[KeySpan Letterhead]
October 16, 2000
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
KeySpan Corporation ("KeySpan") has applied to the Securities and
Exchange Commission (the "Commission") for authority to acquire the issued and
outstanding common stock of Eastern Enterprises ("Eastern"), pursuant to which
Eastern will become a direct, wholly-owned subsidiary of KeySpan (the
"Transaction"). (See File No. 70-9641) Upon consummation of the Transaction,
KeySpan will register as a holding company pursuant to Section 5 of the Act.
Eastern has filed a separate Application/Declaration with the Commission
requesting the Commission's authorization to acquire all the issued and
outstanding common stock of EnergyNorth, Inc. ("EnergyNorth") (hereafter
referred to as the "ENI Transaction"). (See File No. 70-9605) If the Commission
approves the ENI Transaction, upon consummation of such transaction, EnergyNorth
will become a direct subsidiary of Eastern, and, therefore, an indirect
subsidiary of KeySpan. The Transaction and the ENI Transaction are sometimes
collectively referred to herein as the "Mergers."
This opinion is furnished in connection with KeySpan's filing of the
Application/Declaration on Form U-1, as amended, File No. 70-9699 (the
"Financing Application") with the Commission under the Public Utility Holding
Company Act of 1935, as amended (the "Act"). The Financing Application requests
the Commission's authorization and approval, upon consummation of the Mergers
and KeySpan's registration as a holding company under Section 5 of the Act, with
respect to a program of external financing, credit support arrangements, and
other related proposals for the KeySpan System1 for the period commencing on the
date the Mergers are completed and continuing for a period of 3 years from such
date (the "Authorization Period")as follows: (i) to maintain existing financings
and enter into new financings including but not limited to the issuance of
common stock, preferred stock, long term debt and short term debt; (ii)
issuances of shares of common stock or the reissuance of shares of common stock
held in treasury under dividend reinvestment and stock-based management
incentive and employee benefit plans; (iii) issuances of debt securities by the
Utility Subsidiaries; (iv) the maintenance of existing hedging transactions and
the authority to enter into additional
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1 Capitalized terms not otherwise defined herein have the meaning ascribed to
them in the Financing Application.
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Securities and Exchange Commission
October 16, 2000
hedging transactions to the extent not exempt under Rule 52; (v) authorization
to change any wholly-owned Subsidiary's authorized capital stock capitalization;
(vi) the acquisition by KeySpan and the Subsidiaries of the equity securities of
one or more special-purpose subsidiaries organized solely to facilitate a
financing and to guaranty the securities issued by such Financing Subsidiaries,
to the extent not exempt pursuant to Rule 45(b) and Rule 52; (vii) authority for
KeySpan to acquire, directly or indirectly, the equity securities of one or more
Intermediate Subsidiaries organized exclusively for the purpose of acquiring,
financing, and holding the securities of one or more existing or future
Nonutility Subsidiaries, including but not limited to EWGs, FUCOs, Rule 58
Subsidiaries, or ETCs, provided that the Intermediate Subsidiaries may also
provide management, administrative, project development, and operating services
to such entities; (viii) authorization to invest up to 250% of KeySpan's
consolidated retained earnings in EWGs and FUCOs; (ix) authority for certain
Subsidiaries to continue to provide certain services to certain Subsidiaries;
(x) authority for KeySpan and its Subsidiaries to pay dividends out of capital
and unearned surplus as well as paid-in-capital with respect to certain
Subsidiaries, subject to certain limitations and the Subsidiaries to acquire,
retire, or redeem the securities that they have issued to any associate company,
any affiliate, or any affiliate of an associate company; (xi) approval for an
agreement among KeySpan and the Subsidiaries to allocate consolidated income tax
attributes; (xii) authorization for KeySpan and each of its Subsidiaries to
maintain in effect all existing credit facilities, guarantees and equity and
debt financing arrangements and to maintain outstanding all indebtedness and
similar obligations created thereunder as of the date of the completion of the
Mergers (including, without limitation, any credit facilities, equity or debt
financing arrangements, indebtedness or similar obligations incurred in
connection with or to finance the Mergers) and to amend, renew, extend,
supplement and/or replace any of such credit facilities, guarantees, equity or
debt financing arrangements, indebtedness or similar obligations up to the
aggregate dollar amounts specified in the Financing Application, subject to the
limitations set forth in the Financing Appliation; (xiii) authority for
KeySpan's existing Nonutility Subsidiaries currently engaged directly or
indirectly in certain activities under Section 2(b) of the Gas Related
Activities Act of 1990 ("GRAA") to increase their investments in existing
partially owned GRAA Canadian Subsidiaries pending completion of the record; and
(ix) authority to establish and operate a Utility Money Pool and a Nonutility
Money Pool.
I am general counsel to KeySpan and have acted as counsel to KeySpan
in connection with the filing of the Financing Application.
In connection with this opinion, either I or attorneys under my
supervision in whom I have confidence have examined originals or copies,
certified or otherwise identified to my satisfaction, of such records and such
other documents, certificates and corporate or other records as I have deemed
necessary or appropriate as a basis for the opinions expressed in this letter.
In my examination, I have assumed the genuineness of all signatures, the legal
capacity of all persons, the authenticity of all documents submitted to me as
original and the conformity to the original documents of all documents submitted
to me as copies. As to any facts material to my opinion, I have, when relevant
facts were not independently established, relied upon the statement contained in
the Financing Application.
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Securities and Exchange Commission
October 16, 2000
The opinions expressed below with respect to the proposed transactions
described in the Financing Application are subject to the following assumptions,
qualifications, limitations, conditions and exceptions:
A. The proposed transactions shall have been duly authorized
and approved, to the extent required by the governing
corporate documents and applicable state laws, by the Board
of Directors of KeySpan, Eastern, EnergyNorth or of the
appropriate Subsidiary, as the case may be.
B. No act or event other than as described herein shall have
occurred subsequent to the date hereof which would change
the opinions expressed below.
C. All required approvals, authorizations, consents,
certificates, rulings and orders of, and all filings and
registrations with, all applicable federal and state
commissions and regulatory authorities with respect to the
transactions proposed in the Financing Application shall
have been obtained or made, as the case may be, and shall
have become final and unconditional in all respects and
shall remain in effect (including the approval and
authorization of the Commission under the Act) and such
transactions shall have been accomplished in accordance with
all such approvals, authorizations, consents, certificates,
orders, filings and registrations.
D. The Commission shall have duly entered an appropriate order
with respect to the proposed transactions as described in
the Financing Application granting and permitting the
Financing Application to become effective under the Act and
the rules and regulations thereunder.
E. Appropriate corporate actions will have been taken by both
the issuer and acquirer of the securities contemplated by
the Financing Application and the documents transferring the
securities will have been duly authorized, executed and
delivered with all appropriate transfer or other taxes paid.
F. The parties shall have obtained all material consents,
waivers and releases, if any, required for the proposed
transactions under all applicable governing corporate
documents, contracts, agreements, debt instruments,
indentures, franchises, licenses and permits.
Based on the foregoing and subject to the assumptions, qualifications,
limitations, conditions and exceptions set forth herein, I am of the opinion
that, in the event the proposed transactions are consummated in accordance with
the Financing Application:
1. All state and federal laws applicable to the
proposed transactions will have been complied
with;
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Securities and Exchange Commission
October 16, 2000
2. KeySpan is a corporation validly organized, duly
existing and in good standing in the State of New
York. Eastern is a Massachusetts business trust
validly organized, duly existing in good standing
in the State of Massachusetts. Energy North is a
corporation validly organized, duly existing in
good standing in the State of New Hampshire;
3. Any securities to be issued will, in the case of
stock, be validly issued, fully paid and
nonassessable, and the holders thereof will be
entitled to the rights and privileges appertaining
thereto set forth in the applicable articles of
incorporation or other document defining such
rights and privileges.
4. In the case of debt instruments and guarantees,
such debt securities and guarantees will be valid
and binding obligations of the issuer or guarantor
in accordance with their terms subject to
applicable bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium or similar
laws from time to time in effect affecting the
enforceability of creditors' rights generally and
to general principles of equity (including,
without limitation, concepts of materiality,
reasonableness, good faith and fair dealing)
regardless of whether considered in a proceeding
in equity or at law.
5. The Applicants will legally acquire any securities
or assets subject to the Financing Application.
6. The consummation of the proposed transactions will
not violate the legal rights of the holders of any
securities issued by KeySpan, or by any associate
company thereof.
I am a member of the State Bar of New York and do not purport to be an
expert on, nor do I opine as to, the laws of any jurisdiction other than the
State of New York and the federal laws of the United States of America. I hereby
consent to the use of this opinion as an exhibit to the Financing Application.
Very truly yours,
/s/Steven L . Zelkowitz
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