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
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; <PAGE>
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 <PAGE>
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
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.
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
<TABLE>
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 1993
(UNAUDITED)
(THOUSANDS OF DOLLARS)
<CAPTION>
Adjustments
National Dr. (Cr.) Pro
Forma
<S> <C> <C> <C>
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
</TABLE>
SEE NOTES TO PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
<TABLE>
LEIDY HUB, INC.
PRO FORMA CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 1993
(UNAUDITED)
(Thousands of Dollars)
<CAPTION>
Adjustments
Leidy Dr. (Cr.) Pro
Forma
<S> <C> <C> <C>
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
</TABLE>
SEE NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS.
<TABLE>
NATIONAL FUEL RESOURCES, INC.
PRO FORMA CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 1993
(UNAUDITED)
(Thousands of Dollars)
<CAPTION>
Adjustments
NFR Dr. (Cr.) Pro
Forma
<S> <C> <C> <C>
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
</TABLE>
SEE NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS.
EXHIBIT F-16
<TABLE>
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)
<CAPTION>
Adjustments
National Dr. (Cr.) Pro
Forma
<S> <C> <C> <C>
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
</TABLE>
SEE NOTES TO PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
<TABLE>
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)
<CAPTION>
Adjustments
Leidy Dr. (Cr.) Pro
Forma
<S> <C> <C> <C>
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)
</TABLE>
SEE NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS.
<TABLE>
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)
<CAPTION>
Adjustments
NFR Dr. (Cr.) Pro
Forma
<S> <C> <C> <C>
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
</TABLE>
SEE NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS.
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):
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C>
<C>
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
</TABLE>
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.
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.
