01 per share, of KeySpan
Corporation (11)......................
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Stock Purchase Contracts of KeySpan
Corporation (12).......................
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Stock Purchase Units (13)..................
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Warrants of KeySpan
Corporation (14).......................
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Warrant Units (15).........................
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Total.................................. $1,200,000,000 $1,200,000,000 $110,400
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(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 has 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
$1,200,000,000 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.
(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 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 rights to purchase Series D Preferred Stock,
par value $0.01 per share, of KeySpan Corporation (the "Rights"), are
covered by this registration statement. Prior to the occurrence of
certain events, the Rights will not be exercisable or evidenced
separately from shares of common stock of KeySpan Corporation. The
value, if any, attributable to those Rights is reflected in the market
price of the common stock.
(12) 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.
(13) 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 attached Rights 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.
(14) 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.
(15) 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 Statement on Form S-3 (No. 333-60294) of the Registrants. A filing
fee of $125,000 was paid in connection with $500,000,000 of securities that
remain eligible to be sold under such Registration Statement. This registration
statement constitutes Post-Effective Amendment No. 1 to Registration Statement
No. 333-60294, which shall become effective concurrently with this registration
statement in accordance with 8(c) of the Securities Act.
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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.
SUBJECT TO COMPLETION, DATED FEBRUARY 6, 2002
PROSPECTUS
[LOGO]
KEYSPAN CORPORATION
$1,700,000,000
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 ________, 2002.
TABLE OF CONTENTS
Page
About This Prospectus...............................................................................................i
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Risk Factors........................................................................................................1
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Forward-Looking Statements..........................................................................................3
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Keyspan Corporation.................................................................................................4
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The Trusts..........................................................................................................5
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Use of Proceeds.....................................................................................................5
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Ratio of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Stock
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Dividends......................................................................................................5
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Description of Debt Securities......................................................................................7
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Description of Preferred Stock.....................................................................................21
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Description of Depositary Shares...................................................................................24
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Description of the Trust Preferred Securities......................................................................27
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Description of Common Stock........................................................................................39
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Description of Stock Purchase Contracts and Stock Purchase Units...................................................43
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Description of Warrants and Warrant Units..........................................................................44
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United States Federal Income Tax Consequences......................................................................46
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ERISA Considerations...............................................................................................64
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Plan of Distribution...............................................................................................68
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Legal Opinions.....................................................................................................69
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Experts............................................................................................................69
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Where You Can Find More Information................................................................................70
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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.
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 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 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 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 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.
Possible tax law changes may affect the trust preferred securities.
On January 24, 2002, legislation was proposed that generally would deny
the interest deduction for interest paid or accrued on debt instruments that are
not included as liabilities in the certified annual report of the issuer. If
this provision were to apply to the subordinated debt securities, KeySpan would
not be able to deduct interest payments on the subordinated debt securities.
This provision is proposed to be effective for instruments issued on or after
the date of enactment of such legislation. There can be no assurance that the
proposed legislation, future legislative proposals or any final legislation will
not adversely affect the ability of KeySpan to deduct interest on the
subordinated debt securities or otherwise affect the tax treatment of KeySpan or
the investors in the trust preferred securities as described in this
registration statement. Such a change could give rise to a tax event, which
would permit KeySpan to redeem the subordinated debt securities. Such redemption
would cause a mandatory redemption of the trust preferred securities and would
constitute a taxable event as described under "United States Federal Income Tax
Consequences--Trust preferred securities--Consequences to United States
holders--Sales of trust preferred securities or redemption of subordinated debt
securities." See also "Description of the Trust Preferred Securities--Special
event redemption" in this registration statement.
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.
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
- 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, 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. KeySpan has assets of more than $11.5 billion and
approximately 2.5 million gas customers throughout the Northeast.
KeySpan's core business is gas distribution, conducted by its six
regulated gas utility subsidiaries: The Brooklyn Union Gas Company d/b/a KeySpan
Energy Delivery New York and KeySpan Gas East Corporation d/b/a KeySpan Energy
Delivery Long Island distribute gas to customers in the Boroughs of Brooklyn,
Queens and Staten Island in New York City and the Counties of Nassau and Suffolk
on Long Island, respectively; Boston Gas Company, Colonial Gas Company and Essex
Gas Company, each doing business as KeySpan Energy Delivery New England,
distribute gas to customers in eastern and central Massachusetts; and
EnergyNorth Natural Gas, Inc. d/b/a KeySpan Energy Delivery New England
distributes gas to customers in central New Hampshire.
KeySpan is also a major, and growing, generator of electricity. KeySpan
owns and operates five large generating plants and 42 smaller facilities in
Nassau and Suffolk Counties on Long Island and leases and operates a major
facility in Queens County in New York City. Under contractual arrangements,
KeySpan provides power, electric transmission and distribution services
operation and maintenance, billing and other customer services for approximately
one million electric customers of the Long Island Power Authority on Long
Island.
KeySpan's other subsidiaries are involved in oil and gas exploration
and production; gas storage; wholesale and retail gas and electric marketing;
appliance service; heating, ventilation and air conditioning installation and
services; large energy-system ownership, installation and management;
telecommunications; energy-related internet activities; fuel cells; water
barging activities, including the hauling of fuel and other cargo; and providing
meter reading equipment and services to municipal utilities. KeySpan also
invests in, and participates in the development of, pipelines and other
energy-related projects, domestically and internationally.
KeySpan is a registered holding company under the Public Utility
Holding Company Act of 1935, as amended. Therefore, 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 place of business is One Metro Tech Center,
Brooklyn, New York 11201, and its telephone number is (718) 403-1000.
The Trusts
KeySpan Trust I, KeySpan Trust II and KeySpan Trust III are Delaware
business trusts. Their principal place of business is c/o KeySpan Corporation,
One Metro Tech Center, Brooklyn, New York 11201, and its 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.
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 earnings to combined fixed charges and preferred stock
dividends for the periods indicated.
Twelve Months Nine Months Nine Months
Ended Ended Ended
December 31, Twelve Months Ended March 31, December 31, Year Ended December 31, September 30,
1996(a) 1997(a) 1998(a) 1998 1999 2000 2001
---- ---- ---- ---- ---- ---- ----
Ratio of Earnings to Fixed
Charges 2.15 2.21 2.44 (b) 3.23 3.02 2.06
Ratio of Earnings to
Combined Fixed Charges
and Preferred stock
Dividends 1.81 1.85 2.03 (b) 2.47 2.70 2.01
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(a) Represents ratio of earnings to fixed charges and earnings to combined
fixed changes and preferred stock dividends, respectively, for KeySpan's
predecessor, Long Island Lighting Company.
(b) For the nine months ended December 31, 1998, earnings were insufficient to
cover fixed charges by $365.0 million and insufficient to cover combined
fixed charges and preferred stock dividends by $409 million. During the
nine months ended December 31, 1998, KeySpan incurred the following special
charges (after tax): charges associated with the transaction with the Long
Island Power Authority of $107.9 million; charges associated with the
combination of Long Island Lighting Company's gas and electric services
businesses with KeySpan of $83.5 million; an impairment charge of $54.1
million to write-down the value of proved gas reserves; and a charge of
$13.0 million to establish a not-for-profit philanthropic foundation.
Description of 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 the registration statement of which this prospectus forms a part.
"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
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.
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)
Senior debt
The senior debt securities will rank on an equal basis with all of
KeySpan's other unsecured debt.
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;
- 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; or (subordinated debt indenture, section 1402)
- (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)
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;
- 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, 2001,
Consolidated Tangible Assets were $9.86 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:
- 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, Boston Gas Company,
Colonial Gas Company, Essex Gas Company, and EnergyNorth Natural Gas, Inc. d/b/a
KEDNE; 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;
(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)
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
- 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)
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)
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;
- 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.
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, lockbox, 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 approximately $1.5 billion. In
addition, Chase Securities Inc., an affiliate of JPMorgan Chase Bank, acts as a
placement agent for KeySpan's commercial paper program.
Governing law
The laws of the State of New York govern each indenture and will govern the
debt securities. (section 112)
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, 2001, 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, 2001, KeySpan had 89,706 shares of 6% 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 Series A Preferred Stock were issued to trustees acting
on behalf of a KeySpan employee benefit plan; they are convertible into shares
of KeySpan's common stock at the option of the holder, redeemable at KeySpan's
option beginning January 1, 2004, and redeemable at the option of the holder
under specified circumstances. Shares of both the Series B and Series C
Preferred Stock are redeemable at KeySpan's option beginning May 28, 2003, 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 and
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.
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 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.
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.
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 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)
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)
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 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 and those made part of the declaration by the Trust
Indenture Act. The declaration 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 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. 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.
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 which 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.
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
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;
- 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:
- 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
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;
- 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 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:
- 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:
- 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)
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)
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
December 31, 2001, there were 139,429,749 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 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 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.
Rights agreement
Under a rights agreement, each share of KeySpan common stock has
associated with it one preferred stock purchase right. Each of these rights
entitles its holder to purchase, at a purchase price of $95, subject to
adjustment, "units" of one one-hundredth of a share of Series D preferred stock
under circumstances provided for in the rights agreement.
The purpose of the rights agreement is to:
- give KeySpan's board of directors the opportunity to negotiate
with any persons seeking to obtain control of KeySpan;
- deter acquisitions of voting control of KeySpan without assurance
of fair and equal treatment of all KeySpan shareholders; and
- prevent a person from acquiring in the market a sufficient amount
of KeySpan voting power to be in a position to block an action
sought to be taken by KeySpan's shareholders.
The exercise of the rights would cause substantial dilution to a person
attempting to acquire KeySpan on terms not approved by its board of directors
and therefore would significantly increase the price that person would have to
pay to complete the acquisition. The rights agreement may deter a potential
acquisition or tender offer.
Until a "distribution date" occurs, the rights will:
- not be exercisable;
- be represented by the same certificate that represents the shares
with which the rights are associated; and
- trade together with those shares.
The rights will expire at the close of business on March 30, 2009, unless
earlier redeemed or exchanged by KeySpan.
Following a "distribution date," the rights would become exercisable
and KeySpan would issue separate certificates representing the rights, which
would trade separately from the shares of KeySpan common stock.
A "distribution date" would occur upon the earlier of:
- ten business days after a public announcement that the person has
become an "acquiring person"; or
- ten business days after a person commences or announces its
intention to commence a tender or exchange offer that, if
successful, would result in the person becoming an "acquiring
person."
Under the rights agreement, a person becomes an "acquiring person" if
the person, alone or together with a group, acquires beneficial ownership of 20%
or more of the outstanding shares of KeySpan common stock. However, an
"acquiring person" shall not include KeySpan, any of its subsidiaries, any of
its employee benefit plans or any person or entity acting pursuant to such
employee benefit plans. The rights agreement also contains provisions designed
to prevent the inadvertent triggering of the rights by institutional or certain
other shareholders.
If any person becomes an acquiring person, each holder of a right,
other than the acquiring person, will be entitled to purchase, at the purchase
price, a number of shares of KeySpan common stock having a market value two
times the purchase price. If, following a public announcement that a person has
become an acquiring person:
- KeySpan merges or enters into any similar business combination
transaction and KeySpan is not the surviving corporation; or
- 50% or more of KeySpan's assets, cash flow or earning power is
sold or transferred,
each holder of a right, other than the acquiring person, will be entitled to
purchase a number of shares of common stock of the surviving entity having a
market value two times the purchase price.
After a person becomes an acquiring person, but prior to that person
acquiring 50% of KeySpan common stock, KeySpan's board of directors may exchange
the rights, other than rights owned by the acquiring person, at an exchange
ratio of one share of common stock, or one one-hundredth of a share of Class D
Preferred Stock, or of a share of KeySpan's preferred stock having equivalent
rights, preferences and privileges, for each right.
At any time until the tenth business day following a public
announcement that a person has become an acquiring person, KeySpan's board of
directors may redeem all of the rights at a redemption price of $.01 per right.
On the redemption date, the rights will expire and the only entitlement of the
holders of rights will be to receive the redemption price.
A holder of rights will not, as such, have any rights as a shareholder
of KeySpan, including rights to vote or receive dividends.
At any time prior to the distribution date, KeySpan's board of
directors may amend any provisions in the rights agreement. After the
distribution date, the board of directors may amend the provisions of the rights
agreement in order to:
- cure any ambiguity;
- shorten or lengthen any time period under the rights agreement;
or
- make changes that will not adversely affect the interests of the
holders of rights;
provided, that no amendment may be made when the rights are not redeemable.
The distribution of the rights will not be taxable to KeySpan or its
shareholders. A shareholder may recognize taxable income when the rights become
exercisable for common stock of KeySpan or an acquiring company.
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.
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.
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
- 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.
United States Federal Income Tax Consequences
The following summary describes the material 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 of this prospectus. 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 by
United States holders, and does not deal with special situations. For example,
this summary does not address:
- tax consequences to holders who may be subject to special tax
treatment, such as dealers in securities or currencies, financial
institutions, real estate investment trusts, regulated investment
companies, tax-exempt entities, insurance companies, traders in
securities that elect to use a mark-to-market method of
accounting for their securities holdings, or persons liable for
alternative minimum tax;
- tax consequences to persons holding debt securities, trust
preferred securities, preferred stock or common stock as part of
a hedging, integrated, conversion or constructive sale
transaction or a straddle;
- tax consequences to United States holders of debt securities,
trust preferred securities, preferred stock or common stock whose
"functional currency" is not the U.S. dollar;
- alternative minimum tax consequences, if any; or
- any state, local or foreign tax consequences.
The discussion below 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 of this prospectus. 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 offered in this prospectus that is:
- a citizen or resident of the United States;
- a corporation or partnership created or organized in or under the
laws of the United States or any political subdivision of the
United States;
- an estate the income of which is subject to United States federal
income taxation regardless of its source; or
- a trust that (x) 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 (y) 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.
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
- 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 paragraph. 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. 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 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.
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 market
discount in income currently, once made, applies to all market discount
obligations acquired by you on or after the first taxable year to which your
election applies and may not be revoked without the consent of the IRS. You
should consult your own tax advisor before making this election.
Acquisition premium, amortizable bond premium
If you purchase an OID 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 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 your own tax advisor
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, which will be taxed as a payment of interest for 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 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.
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 or retirement
Your tax basis in a foreign currency debt security will be the U.S.
dollar value of the foreign currency amount paid for such foreign currency debt
security determined at the time of your purchase. If you purchased the foreign
currency debt security with previously owned foreign currency, you will
recognize exchange gain or loss at the time of the purchase attributable to the
difference at the time of purchase, if any, between the fair market value of the
debt security in U.S. dollars on the date of purchase and your tax basis in the
foreign currency. Such gain or loss will be ordinary income or loss.
For purposes of determining the amount of any gain or loss you
recognize on the sale, exchange, retirement or other disposition of a foreign
currency debt security, the amount realized on such sale, exchange, retirement
or other disposition generally will be the U.S. dollar value of the amount
realized in foreign currency (less an amount equal to any accrued qualified
stated interest, which will be treated as a payment of interest for federal
income tax purposes) determined at the time of the sale, exchange, retirement or
other disposition.
However, regulations issued under Section 988 of the Code provide a
special rule for purchases and sales of foreign currency debt securities traded
on an established securities market by a cash method taxpayer, under which
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. This election cannot be changed
without the consent of the IRS.
You may also recognize exchange gain or loss attributable to the
movement in exchange rates between the time of purchase and the time of
disposition (including the sale, exchange, retirement or other disposition) of a
foreign currency debt security. Such gain or loss will be treated as ordinary
income or loss. The realization of such gain or loss will be limited to the
amount of overall gain or loss realized on the disposition of a foreign currency
debt security.
If a foreign currency debt security is denominated in one of certain
hyperinflationary currencies, generally:
- exchange gain or loss would be realized with respect to movements
in the exchange rate between the beginning and end of each
taxable year (or such shorter period) the debt security was held,
and
- such exchange gain or loss would be treated as an addition or
offset, respectively, to the accrued interest income on, and an
adjustment to the holder's tax basis in, the foreign currency
debt security.
Your tax basis in the 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 includible in income. 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 will not be treated as interest income or expense,
except to the extent provided in United States Treasury regulations or
administrative pronouncements of the IRS.
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. The United States federal income tax
treatment of dual currency debt securities is uncertain. United States Treasury
regulations currently in effect do not address the tax treatment of dual
currency debt securities.
An IRS announcement states that the IRS is considering issuing proposed
regulations that would:
- apply the principles contained in regulations governing
contingent debt instruments to dual currency debt securities in
the "predominant currency" of the dual currency debt securities
and
- 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.
The IRS states that these concepts are still under consideration.
Persons considering the purchase of dual currency debt securities should
carefully examine the applicable prospectus supplement and should consult their
own tax advisors regarding the United States federal income tax consequences of
the ownership and disposition of such debt securities.
If KeySpan exercises such an option, you may be considered to have
exchanged your debt security denominated in the specified currency for a debt
security denominated in the optional payment currency. If the exercise is
treated as a taxable exchange, you will recognize gain or loss, if any, equal to
the difference between your basis in the debt security denominated in the
specified currency and the value of the debt security denominated in the
optional payment currency. If the exercise of the option is not treated as an
exchange, you will not recognize gain or loss and your basis in the debt
security will be unchanged.
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 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.
Consequences to non-United States holders
The following is a summary of certain United States federal income tax
consequences that will apply to you if you are a non-United States holder of
debt securities.
United States federal withholding tax
The 30% United States federal withholding tax will generally not apply
to any payment of principal or interest, including OID, on debt securities
provided that:
- 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 the 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; 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 notes through certain foreign intermediaries, and you
satisfy the certification requirements of applicable United
States Treasury regulations.
Special certification rules apply to certain non-United States holders
that are entities rather than 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 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, you will be subject to United States
federal income tax on that interest, including OID, on a net income basis
(although exempt from the 30% 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.
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; 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.
Special rules may apply to some non-United States holders, such as
"controlled foreign corporations", "passive foreign investment companies",
"foreign personal holdings companies", certain United States expatriates and
corporations that accumulate earnings to avoid United States federal income tax,
that are subject to special treatment under the Code. These entities should
consult their own tax advisors to determine the United States federal, state,
local and other tax consequences that may be relevant to them.
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
- you do not own 10% or more of the total combined voting power of
all classes of KeySpan voting stock within the meaning of the
Code and United States Treasury regulations and
- interest on those debt securities would not have been, if
received at the time of your death, effectively connected with
the conduct by you of a trade or business in the United States.
Information reporting and backup withholding
United States holders
In general, information reporting requirements will apply to certain
payments of principal and interest, including OID, paid on debt securities and
to the proceeds of sale of a debt security made to you (unless you are an exempt
recipient such as a corporation). A backup withholding tax will apply to such
payments if you fail to provide a taxpayer identification number or
certification of exempt status, or fail to report in full dividend and interest
income.
Non-United States holders
In general, no information reporting or backup withholding will be
required regarding payments that KeySpan makes to you provided that it does not
have actual knowledge that you are a United States person and it has received
from you the 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 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 that you are a United States person; 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.
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
subordinated debt securities, Simpson Thacher & Bartlett, 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, special tax counsel to KeySpan, will deliver an opinion that
under current law, and based upon certain 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.
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.
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,
which will be treated as a payment of interest for federal income
tax purposes); 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 subject
to tax at a maximum rate of 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. 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 interest, including OID, on the trust preferred
securities (or the subordinated debt securities) provided that:
- 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 the 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; 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 you
satisfy the certification requirements of applicable United
States Treasury regulations.
Special certification rules apply to certain non-United States holders
that are entities rather than 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 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.
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, you will be subject to United States federal income tax on that
interest, including OID, on a net income basis (although exempt from the 30%
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.
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 the conduct of a trade or
business by you in the United States; or
- you are an individual who is present in the United States for 183
days or more in the taxable year of that disposition, and certain
other conditions are met.
Special rules may apply to some non-United States holders, such as
"controlled foreign corporations", "passive foreign investment companies",
"foreign personal holding companies", certain United States expatriates and
corporations that accumulate earnings to avoid United States federal income tax,
that are subject to special treatment under the Code. These entities should
consult their own tax advisors to determine the United States federal, state,
local, and other tax consequences that may be relevant to them.
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:
- you do not own 10% or more of the total combined voting power of
all classes of KeySpan voting stock within the meaning of the
Code and United States Treasury regulations; and
- interest on those trust preferred securities (or subordinated
debt securities) would not have been, if received at the time of
your death, effectively connected with the conduct by you of a
trade or business in the United States.
Information reporting and backup withholding
United States holders
In general, information reporting requirements will apply to certain
payments of principal and interest, including OID, paid on the trust preferred
securities (or the subordinated debt securities) and to the proceeds of the sale
of trust preferred securities (or subordinated debt securities) made to you
(unless you are an exempt recipient such as a corporation). A backup withholding
tax will apply to such payments if you fail to provide a taxpayer identification
number or certification of exempt status, or fail to report in full dividend and
interest income.
Non-United States holders
In general, no information reporting or backup withholding will be
required regarding payments on the trust preferred securities (or the
subordinated debt securities) that KeySpan makes to you provided that it does
not have actual knowledge that you are a United States person and it has
received from you the 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 trust preferred securities (or
subordinated debt securities) 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 that you are a United States person; 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.
Possible tax law changes
Legislation proposed on January 24, 2002 contains a provision that
generally would deny the interest deduction for interest paid or accrued on debt
instruments that are not included as liabilities in the certified annual report
of the issuer. This provision is proposed to be effective for instruments issued
on or after the date of enactment of such legislation. There can be no assurance
that the proposed legislation, future legislative proposals or any final
legislation will not adversely affect the ability of KeySpan to deduct interest
on the subordinated debt securities or otherwise affect the tax treatment of
KeySpan or the investors in the trust preferred securities as described in this
registration statement. Such a change could give rise to a tax event, which
would permit KeySpan to redeem the subordinated debt securities. Such redemption
would cause a mandatory redemption of the trust preferred securities and would
constitute a taxable event as described above under "-- Consequences to United
States holders--Sales of trust preferred securities or redemption of
subordinated debt securities." See also "Description of the Trust Preferred
Securities--Special event redemption" in this registration statement.
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 terms.
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.
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. 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
available to the tax authorities in the country in which you reside under the
provisions of an applicable income tax treaty copies of the information returns
reporting the dividends and withholding.
Backup withholding generally will apply to dividends paid to you unless
you satisfy the certification requirements of applicable United States Treasury
regulations.
Payment of the proceeds of a sale of the common or preferred stock to
you within the United States or conducted through some United States-related
financial intermediaries will be subject to both backup withholding and
information reporting 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 that you are a United States person or (2) you otherwise establish an
exemption.
Any amounts withheld under the backup withholding rules may be allowed
as a refund or credit against your United States federal income tax liability
provided the required information is provided to the IRS.
Special rules may apply to some non-United States holders, such as
"controlled foreign corporations", "passive foreign investment companies",
"foreign personal holding companies", certain United States expatriates and
corporations that accumulate earnings to avoid United States federal income tax,
that are subject to special treatment under the Code. These entities should
consult their own tax advisors to determine the United States federal, state,
local, and other tax consequences that may be relevant to them.
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.
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 the Code or ERISA, 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 and prohibit
transactions involving the assets of a covered 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 a covered plan or
the management or disposition of the assets of a covered plan, or who renders
investment advice for compensation to a covered plan, is generally considered a
fiduciary of the covered 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.
Any insurance company investing its general account assets in the
offered securities should consider whether the investment would be subject to
the requirements of ERISA in light of the U.S. Supreme Court's decision in John
Hancock Mutual Life Insurance Co. v. Harris Trust and Savings Bank and under any
subsequent legislation or other guidance that has or may become available
relating to that decision, including the enactment of Section 401(c) of ERISA by
the Small Business Job Protection Act of 1996 and its regulations.
Prohibited Transaction Issues
Section 406 of ERISA and Section 4975 of the Code prohibit covered
plans subject to Title I of ERISA or Section 4975 of the Code 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 the Code. In addition, the
fiduciary of a covered 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 a covered
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,
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 a covered plan subject to Title
I of ERISA or Section 4975 of the Code 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, the covered
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
- (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 such security 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) 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 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.
Because of the foregoing, the offered securities other than trust
preferred securities (the "KeySpan 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.
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 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, 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 Simpson Thacher & Bartlett or
other counsel identified in the prospectus supplement or term sheet.
Experts
Arthur Andersen LLP, independent accountants, audited the financial
statements for the nine months ended December 31, 1998 and the twelve months
ended December 31, 1999 and the twelve months ended December 31, 2000, and
related schedules incorporated by reference in this prospectus. Arthur Andersen
LLP, also audited the financial statements for Eastern Enterprises for the
twelve months ended December 31, 1998 and December 31, 1999, and related
schedules incorporated by reference in this prospectus. These financial
statements and schedules are incorporated by reference herein in reliance upon
the authority of Arthur Andersen LLP, as experts in accounting and auditing in
giving the reports.
Where You Can Find More Information
KeySpan files annual, quarterly and special reports, proxy statements
and other information with the SEC. You may read and copy any of these documents
at the SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. KeySpan's SEC filings are also available to the
public on the SEC's web site at http://www.sec.gov.
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, 2000;
- Quarterly Reports on Form 10-Q for the quarter ended March
31, June 30 and September 30, 2001; and
- KeySpan's Current Reports on Form 8-K filed October 6, 2000;
January 25, May 24, July 17, July 26, October 24 and
December 6, 2001; and January 24, 2002.
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
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.............................................$110,400
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*....................................................................................$720,000
=======
- --------------
* 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
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.
(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) 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.
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 6th day of
February, 2002.
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 below by the following persons in the
capacities and on the dates indicated.
Date:
* February 6, 2002
- -----------------------------------------------------------
Robert B. Catell
Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Gerald Luterman February 6, 2002
- -----------------------------------------------------------
Gerald Luterman
Chief Financial Officer and Executive Vice-President
(Principal Financial Officer)
/s/ Ronald Jendras February 6, 2002
- -----------------------------------------------------------
Ronald Jendras
Vice President, Controller and Chief Accounting Officer
(Principal Accounting Officer)
* February 6, 2002
- -----------------------------------------------------------
Lilyan H. Affinito
Director
* February 6, 2002
- -----------------------------------------------------------
Andrea S. Christensen
Director
* February 6, 2002
- -----------------------------------------------------------
Howard R. Curd
Director
* February 6, 2002
- -----------------------------------------------------------
Donald H. Elliott
Director
* February 6, 2002
- -----------------------------------------------------------
Alan H. Fishman
Director
* February 6, 2002
- -----------------------------------------------------------
Vicki L. Fuller
Director
* February 6, 2002
- -----------------------------------------------------------
J. Atwood Ives
Director
* February 6, 2002
- -----------------------------------------------------------
James R. Jones
Director
* February 6, 2002
- -----------------------------------------------------------
James L. Larocca
Director
* February 6, 2002
- -----------------------------------------------------------
Craig G. Matthews
Director
* February 6, 2002
- -----------------------------------------------------------
Stephen W. McKessy
Director
* February 6, 2002
- -----------------------------------------------------------
Edward D. Miller
Director
* February 6, 2002
- -----------------------------------------------------------
James Q. Riordan
Director
*By: /s/ Ronald Jendras February 6, 2002
-----------------------------------------
Ronald Jendras, as Attorney-in-Fact
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 6th of February, 2002.
KEYSPAN TRUST I
/s/ Ronald S. Jendras
---------------------------
Ronald S. Jendras
Trustee
/s/ Richard A. Rapp
---------------------------
Richard A. Rapp
Trustee
/s/ Michael J. Taunton
---------------------------
Michael J. Taunton
Trustee
KEYSPAN TRUST II
/s/ Ronald S. Jendras
---------------------------
Ronald S. Jendras
Trustee
/s/ Richard A. Rapp
---------------------------
Richard A. Rapp
Trustee
/s/ Michael J. Taunton
---------------------------
Michael J. Taunton
Trustee
KEYSPAN TRUST III
/s/ Ronald S. Jendras
---------------------------
Ronald S. Jendras
Trustee
/s/ Richard A. Rapp
---------------------------
Richard A. Rapp
Trustee
/s/ Michael J. Taunton
---------------------------
Michael J. Taunton
Trustee
EXHIBIT INDEX
1.1** Form of underwriting agreement for debt securities
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 on September 10, 1998, as
amended (filed as Exhibit 3.1 to KeySpan Corporation's Form 8-K/A,
Amendment No. 2, on September 29, 1998 and incorporated herein by
reference)
4.3** Form of Common Stock Certificate
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. 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
4.7**Form of Supplemental Indenture relating to subordinated debentures
for trust preferred securities issuance 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)
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
4.16 Rights Agreement, dated March 30, 1999, by and between the Registrant
and The Bank of New York, as Rights Agent (filed as Exhibit 4 to the
Registrant's Current Report on Form 8-K filed on March 30, 1999 and
incorporated herein by reference). The Rights Agreement includes the
Certificate of Amendment to the Certificate of Incorporation for the
Series D Preferred Stock as Exhibit A thereto, the Form of Rights
Certificate as Exhibit B thereto and the Summary of Rights to Purchase
Series D Preferred Stock as Exhibit C thereto.
4.17** Form of Certificate of Amendment with respect to the preferred stock
4.18** Form of deposit agreement with respect to the depository shares
(including form of depository receipts to be issued thereunder)
4.19** Form of Purchase Contract Agreement
4.20** Form of Debt Warrant Agreement
4.21** Form of Stock Warrant Agreement
4.22** Form of Unit Agreement
4.23** Form of subordinated debt security to be issued to each trust
4.24** Form of senior debt security to be issued
5.1**Opinion and consent of Simpson Thacher & Bartlett as to the validity
of the debt securities, preferred stock, depositary shares,
guarantees, common stock, rights to purchase Series D preferred 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 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 (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 Arthur Andersen LLP
23.4** Consent of Arthur Andersen LLP
23.5 Consent of Simpson Thacher & Bartlett (Included in Exhibit 8.1 above)
24.1** Powers of attorney
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
25.2** Form T-1 of Chase as trustee under the indenture with respect to the
subordinated debt securities
25.3** Form T-1 of Chase as trustee under the declaration of trust of
KeySpan Trust I
25.4** Form T-1 of Chase as trustee under the declaration of trust of
KeySpan Trust II
25.5** Form T-1 of Chase as trustee under the declaration of trust of
KeySpan Trust III
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
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
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
- ------------------
* To be filed as an Exhibit to a Current Report on Form 8-K
** Filed herewith.