-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, SgDrQj3L2rvEzD8EfDOgvfeGBbNzT4Pa+Rx/913ohnW3YJFjWFHn6O2bEf6F8wVx 4T2Rqlz8bTnAdZSI8aDqgw== 0000070145-94-000039.txt : 19940503 0000070145-94-000039.hdr.sgml : 19940503 ACCESSION NUMBER: 0000070145-94-000039 CONFORMED SUBMISSION TYPE: POS AMC PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19940502 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL FUEL GAS CO CENTRAL INDEX KEY: 0000070145 STANDARD INDUSTRIAL CLASSIFICATION: 4924 IRS NUMBER: 131086010 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: POS AMC SEC ACT: 1935 Act SEC FILE NUMBER: 070-07833 FILM NUMBER: 94525514 BUSINESS ADDRESS: STREET 1: 30 ROCKEFELLER PLZ CITY: NEW YORK STATE: NY ZIP: 10112 BUSINESS PHONE: 2125417533 POS AMC 1 AMENDMENT NO. 6 File No. 70-7833 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________________________________________ U-1 AMENDMENT NO. 6 (POST-EFFECTIVE) UNDER THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 ______________________________________________ Names of Companies filing this statement and addresses of principal executive offices: National Fuel Resources, Inc. Leidy Hub, Inc. 10 Lafayette Square 10 Lafayette Square Buffalo, New York 14203 Buffalo, New York 14203 (Formerly Enerop Corporation) ______________________________________________ Name of Top Registered Holding Company: NATIONAL FUEL GAS COMPANY Names and Addresses of Agent for Service: David F. Smith, President Gerald T. Wehrlin, Secretary National Fuel Resources, Inc. Leidy Hub, Inc. 10 Lafayette Square 10 Lafayette Square Buffalo, New York 14203 Buffalo, New York It is respectfully requested that the Commission send copies of all notices, orders and communications to: Kyle G. Storie 10 Lafayette Square Buffalo, New York 14203 Item 1. Description of Proposed Transaction. National Fuel Resources, Inc. ("NFR") and Leidy Hub, Inc. ("Leidy") are wholly-owned subsidiaries of National Fuel Gas Company ("National"). National is a public utility holding company registered under the Public Utility Holding Company Act of 1935, as amended ("Act"). Neither National, nor any of the subsidiaries of National other than NFR and Leidy, join in this Post-Effective Amendment to the Application-Declaration on file in this proceeding. A. Background. NFR has undertaken the following transactions and activities as authorized by the Commission in HCAR No. 35-25437: (1) NFR has been and continues to be engaged in the business of marketing natural gas and related activities. (2) NFR entered into a partnership with Citizens Gas Supply Corporation ("Citizens Gas"). The name of the partnership was Citizens National Gas Co. ("Partnership"). (3) The Partnership engaged in purchasing, storing, transporting and marketing natural gas and the acquisition of related assets. (4) NFR has been and continues to participate in the National Fuel System Money Pool ("Money Pool"). NFR may make borrowings from the Money Pool in a maximum principal amount at any one time outstanding of $15 million through December 31, 1995 pursuant to HCAR No. 35-25964. Additionally, pursuant to HCAR No. 35-25437, NFR was authorized to make available to the Partnership, through December 31, 1991, one or more loans aggregating up to $10 million for investment by the Partnership in "any and all physical assets, and any and all associated contracts and property interests attendant thereto, for use in connection with gathering, transportation, distribution or marketing of natural gas which it would consider taking for itself, and which is consistent with, or is a natural and reasonable extension of, its business as it existed just prior to the closing date" (hereinafter referred to as "Marketing Related Investments") (See pp. 8 - 9 of Form U-1, Amendment No. 3, File No. 70-7833). The funds for these loans to the Partnership were to be derived from NFR Money Pool borrowings and working capital. No loans are outstanding between the Partnership and NFR. On October 28, 1993, NFR filed the Seventh Certificate Pursuant to Rule 24 in regard to this file No. 70-7833, HCAR No. 35-25437, informing the Commission that during the quarter ended September 30, 1993, NFR and Citizens National Gas Company had completed the sale of substantially all of the Partnership assets. Thereafter, the Partnership was wound up and dissolved(1). ________________________ (1) Neither NFR nor any of its affiliates sought approval to sell the Partnership assets and dissolve the Partnership because it was determined that no such approval was necessary under the Act. Section 9(a) was deemed not to be applicable because that section covers the acquisition but not the sale of a security or an interest in a business. Additionally, the Partnership assets were not utility assets, so that, Section 12(d) was also inapplicable. B. Proposed Transactions. (1) NFR proposes to make Marketing Related Investments through borrowings by NFR from the Money Pool up to the then current maximum amount of borrowings that NFR is authorized to make from the Money Pool, which is currently $15 million in the aggregate. It is anticipated tht the majority of these marketing related investments will entail the purchase of gas reserves, gas pipelines and appurtenant property. (2) NFR proposes to take assignment from Leidy of certain research and development investments at book value(2). (i) One of the investments which would be assigned from Leidy to NFR is Leidy's investment in Metscan, Inc. ("Metscan"). Metscan developed a low cost and efficient electronic automatic meter reading device ("AMD"), that provides an economical and efficient method of reading residential natural gas utility meters. The AMD is a microprocessor which is affixed to a gas meter and which accumulates and stores information regarding natural gas usage by a customer and transmits it by telephone line to a computer. This information is then available for billing purposes. The Metscan system, i.e., the attachment of the AMD to a gas meter, and its ________________________ (2) As reported in a Certificate Pursuant to Rule 24 filed on January 24, 1994, Enerop Corporation has changed its name to Leidy Hub, Inc. ("Leidy"). Leidy will focus on marketing hub activities which is more fully explained in a separate U-1 filing which is being filed contemporaneously with this Amendment. connection by telephone line to a computer (i) improves meter reading efficiency, as accurate readings can be received electronically, (ii) enhances meter security and theft detection, because actual consumption data is phoned in monthly (or possibly daily) and the AMD has a tamper alarm, and (iii) enhances consumption monitoring by the ability to provide daily consumption data. As noticed in HCAR No. 35-26023 issued April 8, 1994, Leidy has proposed through Post-Effective Amendment No. 13 to File No. 70-7201 to acquire 29, 167 shares of Metscan Class B Preferred Stock, $.01 par value, ("Class B Preferred"), out of a total number of 2,736,667 shares to be sold, for $35,000 ($1.20 per share). Once the proposed transaction has been consummated, Leidy will own 7.31% of Metscan's common stock, 9.83% of the Metscan Class A Preferred Stock and 1.07% of the Class B Preferred, or about 5.52% of the actual and potential equity investment in Metscan and Leidy's total investment in Metscan will be $1,261,000.00. All of Leidy's interest in Metscan will be transferred to NFR at book value. (3) NFR also seeks authorization to accept assignment of the Agreement dated October 1, 1993, between Leidy (then Enerop) and Perfection Corporation attached as Exhibit A-8 (the "Perfection Agreement") regarding research, development and marketing of polyethylene ball valves ("Valves") for PE fuel gas piping systems ("Perfection Valve Development Program"). Under the Perfection Agreement, Leidy (then Enerop) pays an aggregate of $610,000.00 in return for a royalty of three percent (3%) of the net revenue from the sale of the Valves ("Royalty") up to a 16% return on investment(3). Perfection is a manufacturing company with its principal place of business in Madison, Ohio. It is anticipated that the Valves will be marketed and sold throughout the United States with a significant percentage of such sales occurring within National's system. A condition subsequent to the Perfection Agreement is that Leidy (then Enerop) receive SEC approval under the Act, if it is determined that such approval is necessary. NFR hereby seeks authority to accept assignment of the Perfection Agreement from Leidy and to undertake the obligations and rights thereunder, including the obligation to make the aggregate $610,000.00 investment and the right to receive the Royalty. The Perfection investment constitutes "[t]he acquisition by a registered company of an interest in a company organized to participate in activities related to the supply of natural gas." Thus, pursuant to Section 2(b) of the Gas Related Activities Act of 1990 ("GRAA") the Perfection investment will meet the requirement of Section 11(b) of the Act that it be reasonably incidental or economically necessary or appropriate to the operation of the utility (i.e., National Fuel Gas Distribution Corporation ("Distribution")) provided the Perfection ________________________ (3) The Perfection Agreement covers three separate valve research and development programs. Enerop invested $125,000.00 in the 1 1/4" Program and $85,000.00 in the 2" Program. These programs have been rolled up into the Perfection Agreement along with the new 3-4-6" Program. The $400,000.00 investment in the 3-4-6" Program contemplated in the Perfection Agreement will be made by NFR upon SEC approval of this Amendment. investment is in the interest of the consumers of Distribution or the consumers of any other subsidiary of National. Plastic piping has been shown to be superior to traditional metal piping in regard to durability, leak resistance, ease of installation, etc. It is anticipated that the various plastic Valves developed as a result of the Perfection Research and Development Program will also be superior to metal ones in these respects. Additionally, its anticipated that in many instances plastic Valves will be installed in a pipeline system that is otherwise already all plastic. In such circumstances the need for cathotic protection will be eliminated. Distribution's consumers will benefit from the development of these Valves because the utility will experience lower operations and maintenance costs, thus helping to keep rates from rising. B.2 Future Planned Activities NFR also plans in the future to finance or invest in and provide consulting services to (i) research and development projects related to the gas industry, (ii) qualifying co-generation facilities as defined in the Public Utility Regulatory Policies Act of 1978 ("PURPA"), (iii) qualifying small production facilities as defined in PURPA, (iv) exempt wholesale generators within the meaning of Section 32 of the Act, and (v) foreign utility companies ("FUCOs") within the meaning of Section 33 of the Act. NFR will file for any further required authorization prior to undertaking any investment in or financing of any research and development project, independent power project or foreign utility company. Item 2. Fees, Commissions and Expenses None Item 3. Applicable Statutory Provisions. Sections 9(a), 10, 12(b), 32 and 33 and Rules 23, 24, 43, 45 and 51 and the Section 2(b) of the GRAA are all applicable to the transactions contemplated hereunder. Applicable Provisions Proposed Transaction Section 12(b) NFR's investment in Marketing Rule 45 Related Investments through borrowings from the National Money Pool. Sections 9(a) and 10, Assignment of Leidy's Interest Rules 23 and 43, in Metscan, Inc. to NFR at Book Section 2(b) of the GRAA Value. Sections 9(a) and 10, Approval of Leidy's Investment Rules 23 and 51, in Perfection and Execution Section 2(b) of the GRAA of the Perfection Agreement. Sections 9(a) and 10, Assignment of the Perfection Rules 23 and 43 Agreement to NFR from Leidy at Section 2(b) of the GRAA Book Value. To the extent that the proposals herein are considered by the SEC to require authorization, approval or exemption under any section of the Act or provision of the rule or regulations other than those specifically referred to herein, request for such authorization approval or exemption is hereby made. Item 4. No federal regulatory authority, other than the SEC, has jurisdiction over the proposals. No state regulatory authority has jurisdiction over the proposed transactions. Item 5. Procedure The SEC is requested to issue an order permitting the Application-Declaration to become effective as soon as possible with respect to consummation of the transactions described herein. National respectfully requests that the SEC's orders herein be entered pursuant to the provisions of Rule 23. If a hearing is ordered, Applicant-Declarants waive a recommended decision by a hearing officer, or any other responsible officer of the SEC, and agree that the Division of Investment Management, Office of Public Utility Regulation may assist in the preparation of the SEC's decision and/or order; and request that the SEC's order become effective upon issuance. Item 6. Exhibits and Financial Statements Exhibits A-8 Agreement by and Between Perfection Corporation and Enerop (now Leidy) dated October 1, 1993 CONFIDENTIAL TREATMENT PURSUANT TO RULE 104(b) REQUESTED FOR PORTION OF THIS DOCUMENT. * A-9 Opinion of Counsel for NFR and Leidy A-10 Form of Notice ________________________ * To be filed by amendment Financial Statements F-15 Pro Forma Condensed Balance Sheets of Parent and subsidiaries, Leidy Hub, Inc. and National Fuel Resources, Inc. as of December 31, 1993. F-16 Pro Forma Condensed Statements of Income and Earnings Reinvested in the Business for Parent and subsidiaries, Leidy Hub, Inc. and National Fuel Resources, Inc. for the 12 months ended December 31, 1993. F-17 Notes to the Financial Statements (incorporated by reference as indicated). F-18 Pro Forma Adjusting Journal Entries of Parent and subsidiaries, Leidy Hub, Inc. and National Fuel Resources, Inc. as of December 31, 1993. Item 7. The proposed transactions outlined herein involve no action which will significantly affect the quality of the environment. No federal agency has prepared or is preparing an environmental impact statement with respect to the transactions proposed in the Application-Declaration. SIGNATURES Pursuant to the requirements of the Public Utility Holding Company Act of 1935, the undersigned companies have duly caused this Amendment to the application-declaration to be signed on their behalf by the undersigned thereunto duly authorized. Dated: April 29, 1994 NATIONAL FUEL RESOURCES, INC. By: _________________________ David F. Smith President LEIDY HUB, INC. By: _________________________ Gerald T. Wehrlin Secretary EX-99 2 AGREEMENT AGREEMENT THIS AGREEMENT, made and entered into as of the 1st day of October, 1993, by and between PERFECTION CORPORATION, having an office and place of business in Madison, Ohio (hereinafter called "PERFECTION"), and ENEROP CORPORATION, having an office and place of business in Buffalo, New York (hereinafter called "ENEROP") WITNESSETH: WHEREAS, PERFECTION is engaged in the business of designing, manufacturing and fabricating products for gas lines; and WHEREAS, ENEROP is engaged in the business of assisting in the development of new products related to the natural gas industry; and WHEREAS, PERFECTION has developed improved products for gas lines in accordance with proposals previously submitted to ENEROP; and WHEREAS, PERFECTION proposes to proceed with the development of additional improved products for gas service lines, in accordance with a proposal, dated September 28, 1993 submitted by PERFECTION. NOW, THEREFORE: In consideration of the mutual promises, covenants, and agreements herein contained, the parties have agreed and do agree as follows: A CONDITION PRECEDENT TO THIS AGREEMENT IS THAT ENEROP RECEIVE SEC APPROVAL UNDER THE PUBLIC UTILITY HOLDING COMPANY ACT TO UNDERTAKE THE TRANSACTIONS CONTEMPLATED HEREUNDER IF ENEROP DETERMINES THAT IT IS NECESSARY TO SEEK SUCH APPROVAL. ARTICLE I OBJECTIVE OF THE PROGRAMS ENEROP and PERFECTION previously entered into cooperative research and development programs in regard to (i) 1 1/4 Inch valves (the "1 1/4 Inch Program") pursuant to an Agreement dated June 20, 1988 (Exhibit C) the ("1 1/4 Inch Agreement") and (ii) 2 Inch valves (the "2 Inch Program") pursuant to an Agreement dated December 11, 1989 (Exhibit D) (the "2 Inch Agreement"). PERFECTION and ENEROP now agree to initiate a cooperative research and development program (the "3-4-6 Inch Program" or the "Program") for the purpose of studying, designing, testing and evaluating gas line products upon the following terms and conditions: A. PERFECTION agrees that it will: (1) Submit progress reports to ENEROP at the end of each three (3) month period from the date hereof and additionally as mutually agreed upon; (2) Meet with ENEROP personnel, and such other gas utility personnel as ENEROP may select, to discuss Program details at appropriate intervals; (3) Use its best efforts to complete the (3", 4", 6") plastic gas valve project outlined more fully in the proposal dated September 28, 1993 submitted by PERFECTION to ENEROP, a copy of which is attached hereto as Exhibit A and incorporated herein by reference; (4) Permit ENEROP personnel to have access to all data and information developed, and all laboratory and other facilitates, during normal business hours, used by PERFECTION in performing this Agreement. B. ENEROP agrees that it will: (1) Pay PERFECTION the amount of $400,000.00 according to a statement submitted by PERFECTION to be utilized by PERFECTION to offset development costs associated with the 3-4-6 Inch Program. (2) Provide assistance to PERFECTION in evaluating the field performance of any Program products on pilot installations. C. ENEROP has yet to recover $90,787.00(1) of its investment under the 1 1/4 Inch Agreement and $132,671.00(2) pursuant to the 2 Inch Agreement. These amounts shall be added to the __________________________ (1) This figure is a gross up of the $43,150 still due under the 1 1/4 Program based on a 16% rate of return since June 20, 1988. (2) This figure is a gross up of the $85,000 still due under the 2 Inch Program based on a 16% rate of return since December 11, 1989. $400,000.00 being contributed by ENEROP under this 3-4-6 Inch Program Agreement so that ENEROP's total investment for purposes of royalty payments pursuant to Article V is $623,458.00 (the "Investment"). The terms and conditions regarding the payment of royalties in the 1 1/4 Inch Agreement and the 2 Inch Agreement are hereby modified and superseded by the terms and conditions contained in this Article I-C and Article V hereof to the extent inconsistent with Article I-B and V of the 1 1/4 Inch Agreement and the 2 Inch Agreement, and those Agreements otherwise remain in full force and effect. D. ENEROP shall have the right during normal business hours to audit such books and records of PERFECTION as may be necessary to verify: (1) The costs of the work performed by PERFECTION hereunder; and (2) The amounts required to be paid by PERFECTION to ENEROP under Articles V and VII hereof. ENEROP shall have such right to audit for a period of two years after termination of this Agreement with respect to the costs in paragraph (1) hereof of this Article I-D, and for a period of two years after final payment of any amounts owed by PERFECTION to ENEROP under paragraph (2) hereof of this Article I-D. ARTICLE II TERM OF AGREEMENT A. The term of this Agreement, to accomplish the 3-4-6 Inch Program, shall be for a period of 18 months from the date of execution hereof. ARTICLE III TERMINATION A. Either party may terminate this Agreement upon written notice to the other party at least sixty (60) days in advance of a date of termination specified in the notice, provided that if ENEROP terminates this Agreement under this Section, it shall forfeit all rights under Article IV, V, VI and VII, in regard to 3-4-6 Inch Program and provided further that PERFECTION may terminate this Agreement only for a material breach of this Agreement by ENEROP or pursuant to Article IV. Should either party exercise its right to terminate under this Article III-A then royalty payments as specified in the 1 1/4 Inch Agreement and the 2 Inch Agreement will resume under the same terms and conditions in effect prior to this Agreement. B. Notwithstanding anything herein contained to the contrary, except as provided in Section A of this Article III, the rights and obligations of each party as set forth in Articles IV, V, VI, VII and VIII shall survive and continue to be binding upon the parties after expiration or earlier termination of this Agreement and payments for bona fide costs resulting from commitments made by PERFECTION prior to the effective termination date shall be made by ENEROP, but in no event shall ENEROP be liable for more than a total expenditure of $400,000.00; provided, however, that all obligations of PERFECTION under Article V shall be contingent upon a certification by both parties that the 3-4-6 Inch Program has been completed. PERFECTION shall use its best efforts to minimize the costs of termination. If, despite its best efforts, PERFECTION is unable to complete the 3-4-6 Inch Program, it shall refund to ENEROP any portion of ENEROP's $400,000.00 investment hereunder which has not been spent or otherwise committed to third parties. ARTICLE IV PATENT OWNERSHIP A. Any and all inventions, processes, ideas, or concepts conceived and/or reduced to practice during the term of this Agreement, resulting from the work conducted by PERFECTION under this Agreement, shall be the exclusive property of PERFECTION, provided, however, that ENEROP shall have a nonexclusive, royalty-free, irrevocable license to make, have made, use and sell such invention or process if and only if PERFECTION elects not to proceed with manufacture and sale or does not otherwise commercialize the resultant product incorporating any such invention or process within two (2) years from the date of submission of the final product to ENEROP. PERFECTION shall pay all costs and expense of preparation and prosecution of patent applications for any such inventions, processes, ideas or concepts which PERFECTION shall elect to file. B. If ENEROP determines that a patent application for any invention or process covered under Section A of this Article IV and disclosed by PERFECTION to ENEROP under Article I hereof should be filed, ENEROP shall notify PERFECTION in writing of such determination at the earliest practicable date. If PERFECTION elects not to file, or cause to be filed, a patent application for such invention or process, PERFECTION shall so notify ENEROP at the earliest practicable date, but in any event no later than six (6) months following such written notice to PERFECTION of ENEROP's determination that patent application should be filed. In the event of PERFECTION's election not to file, upon the written request of ENEROP, PERFECTION will assign to ENEROP, PERFECTION's entire right, title, and interest in such invention or process by delivering to ENEROP such assignments and other instruments prepared by ENEROP at ENEROP's expense, as are necessary to vest in ENEROP such right, title and interest. All preparation and prosecution costs of patent applications for inventions assigned by PERFECTION to ENEROP under this Section B of Article IV shall be at ENEROP's expense. If ENEROP obtains a patent for an invention or process covered by this Section B, ENEROP agrees that it will grant to PERFECTION, upon PERFECTION's request, an irrevocable, nonexclusive license to make, have made, use and sell products embodying such invention or process at the royalty rate set forth in Article V hereof and agrees to execute any and all documents necessary to grant such license. No license granted in this Patent Ownership section shall be deemed to grant any rights with respect to any invention, or proprietary data, developed by either party prior to the date of this Agreement, except rights established to the 1 1/4 Inch Agreement or 2 Inch Agreement. ARTICLE V ROYALTIES PERFECTION agrees to pay to ENEROP three percent (3%) of the net sales revenue received by PERFECTION for all products incorporating and/or utilizing developments resulting from the 1 1/4, 2 and 3-4-6 Inch Programs which are sold, leased, or otherwise transferred by PERFECTION and/or its licensees or assignees anywhere in the world (the "Net Sales Revenue") until such time as ENEROP receives a sufficient level of royalties to recover its Investment plus an after tax Internal Rate of Return of 7.61% calculated quarterly on the Investment as determined in accordance with Exhibit B. Thereafter, PERFECTION agrees to pay ENEROP 1.485% of the Net Sales Revenues until such time as ENEROP receives sufficient royalties so that ENEROP attains an Internal Rate of Return of 16% calculated quarterly on the Investment as determined in accordance with Exhibit B. As used herein "Net Sales Revenue" shall mean the price which PERFECTION or its licensees receive from their customers minus any sales or excise taxes other than taxes based on the gross of net income of PERFECTION, and minus any amounts refunded or returned products. If any product resulting from the Program is included within a larger assembly and then sold, leased or otherwise transferred anywhere in the world by PERFECTION or any of its licensees, Net Sales Revenue shall be determined on the basis of the fraction of selling price for such assembly obtained by dividing the manufacturing cost of each such product by the manufacturing cost of the entire assembly sold. All payments due to ENEROP hereunder shall be paid by PERFECTION within sixty (60) days after the close of each calendar quarter for sales, leases or other transfers made, or licensing income received by, PERFECTION to such calendar quarter. ARTICLE VI DISCLOSURE OF TECHNICAL INFORMATION A. Each party agrees to keep the other advised of general technical advances relative to this project obtained by ENEROP or by PERFECTION during the period covered by this Agreement. B. When a written disclosure of unpublished technical information, designated as confidential, or proprietary, is made hereunder by one party to the other, the receiving party agrees that such information shall be kept secret, not be published or disseminated by it without first obtaining prior written consent of the submitting party. Information shall not be considered confidential when: (1) The recipient shall show within a reasonable time after its receipt of the disclosure that the information was in the recipient's possession at the time of disclosure to it and was not acquired directly or indirectly from the discloser; or (2) the information is or becomes public knowledge without the fault of the recipient; or (3) the information is received from a third party who does not require the recipient to keep it in confidence and who did not acquire any part of such information directly or indirectly from the disclosing party; or (4) the information is subsequently developed independently and without the use of the disclosed information. C. All prototype components and hardware resulting from the Program shall be the property of PERFECTION. ARTICLE VII COMPETITION AND INFRINGEMENT A. PERFECTION shall give ENEROP notice of: (1) The marketing of any product infringing a claim of a PERFECTION patent arising from the Program; and (2) The commencement of a suit against PERFECTION claiming that a product resulting from the Program infringes a patent held by the complaintant if and when, and each time that, PERFECTION becomes aware of the marketing of such product or the commencement of such suit. B. If any person markets a product infringing a claim of a PERFECTION patent arising from the Program, PERFECTION may at its option and sole expense bring suit to terminate such infringement, settle such suit, and to collect damages from such suit or the settlement thereof. Any monies recovered as a result of such suit or the settlement thereof in excess of the costs of prosecuting such suit, including attorneys' fees and court costs, shall be paid eighty percent (80%) to PERFECTION, and twenty percent (20%) to ENEROP. C. If any person markets a product infringing a claim of a PERFECTION patent arising from the Program and PERFECTION fails to bring suit to terminate such infringement pursuant to Article VII-B hereof within six (6) months after having given the notice required in Article VII-A hereof or, having brought such suit, fails to prosecute it, ENEROP shall have the right and option at its own expense to bring or prosecute such suit in the name of PERFECTION, and PERFECTION agrees to join and cooperate in such suit at the request of ENEROP. Any monies recovered as a result of such suit or the settlement thereof in excess of costs of prosecuting such suit, including attorneys' fees and court costs, shall be evenly divided between PERFECTION and ENEROP. D. Upon the giving of the notice required by Article VII-A hereof, PERFECTION shall have the right to suspend the payments otherwise required to be made under Article V hereof and to place such payments in an escrow account mutually agreed to by ENEROP and PERFECTION. Any payments suspended under Article VII-D hereof and subsequently payable to ENEROP under Article VII-E hereof shall be paid plus any interest accumulated in the escrow account. E. Payments otherwise due under article V but suspended pursuant to article VII-D hereof shall be disposed of as follows: (1) If PERFECTION successfully terminates an infringement of its patent, pursuant to Article VII-B hereof, by obtaining a final judgment from which no appeal is taken within the maximum time permitted therefor, the payments otherwise to be made under Article V, including the suspended payments, shall be paid to ENEROP; provided, however, that one-half of all costs of terminating such infringement, including attorneys' fees and court costs not recovered pursuant to Article VII-B hereof shall be deducted from such payments; (2) If ENEROP successfully terminates an infringement of PERFECTION's patent pursuant to Article VII-C hereof by obtaining a final judgment from which no appeal is taken within the maximum time permitted therefor, the payments otherwise to be made under Article V hereof, including the suspended payments, shall be paid to ENEROP; (3) If PERFECTION successfully defends any suit against it claiming that a product resulting from the Program infringes the claimant's patent, by obtaining a final judgment from which no appeal is taken within the maximum time permitted therefor, the payments otherwise to be made under Article V hereof, including the suspended payments, shall be paid to ENEROP; provided, however, that the cost of defending such suit, including attorneys' fees and court costs, shall be deducted from such payments up to but not in excess of fifty percent (50%) of such payments; (4) If PERFECTION is unsuccessful in terminating an infringement of its patent pursuant to Article VII-B hereof; ENEROP is unsuccessful in terminating an infringement of PERFECTION's patent pursuant to Article VII-C hereof; PERFECTION is unsuccessful in defending a suit against it claiming a product resulting from the Program infringes another's patent; or if any person markets a product infringing a claim of a PERFECTION patent arising from the Program and (i) PERFECTION fails to bring suit to terminate such infringement, pursuant to Article VII-B hereof; and (ii) nine months after notice given by PERFECTION to ENEROP pursuant to Article VII-A hereof, ENEROP has failed to initiate such suit or to prosecute such suit having been begun by PERFECTION and not prosecuted by it; then, in any or all of such cases, PERFECTION shall not be required to take any further payments under Article V hereof and the suspended payments, less the costs of defending or prosecuting such suit, shall be paid to ENEROP. ARTICLE VIII PUBLICITY The parties agree that before publication or advertisement of any product or equipment resulting from the Program, each party will secure prior written approval from the other party. ARTICLE IX ASSIGNMENT Neither party shall have the right to assign its rights hereunder without first obtaining the written consent of the other and any such attempted assignment without such consent shall be void; provided however, ENEROP shall have the right, without the consent of PERFECTION, to assign such rights to any corporation a majority of whose voting capital stock is owned by NATI0NAL FUEL GAS COMPANY. ARTICLE X MODIFICATIONS No modification, alteration or amendment of this Agreement, and no oral agreement, promise or representation relating thereof shall be binding upon the parties unless reduced to writing and duly executed. ARTICLE XI INDEMNIFICATION AND INSURANCE It is agreed that all persons engaged by PERFECTION upon the work to be performed by it in carrying out this Agreement shall not be considered servants, employees or agents of ENEROP, and PERFECTION shall act hereunder solely as an independent contractor. PERFECTION shall indemnify, save harmless and defend ENEROP, its officers, agents, employees, and consultants from and against any and all liability, suits, actions, legal proceedings, claims, demands, damages, costs, expenses and attorneys' fees resulting from any damage to property or injury to or death of any person arising from or caused by any acts, negligent or otherwise, by PERFECTION or its officers, agents, servants or employees in carrying out this Agreement, including but not limited to product liability, and liability for compensation under any Workman's Compensation Act applicable, either State of Federal. PERFECTION shall also furnish ENEROP, promptly after execution of this Agreement, with certificates evidencing insurance coverage as follows: A. Workmen's Compensation Insurance in conformity with the laws of the state in which the work contemplated by this Agreement is to be done. B. Public Liability Insurance, including product liability, contractual liability, comprehensive general liability, bodily injury, property damage, and automobile and aircraft liability insurance. PERFECTION shall notify ENEROP of any change or cancellation in such insurance promptly after such change or cancellation occurs. ARTICLE XII PERFECTION hereby grants to ENEROP a right of first refusal ("ROFR") with respect to investment and participation in the development of new technology relating to larger gas values. This ROFR shall provide ENEROP with the right to invest and participate in such technology on the same terms and conditions as are offered to any party, which terms and conditions are anticipated to be substantially similar to the terms and conditions contained in this Agreement. ARTICLE XIII AGREEMENT AND EXHIBITS To the extent that this Agreement is inconsistent with anything contained in Exhibits A and B hereto, the terms of this Agreement shall control. ARTICLE XIV GOVERNING LAW This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio. IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by their respective officers thereunto duly authorized as of the day and year first set forth above. ENEROP CORPORATION PERFECTION CORPORATION By: /s/G. T. Wehrlin By: /s/Frank Volgstadt Name: G. T. Wehrlin Name: Frank Volgstadt Title: Secretary/Treasurer Title: Vice President Exhibit A CONFIDENTIAL EXHIBIT A RESEARCH PROPOSAL Develop and market a 3", 4" and 6" polyethylene ball valve for use in fuel gas distribution systems. Presented to: Enerop Corporation Buffalo, New York by: Frank R. Volgstadt Perfection Corporation 222 Lake Street Madison, Ohio 44057 September 28, 1993 PERFECTION CORPORATION RESEARCH PROPOSAL FOR THE DEVELOPMENT AND MARKETING OF SIZE 3, 4 AND 6 POLYETHYLENE BALL VALVES FOR PE FUEL GAS PIPING SYSTEMS. INTRODUCTION A need has been defined in the marketplace to enhance Perfection's line of polyethylene gas valves by adding valve size 3, 4 and 6. The cost of the development of these valve sizes is supported by the attached marketing data. Additionally, the development of these valves will enhance the sales of the previously developed PE valves under this contract by making Perfection a full line distribution system valve supplier. Previous joint research projects with ENEROP have resulted in the development of valves in size 1-1/4 and 2. With end adapters these valve sizes provide for valving of PE services and mains in sizes 1/2" CTS through 2" IPS. With the development of a full port size 4 PE ball valve under this phase of the project we will complete our line of valving products for PE fuel gas piping in sizes 1/2" CTS through and including 6" IPS. This research proposal covers the development of a full port size 4 (4" IPS) polyethylene ball valve which is adapted to 3" IPS and 6" IPS PE piping through the use of different end configurations. The size 4 PE ball valve will compliment the size 2 valve in the PE gas main market. This is a national market as opposed to the primarily northeastern market for the size 1-1/4 curb valve developed earlier. The market for PE gas valves for main line installations is continually expanding nation wide with approximately 80% of all new main installations being polyethylene. Offshore markets for these valving products is continuing to be actively explored with the need for metric fusion adapters for the valve ends being developed as the need arises. 2 PERFECTION CORPORATION STATEMENT OF WORK The statement of work is further developed in the attached CONFIDENTIAL Perfection Marketing report defines the primary market as North America and does not include any offshore sales projections. Any offshore sales will be in addition to the attached projections. At the time of writing the primary tasks needed in the development of the size 4 valve are already underway or completed. The "tie rod", patentable feature of compressing the seals in a modular fabrication concept have been discussed and presented in prior research advisory meetings between Perfection and National Fuel Gas. It is our intent to complete the development and be in limited production of the valve by January 1994. The valve is intended to fully comply with the nationally recognized standard specification for thermoplastic fuel gas valves, namely ANSI B16.40-1985. This standard is entitled An American National Standard, Manually Operated Thermoplastic Gas Shutoffs and Valves in Gas Distribution Systems. Perfection will assure full compliance with ANSI B16.40-1985 before shipping any production orders. As is the case for the sizes 1-1/4 and 2 valves, Perfection will pursue voluntary third party certification on the size 4 valve. The third party certification work will continue pas market introduction of the valve. A Research Advisory Committee comprised of National Fuel and Perfection representatives will meet periodically to monitor development and marketing activities. This group will also define and implement field test studies at National Fuel Gas Company. Brief quarterly reports will be issued to National Fuel summarizing development activities as they occur. This reporting will be discontinued once the valves have completed development. /s/Frank R. Volgstadt Frank R. Volgstadt 3 PERFECTION CORPORATION CONFIDENTIALITY TREATMENT PURSUANT TO RULE 104(b) REQUESTED DELETED FOUR (4) PAGES OF MARKETING RELATED MATERIAL EXHIBIT C AGREEMENT THIS AGREEMENT, made and entered into as of the 20th day of June, 1988, by and between PERFECTION CORPORATION, having an office and place of business in Madison, Ohio (hereinafter called PERFECTION) and ENEROP CORPORATION, having an office and place of business in Buffalo, New York (hereinafter called "ENEROP"). WITNESSETH: WHEREAS, PERFECTION is engaged in the business of designing, manufacturing and fabricating products for gas service lines from the main to the customer; and WHEREAS, ENEROP is engaged in the business of assisting in the development of new products related to the natural gas industry; and WHEREAS, PERFECTION proposes to proceed with the development of improved products for gas service lines, in accordance with a proposal, dated March 22, 1988 submitted by PERFECTION to ENEROP. NOW, THEREFORE: In consideration of the mutual promises, covenants, and agreements herein contained, the parties have agreed and do agree as follows: ARTICLE I OBJECTIVE OF THE PROGRAM PERFECTION and ENEROP hereby agree to initiate a cooperative research and development program (the "Program") for the purpose of studying, designing, testing and evaluating gas service line products upon the following terms and conditions: A. PERFECTION agrees that it will: (1) Submit progress reports to ENEROP at the end of each three (3) month period from the date hereof and additionally as mutually agreed upon; (2) Meet with ENEROP personnel, and such other gas utility personnel as Enerop may select, to discuss Program details at appropriate intervals; (3) Use its best efforts to complete the Program directed specifically toward the plastic gas valve project outlined more fully in the proposal dated March 22, 1988 submitted by PERFECTION to ENEROP, a copy of which is attached hereto as Exhibit A and incorporated herein by reference; (4) Permit ENEROP personnel to have access to all data and information developed, and all laboratory and other facilities, during normal business hours, used by PERFECTION in performing this Agreement. B. ENEROP agrees that it will: (1) Pay PERFECTION the amount of one hundred and twenty-five thousand dollars ($125,000), according to a statement submitted by PERFECTION and verified by ENEROP. (2) Provide assistance to PERFECTION in evaluating the field performance of any Program products on pilot installations. C. ENEROP shall have the right during normal business hours to audit such books and records of PERFECTION as may be necessary to verify: (1) The costs of the work performed by PERFECTION hereunder; and (2) The amounts required to be paid by PERFECTION to ENEROP under Articles V and VII hereof. ENEROP shall have such right to audit for a period of two years after termination of this Agreement with respect to the costs in paragraph (1) hereof of this Article I-C, and for a period of two years after final payment of any amounts owed by PERFECTION to ENEROP under paragraph (2) hereof of this Article I-C. ARTICLE II TERM OF AGREEMENT A. The term of this Agreement, to accomplish the Program, shall be for a period of 18 months from the date of execution hereof. ARTICLE III TERMINATION A. Either party may terminate this Agreement upon written notice to the other party at least sixty (60) days in advance of a date of termination specified in the notice, provided that if ENEROP terminates this Agreement under this Section, it shall forfeit all rights under Article IV, V, VI and VII, and provided further that PERFECTION may terminate this Agreement only for a material breach of this Agreement by ENEROP or pursuant to Article IV. B. Notwithstanding anything herein contained to the contrary, except as provided in Section A of this Article III, the rights and obligations of each party as set forth in Articles IV, V, VI, VII and VIII shall survive and continue to be binding upon the parties after expiration or earlier termination of this Agreement and payments for bona fide costs resulting from commitments made by PERFECTION prior to the effective termination date shall be made by ENEROP, but in no event shall ENEROP be liable for more than a total expenditure of $125,000; provided, however, that all obligations of PERFECTION under Article V shall be contingent upon a certification by both parties that the Program has been completed. PERFECTION shall use its best efforts to minimize the costs of termination. ARTICLE IV PATENT OWNERSHIP A. Any and all inventions, processes, ideas, or concepts conceived and/or reduced to practice during the term of this Agreement, resulting from the work conducted by PERFECTION under this Agreement, shall be the exclusive property of PERFECTION, provided, however, that ENEROP shall have a nonexclusive, royalty-free, irrevocable license to make, have made, use and sell such invention or process if and only if PERFECTION elects not to proceed with manufacture and sale or does not otherwise commercialize the resultant product incorporating any such invention or process within two (2) years from the date of submission of the final product to ENEROP. PERFECTION shall pay all costs and expense of preparation and prosecution of patent applications for any such inventions, processes, ideas or concepts which PERFECTION shall elect to file. B. If ENEROP determines that a patent application for any invention or process covered under Section A of this Article IV and disclosed by PERFECTION to ENEROP under Article I hereof should be filed, ENEROP shall notify PERFECTION in writing of such determination at the earliest practicable date. If PERFECTION elects not to file, or cause to be filed, a patent application for such invention or process, PERFECTION shall so notify ENEROP at the earliest practicable date, but in any event no later than six (6) months following such written notice to PERFECTION of ENEROP's determination that patent application should be filed. In the event of PERFECTION's election not to file, upon the written request of ENEROP, PERFECTION will assign to ENEROP, PERFECTION's entire right, title, and interest in such invention or process by delivering to ENEROP such assignments and other instruments prepared by ENEROP at ENEROP's expense, as are necessary to vest in ENEROP such right, title and interest. All preparation and prosecution costs of patent applications for inventions assigned by PERFECTION to ENEROP under this Section B of Article IV shall be at ENEROP's expense. If ENEROP obtains a patent for an invention or process covered by this Section B, ENEROP agrees that it will grant to PERFECTION, upon PERFECTION's request, an irrevocable, nonexclusive license to make, lave made, use and sell products embodying such invention or process at the royalty rate set forth in Article V hereof and agrees to execute any and all documents necessary to grant such license. No license granted in this Patent Ownership section shall be deemed to grant any rights with respect to any invention, or proprietary data, developed by either party prior to the date of this Agreement. ARTICLE V ROYALTIES A. For a five (5) year term following the effective date of this Agreement, PERFECTION agrees to pay to ENEROP three percent (3%) of Net Sales Revenue received by PERFECTION for all products incorporating and/or utilizing developments resulting from the Program which are sold, leased, or otherwise transferred by PERFECTION and/or its licensees or assignees anywhere in the world In the event that ENEROP does not receive a sufficient level of royalties to recover its investment hereunder ($125,000) plus an after-tax Internal Rate of Return of 18% on such investment, as determined in accordance with Attachment B, the term shall be extended beyond five (5) years and royalties shall continue to be paid until an after-tax Internal Rate of Return of 18%, calculated quarterly, is reached and returned to ENEROP, provided, however, that the term shall not extend beyond a total of ten (10) years. As used herein "Net Sales Revenue" shall mean the price which PERFECTION or its licensees receive from their customers minus any sales or excise taxes other than taxes based on the gross of net income of PERFECTION, and minus any amounts refunded or returned products. If any product resulting from the Program is included within a larger assembly and then sold, leased or otherwise transferred anywhere in the world by PERFECTION or any of its licensees, Net Sales Revenue shall be determined on the basis of the fraction of selling price for such assembly obtained by dividing the manufacturing cost of each such product by the manufacturing cost of the entire assembly sold. All payments due to ENEROP hereunder shall be paid by PERFECTION within sixty (60) days after the close of each calendar quarter for sales, leases or other transfers made, or licensing income received by, PERFECTION to such calendar quarter. ARTICLE VI DISCLOSURE OF TECHNICAL INFORMATION A. Each party agrees to keep the other advised of general technical advances relative to this project obtained by ENEROP or by PERFECTION during the period covered by this Agreement. B. When a written disclosure of unpublished technical information, designated as confidential, or proprietary, is made hereunder by one party to the other, the receiving party agrees that such information shall be kept secret, not be published or disseminated by it without first obtaining prior written consent of the submitting party. Information shall not be considered confidential when: (1) The recipient shall show within a reasonable time after its receipt from the disclosure that the information was in the recipient's possession at the time of disclosure to it and was not acquired directly or indirectly from the discloser; or (2) the information is or becomes public knowledge without the fault of the recipient; or (3) the information is received from a third party who does not require the recipient to keep it in confidence and who did not acquire any part of such information directly or indirectly from the disclosing party; or (4) the information is subsequently developed independently and without the use of the disclosed information. C. All prototype components and hardware resulting from the Program shall be the property of PERFECTION. ARTICLE VII COMPETITION AND INFRINGEMENT A. PERFECTION shall give ENEROP notice of: (1) The marketing of any product infringing a claim of a PERFECTION patent arising from the Program; and (2) The commencement of a suit against PERFECTION claiming that a product resulting from the Program infringes a patent held by the complainant if and when, and each time that, PERFECTION becomes aware of the marketing of such product or the commencement of such suit. B. If any person markets a product infringing a claim of a PERFECTION patent arising from the Program, PERFECTION may at it option and sole expense bring suit to terminate such infringement, settle such suit, and to collect damages from such suit or +the settlement thereof. Any monies recovered as a result of such suit or the settlement thereof in excess of the costs of prosecuting such suit, including attorneys' fees and court costs, shall be paid eighty percent (80%) to PERFECTION, and twenty percent (20%) to ENEROP. C. If any person markets a product infringing a claim of PERFECTION patent arising from the Program and PERFECTION fails to bring suit to terminate such infringement pursuant to Article VII-6 hereof within six (6) months after having given the notice required in Article VII-A hereof or, having brought such suit, fails to prosecute it, ENEROP shall have the right and option to bring or prosecute such suit in the name of PERFECTION, and PERFECTION agrees to join and cooperate in such suit at the request of ENEROP. Any monies recovered as a result of such suit or the settlement thereof in excess of costs of prosecuting such suit, including attorneys' fees and court costs, shall be evenly divided between PERFECTION and ENEROP. D. Upon the giving of the notice required by Article VII-A hereof, PERFECTION shall have the right to suspend the payments otherwise required to be made under Article V hereof and to place such payments in an escrow account mutually agreed to by ENEROP and PERFECTION. Any payments suspended under Article VII-D hereof and subsequently payable to ENEROP under Article VII-E hereof shall be paid plus any interest accumulated in the escrow account. E. Payments otherwise due under Article V but suspended pursuant to Article VII-D hereof shall be disposed of as follows: (1) If PERFECTION successfully terminates an infringement of its patent, pursuant to Article VII-8 hereof, by obtaining a final judgment from which no appeal is taken within the maximum time permitted therefor, the payments otherwise to be made under Article V, including the suspended payments, shall be paid to ENEROP; provided, however, that one-half of all costs of terminating such infringement, including attorneys' fees and court costs not recovered pursuant to Article VII-8 hereof shall be deducted from such payments; (2) If ENEROP successfully terminates an infringement of PERFECTION's patent pursuant to Article VII-C hereof by obtaining a final judgment from which no appeal is taken within the maximum time permitted therefor, the payments otherwise to be made under Article V hereof, including the suspended payments, shall be paid to ENEROP; (3) If PERFECTION successfully defends any suit against it claiming that a product resulting from the Program infringes the claimant's patent, by obtaining a final judgment from which no appeal is taken within the maximum time permitted therefor, the payments otherwise to be made under Article V hereof, including the suspended payments, shall be paid to ENEROP; provided, however, that the cost of defending such suit, including attorneys' fees and court costs, shall be deducted from such payments up to but not in excess of fifty percent (50%) of such payments; (4) If PERFECTION is unsuccessful in terminating an infringement of its patent pursuant to Article VII-B hereof; ENEROP in unsuccessful in terminating an infringement of PERFECTION's patent pursuant to Article VII-C hereof; PERFECTION is unsuccessful in defendant a suit against it claiming a product resulting from the Program infringes another's patent; or if any person markets a product infringing a claim of a PERFECTION patent arising from the Program and (i) PERFECTION fails to bring suit to terminate such infringement, pursuant to Article VII-8 hereof; and (ii) nine months after notice given by PERFECTION to ENEROP pursuant to Article VII-A hereof, ENEROP has failed to initiate such suit or to prosecute such suit having been begun by PERFECTION and not prosecuted by it; then, in any or all of such cases, PERFECTION shall not be required to make any further payments under Article V hereof and the suspended payments, less the costs of defending or prosecuting such suit, shall be paid to ENEROP. ARTICLE VIII PUBLICITY The parties agree that before publication or advertisement of any product or equipment resulting from the Program, each party will secure prior written approval from the other party. ARTICLE IX ASSIGNMENT Neither party shall have the right to assign its rights hereunder without first obtaining the written consent of the other and any such attempted assignment without such consent shall be void; provided however, ENEROP shall have the right, without the consent of PERFECTION, to assign such rights to any corporation a majority of whose voting capital stock is owned by NATIONAL FUEL GAS COMPANY. ARTICLE X MODIFICATIONS No modification, alteration or amendment of this Agreement, and no oral agreement, promise or representation relating thereof shall be binding upon "-he parties unless reduced to writing and duly executed. ARTICLE XI INDEMNIFICATION AND INSURANCE It is agreed that all persons engaged by PERFECTION upon the work to be performed by it in carrying out this Agreement shall not be considered servants, employees or agents of ENEROP, and PERFECTION shall act hereunder solely as an independent contractor. PERFECTION shall indemnify, save harmless and defend ENEROP, its officers, agents, employees, and consultants from and against any and all liability, suits, actions, legal proceedings, claims, demands, damages, costs, expenses and attorneys' fees resulting from any damage to property or injury to or death of any person arising from or caused by any acts, negligent or otherwise, by PERFECTION or its officers, agents, servants or employees in carrying out this Agreement, including but not limited to product liability. PERFECTION shall also furnish ENEROP, promptly after execution of this Agreement, with certificates evidencing insurance coverage as follows: A. Workmen's Compensation insurance in conformity with the laws of the state in which the work contemplated by this Agreement is to be done. B. Public Liability Insurance, including product liability, contractual liability, comprehensive general liability, bodily injury, property damage, and automobile and aircraft liability insurance. PERFECTION shall notify ENEROP of any change or cancellation in such insurance promptly after such change of Cancellation occurs. ARTICLE XII PERFECTION hereby grants to ENEROP a right of first refusal ("ROFR") with respect to investment and participation in the development of new technology relating to larger gas values. This ROFR shall provide ENEROP with the right to invest and participate in such technology on the same terms and conditions as are offered to any party, which terms and conditions are anticipated to be substantially similar to the terms and conditions contained in this Agreement. ARTICLE XIII AGREEMENT AND EXHIBITS To the extent that this Agreement is inconsistent with anything contained in Exhibits A and B hereto, the terms of this Agreement shall control. ARTICLE XIV GOVERNING LAW This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio. IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by their respective officers thereunto duly authorized as of the day and year first set forth above. ENEROP CORPORATION PERFECTION CORPORATION By /s/John Brown By: /s/ President VP Research and QA Title Title June 13, 1988 6/20/88 Date Date EXHIBIT A RESEARCH PROPOSAL Develop and market a polyethylene plug valve for use in fuel gas distribution piping system presented to: ENEROP CORPORATION Buffalo, New York by: Frank R. Volgstadt PERFECTION CORPORATION 222 Lake Street Madison, Ohio 44057 March 22, 1988 RESEARCH PROPOSAL FOR THE DEVELOPMENT AND MARKETING OF AN 1-1/4" POLYETHYLENE PLUG VALVE FOR USE IN FIELD GAS DISTRIBUTION PIPING SYSTEMS INTRODUCTION: A need has been defined in the marketplace for a reliable, safe, cost effective polyethylene valve for use in fuel gas distribution systems. This valve has been defined as 1-1/4" IPS size with outlets from 1/2" CTS thru 1-1/4" IPS. The primary application for this type of valve in the gas distribution system is, as commonly termed, a "curb stop". This is the valve that is normally located in the service line at the property line between the main at the street and the meter at the building. This valve's primary function is the rapid shut-down of the service to the building in the case of an emergency, or in some areas as a shut-off for nonpayment. The market need has been defined based on the inadequacies of metal curb stops due to the need to wrap and cathodically protect them, and the relative high cost of safe, effective polyethylene valves that are currently on the market. STATEMENT OF WORK: This statement of work, which is further developed in the attached "Preliminary Marketing Study No. 2", Gant Chart of the project, and Pert Chart of the project. The tasks outlined include all functions which are required to take the valve from a concept through and including the manufacturing and marketing of the product. These functions include all aspects of model making, prototype tooling, prototype assemblies, in-house laboratory testing, third party laboratory testing, field testing, product introduction, customer testing, production tooling, full scale manufacturing of the valves, and a complete sales and marketing program. Critical to the success of this program is the formation and implementation of a Research Advisory Committee to direct the technical aspects of the project. This Research Advisory Committee shall be comprised of representatives from the operations and engineering departments of National fuel and representatives of the manufacturing, marketing, engineering, and research departments of Perfection Corporation. This Research Advisory committee, which will meet periodically, will review the progress of the project and be instrumental in comprehensive field testing in selected regions of the National Fuel Distribution Area. CONFIDENTIALITY TREATMENT PURSUANT TO RULE 104(b) REQUESTED DELETED TEN (10) PAGES OF MARKETING RELATED MATERIAL EXHIBIT D AGREEMENT THIS AGREEMENT, made and entered into as of the 11th day of December, 1989 by and between PERFECTION CORPORATION, having an office and place of business in Madison, Ohio (hereinafter called PERFECTION) and ENEROP CORPORATION, having an office and place of business in Buffalo, New York (hereinafter called "ENEROP"). WITNESSETH: WHEREAS, PERFECTION is engaged in the business of designing, manufacturing and fabricating products for gas service to the customer; and WHEREAS, ENEROP is engaged in the business of assisting in the development of new products related to the natural gas industry; and WHEREAS, PERFECTION proposes to proceed with the development of improved products for gas service lines, in accordance with a proposal, submitted by PERFECTION to ENEROP. NOW, THEREFORE: In consideration of the mutual promises, covenants, and agreements herein contained, the parties have agreed and do agree as follows: ARTICLE I OBJECTIVE OF THE PROGRAM PERFECTION and ENEROP hereby agree to initiate a cooperative research and development program (the "Program") for the purpose of studying, designing, testing and evaluating gas service line products upon the following terms and conditions: A. PERFECTION agrees that it will: (1) Submit progress reports to ENEROP at the end of each three (3) month period from the date hereof and additionally as mutually agreed upon; (2) Meet with ENEROP personnel, and such other gas utility personnel as Enerop may select, to discuss Program details at appropriate intervals; (3) Use its best efforts to complete the Program directed specifically toward the 2" plastic gas valve outlined more fully in the proposal submitted by PERFECTION to ENEROP, a copy of which is attached hereto as Exhibit A and incorporated herein by reference; (4) Permit ENEROP personnel to have access to all data and information developed, and all laboratories and other facilities, during normal business hours, used by PERFECTION in performing pursuant to this Agreement. B. ENEROP agrees that it will: (1) Pay PERFECTION the amount of eighty-five thousand dollars ($85,000) for the development and completion of the Program. (2) Provide assistance to PERFECTION in evaluating the field performance of any Program products on pilot installations. C. ENEROP shall have the right during normal business hours to audit such books and records of PERFECTION as may be necessary to verify: (1) The costs of the work performed by PERFECTION hereunder; and (2) The amounts required to be paid by PERFECTION to ENEROP under Articles V and VII hereof. ENEROP shall have such right to audit for a period of two years after termination of this Agreement with respect to the costs in paragraph (1) hereof of this Article I-C, and for a period of two years after final payment of any amounts owed by PERFECTION to ENEROP referred to under paragraph (2) hereof of this Article I-C. ARTICLE II TERM OF AGREEMENT A. The term of this Agreement, to accomplish the Program, shall be for a period of 18 months from the date of execution hereof. ARTICLE III TERMINATION A. Either party may terminate this Agreement upon written notice to the other party at least sixty (60) days in advance of a date of termination specified in the notice, provided that if ENEROP terminates this Agreement under this Section, it shall forfeit all rights under Article IV, V, VI and VII, and provided further that PERFECTION may terminate this Agreement only for a material breach of this Agreement by ENEROP or pursuant to Article IV. B. Notwithstanding anything herein contained to the contrary, except as provided in Section A of this Article III, the rights and obligations of each party as set forth in Articles IV, V, VI, VII and VIII shall survive and continue to be binding upon the parties after expiration or earlier termination of this Agreement and payments for bona fide costs resulting from commitments made by PERFECTION prior to the effective termination date shall be made by ENEROP, but in no event shall ENEROP be liable for more than a total expenditure of $85,000; provided, however, that ail obligations of PERFECTION under Article V shall be contingent upon a certification by both parties that the Program has been completed. PERFECTION shall use its best efforts to minimize the costs of termination. ARTICLE IV PATENT OWNERSHIP A. Any and all inventions, processes, ideas, or concepts conceived and/or reduced to practice during the term of this Agreement, resulting from the work conducted by PERFECTION under this Agreement, shall be the exclusive property of PERFECTION, provided, however, that ENEROP shall have a nonexclusive, royalty-free, irrevocable license to make, have made, use and sell such invention or process if and only if PERFECTION elects not to proceed with manufacture and sale or does not otherwise commercialize the resultant product incorporating any such invention or process within two (2) years from the date of submission of the final product to ENEROP. PERFECTION shall pay all costs and expense of preparation and prosecution of patent applications for any such inventions, processes, ideas or concepts which PERFECTION shall elect to file. B. If ENEROP determines that a patent application for any invention or process covered under Section A of this Article IV and disclosed by PERFECTION to ENEROP under Article I hereof should be filed, ENEROP shall notify PERFECTION in writing of such determination at the earliest practicable date. If PERFECTION elects not to file, or cause to be filed, a patent application for such invention or process, PERFECTION shall so notify ENEROP at the earliest practicable date, but in any event no later than six (6) months following such written notice to PERFECTION of ENEROP's determination that patent application should be filed. In the event of PERFECTION's election not to file, upon the written request of ENEROP, PERFECTION will assign to ENEROP, PERFECTION's entire right, title, and interest in such invention or process by delivering to ENEROP such assignments and other instruments prepared by ENEROP at ENEROP's expense, as are necessary to vest in ENEROP such right, title and interest. All preparation and prosecution costs of patent applications for inventions assigned by PERFECTION to ENEROP under this Section B of Article IV shall be at ENEROP's expense. If ENEROP obtains a patent for an invention or process covered by this Section B, ENEROP agrees that it will grant to PERFECTION, upon PERFECTION's request, an irrevocable, nonexclusive license to make, have made, use and sell products embodying such invention or process at the royalty rate set forth in Article V hereof and agrees to execute any and all documents necessary to grant such license. No license granted in this Patent Ownership section shall be deemed to grant any rights with respect to any invention, or proprietary data, developed by either party prior to the date of this Agreement. ARTICLE V ROYALTIES A. For a five (5) year term following the effective date of this Agreement, PERFECTION agrees to pay to ENEROP 3% of Net Sales Revenue received by PERFECTION for all products incorporating and/or utilizing developments resulting from the Program which are sold, leased, or otherwise transferred by PERFECTION and/or its licensees or assignees anywhere in the world. In the event that ENEROP does not receive a sufficient level of royalties to recover its investment hereunder ($85,000) plus an after-tax Internal Rate of Return of 18% on such investment, as determined in accordance with Exhibit B, the term shall be extended beyond five (5) years and royalties shall continue to be paid until such level is reached and returned to ENEROP, provided, however, that the term shall not extend beyond a total of ten (10) years. As used herein "Net Sales Revenue" shall mean the price which PERFECTION or its licensees receive from their customers minus any sales or excise taxes other than taxes based on the gross of net income of PERFECTION, and minus any amounts refunded or returned products. If any product resulting from the Program is included within a larger assembly and then sold, leased or otherwise transferred anywhere in the world by PERFECTION or any of its licensees, Net Sales Revenue shall be determined on the basis of the fraction of selling price for such assembly obtained by dividing the manufacturing cost of each such product by the manufacturing cost of the entire assembly sold. All payments due to ENEROP hereunder shall be paid by PERFECTION within sixty (60) days after the close of each calendar quarter for sales, leases or other transfers made, or licensing income received by, PERFECTION in such calendar quarter. ARTICLE VI DISCLOSURE OF TECHNICAL INFORMATION A. Each party agrees to keep the other advised of general technical advances relative to this project obtained by ENEROP or by PERFECTION during the period covered by this Agreement. B. When a written disclosure of unpublished technical information, designated as confidential, or proprietary, is made hereunder by one party to the other, the receiving party agrees that such information shall be kept secret, not be published or disseminated by it without first obtaining prior written consent of the submitting party. Information shall not be considered confidential when: (1) The recipient shall show within a reasonable time after its receipt of the disclosure that the information was in the recipient's possession at the time of disclosure to it and was not acquired directly or indirectly from the discloser; or (2) the information is or becomes public knowledge without the fault of the recipient; or (3) the information is received from a third party who does not require the recipient to keep it in confidence and who did not acquire any part of such information directly or indirectly from the disclosing party; or (4) the information is subsequently developed independently and without the use of the disclosed information. C. All prototype components and hardware resulting from the Program shall be the property of PERFECTION. ARTICLE VII COMPETITION AND INFRINGEMENT A. PERFECTION shall give ENEROP notice of: (1) The marketing of any product infringing a claim of a PERFECTION patent arising from the Program; and (2) The commencement of a suit against PERFECTION claiming that a product resulting from the Program infringes a patent held by the complainant if and when, and each time that, PERFECTION becomes aware of the marketing of such product or the commencement of such suit. B. If any person markets a product infringing a claim of a PERFECTION patent arising from the Program, PERFECTION may at its option and sole expense bring suit to terminate such infringement, settle such suit, and to collect damages from such suit or the settlement thereof. Any monies recovered as a result of such suit or the settlement thereof in excess of the costs of prosecuting such suit, including attorneys' fees and court costs, shall be paid eighty percent (80%) to PERFECTION, and twenty percent (20%) to ENEROP. C. If any person markets a product infringing a claim of a PERFECTION patent arising from the Program and PERFECTION fails to bring suit to terminate such infringement pursuant to Article VII-8 hereof within six (6) months after having given the notice required in Article VII-A hereof or, having brought such suit, fails to prosecute it, ENEROP shall have the right and option to bring or prosecute such suit in the name of PERFECTION, and PERFECTION agrees to join and cooperate in such suit at the request of ENEROP. Any monies recovered as a result of such suit or the settlement thereof in excess of costs of prosecuting such suit, including attorneys' fees and court costs, shall be evenly divided between PERFECTION and ENEROP. D. Upon the giving of the notice required by Article VII-A hereof, PERFECTION shall have the right to suspend the payments otherwise required to be made under Article V hereof and to place such payments in an escrow account mutually agreed to by ENEROP and PERFECTION. Any payments suspended under Article VII-D hereof and subsequently payable to ENEROP under Article VII-E hereof shall be paid plus any interest accumulated in the escrow account. E. Payments otherwise due under Article V but suspended pursuant to Article VII-D hereof shall be disposed of as follows: (1) If PERFECTION successfully terminates an infringement of its patent, pursuant to Article VII-B hereof, by obtaining a final judgment from which no appeal is taken within the maximum time permitted therefor, the payments otherwise to be made under Article V, including the suspended payments, shall be paid to ENEROP; provided, however, that one-half of all costs of terminating such infringement, including attorneys' fees and court costs not recovered pursuant to Article VII-8 hereof shall be deducted from such payments; (2) If ENEROP successfully terminates an infringement of PERFECTION's patent pursuant to Article VII-C hereof by obtaining a final judgment from which no appeal is taken within the maximum time permitted therefor, the payments otherwise to be made under Article V hereof, including the suspended payments, shall be paid to ENEROP; (3) If PERFECTION successfully defends any suit against it claiming that a product resulting from the Program infringes the claimant's patent, by obtaining a final judgment from which no appeal is taken within the maximum time permitted therefor, the payments otherwise to be made under Article V hereof, including the suspended payments, shall be paid to ENEROP; provided, however, that the cost of defending such suit, including attorneys' fees and court costs, shall be deducted from such payments up to but not in excess of fifty percent (50%) of such payments; (4) If PERFECTION is unsuccessful in terminating an infringement of its patent pursuant to Article VII-B hereof; ENEROP is unsuccessful in terminating an infringement of PERFECTION's patent pursuant to Article VII-C hereof; PERFECTION is unsuccessful in defending a suit against it claiming a product resulting from the Program infringes another's patent; or if any person markets a product infringing a claim of a PERFECTION patent arising from the Program and (i) PERFECTION fails to bring suit to terminate such infringement, pursuant to Article VII-8 hereof; and (II) nine months after notice given by PERFECTION to ENEROP pursuant to Article VII-A hereof, ENEROP has failed to initiate such suit or to prosecute such suit having been begun by PERFECTION and not prosecuted by it; then, in any or all of such cases, PERFECTION shall not be required to make any further payments under Article V hereof and the suspended payments, less the costs of defending or prosecuting such suit, shall be paid to ENEROP. ARTICLE VIII PUBLICITY The parties agree that before publication or advertisement of any product or equipment resulting from the Program, each party will secure prior written approval from the other party. ARTICLE IX ASSIGNMENT Neither party shall have the right to assign its rights hereunder without first obtaining the written consent of the other and any such attempted assignment without such consent shall be void; provided however, ENEROP shall have the right, without the consent of PERFECTION, to assign such rights to any corporation a majority of whose voting capital stock is owned by NATIONAL FUEL GAS COMPANY. ARTICLE X MODIFICATIONS No modification, alteration or amendment of this Agreement, and no oral agreement, promise or representation relating thereof shall be binding upon the parties unless reduced to writing and duly executed. ARTICLE XI INDEMNIFICATION AND INSURANCE It is agreed that all persons engaged by PERFECTION upon the work to be performed by it in carrying out this Agreement shall not be considered servants, employees or agents of ENEROP, and PERFECTION shall act hereunder solely as an independent contractor. PERFECTION shall indemnify, save harmless and defend ENEROP, its officers, agents, employees, and consultants from and against any and all liability, suits, actions, legal proceedings, claims, demands, damages, costs, expenses and attorneys' fees resulting from any damage to property or injury to or death of any person arising from or caused by any acts, negligent or otherwise, by PERFECTION or its officers, agents, servants or employees in carrying out this Agreement, including but not limited to product liability, and liability for compensation under any Workmen's Compensation Act applicable, either State or Federal. PERFECTION shall also furnish ENEROP, promptly after execution of this Agreement, with certificates evidencing insurance coverage as follows: A. Workmen's Compensation insurance in conformity with the laws of the state in which the work contemplated by this Agreement is to be done. B. Public Liability Insurance, including product liability, contractual liability, comprehensive general liability, bodily injury, property damage, and automobile and aircraft liability insurance. PERFECTION shall notify ENEROP of any change or cancellation in such insurance promptly after such change of cancellation occurs. ARTICLE XII PERFECTION hereby grants to ENEROP a right of first refusal ("ROFR") with respect to investment and participation in the development of new technology relating to larger gas values. This ROFR shall provide ENEROP with the right to invest and participate in such technology on the same terms and conditions as are offered to any party, which terms and conditions are anticipated to be substantially similar to the terms and conditions contained in this Agreement. ARTICLE XIII AGREEMENT AND EXHIBITS To the extent that this Agreement is inconsistent with anything contained in Exhibits A and B hereto, the terms of this Agreement shall control. ARTICLE XIV GOVERNING LAW This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio. IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by their respective officers thereunto duly authorized as of the day and year first set forth above. ENEROP CORPORATION PERFECTION CORPORATION By /s/Richard M. DiValerio By /s/ RICHARD M. DiVALERIO VP Research Secretary Title Title December 11, 1989 29 - Nov - 1989 Date Date EXHIBIT A RESEARCH PROPOSAL Develop and market a 2" polyethylene plug valve for use in fuel gas distribution piping systems presented to: ENEROP CORPORATION Buffalo, New York by: Frank R. Volgstadt PERFECTION CORPORATION 222 Lake Street Madison, Ohio 44057 October 31, 1989 RESEARCH PROPOSAL FOR THE DEVELOPMENT OF MARKETING OF A SIZE 2 POLYETHYLENE PLUG VALVE FOR USE IN FUEL GAS DISTRIBUTION PIPING SYSTEMS INTRODUCTION: The need has been defined in the marketplace for a reliable, safe, cost effective polyethylene valve for use in fuel gas distribution systems. The successful design, development and introduction of a 1-1/4 size polyethylene gas valve has prompted the need for a similar type valve in size 2. The primary application for the 1-1/4 valve was as a "curb stop", a valve which is normally located in a service line at the property line between the main and the meter. This research proposal covers the size 2 valve whose primary application is for main flow control. That is, it will be used throughout the Country in 2" IPS polyethylene gas mains wherever the need for flow control is defined. The market for size 2 valve is much more widespread than the 1-1/4 size valve. The primary market for the 1-1/4 valve is the northeast, due to the fact that the northeastern utilities use these valves as emergency shut-offs or in some areas shut-off for nonpayment. The 2 valve design for installation on gas mains and approximately 80% of all new mains installed in the United States, are in polyethylene plastic. Thus, the market for the size 2 PE valve encompasses the entire United States, North America, and limited offshore markets. STATEMENT OF WORK: The Statement of Work, which is further developed in the attached, confidential interoffice dated August 4, 1989 defines the total annual North American market for size 2 polyethylene gas shut-off valves. The tasks required for the development of the size 2 valve will parallel those which were undertaken on the 1-1/4 sized valve and which are required to take the valve from a concept through and including the manufacturing and marketing of the product. A formal work schedule will be developed at our first Research Advisory Committee. The task will include all aspects of model making, prototype tooling, prototype assemblies, in-house laboratory testing, third party laboratory testing, field testing, product introduction, customer testing, production tooling, full scale manufacturer of the 2 valve, and a complete sales And marketing program. As in the case of the 1-1/4 polyethylene gas valve, the success of the program is the formation and implementation of a Research Advisory Committee to direct the technical aspects of the project. The Research Advisory Committee (RAC) which was established for the 1-1/4 program could very well continue on with the control and direction of the 2 valve program. As in the case of the 1-1/4" program, the Research Advisory Committee should be comprised of representatives from the Operations and Engineering Departments of National Fuel and representatives of the Manufacturing, Marketing, Engineering and Research Department of Perfection Corporation. The anticipated National Fuel manpower requirements would be no different than those necessary for review and approval of any gas distribution product being introduced to National Fuel. The Research Advisory Committee which will meet periodically will review the progress of the project and be instrumental in comprehensive field tests in selected regions of the National Fuel Gas Distribution area. F. R. Volgstadt FRV:ccc G27-040 Rockwell: initially no action: possible price reductions G27-041 CONFIDENTIALITY TREATMENT PURSUANT TO RULE 104(b) REQUESTED DELETED TWO (2) PAGES OF MARKETING RELATED MATERIAL EX-99 3 NOTICE EXHIBIT A-10 UNITED STATES OF AMERICA before the SECURITIES AND EXCHANGE COMMISSION PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 Release No. __________________________________________ In the Matter of NATIONAL FUEL RESOURCES, INC. LEIDY HUB, INC. 10 Lafayette Square Buffalo, New York 14203 (70-7833) __________________________________________ NOTICE REGARDING INVESTMENT IN MARKETING RELATED ACTIVITIES THROUGH MONEY POOL BORROWINGS; TRANSFER OF INTERESTS BETWEEN AFFILIATES; PLANNED FUTURE ACTIVITIES National Fuel Resources, Inc. ("NFR") and Leidy Hub, Inc. ("Leidy") both of 10 Lafayette Square, Buffalo, New York 14203, have filed a post-effective amendment under Sections 9(a), 10, 12(b), 32 and 33 of the Act and Rules 23, 24, 43, 45 and 51 and Section 2(b) of the Gas Related Activities of 1990. A notice in this matter was last issued by the Commission on December 20, 1991 (HCAR No. 35-25437). In HCAR No. 35-25964 NFR was authorized to make borrowings from the National Fuel System Money Pool ("Money Pool") up to a maximum principal amount at any one time outstanding of $15 million through December 31, 1995. NFR proposes to use borrowings from the Money Pool to make investments related to NFR's business, including investments in gas reserves, gas pipelines and appurtenant property. NFR also seeks authorization to take assignment of Leidy's interest in Metscan, Inc. ("Metscan") at book value. Metscan has developed an electronic automatic gas meter reading device which improves meter reading efficiency and enhances meter security. As noticed in HCAR No. 35-26023 issued April 8, 1994, Leidy has proposed through Post-Effective Amendment No. 13, File No. 70-7201, to acquire 29, 167 shares of Metscan Class B Preferred Stock, $.01 par value, ("Class B Preferred") for $35,000. Once the proposed transaction has been consummated, Leidy will own 7.31% of Metscan's common stock, 9.83% of the Metscan Class A Preferred and 1.07% of the Class B Preferred, or about 5.52% of the actual and potential equity investment in Metscan and Leidy's total investment in Metscan will be $1,261,000.00. All of Leidy's interest in Metscan will be transferred to NFR. NFR also seeks authorization to accept assignment at book value of an Agreement between Leidy (then Enerop) and Perfection Corporation regarding research, development and marketing of polyethylene ball valves for PE fuel gas piping systems. Plastic piping has been shown to be superior to traditional metal piping in regard to durability, leak resistance, ease of installation, etc. It is anticipated that the various plastic Valves developed as a result of the Perfection Research and Development Program will also be superior to metal ones in these respects. Under the Perfection Agreement, Leidy (then Enerop) pays an aggregate of $610,000.00 in return for a royalty of three percent (3%) of the net revenue from the sale of the valves up to a 16% return on investment. NFR also plans in the future to finance or invest in and provide consulting services to (i) research and development projects related to the gas industry, (ii) qualifying co-generation facilities as defined in the Public Utility Regulatory Policies Act of 1978 ("PURPA"), (iii) qualifying small production facilities as defined in PURPA, (iv) exempt wholesale generators within the meaning of Section 32 of the Act, and (v) foreign utility companies ("FUCOs") within the meaning of Section 33 of the Act. NFR will file for any further required authorization prior to undertaking any investment in or financing of any research and development project, independent power project or foreign utility company. It is stated that no state or federal commission, other than this Commission, has jurisdiction over the proposed transactions. The application-declaration, this and prior post-effective amendments, and any amendments thereto are available for public inspection through the Commission's Office of Public Reference. Interested persons wishing to comment or request a hearing should submit their views in writing by _____________________, to the Secretary, Securities and Exchange Commission, Washington, D.C. 20549, and serve a copy on the applicant-declaration at the address specified above. Proof of service (by affidavit or, in the case of an attorney at law, by certificate) should be filed with the request. Any request for a hearing shall identify specifically the issues of fact or law that are disputed. A person who so requests will be notified of any hearing, if ordered, and will receive a copy of any application-declaration, as filed, and as it may be further amended, may be granted and permitted to become effective. EX-99 4 BALANCE SHEET EXHIBIT F-15 National Fuel Resources, Inc. ("NFR") and Leidy Hub, Inc. ("Leidy") are wholly-owned subsidiaries of National Fuel Gas Company ("National"). NFR wishes to confirm its continued authority to make up to $10 million of marketing related investments through borrowings by NFR from the money pool. In addition, NFR seeks authority to invest in and/or finance research and development activities related to the gas industry and to invest in or finance independent power projects and foreign utility companies NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET AS OF DECEMBER 31, 1993 (UNAUDITED) (THOUSANDS OF DOLLARS)
Adjustments National Dr. (Cr.) Pro Forma ASSETS PROPERTY, PLANT AND EQUIPMENT $2,067,234 $10,000 (a) $2,077,234 LESS - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION 575,677 575,677 1,491,557 10,000 1,501,557 CURRENT ASSETS 321,720 (10,400) (a,b) 311,320 OTHER ASSETS 222,792 400 (b) 223,192 $2,036,069 $0 $2,036,069 CAPITALIZATION AND LIABILITIES CAPITALIZATION: COMMON STOCK $36,989 $36,989 PAID IN CAPITAL 371,097 371,097 EARNINGS REINVESTED IN THE BUSINESS 353,342 353,342 761,428 0 761,428 LONG TERM DEBT, NET OF CURRENT PORTION 478,417 478,417 TOTAL CAPITALIZATION 1,239,845 0 1,239,845 CURRENT LIABILITIES 442,300 442,300 OTHER LIABILITIES 353,924 353,924 $2,036,069 $0 $2,036,069
SEE NOTES TO PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS. LEIDY HUB, INC. PRO FORMA CONDENSED BALANCE SHEET AS OF DECEMBER 31, 1993 (UNAUDITED) (Thousands of Dollars)
Adjustments Leidy Dr. (Cr.) Pro Forma ASSETS PROPERTY, PLANT AND EQUIPMENT $3 $3 LESS - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION 3 3 0 0 0 CURRENT ASSETS 43 813 (a,b) 556 (300) (c) OTHER ASSETS 814 (813) (a,b) 1 $857 ($300) $557 CAPITALIZATION AND LIABILITIES CAPITALIZATION: COMMON STOCK $4 $4 PAID IN CAPITAL 1,038 1,038 EARNINGS REINVESTED IN THE BUSINESS (468) (468) 574 0 574 LONG-TERM DEBT, NET OF CURRENT PORTION 0 0 TOTAL CAPITALIZATION 574 0 574 CURRENT LIABILITIES 332 300 (c) 32 OTHER LIABILITIES (49) (49) $857 $300 $557
SEE NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS. NATIONAL FUEL RESOURCES, INC. PRO FORMA CONDENSED BALANCE SHEET AS OF DECEMBER 31, 1993 (UNAUDITED) (Thousands of Dollars)
Adjustments NFR Dr. (Cr.) Pro Forma ASSETS PROPERTY, PLANT AND EQUIPMENT $15 $10,000 (b) $10,015 LESS - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION 4 4 11 10,000 10,011 CURRENT ASSETS 7,378 0 (a,b,c,d,e) 7,378 OTHER ASSETS 416 1,213 (d,e,f) 1,629 $7,805 $11,213 $19,018 CAPITALIZATION AND LIABILITIES CAPITALIZATION: COMMON STOCK $10 $10 PAID IN CAPITAL 3,490 3,490 EARNINGS REINVESTED IN THE BUSINESS 1,226 1,226 4,726 0 4,726 LONG-TERM DEBT, NET OF CURRENT PORTION 0 0 TOTAL CAPITALIZATION 4,726 0 4,726 CURRENT LIABILITIES 2,535 (11,213) (a,c) 13,748 OTHER LIABILITIES 544 544 $7,805 ($11,213) $19,018
SEE NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS. EX-99 5 INCOME STATEMENTS EXHIBIT F-16 NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF INCOME AND EARNINGS REINVESTED IN THE BUSINESS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1993 (UNAUDITED) (Thousands of Dollars)
Adjustments National Dr. (Cr.) Pro Forma OPERATING REVENUES $1,036,294 $1,036,294 OPERATING EXPENSES: PURCHASED GAS 419,149 419,149 OPERATION EXPENSE 260,476 260,476 MAINTENANCE 23,871 23,871 PROPERTY, FRANCHISE & OTHER TAXES 96,091 96,091 DEPRECIATION, DEPLETION & AMORTIZATION 70,772 70,772 INCOME TAXES - NET 43,358 43,358 913,717 0 913,717 OPERATING INCOME 122,577 0 122,577 OTHER INCOME 4,363 4,363 INCOME BEFORE INTEREST CHARGES 126,940 0 126,940 INTEREST CHARGES: INTEREST ON LONG-TERM DEBT 37,320 37,320 OTHER INTEREST 12,544 12,544 49,864 0 49,864 INCOME BEFORE CUMULATIVE EFFECT $77,076 $0 $77,076 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES 3,826 3,826 NET INCOME AVAILABLE FOR COMMON STOCK $80,902 $0 $80,902 EARNINGS REINVESTED IN THE BUSINESS BALANCE AT JANUARY 1, 1993 327,554 327,554 408,456 0 408,456 DIVIDENDS ON COMMON STOCK 55,114 55,114 BALANCE AT DECEMBER 31, 1993 $353,342 $0 $353,342 EARNINGS PER COMMON SHARE INCOME BEFORE CUMULATIVE EFFECT $2.16 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES $0.11 NET INCOME AVAILABLE FOR COMMON STOCK $2.27 WEIGHTED AVG. COMMON SHARES OUTSTANDING 35,655,517
SEE NOTES TO PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS. LEIDY HUB, INC. PRO FORMA CONDENSED STATEMENTS OF INCOME AND EARNINGS REINVESTED IN THE BUSINESS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1993 (UNAUDITED) (Thousands of Dollars)
Adjustments Leidy Dr. (Cr.) Pro Forma OPERATING REVENUES $0 $0 OPERATING EXPENSES: PURCHASED GAS 0 0 OPERATION EXPENSE 500 500 MAINTENANCE 0 0 PROPERTY, FRANCHISE & OTHER TAXES 4 4 DEPRECIATION, DEPLETION & AMORTIZATION 0 0 INCOME TAXES - NET (148) (148) 356 0 356 OPERATING INCOME (356) 0 (356) OTHER INCOME 88 88 INCOME BEFORE INTEREST CHARGES (268) 0 (268) INTEREST CHARGES: INTEREST ON LONG-TERM DEBT 0 0 OTHER INTEREST 10 10 10 0 10 INCOME BEFORE CUMULATIVE EFFECT ($278) $0 ($278) CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES 0 0 NET INCOME AVAILABLE FOR COMMON STOCK ($278) $0 ($278) EARNINGS REINVESTED IN THE BUSINESS BALANCE AT JANUARY 1, 1993 (190) (190) (468) 0 (468) DIVIDENDS ON COMMON STOCK 0 0 BALANCE AT DECEMBER 31, 1993 ($468) $0 ($468)
SEE NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS. NATIONAL FUEL RESOURCES, INC. PRO FORMA CONDENSED STATEMENTS OF INCOME AND EARNINGS REINVESTED IN THE BUSINESS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1993 (UNAUDITED) (Thousands of Dollars)
Adjustments NFR Dr. (Cr.) Pro Forma OPERATING REVENUES $28,208 $28,208 OPERATING EXPENSES: PURCHASED GAS 25,701 25,701 OPERATION EXPENSE 1,041 1,041 MAINTENANCE 0 0 PROPERTY, FRANCHISE & OTHER TAXES 3 3 DEPRECIATION, DEPLETION & AMORTIZATION 2 2 INCOME TAXES - NET 626 626 27,373 0 27,373 OPERATING INCOME 835 0 835 OTHER INCOME 61 61 INCOME BEFORE INTEREST CHARGES 896 0 896 INTEREST CHARGES: INTEREST ON LONG-TERM DEBT 0 0 OTHER INTEREST 10 10 10 0 10 INCOME BEFORE CUMULATIVE EFFECT $886 $0 $886 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES 0 0 NET INCOME AVAILABLE FOR COMMON STOCK $886 $0 $886 EARNINGS REINVESTED IN THE BUSINESS BALANCE AT JANUARY 1, 1993 340 340 1,226 0 1,226 DIVIDENDS ON COMMON STOCK 0 0 BALANCE AT DECEMBER 31, 1993 $1,226 $0 $1,226
SEE NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS. EX-99 6 NOTES EXHIBIT F-17 NATIONAL FUEL GAS COMPANY NOTES TO PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1) The Notes to Consolidated Financial Statements appearing on pages 57 to 88 of National Fuel Gas Company's September 30, 1993 Form 10-K are incorporated herein by reference. 2) The Notes to Consolidated Financial Statements appearing on pages 7 to 14 of National Fuel Gas Company's December 31, 1993 Form 10-Q are incorporated herein by reference. 3) Analysis of Investments in Associated Companies at December 31, 1993 (thousands of dollars):
Par of Earnings Total Investment Stated Value Reinvested in Unremitted in Associated of Paid the Business Earnings Companies Subsidiary in at Since at Stock Capital Acquisition Acquisition Equity Registrant: Distribution Corporation $59,171 $121,668 $4,636 $155,415 $340,890 Supply Corporation 25,345 6,562 2,453 121,925 156,285 Penn-York 29,332 2,247 31,579 Seneca Resources 500 92,245 6 (25,371) 67,380 Leidy Hub 4 1,038 (468) 574 Empire Exploration 15 11,714 3,089 14,818 Highland 5 445 3,235 3,685 UCI 1 5,959 (1,434) 4,526 Data-Track 1 499 89 589 National Fuel Resources 10 3,490 1,226 4,726 Consolidating Adjustment 16,665 16,665 114,384 243,620 7,095 276,618 641,717 Supply Corporation: Empire Exploration 61 61 $114,384 $243,681 $7,095 $276,618 $641,778
LEIDY HUB, INC. NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS 1) The Notes to Consolidated Financial Statements appearing on pages 57 to 88 of National Fuel Gas Company's September 30, 1993 Form 10-K are incorporated herein by reference. 2) The Notes to Consolidated Financial Statements appearing on pages 7 to 14 of National Fuel Gas Company's December 31, 1993 Form 10-Q are incorporated herein by reference. NATIONAL FUEL RESOURCES, INC. NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS 1) The Notes to Consolidated Financial Statements appearing on pages 57 to 88 of National Fuel Gas Company's September 30, 1993 Form 10-K are incorporated herein by reference. 2) The Notes to Consolidated Financial Statements appearing on pages 7 to 14 of National Fuel Gas Company's December 31, 1993 Form 10-Q are incorporated herein by reference. EX-99 7 ADJUSTING ENTRIES EXHIBIT F-18 NATIONAL FUEL GAS COMPANY PRO FORMA ADJUSTING JOURNAL ENTRIES AS OF DECEMBER 31, 1993 (UNAUDITED) (Thousands of Dollars) DEBIT CREDIT (a) PROPERTY, PLANT & EQUIPMENT $10,000 CURRENT ASSETS $10,000 To record NFR's investment in marketing related property, plant and equipment (b) OTHER ASSETS $400 CURRENT ASSETS $400 To record NFR's additional investment in Perfection in accordance with Agreement dated October 1, 1993 NOTE: No proforma entry is reflected for the proposed investment in or financing of independent power projects and foreign utility company activities. Proforma entries related to this will be reflected in any subsequent filing seeking further authorization prior to undertaking any investment in or financing of this nature. LEIDY HUB, INC. PRO FORMA ADJUSTING ENTRIES AS OF DECEMBER 31, 1993 (UNAUDITED) (Thousands of Dollars) DEBIT CREDIT (a) CURRENT ASSETS $210 OTHER ASSETS $210 To record Leidy's receipt of payment from NFR for assignment of Perfection Agreement to NFR (b) CURRENT ASSETS $603 OTHER ASSETS $603 To record Leidy's receipt of payment from NFR for assignment of Metscan investment to NFR (c) CURRENT LIABILITIES $300 CURRENT ASSETS $300 To record Leidy's repayment of money pool borrowings from the proceeds of the assignment of the Perfection and Metscan investments. NATIONAL FUEL RESOURCES, INC. PRO FORMA ADJUSTING ENTRIES AS OF DECEMBER 31, 1993 (UNAUDITED) (Thousands of Dollars) DEBIT CREDIT (a) CURRENT ASSETS $10,000 CURRENT LIABILITIES $10,000 To record NFR's borrowings from the money pool to invest in marketing related property, plant & equipment (b) PROPERTY, PLANT & EQUIPMENT $10,000 CURRENT ASSETS $10,000 To record NFR's investment in marketing related property, plant and equipment (c) CURRENT ASSETS $1,213 CURRENT LIABILITIES $1,213 To record NFR's borrowings from the money pool to invest in research and development projects (Metscan & Perfection) (d) OTHER ASSETS $603 CURRENT ASSETS $603 To record NFR's payment to Leidy for assignment of Metscan investment from Leidy (e) OTHER ASSETS $210 CURRENT ASSETS $210 To record NFR's payment to Leidy for assignment of Perfection Agreement from Leidy (f) OTHER ASSETS $400 CURRENT ASSETS $400 To record NFR's additional investment in Perfection in accordance with Agreement dated October 1, 1993 NOTE: No proforma entry is reflected for the proposed investment in or financing of independent power projects and foreign utility company activities. Proforma entries related to this will be reflected in any subsequent filing seeking further authorization prior to undertaking any investment in or financing of this nature. -----END PRIVACY-ENHANCED MESSAGE-----