UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss.240.14a-11(c) orss.240.14a-12
KEYSPAN CORPORATION
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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(NAME OF PERSON(S) FILING PROXY STATEMENT IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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[KEYSPAN LOGO]
One MetroTech Center
Brooklyn, New York 11201-3850
KEYSPAN CORPORATION
Notice of 2002 Annual Meeting of Shareholders and
Proxy Statement
[KEYSPAN LOGO]
One MetroTech Center
Brooklyn, New York 11201-3850
LETTER TO SHAREHOLDERS
April 4, 2002
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
KeySpan Corporation at 10:00 a.m. Eastern Time, on Thursday, May 9, 2002, at the
Tilles Center for the Performing Arts, Long Island University, C. W. Post
Campus, 720 Northern Boulevard, Greenvale, New York.
We will review with you our 2001 performance and our plans for the future.
We have continued our procedure by which you may provide a proxy by telephone or
through the Internet in order to cast your vote more easily. Whether you choose
to provide a written proxy card, or one by telephone or through the Internet,
please vote as soon as possible.
I look forward to seeing you on May 9th at the Annual Meeting. Enclosed with the
Proxy Statement is your voting card. I would like to take this opportunity to
remind you that your vote is important.
Robert B. Catell
Chairman and Chief Executive Officer
[KEYSPAN LOGO]
One MetroTech Center
Brooklyn, New York 11201-3850
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 4, 2002
Dear Shareholder:
The Annual Meeting of Shareholders of KeySpan Corporation ("KeySpan" or the
"Company") will be held on Thursday, May 9, 2002, at 10:00 a.m. Eastern Time, at
the Tilles Center for the Performing Arts, Long Island University, C. W. Post
Campus, 720 Northern Boulevard, Greenvale, New York, to consider and take action
on the following items:
1. Election of ten directors;
2. Ratification of Deloitte & Touche LLP, as independent public
accountants for the Company for the year ending December 31, 2002; and
3. Transact any other business properly brought before the Annual Meeting
or any adjournment thereof.
Shareholders of record as of the close of business on March 11, 2002 are
entitled to vote at the Annual Meeting or any postponement or adjournment
thereof.
If your shares are held through a bank, broker or other nominee and you plan to
attend the meeting, please request a letter or some other evidence of ownership
from your bank, broker or other nominee, as well as proper authorization if you
wish to vote your shares in person.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THIS MEETING. EVEN IF YOU
PLAN TO ATTEND THE MEETING, WE HOPE THAT YOU WILL READ THE ENCLOSED PROXY
STATEMENT AND THE VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, AND THEN VOTE
(1) BY COMPLETING, SIGNING, DATING AND MAILING THE PROXY CARD IN THE ENCLOSED
POSTAGE- PAID ENVELOPE, OR (2) BY CALLING THE TOLL-FREE NUMBER LISTED ON THE
PROXY CARD, OR (3) THROUGH THE INTERNET AS INDICATED ON THE PROXY CARD. THIS
WILL NOT AFFECT YOUR RIGHT TO ATTEND OR VOTE AT THE MEETING.
By Order of the Board of Directors,
Richard A. Rapp, Jr.
Vice President, Secretary and Deputy General Counsel
Directions to the
TILLES CENTER FOR THE PERFORMING ARTS
Long Island University
C. W. Post Campus
720 Northern Boulevard
Greenvale, New York
By Car:
From the west: Take the Long Island Expressway (Route 495) east to exit 39 (Glen
Cove Road). Proceed north to Route 25A (Northern Boulevard) and turn right
(east). Proceed eastward on Route 25A approximately two miles; turn right at the
fifth traffic light into the West Gate of the campus.
From the east: Take the Long Island Expressway (Route 495) west to exit 41N
(Route 106/107 North). Continue on Route 107 north to Route 25A (Northern
Boulevard) and turn left (west). Proceed approximately 1/4 mile and turn left at
the second traffic light into the West Gate of the campus.
NOTE: You may also use the Northern State Parkway instead of the Long Island
Expressway. Use Exit 31 for Glen Cove Road north or Exit 35 for Route 107 north
and follow above directions.
By Public Transportation from New York City:
By Train: From Pennsylvania Station: Take either the Long Island Rail Road's
Port Jefferson train line to the Hicksville station or the Port Washington -
Manhasset train line to the Great Neck station or the Manhasset station or the
Oyster Bay train line to the Greenvale station. The Great Neck station and the
Hicksville station both have bus service to the C. W. Post Campus.
Taxi service to the campus is available from the Greenvale, Manhasset, GreatNeck
and Hicksville stations. Taxi service prices range from $8 to $16.
To reach the Long Island Rail Road call (516) 822-5477.
By Bus: C. W. Post is serviced by the Metropolitan Transit Authority, Long
Island Bus N20. For schedule times call the MTA at (516) 766-6722.
PROXY STATEMENT OF KEYSPAN CORPORATION
ANNUAL MEETING TO BE HELD ON MAY 9, 2002
Proxies are being solicited on behalf of the Board of Directors of the Company
for use at the Annual Meeting of Shareholders on May 9, 2002, or any adjournment
thereof. This Proxy Statement is first being mailed to the shareholders of the
Company on or about April 4, 2002.
Q: What am I voting on?
A: Election of ten directors; ratification of Deloitte & Touche LLP, as
independent public accountants for the year ending December 31, 2002; and
any other business properly brought before the meeting.
Q: Who is entitled to vote?
A: Common Stock shareholders as of the close of business on March 11, 2002
(the "Record Date"). Each share of KeySpan's Common Stock, par value $.01
per share (the "Common Stock") is entitled to one vote.
Q: How do I vote?
A: If you hold your shares in your name, as a "shareholder of record," you can
vote in person at the Annual Meeting or you can complete and submit a proxy
by mail, telephone or the Internet, as provided on your proxy card.
If you hold your shares indirectly in the name of a bank, broker or other
nominee, as a "street- name shareholder," you will receive instructions
from your bank, broker or other nominee describing how to vote your shares.
The enclosed proxy card contains instructions for mail, telephone and
Internet voting. Whichever method you use, the proxies identified on the
proxy card will vote your shares in accordance with your instructions.
If you submit a proxy card without giving specific voting instructions with
respect to any or all proposals, you give the named proxies the authority
to vote, in their discretion, on each such proposal. In addition, a
properly signed and dated proxy card (or a proxy properly delivered by
telephone or through the Internet) gives the named proxies the authority to
vote, in their discretion, on any other matter that may arise at the
meeting.
Q: Do I have the right to revoke my proxy?
A: Yes. You can revoke your proxy by submitting a new proxy; giving written
notice to the Secretary of the Company prior to the Annual Meeting stating
that you are revoking your proxy; or attending the Annual Meeting and
voting your shares in person.
Unless you decide to vote your shares in person at the Annual Meeting, you
should revoke your prior proxy in the same way you initially submitted it,
that is, by mail, telephone or Internet.
Q: Is my vote confidential?
A: Yes. Only EquiServe Trust Company, N.A. ("EquiServe"), the inspector of
election, and certain employees have access to your voting instructions.
All written comments will be provided to KeySpan and only your name will be
disclosed unless you request to remain anonymous.
Q: Who will count the votes?
A: EquiServe will tabulate the votes and act as inspector of election.
Q: What if I get more than one proxy card?
A: Your shares are probably registered differently or are in more than one
account. Sign and return all proxy cards to ensure that all your shares are
voted. Please have all of your accounts registered exactly in the same name
and social security number. You may do this by contacting our transfer
agent, EquiServe, by calling 1-800-482-3638.
Q: What constitutes a quorum?
A: As of the close of business on March 11, 2002, the Record Date, 140,071,011
shares of Common Stock were issued and outstanding. A majority of the
outstanding shares, present or represented by proxy, constitutes a quorum.
For purposes of determining the presence of a quorum, shares represented by
abstentions and "broker non-votes" will be counted as present. If you vote
by proxy card or give a proxy by telephone or through the Internet, you
will be considered part of the quorum. In the absence of a quorum, the
Annual Meeting may be adjourned.
1
Q: What percentage of stock do the directors and officers own?
A: The directors and certain executive officers own approximately 306,605
shares, which is less than 1% of our Common Stock, as of March 1, 2002.
Q: When are the shareholder proposals due for the 2003 Annual Meeting?
A: Shareholder proposals for the 2003 Annual Meeting must be received by
KeySpan at its offices at One MetroTech Center, Brooklyn, New York
11201-3850, Attention: Secretary, by December 5, 2002, to be considered by
the Company for possible inclusion in the proxy materials for the 2003
Annual Meeting. In addition, all shareholder proposals or nominations for
election as director for the 2003 Annual Meeting must be submitted to the
Company in accordance with Section 2.7 of the Company's By- Laws not less
than 60 nor more than 90 calendar days in advance of the first anniversary
date of the 2002 Annual Meeting.
2
PROPOSAL 1. ELECTION OF DIRECTORS
The Board of Directors unanimously recommends a vote FOR each of the ten
nominees named below to serve as members of the Board of Directors for a
one-year term:
Nominees for election this year are:
. Robert B. Catell . J. Atwood Ives
. Andrea S. Christensen . James R. Jones
. Howard R. Curd . James L. Larocca
. Donald H. Elliott . Stephen W. McKessy
. Alan H. Fishman . Edward D. Miller
Each director will hold office for one year or until their successors are duly
elected or chosen and qualified.
If any director is unable to stand for election, the Board may provide for a
lesser number of directors or designate a substitute. In the latter event,
shares represented by proxies may be voted for a substitute director. KeySpan
does not anticipate that any of the individuals listed above will be unable to
serve the full term of office to which they may be elected. The affirmative vote
of a plurality of the shares of KeySpan Common Stock cast is required for the
election of directors.
Effective May 9, 2002, both Lilyan H. Affinito and James Q. Riordan will retire,
and Vicki L. Fuller will resign, as directors of the Company. The Board and the
Company extend their gratitude to Ms. Affinito, Ms. Fuller and Mr. Riordan for
their service as valued directors.
Effective March 1, 2002, Craig G. Matthews retired as a director and as vice
chairman and chief operating officer of the Company. The Board and the Company
extend their gratitude to the long and valued service Mr. Matthews provided to
the Company as a member of the Board and as an officer of the Company.
Effective December 31, 2001, George Bugliarello and Basil A. Paterson retired as
consulting directors of the Company. Messrs. Bugliarello and Paterson were also
members of the board of directors and retired as such on December 31, 2000. The
Board and the Company extend their gratitude to Messrs. Bugliarello and Paterson
for their service as valued directors.
Effective November 7, 2001, William C. Thompson, Jr. resigned as consulting
director of the Company after his election as Comptroller of the City of New
York. Edward Travaglianti remains as the sole consulting director of the Company
and, as such, will continue to advise and counsel the Board and any of its
committees on various matters. A consulting director does not have the right to
vote at meetings of the Board or at meetings of committees of the Board.
Finally, the Board and the Company recognize the late Richard N. Daniel for his
service as a valued director of the Company until his passing on October 25,
2001. The Board and the Company also extend their best wishes to Mr. Daniel's
family and loved ones.
In recognition of the vacancies left by Mdmes. Affinito and Fuller and Messrs.
Riordan, Matthews and Daniel, the Board has resolved to reduce and fix its size
at ten, effective May 9, 2002.
3
Nominees for the Board of Directors
[PHOTO] ROBERT B. CATELL - Age 65 - Director since May 1998 Chairman
and Chief Executive Officer of KeySpan Corporation since
July 1998. Joined KeySpan's subsidiary, The Brooklyn Union
Gas Company, in 1958 and was elected Assistant Vice
President in 1974, Vice President in 1977, Senior Vice
President in 1981 and Executive Vice President in 1984.
Elected Brooklyn Union's Chief Operating Officer in 1986 and
President in 1990. Mr. Catell served as President and Chief
Executive Officer from 1991 to 1996 when he was elected
Chairman and Chief Executive Officer. Serves on the Boards
of Alberta Northeast Gas, Ltd., Boundary Gas, Inc., Taylor
Gas Liquids, Ltd., The Houston Exploration Company, Gas
Technology Institute, Edison Electric Institute, New York
State Energy Research and Development Authority,
Independence Community Bank Corp., Business Council of New
York State, Inc., New York City Investment Fund, New York
City Partnership and Long Island Association.
[PHOTO] ANDREA S. CHRISTENSEN - Age 62 - Director since January 2001
Partner in the law firm of Kaye, Scholer, Fierman, Hays &
Handler, LLP since 1976. Joined that firm in 1968 and
previously was an associate with the law firm of Kelley,
Drye & Warren. Adjunct Professor at New York University
School of Law from 1984 to 1994. Member of the Association
of the Bar of the City of New York, American Bar
Association, International Society for Labor Law and Social
Security. Former Chairperson of New York County Lawyers
Association Committee on Labor Relations. Served as Director
of The Brooklyn Union Gas Company from 1980 to 2000 and the
American Arbitration Association from 1988 to 1999.
[PHOTO] HOWARD R. CURD - Age 63 - Director since May 1998 Chairman
and Chief Executive Officer of Uniroyal Technology
Corporation, a developer and manufacturer of proprietary
plastic products and specialty chemical and polymer
products, since 1992. Served as President and Chief
Executive Officer of Uniroyal from 1991 to 1992. Formed his
own business in 1972 and, during the period 1972 to 1982,
acquired controlling interests in a 100-year old investment
banking firm, Polycast Technology Corporation and the U.S.
Playing Card Corporation. Served on the Board of Emcore
Corporation.
[PHOTO] DONALD H. ELLIOTT - Age 69 - Director since May 1998 Partner
in the law firm of Hollyer Brady Smith & Hines LLP, since
1995. Attorney in the law firm of Webster & Sheffield from
1957 to 1965 and Partner from 1973 to 1991. Counsel to the
Mayor of New York City and then Chairman of the New York
City Planning Commission from 1966 to 1973. Partner in the
law firm of Mudge Rose Guthrie Alexander and Ferdon from
1991 to 1995. Trustee of Independence Community Bank Corp.
and Long Island University. Serves on the Board of
Independence Community Bank and an honorary member of the
New York Chapter of the American Institute of Architects.
4
[PHOTO] ALAN H. FISHMAN - Age 56 - Director since May 1998 President
and Chief Executive Officer of Independence Community Bank
Corp., the parent savings and loan holding company of
Independence Community Bank, since March 2001. Joined
Chemical Bank in 1969, named Chief Financial Officer in 1979
and elected Senior Vice President responsible for worldwide
investment banking activities in 1983. Joined Neuberger &
Berman in 1988 and was responsible for an investment
partnership. Joined American International Group, Inc. in
1989 as a Senior Vice President and elected President of AIG
Financial Services Group. Joined the firm of Adler & Shaykin
in 1990 as a Managing Partner. Former Managing Partner and
founder of Columbia Financial Partners, L.P. in 1992.
President and Chief Executive Officer of ContiFinancial
Corporation from July 1999 to March 2001. Chairman of the
Brooklyn Academy of Music.
[PHOTO] J. ATWOOD IVES - Age 65 - Director since November 2000
Former Chairman and Chief Executive Officer of Eastern
Enterprises from 1991 to November 2000. Director or Trustee
of several mutual funds advised by the Massachusetts
Financial Services Company, Trustee of the Museum of Fine
Arts, Boston, Director of the United Way of Massachusetts
Bay, President and Director of the Beacon Hill Village,
overseer of WGBH Educational Foundation, and member of the
Corporate Advisory Board of the Boston College Carroll
School of Management.
[PHOTO] JAMES R. JONES - Age 62 - Director since May 1998 Senior
Counsel to the law firm of Manatt, Phelps & Phillips, LLP
from March 1999 to October 2001. Chairman and Chief
Executive Officer of Manatt Jones Global Strategies, LLP
since October 2001 and Chairman of GlobeRanger Corporation
since September 1999. Retired President of Warnaco, Inc. -
International Division. White House Staff, Special Assistant
and Appointments Secretary from 1965 to 1969 and Congressman
from Oklahoma from 1973 to 1987. Partner in the law firm of
Dickstein Shapiro Morin & Oshinsky LLP from 1987 to 1989.
Chairman and Chief Executive Officer of the American Stock
Exchange from 1989 to 1993. Served as United States
Ambassador to Mexico from 1993 to 1997.
[PHOTO] JAMES L. LAROCCA - Age 58 - Director since January 2001 Dean
of the college and distinguished Professor of Public Policy
at Long Island University's Southampton College since April
2000 and Adjunct Professor of Public Policy at Hofstra
University since January 1999. Immediately prior to his
appointment to Southampton, he practiced law with the firm
of Cullen and Dykman. Served in the cabinets of two New York
governors as Commissioner of Transportation, Commissioner of
Energy, Director of Federal Affairs, Trustee of the New York
Power Authority and Chairman of the Energy Research and
Development Authority. Served as President of the Long
Island Association from 1985 to 1993. Former director of
European American Bank and ContiFinancial Corporation, and
current Chairman of the Long Island Nature Conservancy.
5
[PHOTO] STEPHEN W. McKESSY - Age 64 - Director since May 1998
Retired Vice Chairman of PricewaterhouseCoopers. Served in
various officer positions at PricewaterhouseCoopers from
1960 to 1997. Serves as a Director for the Greater Boy
Scouts of America, the Board of Advisors of St. John's
University College of Business Administration and the Board
of Governors of the Silver Spring Country Club.
[PHOTO] EDWARD D. MILLER - Age 61 - Director since May 1998 Member
of the Supervisory Board and senior advisor to the Chief
Executive Officer of AXA Group since July 2001. From August
1997 through June 2001, Mr. Miller served as President and
Chief Executive Officer of AXA Financial, Inc. He was
Chairman and Chief Executive Officer of The Equitable Life
Assurance Society of the United States, the principal
insurance subsidiary of AXA Financial, Inc., from August
1997 through June 2001. Mr. Miller also served as Senior
Vice Chairman of Chase Manhattan Bank from 1996 through
1997. He serves as a member of the Board of Directors of
Topps Company, Incorporated, a member of the Board of
Governors of the United Way of Tri-State, Chairman of the
Board of Directors of Phoenix House, and Chairman of the
2001 Insurance Industry Blood Drive. Mr. Miller is a Trustee
of the Inner-City Scholarship Fund, the New York City Police
Foundation, Pace University, and the New York Blood Center.
6
Board of Directors - Committees
The Board of Directors is responsible, under New York law and the Company's
Certificate of Incorporation and By- Laws, with overseeing the business and
management of the Company. The Board of Directors met nine times between January
1 and December 31, 2001. During 2001, the Board maintained four standing
committees. The functions, number of meetings held and composition of the Board
committees, as of December 31, 2001, are described below:
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Committee
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Compensation
Director Executive and Audit Corporate
Nominating Responsibility
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L. H. Affinito X X
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R. B. Catell X (Chair)
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A. S. Christensen X
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H.R. Curd X X
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R.N. Daniel X X
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D.H. Elliott X X(Chair)
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A.H. Fishman X X (Chair)
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V. L. Fuller X
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J. A. Ives X
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J. R. Jones X X
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J. L. Larocca X X
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C. G. Matthews X
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S. W. McKessy X X X
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E.D. Miller X X (Chair)
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J. Q. Riordan X X X
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Meetings held from
January 1 to 2 8 6 1
December 31, 2001
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X: Member.
Chair: Committee Chairperson.
Committees
Executive Committee: Acts on behalf of the Board of Directors whenever the Board
is not in session, except for certain matters as prescribed by New York law.
Audit Committee: Reviews auditing, accounting, financial reporting and internal
control functions. Recommends independent public accountants and reviews their
services. All members are non-employee directors.
Corporate Responsibility Committee: Oversees ethics, community development,
environmental issues and equal employment opportunity matters.
Compensation and Nominating Committee: Administers executive compensation
programs, policies and practices. Conducts director searches and recommends
directors. All members are non-employee directors. The Committee will not accept
nominations for election by shareholders at the Annual Meeting, unless such
nominations were received within the time period prescribed in Section 2.7 of
the Company's By- Laws.
7
Each of the directors attended at least 91% or more of all meetings of the Board
and each committee of which he or she was a member during the period from
January 1 to December 31, 2001.
Director Compensation
The directors will receive the following compensation, effective April 1, 2002:
. Non-employee and consulting directors:
$30,000 annual retainer;
$1,500 meeting fee for each meeting of the Board of Directors and
each meeting of a committee of the Board of Directors attended
(directors attending more than one meeting on the same day shall
be paid only one meeting fee for that day);
$4,000 committee chairman retainer; and
Options to purchase 4,600 shares of KeySpan Common Stock (granted
March 1, 2002).
- Employee directors:
Receive no additional compensation for serving on the Board or
its committees.
The Board of Directors has adopted the Directors' Deferred Compensation Plan to
directly align the non-employee directors' and consulting directors' financial
interest with those of the shareholders. The Directors' Deferred Compensation
Plan requires all non-employee directors and consulting directors to defer a
minimum of 50% of their cash compensation as directors or consulting directors
in exchange for Common Stock equivalents. Common Stock equivalents are valued by
utilizing the lowest of either (i) the average of the high and low price per
share of KeySpan Common Stock on the first trading day of the calendar quarter
or (ii) the average of the high and low price per share of KeySpan Common Stock
on the last trading day of the calendar quarter, in which contributions are
received. Compensation not subject to mandatory deferral into a Common Stock
equivalent account may, at the director's or consulting director's option, be
deferred into a cash account bearing interest at the prime rate. Upon
retirement, death or termination of service as a director, all amounts in a
director's or consulting director's Common Stock equivalent account and cash
account shall, at the director's or consulting director's election, (i) be paid
in a lump sum in cash; (ii) be deferred for up to five years; and/or (iii) be
paid in the number of annual installments, up to ten, specified by the director
or consulting director.
8
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table presents the annual compensation paid to the Chief Executive
Officer and the four other most highly compensated executive officers (the
"Named Executive Officers").
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Annual Compensation Long-Term Compensation
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Restricted
Stock Shares LTIP
Salary Bonus Award(s) Underlying Payouts All Other Comp
Name Year ($) ($)(1) ($) Options ($) ($)(2)
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Robert B. Catell 2001 860,669 901,228 0 267,000 0 20,444
Chairman & CEO 2000 786,000 336,000 0 568,800 0 22,817
1999 700,000 317,665 343,643 696,000 0 25,673
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Craig G. Matthews(3) 2001 586,153 486,974 790,000(4) 124,000 0 21,175
Vice Chairman 2000 506,000 246,690 0 234,400(5) 0 15,627
& COO 1999 445,833 153,758 286,250(4) 355,000(6) 0 14,618
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Robert J. Fani 2001 361,667 247,203 0 78,200 0 3,651
President, KeySpan 2000 300,417 95,935 0 129,400 0 3,628
Energy Services and 1999 250,000 59,569 0 146,000 0 578
Supply
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Wallace P. Parker Jr. 2001 360,834 243,314 0 78,200 0 6,490
President, KeySpan 2000 300,250 95,168 0 129,400 0 5,424
Energy Delivery 1999 248,000 62,340 0 146,000 0 3,711
Gerald Luterman 2001 330,486 259,360 0 60,000 0 14,539
Executive Vice 2000 318,333 120,000 0 131,800 0 14,596
President & CFO 1999 127,308(7) 0 0 100,000 0 7,593
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FOOTNOTES:
(1) Bonus awards paid each year are attributable to performance during the
previous year.
(2) Amounts are comprised of the cost of life insurance paid by KeySpan and
allocated to the Named Executive Officers for income tax purposes during
2001, 2000 and 1999.
(3) Effective March 1, 2002, Mr. Matthews has retired as an officer and
director of the Company.
(4) Mr. Matthews has forfeited his restricted stock awards as a result of his
retirement.
(5) Includes 75,000 unvested stock options that Mr. Matthews has forfeited as a
result of his retirement.
(6) Includes 45,000 unvested stock options that Mr. Matthews has forfeited as a
result of his retirement.
(7) Mr. Luterman was hired by the Company in July 1999.
9
COMPENSATION AND NOMINATING COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation and Nominating Committee (the "Committee") of the Board of
Directors, composed of six non- employee directors, administers KeySpan's
executive compensation program. The members of the Committee are Donald H.
Elliott, James R. Jones, James L. Larocca, Stephen W. McKessy, Edward D. Miller
and James Q. Riordan, with Mr. Miller serving as chairperson. None of such
members is or has been an officer or employee of KeySpan or any of its
subsidiaries.
During 2001, the Committee met periodically throughout the year and utilized
outside consultants from the Hay Group, a national compensation consultant, to
review the compensation levels of KeySpan's officers, including the Named
Executive Officers, and to provide advice with respect to incentive compensation
plan matters. The Committee also reviews, recommends and approves changes to the
Company's compensation policies and programs for the Chief Executive Officer,
other senior executives and certain key employees. In addition, the Committee
makes recommendations concerning the Company's employee benefit policies and
exercises such powers and makes such other compensation-related determinations
as are entrusted to the Committee by the Board of Directors. After review and
approval by the Committee, all issues relating to executive compensation are
submitted to the entire Board for ratification. There were no material decisions
of the Committee which were overruled or revised by the Board.
Executive Compensation Philosophy and Policies
The philosophy of KeySpan with respect to executive compensation is that the
Chief Executive Officer and other executives should be compensated at
market-competitive levels to attract, motivate, and retain talented executives
needed to achieve KeySpan's vision of being the premier energy company in the
Northeast. Through the Committee, the Board of Directors has developed a "pay
for performance" executive compensation philosophy and approved the
implementation of a total compensation plan designed to focus attention on
KeySpan's strategic business initiatives and financial performance objectives.
The Committee adheres to the following compensation policies which are intended
to facilitate the achievement of KeySpan's business strategies and further the
Company's vision:
. The executive compensation program should emphasize pay for
performance and encourage retention of those employees who enhance
KeySpan's performance.
. Compensation arrangements will maintain a reasonable balance between
base salary, annual and long-term incentive compensation and be
designed to focus such executives on the long-term interests of the
shareholders and creating value for the shareholders.
. The incentive compensation program for executives shall strengthen the
link of incentive compensation to the achievement of financial and
strategic objectives which are set in advance by the Committee.
. In determining executive compensation levels for base salary, annual
and long-term compensation, the compensation levels shall be
competitive with compensation levels for executive positions of
similar scope for general industry in the metropolitan New York City
and Boston areas, as well as peer energy companies. If KeySpan's
performance exceeds that of the comparable group, compensation should
be above the median; likewise, if KeySpan's performance falls below
that of the group, the compensation paid to executives should be below
the median of the comparable companies.
Components of Compensation
The Committee compares total compensation levels for KeySpan's executives to the
compensation paid to executives in comparable general industry and peer energy
companies. In this regard, the Committee uses analyses prepared by the Hay Group
to review the compensation levels of executives in the energy industry, and in
the regional and national marketplace. In addition, the Committee reviews
compensation data for executive positions comparable in scope to those in
general industry companies in the metropolitan New York City and Boston areas.
The companies analyzed in this process tend to have national business operations
and have positions that are similar in scope with comparable revenue size or
employment levels. Through this process, the Committee identifies the median
compensation level, both with
10
respect to base salary and the overall executive compensation program.
The Committee strives to ensure that compensation for the Company's executive
officers provides a direct link to strategic financial measures and shareholder
value. To achieve this performance linkage, KeySpan has established three
programs for the direct compensation of executive officers: the Base Salary
Program, the Corporate Annual Incentive Compensation Plan and the Long-Term
Performance Incentive Compensation Plan. The intent of these programs is to
place increased emphasis on performance-based pay and reduced emphasis on base
salary in determining total compensation.
Each of the three programs is discussed in greater detail below.
The Base Salary Program
In setting base salary levels for the Chief Executive Officer, the Named
Executive Officers and other executive officers, the Committee considers the
competitive market data for executives in comparable positions in other energy
and general industry markets. In setting base salary levels, KeySpan currently
targets the 50th percentile of the comparable labor market. The Committee also
considers the experience level and actual performance achieved by the executive
as it relates to KeySpan's corporate goals in setting such executive's base
salary.
When Mr. Catell was promoted to and elected as Chairman and Chief Executive
Officer on July 31, 1998, KeySpan entered into an employment agreement with Mr.
Catell that provided a base salary of $700,000 per year, subject to such
increases that may be approved by the Board. Base salary increases based upon
performance are determined on an annual basis. Effective January 1, 2001, the
Committee and the Board approved an increase in Mr. Catell's annual base salary
to $881,000. As the Company continues to align base pay to competitive market
levels, the base salary level for the Chief Executive Officer, the Named
Executive Officers and other executive officers, compared to competitive market
data, is generally at the 50th percentile of comparable positions at this time.
In determining the base salary level for the Chief Executive Officer, the
Committee has taken into consideration Mr. Catell's performance in connection
with, among other things, an increase in overall earnings per share, total
shareholder return and the implementation of the Company's acquisition growth
strategy, including the successful integration of Eastern Enterprises during
2001. Based upon an assessment of all these factors, effective January 1, 2002,
the Committee and the Board approved an increase in annual base salary for Mr.
Catell to $938,000.
The Corporate Annual Incentive Compensation Plan
The Board of Directors adopted the Corporate Annual Incentive Compensation Plan
(the "Corporate Plan") in September 1998. The awards to be earned under the
Corporate Plan will be paid as cash based upon annual performance results. For
2001, the performance measurement period included the twelve-month period from
January 1, 2001 to December 31, 2001. The awards for this period were paid in
March 2002. The Corporate Plan provides annual incentive awards to officers and
all management employees who, by the nature and scope of their positions,
regularly and directly make a significant contribution to the success of KeySpan
in the achievement of corporate goals that the Committee believes are important
to the shareholders of KeySpan. The specific corporate goals for the Corporate
Plan are established by management and reviewed and approved by the Committee
and the Board of Directors. The Corporate Plan is intended to improve
shareholder return and corporate performance and includes goals which encourage
increased return on equity, improved cash flow, improved corporate earnings
results, improved competitive position, improved customer satisfaction, improved
employee satisfaction and control of operating expenses. During 2001, a
corporate diversity incentive was introduced as a performance measure in the
Corporate Plan. Incentive awards as a percentage of cumulative salary paid in
connection with 2001 are based upon both Company and strategic business group
performance. The incentive award ranges are established annually by the
Committee for eligible executives and management employees in the Corporate
Plan. Incentive award levels are intended to provide awards that are competitive
within the industry at target award levels when performance results are
achieved.
The 2001 Corporate Plan provided for award opportunities to executives which
ranged from zero, if below target performance levels, up to 80% of cumulative
paid salary at target performance levels, with a maximum award potential of 160%
of cumulative paid salary at maximum performance levels. For 2001, the Chief
Executive Officer had a target award level of 80% of cumulative paid salary with
performance criteria based upon return on equity, consolidated earnings per
share, cash flow and our diversity incentive. Based upon actual 2001 results, an
award payout of 32% of
11
cumulative paid salary was approved by the Committee and paid in March 2002. The
amount reflected in the Summary Compensation table that was paid in March 2001
for performance during 2000 represented a payout of 115% of cumulative paid
salary. Upon the recommendation of the Hay Group for the year 2002, the Chief
Executive Officer's target award remains at 80% of cumulative paid salary. All
executives in the Corporate Plan have a portion of their incentive award linked
directly to overall corporate performance goals and to the results achieved in
their respective strategic business group.
Pursuant to the Corporate Plan, commencing with the 2001 plan year, the Chief
Executive Officer, the Named Executive Officers and certain other executives may
elect to defer between 10% to 50% of their annual cash award and purchase
deferred stock units ("DSUs"), which track the performance of the Company's
Common Stock but do not possess voting rights. Executives will also receive a
20% match by the Company on the amount deferred in each year. The number of DSUs
credited shall be determined by utilizing the lower of either (i) the average of
the high and low price per share of Common Stock on the first trading date of
the calendar quarter or (ii) the average of the high and low price per share of
KeySpan Common Stock on the last trading day of the calendar quarter, in which
the contributions are received. The DSU, must be deferred until retirement or
resignation and are payable in Common Stock. The match on the deferral is also
payable in Common Stock upon retirement or in the event of an executive's
disability, death or upon change of control. The match is forfeited in the event
of the executive's resignation prior to retirement. The Chief Executive Officer
elected to defer 50% of his 2001 annual award, paid in March 2002, into a DSU
account.
Each DSU shall be in the form of an unfunded bookkeeping entry and shall
represent one full or fractional share of KeySpan Common Stock. The Company will
maintain a book entry account reflecting the DSUs purchased by each executive.
The account will be credited with dividend equivalents in the amount of any cash
dividend paid from time to time converted to a stock unit or fraction of a unit
in the executive's DSU account as of such dividend date.
The Long-Term Performance Incentive Compensation Plan
As a result of the Committee's review of the competitiveness of KeySpan's total
compensation program, and the Hay Group's review of the long-term incentive
plans used by a majority of energy companies, the Committee recommended, and the
Board of Directors adopted, the KeySpan Long-Term Performance Incentive
Compensation Plan (the "Incentive Plan") in March 1999. The Incentive Plan was
subsequently approved by the shareholders at the May 1999 Annual Meeting of
Shareholders. On May 10, 2001, shareholders approved an amendment to the
Incentive Plan which increased the authorized shares to a total of 19,250,000.
As of March 1, 2002, approximately 12,492,085 stock options and 116,893
restricted stock grants have been awarded under the Incentive Plan.
The Incentive Plan provides for the award of incentive stock options,
non-qualified stock options, performance stock awards and restricted shares to
key employees and non-employee directors and consultants of KeySpan and its
subsidiaries as determined by the Committee. The purpose of the Incentive Plan
is to optimize KeySpan's performance through incentives that directly link the
participant's goals to those of KeySpan's shareholders and to attract and retain
participants who make significant contributions to the success of KeySpan.
The stock option component of the Incentive Plan entitles the participants to
purchase shares of Common Stock at an exercise price per share determined by the
Committee that is no less than the closing price of the Common Stock on the New
York Stock Exchange on the date of the grant.
On February 13, 2001, based upon the performance of the Chief Executive Officer,
the Committee approved a grant to Mr. Catell of 267,000 non-qualified stock
options to purchase Common Stock at an exercise price of $39.50 (vesting on a
pro rata basis over a three to five-year period, depending upon Company
performance, or fully upon retirement, whichever occurs first).
Since 2001, the option award process includes a performance goal feature in the
stock option vesting schedule for officers which directly links total
shareholder return ("TSR") for KeySpan Common Stock to the options granted. The
TSR goal measures the total return to shareholders of KeySpan Common Stock
including price appreciation and dividends. KeySpan's performance will be
measured against the S&P Utility Group over a three-year performance period,
with KeySpan's goal to be in the top third of those comprising the group.
Options were granted with a five-year pro rata vesting schedule, rather than the
traditional three-year pro rata vesting schedule. If, at the end of the
three-year
12
performance period, KeySpan's TSR is within the top third of companies that
comprise the S&P Utility Group, then those options that are not yet vested will
vest immediately. If the TSR goal is not achieved in year three, the remaining
unvested options will continue to vest on the five-year schedule.
On March 1, 2002, the Committee approved a grant to Mr. Catell of 372,000
non-qualified stock options and 13,295 shares of restricted stock. The options
shall vest pro rata over a three to five-year period, depending upon the
Company's performance under the TSR goals. However, in the event of retirement,
the options shall vest pro rata using the number of full months of employment
from the grant date to retirement, divided by 36 months.
Beginning in 2002, in order to further align the interests of shareholders, in
the award of restricted stock to officers, a share price performance target
shall be included in the award agreement. A four year share price target has
been established and linked to the lapse of restrictions. The minimum
restriction period is two years. If the target share price is met at any time
between years two and four, the restrictions shall lapse. However, if the target
is not achieved by the fourth year, restrictions shall not lapse until the sixth
year. In the event of retirement, the restrictions on the shares granted shall
lapse on a pro rata basis using the full months of employment from the grant
date to retirement, divided by 48 months.
During 2002, an aggregate of 2,132,800 non-qualified stock options and 74,195
shares of restricted common stock were granted to all officers as a group. The
grants of non-qualified stock options and restricted Common Stock were made to
executives generally determined on the basis of the executive's performance and
position within KeySpan and the level of such executive's compensation to focus
such executives on the long-term interests of shareholders.
The Committee believes that performance based stock options and restricted
shares are directly linked to KeySpan's shareholder value. As the value of
KeySpan's Common Stock is generally considered the strongest indicator of
overall corporate performance, these awards provide a strong incentive to
participants by linking compensation to the future value of KeySpan's Common
Stock.
Policy with Respect to Section 162(m) Deduction Limit
Under Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), the Company cannot deduct compensation in excess of $1,000,000 paid in
any year to the Chief Executive Officer or any of the Named Executive Officers
whose compensation must be detailed in the Proxy Statement. Certain benefit
plans and compensation paid under plans that are performance-based are not
subject to the $1,000,000 annual limit if certain requirements are satisfied.
Although the Company's compensation policy is generally designed to relate
compensation to performance, certain payments do not meet such requirement
because they allow the Committee and the Board to exercise discretion in setting
compensation. The Committee is of the opinion that it is in the Company's best
interest for the Committee and the Board to retain discretion in order to
preserve flexibility in compensating such executive officers, especially in
light of an increasingly competitive marketplace.
Conclusion
The Committee believes that KeySpan's executive compensation policies and
programs serve both the interests of KeySpan and its shareholders effectively.
The various compensation programs are appropriately balanced to provide the
motivation for executives to contribute to KeySpan's overall success and enhance
the value of KeySpan for the shareholders' benefit, and are consistent with
compensation programs for companies of similar size in the utility industry
generally and in the energy industry specifically.
The Committee will continue to monitor the effectiveness of KeySpan's total
compensation program to meet the current and the future needs of KeySpan.
Compensation and Nominating Committee
Edward D. Miller, Chairman James L. Larocca
Donald H. Elliott Stephen W. McKessy
James R. Jones James Q. Riordan
13
STOCK OPTION GRANTS TABLE
The following table provides information on stock option grants during 2001 for
the Named Executive Officers and the grant date present value of such officers'
unexercised options at December 31, 2001:
Percent of
Number of Total Grant Date
Securities Number of Option Present
Underlying Options Exercise Value of
Options Granted to Price Expiration Options(2)
Name Granted(1) Employees ($/Share) Date ($)
- --------------------------------------------------------------------------------------------------------------------------------
R.B. Catell 267,000 11.84 39.50 Feb. 12, 2011 1,412,430
- --------------------------------------------------------------------------------------------------------------------------------
C.G. Matthews 124,000 5.49 39.50 Feb. 12, 2011 655,960
- --------------------------------------------------------------------------------------------------------------------------------
R.J. Fani 60,000 2.66 39.50 Feb. 12, 2011 317,400
-------------------------------------------------------------------------------------------------------
18,200 .80 36.59 July 1, 2011 96,278
- --------------------------------------------------------------------------------------------------------------------------------
W.P. Parker Jr. 60,000 2.66 39.50 Feb. 12, 2011 317,400
-------------------------------------------------------------------------------------------------------
18,200 .80 36.59 July 1, 2011 96,278
- --------------------------------------------------------------------------------------------------------------------------------
G. Luterman 60,000 2.66 39.50 Feb. 12, 2011 317,400
- --------------------------------------------------------------------------------------------------------------------------------
(1) Options vest ratably over a five-year period with the first one-fifth
having vested on February 13, 2002 (accelerated vesting in third year
applies upon achievement of certain prescribed goals).
(2) Options have been valued using the Black-Scholes option pricing model
adapted to reflect the specific provisions of the Company's Incentive
Plan and related assumptions regarding exercisability. The values shown
are theoretical and do not necessarily reflect the actual values that
may be realized upon the future exercise of the options. Any actual
value will result to the extent that the market value of the Common
Stock at a future date exceeds the exercise price. Assumptions for
modeling are based on the dividend yield, risk-free rate of return,
standard deviation of prices over a relevant period as of the grant date
and the expected lives of the options.
Stock Option Exercises Table
The following table provides information on aggregated option exercises in 2001
and fiscal year end option values for the Named Executive Officers:
-------------------------------------------- -------------------------------------------
Shares Number of Securities Underlying Value of In-The-Money
Acquired Unexercised Options at Fiscal Year End Options at Fiscal Year End
on Value -------------------------------------------- -------------------------------------------
Name Exercise Realized
Exercisable Unexercisable Total Exercisable Unexercisable Total
- -----------------------------------------------------------------------------------------------------------------------------------
R.B. Catell 0 $0 906,467 710,334 1,616,801 $6,402,739 $4,960,672 $11,363,411
- -----------------------------------------------------------------------------------------------------------------------------------
C.G. Matthews 54,666 $529,227 323,734 319,000 642,734 $2,314,614 $2,163,937 $4,478,551
- -----------------------------------------------------------------------------------------------------------------------------------
R.J. Fani 82,366 $1,013,283 32,000 176,534 208,534 $231,113 $1,126,321 $1,357,434
- -----------------------------------------------------------------------------------------------------------------------------------
W. P. Parker Jr. 71,666 $1,111,664 103,067 176,534 279,601 $604,637 $1,102,508 $1,617,145
- -----------------------------------------------------------------------------------------------------------------------------------
G. Luterman 20,000 $311,280 61,799 176,667 238,467 $575,860 $1,242,513 $1,818,373
- -----------------------------------------------------------------------------------------------------------------------------------
14
Security Ownership of Management
The following table sets forth information as of March 1, 2002, with respect to
the number of shares of Common Stock beneficially owned and Common Stock
equivalents credited to each director, each Named Executive Officer and all
directors and executive officers as a group. Unless otherwise indicated, each
person shown below has the sole power to vote and the sole power to dispose of
the shares of Common Stock listed as beneficially owned. The percentage of
shares held by any one person, or all directors and executives as a group, does
not exceed 1% of all outstanding shares of KeySpan's Common Stock.
Name of Total of Common Common Stock Common Stock
Beneficial Owner Stock Beneficially Beneficially Owned Equivalents(1)
Owned & Equivalents
- -------------------------------------------------------------------------------------------------------------------------
L. H. Affinito(2) 10,608 4,300(3) 6,308
- -------------------------------------------------------------------------------------------------------------------------
R. B. Catell 1,310,589(4) 1,310,226(4) 363
- -------------------------------------------------------------------------------------------------------------------------
A. S. Christensen 17,863 6,974(3) 10,889
- -------------------------------------------------------------------------------------------------------------------------
H. R. Curd 32,096 23,300(3) 8,796
- -------------------------------------------------------------------------------------------------------------------------
D. H. Elliott 26,274 4,466(3) 21,808
- -------------------------------------------------------------------------------------------------------------------------
R. J. Fani 117,694(4) 117,623(4) 70
- -------------------------------------------------------------------------------------------------------------------------
A. H. Fishman 19,396 6,633(3) 12,763
- -------------------------------------------------------------------------------------------------------------------------
V. L. Fuller(2) 10,261 3,633(3) 6,628
- -------------------------------------------------------------------------------------------------------------------------
J. A. Ives 64,730 63,237(3)(5) 1,493
- -------------------------------------------------------------------------------------------------------------------------
J. R. Jones 9,806 4,657(3) 5,149
- -------------------------------------------------------------------------------------------------------------------------
J. L. Larocca 14,600 7,659(3) 6,941
- -------------------------------------------------------------------------------------------------------------------------
G. Luterman 121,661(4) 121,651(4) 10
- -------------------------------------------------------------------------------------------------------------------------
C. G. Matthews(6) 542,856(4) 542,493(4) 363
- -------------------------------------------------------------------------------------------------------------------------
S. W. McKessy 15,092 4,767(3) 10,325
- -------------------------------------------------------------------------------------------------------------------------
E. D. Miller 26,678 11,938(3) 14,739
- -------------------------------------------------------------------------------------------------------------------------
W. P. Parker Jr. 191,094(4) 190,986(4) 109
- -------------------------------------------------------------------------------------------------------------------------
J. Q. Riordan(2) 45,107 24,800(3) 20,307
- -------------------------------------------------------------------------------------------------------------------------
All directors and 3,761,054 3,628,207 132,847
executives as a group,
including those named
above, a total of 33
persons.
- -------------------------------------------------------------------------------------------------------------------------
(1) The term "Common Stock Equivalents" refers to units of value which track
the performance of Common Stock. Such units do not possess voting rights
and have been issued pursuant to the Directors' Deferred Compensation Plan
or the Company's supplemental employee stock savings plan.
(2) Effective May 9, 2002, both Ms. Affinito and Mr. Riordan will retire, and
Ms. Fuller will resign, as directors of the Company.
(3) Includes 3,300 shares issuable pursuant to options that vested on February
13, 2002.
(4) Includes shares issuable pursuant to options that are either currently
exercisable or exercisable within 60 days of the date of this Proxy
Statement as follows: Mr. Catell - 1,228,201 shares; Mr. Matthews - 522,734
shares; Mr. Fani - 104,307 shares; Mr. Parker - 175,374 shares; and Mr.
Luterman - 115,466 shares.
(5) Includes 55,390 shares issuable pursuant to options that vested on November
8, 2000.
15
(6) Effective March 1, 2002, Mr. Matthews has retired as a director and officer
of the Company.
PERFORMANCE GRAPH
The following graph presents, for the period beginning May 28, 1998 through
December 31, 2001, a comparison of cumulative total shareholder returns for
KeySpan, the Standard & Poor's Utilities Index and the Standard & Poor's 500
Index.
[PERFORMANCE GRAPH]
May 28, 1998 December 31, 1998 December 31, 1999 December 31, 2000
------------ ----------------- ----------------- -----------------
KeySpan $100.00 $ 93.99 $ 74.96 $143.92
S&P Utilities Index $100.00 $108.57 $ 99.66 $158.99
S&P 500 Index $100.00 $113.65 $137.87 $125.33
December 31, 2001
$124.53
$110.78
$110.48
Assumes $100 invested on May 28, 1998 in shares of KeySpan Common Stock, the S&P
Utilities Index and the S&P 500 Index, and that all dividends were reinvested.
16
COMPENSATION UNDER RETIREMENT PLANS
The Company's retirement plan provides retirement benefits based upon the
individual participant's years of service and final average annual compensation
(as defined below). The following table sets forth the estimated annual
retirement benefits (exclusive of Social Security payments) payable to
participants in the specified compensation and years-of-service categories,
assuming continued active service until normal retirement age and that the
Company's retirement plan is in effect at such time.
Years of Service
------------------------------------------------------------------------------------------------------------------
Remuneration 20 25 30 35 40 45
- ------------
--------------- --------------- ---------------- --------------- --------------- -------------
$200,000. . . . . $60,000 $75,000 $90,000 $105,000 $120,000 $135,000
$275,000. . . . $82,500 $103,125 $123,750 $144,375 $165,000 $185,625
$350,000. . . . . $105,000 $131,250 $157,500 $183,750 $210,000 $236,500
$425,000. . . . . $127,500 $159,375 $191,250 $223,125 $255,000 $286,875
$500,000. . . . . $150,000 $187,500 $225,000 $262,500 $300,000 $337,500
$575,000. . . . . $172,500 $215,625 $258,750 $301,875 $345,000 $388,125
$650,000. . . . . $195,000 $243,750 $292,500 $341,250 $390,000 $438,750
$725,000. . . . . $217,500 $271,875 $326,250 $380,625 $435,000 $489,375
$800,000. . . . . $240,000 $300,000 $360,000 $420,000 $480,000 $540,000
$875,000. . . . . $262,500 $328,125 $393,750 $459,375 $525,000 $590,625
$950,000. . . . . $285,000 $356,250 $427,500 $498,750 $570,000 $641,250
$1,025,000. . . . $307,500 $384,375 $461,250 $538,125 $615,000 $691,875
$1,100,000. . . . $330,000 $412,500 $495,000 $577,500 $660,000 $742,500
$1,175,000. . . . $352,500 $440,625 $528,750 $616,875 $705,000 $793,125
$1,250,000. . . . $375,000 $468,750 $562,500 $656,250 $750,000 $843,750
$1,325,000. . . . $397,500 $496,875 $596,250 $695,625 $795,000 $894,375
$1,400,000. . . . $420,000 $525,000 $630,000 $735,000 $840,000 $945,000
$1,475,000. . . . $442,500 $553,125 $663,750 $774,375 $885,000 $995,625
$1,550,000. . . . $465,000 $581,250 $697,500 $813,750 $930,000 $1,046,250
$1,625,000 $487,500 $609,375 $731,250 $853,125 $975,000 $1,096,875
- ----------------------
For purposes of the retirement plan, the final average annual compensation is
the average annual compensation for the highest five consecutive years of
earnings during the last ten years of credited service. The annual salary and
bonus for the current year for the Named Executive Officers is indicated in the
Annual Compensation columns of the Summary Compensation Table.
The number of years of credited service for the Chief Executive Officer and,
with the exception of Mr. Matthews, each of the Named Executive Officers
currently employed by the Company, based on continued service to age 65, normal
retirement age, will be as follows: R. B. Catell - 45 years, R. J. Fani - 42
years, W. P. Parker - 43 years and G. Luterman - 10 years. As a result of Mr.
Matthews' retirement, his actual years of credited service to the Company will
be 36 years.
The Code limits the annual compensation taken into consideration for, and the
maximum annual retirement benefits payable to, a participant under the Company's
retirement plan. For 2001, these limits were $170,000 and $140,000,
respectively. Annual retirement benefits attributable to amounts in excess of
these limits are provided for under the Excess Benefit Plan (the "Benefit Plan")
and not under the Company's retirement plan.
17
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Neither Messrs. Elliott, Jones, Larocca, McKessy, Miller or Riordan is an
officer or employee, or former officer or employee, of KeySpan or any of its
subsidiaries. No interlocking relationship exists between the members of
KeySpan's Board or Compensation and Nominating Committee and the board of
directors or compensation committee of any other company, nor has any such
interlocking relationship existed in the past.
AGREEMENTS WITH EXECUTIVES
Employment Agreements
In September 1998, KeySpan entered into an employment agreement with Mr. Robert
B. Catell relating to his services as Chairman and Chief Executive Officer which
was amended on February 24, 2000. The agreement covers the period beginning July
31, 1998 and ending July 31, 2003. In addition to base salary, annual and long-
term incentive compensation and other employee benefits, Mr. Catell's employment
agreement provides for severance benefits to be paid to him in the event his
employment is terminated by KeySpan without cause or if Mr. Catell terminates
his employment for good reason. The severance benefits to be provided during the
severance period would include: (a) payment to Mr. Catell in a single lump sum
of (i) all accrued obligations and (ii) the aggregate amount of salary and
annual incentive compensation that he would have received had he remained
employed through the end of the employment period; (b) continued accrual of
Supplemental Executive Retirement Plan benefits (as provided in the agreement)
during the severance period; and (c) continuation of all other employment
benefits, as if he had remained employed by KeySpan during the severance period.
If Mr. Catell voluntarily terminates his employment, other than for good reason,
the Company shall pay the accrued obligations to Mr. Catell and he shall be
entitled to supplemental retirement benefits. If Mr. Catell's employment is
terminated following a "change of control" of KeySpan (as defined in the
agreement), the severance period is defined to mean the period from the date of
termination through the end of the employment period, or, if longer, the third
anniversary of the date of termination.
KeySpan also entered into an employment agreement on September 1, 1999 with Mr.
Craig G. Matthews relating to his services as President and Chief Operating
Officer. The agreement covered the period beginning September 1, 1999 through
August 31, 2003. The agreement was amended, effective March 2, 2001, to reflect
Mr. Matthews' promotion to Vice Chairman and Chief Operating Officer with the
terms of the amended agreement ending on March 2, 2003 or, at the option of Mr.
Matthews, on August 31, 2003. In addition to base salary, annual and long- term
incentive compensation and other employee benefits, Mr. Matthews' employment
agreement provided for severance benefits to be paid to him in the event his
employment was terminated by KeySpan without cause or if Mr. Matthews terminated
his employment for good reason. Nevertheless, as a result of his retirement
without cause, the Company will pay the accrued obligations to him without
severance benefits and he is entitled to supplemental retirement benefits
provided by the benefit plan.
KeySpan also is party to an employment agreement entered into on July 29, 1999
with Mr. Gerald Luterman relating to his services as Senior Vice President and
Chief Financial Officer. The agreement covers the period beginning July 29, 1999
and ending July 31, 2002. In addition to base salary, annual and long-term
incentive compensation and other employee benefits, Mr. Luterman's employment
agreement provides for severance benefits to be paid to him in the event his
employment is terminated by KeySpan without cause or if Mr. Luterman terminates
his employment for good reason. The severance benefits to be provided during the
severance period would include: (a) payment to Mr. Luterman in a single lump sum
of (i) all accrued obligations and (ii) the aggregate amount of salary and
annual target incentive compensation that he would have received had he remained
employed through the end of the employment period; (b) continued accrual and
vesting of benefits under the benefit plan during the severance period; and (c)
continuation of all other employment benefits, as if he had remained employed by
KeySpan during the severance period. If Mr. Luterman voluntarily terminates his
employment, other than for good reason, the Company shall pay the accrued
obligations to Mr. Luterman and he shall be entitled to supplemental retirement
benefits provided by the Benefit Plan. If Mr. Luterman's employment is
terminated following a "change of control" of KeySpan (as defined in the
agreement), he is eligible to receive the severance benefits provided under his
agreement as an offset, and not in addition to, any severance payments from the
Senior Executive Change of Control Severance Plan (the "Change of Control
Plan").
18
Senior Executive Change of Control Severance Plan
With the exception of Mr. Catell, 48 officers of the Company and certain
subsidiaries are participants in the Change of Control Plan. The Change of
Control Plan, as amended, provides for the payment of severance and other
benefits upon certain qualifying terminations of such executives within two (2)
years of a "change of control" of the Company (as defined in the Change of
Control Plan). The protection period under the Change of Control Plan commences
upon the date that KeySpan enters into a definitive agreement, the transaction
contemplated by which will, when consummated, constitute a change of control
under the Change of Control Plan and will continue for a period of two years
after the effective date of the actual change of control. The benefits payable
under the Change of Control Plan generally provide for (i) the payment of the
sum of the executive's base salary, incentive compensation and compensation
previously deferred by the executive, all through the date of termination; (ii)
the payment of an amount equal to three times an executive's base salary and
incentive compensation for any President, any Executive Vice Presidents and
certain Senior Vice Presidents of KeySpan and certain subsidiaries and two times
an executive's base salary and incentive compensation for other officers; (iii)
the payment of amounts under retirement plans; and (iv) the continuation of
certain other benefits for a period of two to three years depending on the
executive's position with the Company. The Change of Control Plan expires
October 30, 2003, unless extended for an additional period by the Board of
Directors; provided that, following a change of control, the Change of Control
Plan shall continue until after all the executives who become entitled to any
payments thereunder shall have received such payments in full.
Security Ownership of Certain Beneficial Owners
As of March 1, 2002, there were no beneficial owners of more than 5% of the
Company's Common Stock.
PROPOSAL 2. RATIFICATION OF DELOITTE & TOUCHE LLP AS
INDEPENDENT PUBLIC ACCOUNTANTS
In accordance with the recommendations of its Audit Committee, the Board of
Directors recommends that the shareholders ratify the appointment of the firm of
Deloitte & Touche LLP ("Deloitte & Touche"), as independent public accountants
to audit the books, records and accounts of KeySpan and its subsidiaries for the
year ending December 31, 2002. Arthur Andersen LLP ("Arthur Andersen") served as
KeySpan's independent public accountants since May 1998. On March 29, 2002,
KeySpan's Board of Directors, upon recommendation of the Audit Committee,
determined not to renew the engagement of Arthur Andersen and appointed Deloitte
& Touche as independent public accountants.
During the past two fiscal years, and the subsequent interim period through
March 29, 2002, there has been no report on the financial statements of the
Company by Arthur Andersen which contained an adverse opinion or a disclaimer of
opinion, or was qualified or modified as to uncertainty, audit scope, or
accounting principles. During the past two fiscal years, and the subsequent
interim period through March 29, 2002, there have been no disagreements with
Arthur Andersen on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure which, if not resolved to
the satisfaction of Arthur Andersen, would have caused the firm to make
reference to the subject matter of such disagreements in connection with its
report.
A representative of both Arthur Andersen and Deloitte & Touche will attend the
Annual Meeting and be available to answer shareholder questions and will have
the opportunity to make a statement if they desire to do so.
Audit Fees
Audit fees paid by the Company to Arthur Andersen for the fiscal year ended
December 31, 2001, were approximately $1,065,000 and audit related fees amounted
to approximately $874,000. Audit related services
19
generally include fees for statutory audits, benefit plan audits, accounting
consultation, various attest services under professional standards, assistance
with registration statements, comfort letters and consents.
All Other Fees
All other fees paid by the Company to Arthur Andersen for the fiscal year ended
December 31, 2001, were approximately $1,260,000. Such fees generally include
tax consultation and tax services.
The Audit Committee has reviewed the nature and scope of the services provided
by Arthur Andersen and considers such to have been compatible with the
maintenance of Arthur Andersen's independence throughout its service to the
Company.
The Audit Committee has also determined that the scope of services to be
provided by Deloitte & Touche in 2002 will generally be limited to audit and
audit related services and tax services. The Audit Committee will expressly
approve the provision of any services by Deloitte & Touche outside the scope of
the foregoing services if the additional services involve fees in excess of
$50,000.
The affirmative vote of a majority of the votes cast at the meeting is required
for approval of this proposal.
The Board of Directors unanimously recommends a vote FOR this proposal.
OTHER INFORMATION
Report of the Audit Committee
The Audit Committee of the Board of Directors of KeySpan is composed of six
independent, non-employee directors and operates under a written charter adopted
by the Board of Directors.
We have reviewed and discussed with management the Company's audited financial
statements as of, and for, the year ended December 31, 2001.
We have discussed with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61, Communication with Audit
Committees, as amended, by the Auditing Standards Board of the American
Institute of Certified Public Accountants.
We have received and reviewed the written disclosures and the letter from the
independent auditors required by Independence Standard No.1, Independence
Discussions with Audit Committees, as amended, by the Independence Standards
Board, discussed with the auditors any relationships that may impact their
objectivity and independence and satisfied themselves as to the auditors'
independence.
Based on the reviews and discussions referred to above, we recommended to the
Board of Directors that the audited financial statements referred to above be
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2001.
Audit Committee
Alan H. Fishman, Chairman Vicki L. Fuller
Lilyan H. Affinito Stephen W. McKessy
Howard R. Curd James Q. Riordan
20
Directors and Officers Liability Insurance and Indemnity
KeySpan currently has in place director and officer ("D&O") liability insurance
for the purpose of reimbursing the Company when it has indemnified its directors
and officers. D&O liability insurance also provides direct payment to KeySpan's
directors and officers under certain circumstances when KeySpan has not
previously provided indemnification. KeySpan also has liability insurance which
provides fiduciary coverage for KeySpan, its directors, officers and employees
for any alleged breach of fiduciary duty under the Employee Retirement Income
Security Act. The D&O and fiduciary liability insurances were purchased from
Associated Electric & Gas Insurance Services for a one-year period commencing
May 28, 2001 at a total cost of $1,769,515. The Company will renew the D&O
liability and fiduciary insurances for a one-year period commencing May 28,
2002.
Shareholder Rights Plan
On March 30, 1999, the Board of Directors entered into a Rights Agreement
pursuant to which one preferred stock purchase right (a "Right") per share of
Common Stock will be distributed as a dividend to shareholders of record on the
close of business on April 14, 1999. Each Right, when exercisable, will entitle
the holder thereof to purchase one one-hundredth of a share of Series D
Preferred Stock at a price of $95.00 per share. The Rights will be exercisable
only if a person or a group acquires 20% or more of the outstanding shares of
Common Stock or announces a tender offer following which it would hold 20% or
more of such outstanding Common Stock. The Rights entitle the holders, other
than the acquiring person, to purchase Common Stock having a market value of two
times the exercise price of the Right. If, following the acquisition by a person
or group of 20% or more of KeySpan's outstanding shares of Common Stock, KeySpan
were acquired in a merger or other business combination, each Right would be
exercisable for that number of the acquiring company's shares of common stock
having a market value of two times the exercise price of the Right. Subject to
the terms of the Rights Agreement, KeySpan may redeem the Rights at $.01 per
Right at any time until ten days following the occurrence of an event that
causes the Rights to become exercisable for Common Stock. The Rights expire in
ten years.
The foregoing description of the Rights Agreement and of the Rights is qualified
in its entirety by the terms of the Rights Agreement, dated March 30, 1999, by
and between KeySpan and the Rights Agent, a copy of which was filed as an
exhibit to KeySpan's Report on Form 8-K dated March 30, 1999.
Notice to Shareholders of a Change of Rights Agent
EFFECTIVE JUNE 1, 2002, (THE "DISCHARGE DATE"), THE BANK OF NEW YORK WILL BE
DISCHARGED AS THE RIGHTS AGENT UNDER THE RIGHTS AGREEMENT. EFFECTIVE UPON THE
DISCHARGE DATE, KEYSPAN WILL APPOINT EQUISERVE TRUST COMPANY, N.A. TO SERVE AS
THE SUCCESSOR RIGHTS AGENT UNDER THE RIGHTS AGREEMENT.
Involvement in Certain Proceedings
In May 2000, ContiFinancial Corporation ("ContiFinancial") filed a voluntary
petition for relief under the provisions of Chapter 11 of the United States
Bankruptcy Code. At the time of such filing, Alan H. Fishman was serving as
President and Chief Executive Officer of ContiFinancial. Mr. Fishman joined
ContiFinancial in July 1999 and resigned in March 2001.
Material Litigation
KeySpan has been cooperating in preliminary inquiries regarding trading in the
Company's Common Stock by individual officers of KeySpan prior to the July 17,
2001 announcement that KeySpan was taking a special charge in its energy
services business and otherwise reducing its 2001 earnings forecast. These
inquiries are being conducted by the U.S. Attorney's Office, Southern District
of New York, and the Securities and Exchange Commission ("SEC"). As part of its
continuing inquiry, on March 5, 2002, the SEC issued a formal order of
investigation, pursuant to which it will review the trading activity of certain
Company insiders from May 1, 2001 to the present, as well as the Company's
compliance with its reporting rules and regulations, generally during the period
following the acquisition of the Roy Kay companies which are part of our energy
services business, through
21
the July 17th announcement.
In addition, KeySpan and certain of its officers and directors are defendants in
a number of class action lawsuits filed in the United States District Court for
the Eastern District of New York after the July 17th announcement. These
lawsuits allege, among other things, violations of Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934, as amended ("Exchange Act"), in connection
with disclosures relating to or following the acquisition of the Roy Kay
companies. Finally, in October 2001, a shareholder's derivative action was
commenced in the same court against certain officers and directors of KeySpan,
alleging, among other things, breaches of fiduciary duty, violations of the New
York Business Corporation Law and violations of Section 20(a) of the Exchange
Act. Each of the proceedings seeks monetary damages in an unspecified amount. We
are unable to determine the outcome of these proceedings and what effect, if
any, such outcome will have on our financial condition, results of operations or
cash flows.
Deadline For Shareholder Proposals
Shareholder proposals for the 2003 Annual Meeting must be received by the
Secretary at KeySpan's principal executive office at One MetroTech Center,
Brooklyn, New York 11201-3850, Attention: Secretary, by December 5, 2002, to be
considered by the Company for possible inclusion in the proxy materials for the
2003 Annual Meeting.
In addition, all shareholder proposals or nominations for election of a director
for the 2003 Annual Meeting must be submitted to the Company in accordance with
Section 2.7 of the Company's By-Laws not less than 60 nor more than 90 calendar
days in advance of the anniversary date of the 2002 Annual Meeting.
Additional Information
KeySpan's Annual Report for the period ended December 31, 2001 is being mailed
to shareholders on or about the date of this Proxy Statement. KeySpan files an
Annual Report on Form 10-K with the SEC which includes additional information
concerning KeySpan and its operations. The Company's Annual Report or Annual
Report on Form 10-K, except for exhibits, will be furnished at no cost to
shareholders upon written request to: Secretary, KeySpan Corporation, One
MetroTech Center, Brooklyn, New York 11201-3850.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires KeySpan's directors, executive
officers and persons who own more than ten percent (10%) of a registered class
of KeySpan's equity securities to file with the SEC initial reports of
beneficial ownership and reports of changes in beneficial ownership of Common
Stock and other equity securities of KeySpan. Executive officers, directors and
greater than ten percent (10%) shareholders are required by SEC regulation to
furnish KeySpan with copies of all Section 16(a) forms which they file.
To KeySpan's knowledge, based solely on review of information furnished to
KeySpan, reports filed through KeySpan and representations that no other reports
were required, all Section 16(a) filing requirements applicable to its
directors, executive officers and greater than ten percent (10%) beneficial
owners were complied with during the twelve-month period ended December 31,
2001, except that Donald H. Elliott reported a delinquent Form 4 transaction on
his Form 5 report and William C. Thompson, Jr. reported two delinquent Form 4
transactions on his Form 5 report. Additionally, Mr. Wallace P. Parker Jr.
reported a delinquent transaction on his current Form 5 report which should have
been reported on a Form 5 report for the period ended December 31, 2000.
Method and Cost of Solicitation of Proxies
KeySpan will bear the cost of soliciting proxies. In addition to the use of the
mails, proxies may be solicited personally, by telephone or through the Internet
by KeySpan directors, officers, employees and agents for no additional
compensation. In addition, KeySpan will reimburse brokers, bank nominees and
other institutional holders for their reasonable out-of-pocket expenses in
forwarding proxy materials to the beneficial owners of the Company's Common
Stock.
22
Disclosure of "Broker Non-Votes" And Abstentions
SEC rules provide that specifically designated blank spaces are provided on the
proxy card for shareholders to mark if they wish either to withhold authority to
vote for one or more nominees for director or to abstain on one or more of the
proposals. Votes withheld in connection with the election of one or more of the
nominees for director will not be counted as votes cast for or against such
individuals. With respect to the proposal relating to selection of auditors,
abstentions are not counted in determining the number of votes cast in
connection with this proposal, since New York State law requires a majority of
only those votes cast "for" or "against" approval, while broker non-votes are
treated as shares not entitled to vote, thus giving both abstentions and
non-votes no effect.
All abstentions and broker non-votes are counted towards the establishment of a
quorum.
Confidential Voting
KeySpan has adopted a policy to the effect that all proxy (voting instruction)
cards, ballots and vote tabulations which identify the particular vote of a
shareholder are to be kept secret from KeySpan, its directors, officers and
employees. Accordingly, proxy cards are returned in envelopes addressed to the
tabulator, EquiServe, which receives and tabulates the proxies and is
independent of KeySpan. The final tabulation is inspected by inspectors of
election who also are independent of KeySpan, its directors, officers and
employees. The identity and vote of any shareholder shall not be disclosed to
KeySpan, its directors, officers or employees, nor to any third party except (i)
to allow the independent inspectors of election to certify the results of the
vote to KeySpan, its directors, officers and employees; (ii) as necessary to
meet applicable legal requirements and to assert or defend claims for or against
KeySpan; (iii) in the event of a proxy solicitation based on an opposition proxy
statement filed, or required to be filed, with the SEC; or (iv) in the event a
shareholder has made a written comment on such form of proxy.
Other Matters
As of the date of this Proxy Statement, KeySpan knows of no business that will
be presented for consideration at the Annual Meeting of Shareholders other than
the proposals discussed above. If any matter is properly brought before the
meeting for action by the shareholders, proxies in the form returned to KeySpan
will be voted in accordance with the recommendation of the Board of Directors
or, in the absence of such a recommendation, in accordance with the judgment of
the proxy holder.
By Order of the Board of Directors
Robert B. Catell
Chairman and Chief Executive Officer
23
P
R
O
X
Y
KEYSPAN CORPORATION PROXY/VOTING INSTRUCTION CARD
This proxy is solicited on behalf of the Board of Directors of KeySpan
Corporation for the Annual Meeting of Shareholders on May 9, 2002
The undersigned appoints Andrea S. Christensen and James L. Larocca
each of them, with full power of substitution in each, the proxies of the
undersigned to represent the undersigned and vote all shares of KeySpan
Corporation Common Stock which the undersigned may be entitled to vote at the
Annual Meeting of Shareholders to be held on May 9, 2002, and at any adjournment
or postponement thereof, as indicated on the reverse side. In their decision,
the proxies are authorized to vote upon such other business as may properly come
before the meeting, including, without limitation, any motion to adjourn the
meeting to another time or place (including for the purpose of soliciting
additional proxies).
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned shareholder. If no direction is given, this
proxy will be voted FOR all proposals and as said proxies deem advisable on such
other matters as may properly come before the meeting.
Nominees:
01 Robert B. Catell 06 J. Atwood Ives
02 Andrea S. Christensen 07 James R. Jones
03 Howard R. Curd 08 James L. Larocca
04 Donald H. Elliott 09 Stephen W. McKessey
05 Alan H. Fishman 10 Edward D. Miller
Comments: _________________________________________
- ---------------------------------------------------
- ---------------------------------------------------
If you have written in the above space, please mark the comments notification
box on the reverse side.
-----------
See Reverse
Side
-----------
(Continued, and to be signed and dated on the reverse side.)
FOLD AND DETACH HERE
- --------------------------------------------------------------------------------
ADMISSION TICKET
KEYSPAN CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
MAY 9, 2002 AT 10:00 A.M.
TILLES CENTER FOR THE PERFORMING ARTS
Long Island University
C.W. Post Campus
720 Northern Boulevard
Greenvale, New York
Directions
By Car:
From the west: Take the Long Island Expressway (Route 495) east to Exit 39 (Glen
Cove Road). Proceed north to Route 25A (Northern Boulevard) and turn right
(east). Proceed eastward on Route 25A approximately two miles; turn right at the
fifth traffic light into the West Gate of the campus.
From the east: Take the Long Island Expressway (Route 495) west to Exit 41N
(Route 106/107 North). Continue on Route 107 north to Route 25A (Northern
Boulevard) and turn left (west). Proceed approximately 1/4 mile and turn left at
the second traffic light into the West Gate of the campus.
NOTE: You may also use the Northern State Parkway instead of the Long Island
Expressway. Use Exit 31 for Glen Cove Road north or Exit 35 for Route 107 north
and follow above directions.
By Public Transportation from New York City:
By Train: From Pennsylvania Station: Take either the Long Island Rail Road's
Port Jefferson train line to the Hicksville station or the Port
Washington-Manhasset line to the Great Neck Station or the Manhasset station or
the Oyster Bay train to the Greenvale station. The Great Neck and the Hicksville
station both have bus service to C.W. Post Campus. Taxi service to the campus is
available from the Greenvale, Manhasset, Great Neck and Hicksville stations.
Taxi service prices rage from $8 to $16. To reach Long Island Rail Road call
(516) 822-5477.
By Bus: C.W. Post is serviced by the Metropolitan Transit Authority, Long Island
Bus N20. For schedule times call the MTA at (516) 766-6722.
[X] Please mark your votes as in this example.
The shares are represented by this proxy when signed and returned will be voted
as directed by the shareholder. If no direction is given, such shares will be
voted FOR all proposals and as said Proxies deem advisable on such other matters
as may properly come before the meeting.
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote "FOR" all proposals.
- --------------------------------------------------------------------------------
1. Election of Directions (see reverse side)
FOR WITHHELD
[ ] [ ]
For, except vote withheld from the following nominee(s):
- ----------------------
2. Ratification of Deloitte & Touche LLP as independent accountants.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
- --------------------------------------------------------------------------------
I have included comments, or have included a change of address. [ ]
I already receive an Annual Report and do not wish to receive one for
this account. [ ]
I plan to attend the Annual Meeting. [ ]
Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such. If more than one trustee, all should sign.
--------------------------------
--------------------------------
SIGNATURE)S) DATE
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
[LOGO] KEYSPAN
PROXY VOTING INSTRUCTION CARD
Your vote is important. Casting your vote in one of the three ways described on
this instruction card votes all common shares of KeySpan Corporation that you
are entitled to vote and gives voting instructions for any common shares held on
your behalf in the KeySpan 401(k) Plan.
Please consider the issues discussed in the proxy statement and cast your vote
by:
. Accessing the World Wide Web site
http://www.eproxyvote.com/kse to vote via the
Internet. You can also register at this site to
access future proxy materials electronically.
. Using a touch-tone telephone to vote by phone
toll free from the U.S. or Canada. Simply dial
1-877-779-8683 and follow the instructions. For
shareholders from other locations, please call
1-201-536-8073. When you are finished voting,
your vote will be confirmed and the call will
end.
. Completing, dating, signing and mailing the proxy
card in the postage-paid envelope included with
the proxy statement or sending it to KeySpan
Corporation, P.O. Box 8535, Edison, NJ
08818-9402.
You can vote by phone or via the Internet anytime prior to May 9, 2002. You will
need the control number printed at the top of this instruction card to vote by
phone or via the Internet. If you do so, you do not need to mail in your proxy
card.