SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM U5S
ANNUAL REPORT
For the Fiscal Year Ended September 30, 1996
Filed Pursuant to the
Public Utility Holding Company Act of 1935
by
National Fuel Gas Company
10 Lafayette Square, Buffalo, N.Y. 14203
<PAGE>
NATIONAL FUEL GAS COMPANY
FORM U5S - ANNUAL REPORT
For the Fiscal Year Ended September 30, 1996
TABLE OF CONTENTS
Page
ITEM 1. SYSTEM COMPANIES AND INVESTMENTS THEREIN AS OF
SEPTEMBER 30, 1996 3
ITEM 2. ACQUISITIONS OR SALES OF UTILITY ASSETS 7
ITEM 3. ISSUE, SALE, PLEDGE, GUARANTEE OR ASSUMPTION OF
SYSTEM SECURITIES 7
ITEM 4. ACQUISITION, REDEMPTION OR RETIREMENT OF SYSTEM
SECURITIES 8
ITEM 5. INVESTMENTS IN SECURITIES OF NONSYSTEM COMPANIES 9
ITEM 6. OFFICERS AND DIRECTORS
Part I. Names, principal business address and
positions held as of September 30, 1996 11
Part II. Financial connections as of September 30, 1996 13
Part III. Compensation and other related information 13
ITEM 7. CONTRIBUTIONS AND PUBLIC RELATIONS 18
ITEM 8. SERVICE, SALES AND CONSTRUCTION CONTRACTS
Part I. Intercompany sales and services
(1) Salaries of officers of the Registrant 19
(2) Services rendered by Statutory Subsidiaries 21
(3) Services rendered by Registrant 28
Part II. Contracts to purchase services or goods
between any System company and any affiliate 29
Part III. Employment of any person by any System
company for the performance on a continuing
basis of management services 29
ITEM 9. WHOLESALE GENERATORS AND FOREIGN UTILITY COMPANIES 29
ITEM 10. FINANCIAL STATEMENTS AND EXHIBITS
Financial Statements (Index) 32
Exhibits 57
SIGNATURE 63
<PAGE>
ITEM 1. SYSTEM COMPANIES AND INVESTMENTS THEREIN AS OF SEPTEMBER 30, 1996
Number of Common Percent of Issuer Owner's
Name of Company Shares Owned Voting Power Book Value Book Value
- - --------------- ---------------- ------------ ---------- ----------
(Thousands of Dollars)
--------------------
Registrant:
National Fuel Gas Company
(Parent, Company or Registrant) - - - -
Statutory Subsidiaries:
National Fuel Gas Distribution
Corporation (Distribution
Corporation) (Note 1) 2,000 100% $400,584 $400,584
Unsecured Debt (Note 10) - - $440,000 $440,000
National Fuel Gas Supply
Corporation (Supply
Corporation) (Note 2) 1,013,802 100% $219,208 $219,208
Unsecured Debt (Note 10) - - $212,465 $212,465
Seneca Resources Corporation
(Seneca Resources) (Note 3) 100,000 100% $138,592 $138,592
Unsecured Debt (Note 10) - - $184,400 $184,400
Empire Exploration Company,
Empire 1983 Drilling
Program, Empire 1983
Joint Venture (Note 11) N/A N/A $ 970 $ 970
Highland Land & Minerals, Inc.
(Highland) (Note 4) 4,500 100% $ 4,648 $ 4,648
Utility Constructors, Inc.
(UCI) (Note 5) 1,000 100% $ 3,391 $ 3,391
Data-Track Account Services,
Inc. (Data-Track) (Note 6) 1,000 100% $ 638 $ 638
Leidy Hub, Inc. (Leidy Hub)
(Note 7) 4,000 100% $ 679 $ 679
Unsecured Debt (Note 10) - - $ 300 $ 300
Ellisburg-Leidy Northeast
Hub Company (Note 7) N/A 50% $ 545 $ 130
Enerchange L.L.C. (Note 7) N/A 14.5% $ 2,774 $ 930
National Fuel Resources, Inc.
(NFR) (Note 8) 10,000 100% $ 9,235 $ 9,235
Horizon Energy Development, Inc.
(Horizon) (Notes 9 and 12-14) 1,250 100% $ (6,340) $ (6,340)
Unsecured Debt (Note 10) - - $ 7,600 $ 7,600
Sceptre Power Company (Note 12) N/A 100% $ 1,949 $ 1,949
Beheer-en-Beleggingmaatschappij
Bruwabel B.V. (Bruwabel)
(Note 13) 400 100% $ 2,133 $ 2,133
Power International, s.r.o.
(PI) (Note 13) N/A 100% $ 326 $ 326
Power Development, s.r.o.
(PD) (Note 13) N/A 100% $ 1,845 $ 1,845
Teplarna Kromeriz a.s.
(Kromeriz) (Note 13) N/A 100% $ 1,178 $ 1,178
<PAGE>
ITEM 1. SYSTEM COMPANIES AND INVESTMENTS THEREIN AS OF SEPTEMBER 30, 1996
(Continued)
Notes:
(1) Distribution Corporation is a public utility that sells natural gas and
provides gas transportation service in western New York and northwestern
Pennsylvania.
(2) Supply Corporation is engaged in the transportation and storage of
natural gas for affiliated and nonaffiliated companies.
(3) Seneca Resources is engaged in the exploration for, and the development
and purchase of, natural gas and oil reserves in the Gulf Coast of Texas
and Louisiana, in California, and in the Appalachian region of the
United States. In addition, Seneca Resources is engaged in the marketing
of timber from its Pennsylvania land holdings.
(4) Highland operates a sawmill and kiln in Kane, Pennsylvania.
(5) UCI discontinued its operations (primarily pipeline construction) in
1995 and its affairs are being wound down.
(6) Data-Track provides collection services (principally issuing collection
notices) for the subsidiaries of the Company, particularly Distribution
Corporation.
(7) Leidy Hub is engaged in providing various natural gas hub services to
customers in the northeastern, mid-Atlantic, Chicago and Los Angeles
areas of the United States and Ontario, Canada, through (i) Leidy Hub's
50% ownership of Ellisburg-Leidy Northeast Hub Company and (ii) Leidy
Hub's 14.5% ownership of Enerchange, L.L.C. (Enerchange) which in turn
owns 50% of QuickTrade, L.L.C.
(8) NFR is engaged in the marketing and brokerage of natural gas and the
performance of energy management services for utilities and end-users
located in the northeastern and midwestern United States.
(9) Horizon was formed to engage in foreign and domestic energy projects
through investment as a sole or partial owner in various business
entities (see Notes 12-14).
(10) Unsecured debt is presented on page 6.
(11) In December 1983, Empire Exploration, Inc. (which was subsequently
merged into Seneca Resources) established a drilling fund through a
series of limited partnerships in which it acts as general partner (See
File No. 70-6909). Empire Exploration, Inc.'s aggregate investment in
all three limited partnerships amounted to $970,150.
<PAGE>
ITEM 1. SYSTEM COMPANIES AND INVESTMENTS THEREIN AS OF SEPTEMBER 30, 1996
(Continued)
(12) Horizon became one of the partners in Sceptre Power Company, a
California general partnership, on September 15, 1995. This partnership
was dissolved as of December 23, 1996.
(13) Horizon purchased 100% of the capital stock of Bruwabel as of June 25,
1996. Bruwabel owns 100% of the ownership interests of PI and PD (both
Czech corporations). PD owns 100% of the ownership interests of Kromeriz
(also a Czech corporation). Bruwabel and its subsidiaries are primarily
engaged in district heating and power generation project development in
Eastern Europe. Currently, the only material asset of these companies is
a district heating system which sells steam heat to residential and
commercial customers in the city of Kromeriz, Czech Republic. Horizon
intends to carry out the plan of the previous owner to convert this
steam plant into a 35-50 megawatt cogeneration facility which would sell
electricity to the local electric distribution company under
agreements currently being negotiated. The Kromeriz district heating
plant will continue operating while Horizon continues the development of
the cogeneration expansion. It is anticipated that construction will
begin on the cogeneration expansion within one year.
Horizon will file for Exempt Wholesale Generator (EWG) or Foreign
Utility Company (FUCO) status in regard to the Kromeriz project
described above at the earliest appropriate time.
(14) Horizon owned 60% of the voting power of Sceptre Kabirwala, L.L.C.
(SKLLC) (a Delaware limited liability company) which in turn owned 60%
of the voting power of KPP Investment, L.L.C. (KPP) (a Delaware limited
liability company), which in turn owned 48.19% of the voting stock of
Fauji Kabirwala Power Company Limited (FKPCL) (a Pakistan public limited
company). FKPCL is a certified exempt wholesale generator.
See Item 9 and exhibits H and I for further information.
<PAGE>
ITEM 1. SYSTEM COMPANIES AND INVESTMENTS THEREIN AS OF SEPTEMBER 30, 1996
(Concluded)
Note (10) Unsecured Debt
Principal Issuer Owner's
Name of Company Amount Book Book
(Issuer) Security Owned by Registrant Owed Value Value
- - --------------- ---------------------------- --------- ------ -------
(Thousands of Dollars)
Distribution
Corporation Intercompany Notes:
6.54% Due November 5, 1997 7,000 7,000 7,000
5.72% Due March 1, 1999 50,000 50,000 50,000
6.71% Due February 4, 2000 50,000 50,000 50,000
7.99% Due February 1, 2004 100,000 100,000 100,000
7.46% Due March 30, 2023 49,000 49,000 49,000
8.55% Due July 15, 2024 20,000 20,000 20,000
7.50% Due June 13, 2025 50,000 50,000 50,000
5.4765% System Money Pool* 114,000 114,000 114,000
-------- -------- --------
440,000 440,000 440,000
-------- -------- --------
Supply
Corporation Intercompany Notes:
6.54% Due November 5, 1997 25,000 25,000 25,000
7.37% Due July 14, 1999 50,000 50,000 50,000
7.99% Due February 1, 2004 25,000 25,000 25,000
8.44% Due November 10, 2012 50,965 50,965 50,965
8.55% Due July 15, 2024 30,000 30,000 30,000
5.4765% System Money Pool* 31,500 31,500 31,500
-------- -------- --------
212,465 212,465 212,465
-------- -------- --------
Seneca
Resources Intercompany Notes:
6.54% Due November 5, 1997 18,000 18,000 18,000
6.22% Due July 2, 1998 50,000 50,000 50,000
5.72% Due March 1, 1999 50,000 50,000 50,000
5.4765% System Money Pool* 66,400 66,400 66,400
-------- -------- --------
184,400 184,400 184,400
-------- -------- --------
Leidy Hub 5.4765% System Money Pool* 300 300 300
-------- -------- --------
Horizon 5.4765% System Money Pool* 7,600 7,600 7,600
-------- -------- --------
$844,765 $844,765 $844,765
======== ======== ========
* Interest rate represents weighted average of all short-term securities
outstanding at September 30, 1996, pursuant to System money pool
arrangement, S.E.C. File No. 70-8297 (Release Nos. 25964, 26076 and
26196).
<PAGE>
ITEM 2. ACQUISITIONS OR SALES OF UTILITY ASSETS
None during fiscal year ended September 30, 1996.
ITEM 3. ISSUE, SALE, PLEDGE, GUARANTEE OR ASSUMPTION OF SYSTEM SECURITIES
None during fiscal year ended September 30, 1996.
<PAGE>
ITEM 4. ACQUISITION, REDEMPTION OR RETIREMENT OF SYSTEM SECURITIES
FISCAL YEAR ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Number of Shares or
Name of Company Principal Amount
Acquiring, Redeeming ---------------------------- Commission
Name of Issuer and Title of Issue or Retiring Securities Acquired Redeemed Retired Consideration Authorization
- - --------------------------------- ---------------------- -------- -------- ------- ------------- --------------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
------------------------------------------
Registered Holding Company:
Registrant:
8.90% Note due December 18, 1995 Registrant $25,500 $25,500 Rule 42
8.875% Note due December 18, 1995 Registrant 20,000 20,000 Rule 42
8.90% Note due December 20, 1995 Registrant 13,000 13,000 Rule 42
4.53% Note due September 9, 1996 Registrant 30,000 30,000 Rule 42
Distribution Corporation:
5.72% Note maturing
March 1, 1999 Registrant $50,000 50,000 File No. 70-8541
Seneca Resources:
5.72% Note maturing
March 1, 1999 Registrant 50,000 50,000 File No. 70-8541
Subsidiaries of Registered
Holding Company
Distribution Corporation:
9.03% Note Due December 18, 1995 Distribution Corp. 8,000 8,000 Rule 42
Supply Corporation 17,500 17,500 Rule 42
9.00% Note due December 18, 1995 Distribution Corp. 9,000 9,000 Rule 42
Supply Corporation 11,000 11,000 Rule 42
9.03% Note due December 20, 1995 Distribution Corp. 13,000 13,000 Rule 42
Seneca Resources:
4.66% Note due September 9, 1996 Seneca Resources 30,000 30,000 Rule 42
</TABLE>
<PAGE>
ITEM 5. INVESTMENTS IN SECURITIES OF NONSYSTEM COMPANIES
Number of Aggregate
1. Name of Owner Persons Business of Persons Investment
------------- --------- ------------------- ----------
None.
<PAGE>
THIS PAGE LEFT BLANK INTENTIONALLY
<PAGE>
ITEM 6. OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
Part I. Names, principal business address and positions held as of September 30, 1996
Names of System Companies with Which Connected
--------------------------------------------------------------
National Fuel National Fuel Seneca
Gas Distribution Gas Supply Resources
Registrant Corp. Corp. Corp.
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
B. J. Kennedy Buffalo, NY (1) | D,COB,CEO,P,s | D, COB, s | D, COB, s | s |
- - -------------------------------------------------------------------------------------------------------
B. S. Lee Des Plaines, IL (2) | D, df | - | - | - |
- - -------------------------------------------------------------------------------------------------------
G. L. Mazanec Houston, TX (3) | D, df | - | - | - |
- - -------------------------------------------------------------------------------------------------------
L. F. Kahl Williamsville, NY (4) | D, df | - | - | - |
- - -------------------------------------------------------------------------------------------------------
L. Rochwarger Buffalo, NY (1) | D, df | - | - | - |
- - -------------------------------------------------------------------------------------------------------
G. H. Schofield Buffalo, NY (1) | D, df | - | - | - |
- - -------------------------------------------------------------------------------------------------------
E. T. Mann Buffalo, NY (1) | D, df | - | - | - |
- - -------------------------------------------------------------------------------------------------------
R. T. Brady East Aurora, NY (5) | D, df | - | - | - |
- - -------------------------------------------------------------------------------------------------------
P. C. Ackerman Buffalo, NY (1) | D, SVP, s | D, P, s | EVP | D, s |
- - -------------------------------------------------------------------------------------------------------
J. A. Beck Houston, TX (6) | - | - | - | P, s |
- - -------------------------------------------------------------------------------------------------------
R. P. Borneman Buffalo, NY (1)(8) | - | VP, s | s | s |
- - -------------------------------------------------------------------------------------------------------
W. M. Petmecky Houston, TX (6) | - | - | - | SVP, S, s |
- - -------------------------------------------------------------------------------------------------------
D. A. Brown Houston, TX (6) | - | - | - | VP, s |
- - -------------------------------------------------------------------------------------------------------
E. E. Wassell Houston, TX (6) | - | - | - | VP, s |
- - -------------------------------------------------------------------------------------------------------
J. F. McKnight Houston, TX (6) | - | - | - | VP, s |
- - -------------------------------------------------------------------------------------------------------
C. H. Friedrich Houston, TX (6) | - | - | - | T, s |
- - -------------------------------------------------------------------------------------------------------
A. M. Cellino Buffalo, NY (1) | S, s | VP, s | - | - |
- - -------------------------------------------------------------------------------------------------------
W. E. DeForest Buffalo, NY (1) | - | SVP, D, s | s | s |
- - -------------------------------------------------------------------------------------------------------
B. H. Hale Buffalo, NY (1) | s | D, SVP | s | - |
- - -------------------------------------------------------------------------------------------------------
R. Hare Buffalo, NY (1) | - | - | D, P, s | - |
- - -------------------------------------------------------------------------------------------------------
W. J. Hill Buffalo, NY (1) | D | - | - | - |
- - -------------------------------------------------------------------------------------------------------
R. J. Kreppel Buffalo, NY (1) | - | - | - | - |
- - -------------------------------------------------------------------------------------------------------
J. P. Pawlowski Buffalo, NY (1) | T, s | D, SVP, T, s | T, S, s | s |
- - -------------------------------------------------------------------------------------------------------
J. R. Pustulka Buffalo, NY (1) | - | - | VP, s | - |
- - -------------------------------------------------------------------------------------------------------
J. D. Ramsdell Buffalo, NY (1) | - | VP, s | - | - |
- - -------------------------------------------------------------------------------------------------------
W. A. Ross Buffalo, NY (1) | - | - | D, VP, s | - |
- - -------------------------------------------------------------------------------------------------------
D. J. Seeley Buffalo, NY (1) | - | s | D, SVP, s | - |
- - -------------------------------------------------------------------------------------------------------
D. F. Smith Buffalo, NY (1) | - | SVP, D, S, s | s | D, s |
- - -------------------------------------------------------------------------------------------------------
R. J. Tanski Buffalo, NY (1) | - | VP, GC, s | - | - |
- - -------------------------------------------------------------------------------------------------------
P. A. Turek Erie, PA (7)(8) | - | - | D, VP, s | - |
- - -------------------------------------------------------------------------------------------------------
G. T. Wehrlin Buffalo, NY (1) | C, s | SVP, D, C, s | s | D, C, s |
- - -------------------------------------------------------------------------------------------------------
R. W. Wilcox Buffalo, NY (1) | - | VP, s | s | s |
- - -------------------------------------------------------------------------------------------------------
R. J. Wright Buffalo, NY (1) | - | VP, s | s | s |
- - -------------------------------------------------------------------------------------------------------
</TABLE>
Position Symbol Key
COB - Chairman of the Board of Directors df - Director's Fees
CEO - Chief Executive Officer S - Secretary
P - President C - Controller
EVP - Executive Vice President D - Director
SVP - Senior Vice President s - Salary
VP - Vice President T - Treasurer
GC - General Counsel
Notes
(1) National Fuel Gas Company, 10 Lafayette Square, Buffalo, New York 14203
(2) Institute of Gas Technology, 1700 So. Mt. Prospect Road, DesPlaines, IL
60018-1804
(3) 302 Fall River Court, Houston, TX 77024
(4) The Vector Group, L.L.C., 6255 Sheridan Drive, Suite 100, Williamsville,
NY 14221
(5) Moog Industries, Inc. 300 Jamison Rd., East Aurora, NY 14052-0018
(6) Seneca Resources Corporation, 1201 Louisiana Street, Suite 400, Houston,
Texas 77002
(7) National Fuel Gas Company, 1100 State Street, Erie, Pennsylvania 16512
(8) Retired effective October 1, 1996
(9) Power International, Maiselova 15, Praha 1 - Josefov, 11000, Czech
Republic
(10) Intra Beheer B.V., Leidseplein 29, 1017 PS, Amsterdam, The Netherlands
<PAGE>
<TABLE>
<CAPTION>
Highland Utility Data-Track Horizon
Land & Constructors Account National Fuel Leidy-Hub, Energy
Minerals, Inc. Inc. Services, Inc. Resources, Inc. Inc. Development, Inc.*
- - -----------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
s | COB | s | s | D | -
- - -----------------------------------------------------------------------------------------------------
- | - | - | - | - | -
- - -----------------------------------------------------------------------------------------------------
- | - | - | - | - | -
- - -----------------------------------------------------------------------------------------------------
- | - | - | - | - | -
- - -----------------------------------------------------------------------------------------------------
- | - | - | - | - | -
- - -----------------------------------------------------------------------------------------------------
- | - | - | - | - | -
- - -----------------------------------------------------------------------------------------------------
- | - | - | - | - | -
- - -----------------------------------------------------------------------------------------------------
- | - | - | - | - | -
- - -----------------------------------------------------------------------------------------------------
D, P, s | D, P | D, P | - | - | D, P, s
- - -----------------------------------------------------------------------------------------------------
- | - | - | - | - | -
- - -----------------------------------------------------------------------------------------------------
- | - | s | - | - | -
- - -----------------------------------------------------------------------------------------------------
- | - | - | - | - | -
- - -----------------------------------------------------------------------------------------------------
- | - | - | - | - | -
- - -----------------------------------------------------------------------------------------------------
- | - | - | - | - | -
- - -----------------------------------------------------------------------------------------------------
- | - | - | - | - | -
- - -----------------------------------------------------------------------------------------------------
- | - | - | - | - | -
- - -----------------------------------------------------------------------------------------------------
- | - | - | - | - | -
- - -----------------------------------------------------------------------------------------------------
- | - | s | s | D, P, s | -
- - -----------------------------------------------------------------------------------------------------
- | - | - | - | - | VP, s
- - -----------------------------------------------------------------------------------------------------
- | - | - | - | - | -
- - -----------------------------------------------------------------------------------------------------
- | - | - | - | - | -
- - -----------------------------------------------------------------------------------------------------
- | - | - | D, P, s | - | -
- - -----------------------------------------------------------------------------------------------------
S, T, s | T | T, s | s | - | -
- - -----------------------------------------------------------------------------------------------------
- | - | - | - | - | -
- - -----------------------------------------------------------------------------------------------------
- | - | - | - | - | -
- - -----------------------------------------------------------------------------------------------------
- | - | - | - | - | -
- - -----------------------------------------------------------------------------------------------------
- | - | - | - | - | -
- - -----------------------------------------------------------------------------------------------------
D, s | D, S | D, S, s | D, s | - | -
- - -----------------------------------------------------------------------------------------------------
- | - | - | S, T | - | -
- - -----------------------------------------------------------------------------------------------------
- | - | - | - | - | -
- - -----------------------------------------------------------------------------------------------------
D, s | D | D, s | D, s | D, S, T, s | S, T, s
- - -----------------------------------------------------------------------------------------------------
s | - | s | s | - | -
- - -----------------------------------------------------------------------------------------------------
s | - | s | s | - | -
- - -----------------------------------------------------------------------------------------------------
</TABLE>
* Directors of Horizon's subsidiaries are as follows:
Bruwabel
- - --------
Managing Directors:
B. H. Hale Buffalo, NY (1)
G. T. Wehrlin Buffalo, NY (1)
Hirsch Gebouw (Intra Beheer B.V.) Amsterdam, The Netherlands (10)
Power International
- - -------------------
Managing Director:
Vladimir Prerad Prague, Czech Republic (9)
Power Development
- - -----------------
Managing Director:
Vladimir Prerad Prague, Czech Republic (9)
Teplarna Kromeriz
- - -----------------
Directors:
Vladimir Prerad Prague, Czech Republic (9)
Lubos Jarolimek Prague, Czech Republic (9)
Jiri Stipek Prague, Czech Republic (9)
<PAGE>
Item 6. OFFICERS AND DIRECTORS (Continued)
Part II. Financial connections as of September 30, 1996:
Position Held Applicable
Name of Officer Name and Location of in Financial Exemption
or Director Financial Institution Institution Rule
- - --------------- --------------------- ------------- ----------
R. T. Brady Manufacturers and Traders
Trust Company,
Buffalo, New York Director 70 (a)
First Empire State
Corporation,
Buffalo, New York Director 70 (a)
B. J. Kennedy Marine Midland Bank
Buffalo, New York Director 70 (a)
Part III. Compensation and other related information:
(A) Compensation of Directors and Executive Officers:
The information required by this item appears under "Directors'
Compensation," and "Executive Compensation," on pages 6, 29 to 30 and C-1 to C-2
and pages 9 to 19, respectively, of National Fuel Gas Company Proxy Statement,
dated December 30, 1996, included as exhibit A (3) to this Form U5S and is
incorporated herein by reference.
(B) Interest of executive officers and directors in securities of System
Companies including options or other rights to acquire securities:
The information required by this item appears under "Security Ownership
of Certain Beneficial Owners and Management," on pages 7 to 8 of the National
Fuel Gas Company Proxy Statement, dated December 30, 1996, included as Exhibit
A(3) of this Form U5S and is incorporated herein by reference.
(C) Contracts and Transactions with System Companies:
Exhibit No. in Document
(Incorporated by Reference
as Indicated in Notes)
--------------------------
Employment Agreement, dated September 17,
1981, with Bernard J. Kennedy. 10.4 (6)
Ninth Extension to Employment Agreement
with Bernard J. Kennedy, dated September 19,
1996. 10.6 (8)
National Fuel Gas Company 1983 Incentive
Stock Option Plan, as amended and restated
through February 18, 1993. 10.2 (5)
National Fuel Gas Company 1984 Stock Plan,
as amended and restated through
February 18, 1993. 10.3 (5)
Amendment to National Fuel Gas Company 1984
Stock Plan, dated December 11, 1996. 10.7 (8)
<PAGE>
Item 6. OFFICERS AND DIRECTORS (Continued)
Part III. Compensation of Directors and Executive Officers (Continued)
National Fuel Gas Company 1993 Award and
Option Plan, dated February 18, 1993. 10.1 (5)
Amendment to National Fuel Gas Company 1993
Award and Option Plan, dated October 27,
1995. 10.8 (7)
Amendment to National Fuel Gas Company 1993
Award and Option Plan, dated December 11,
1996. 10.8 (8)
National Fuel Gas Company 1997 Award and
Option Plan. 10.9 (8)
Change in Control Agreement, dated May 1,
1992, with Philip C. Ackerman. 10.4 (3)
Change in Control Agreement, dated May 1,
1992, with Richard Hare. 10.5 (3)
Form of Change in Control Agreement, dated
May 1, 1992, with Walter E. DeForest, Bruce
H. Hale, Joseph P. Pawlowski, Dennis J. Seeley,
David F. Smith and Gerald T. Wehrlin and dated
March 16, 1995 with James A. Beck. 10.16 (8)
Agreement, dated August 1, 1989, with Richard
Hare. 10-Q (1)
National Fuel Gas Company Deferred
Compensation Plan, as amended and restated
through May 1, 1994. 10-7 (6)
Amendment to National Fuel Gas Company
Deferred Compensation Plan, dated September
27, 1995. 10.9 (7)
Amendment to National Fuel Gas Company
Deferred Compensation Plan, dated September
19, 1996. 10.10 (8)
National Fuel Gas Company and Participating
Subsidiaries Executive Retirement Plan as
amended and restated through November 1, 1995. 10.10 (7)
National Fuel Gas Company and Participating
Subsidiaries 1996 Executive Retirement Plan
Trust Agreement II, dated May 6, 1996. 10.13 (8)
Executive Death Benefits Agreement, dated
April 1, 1991, with William J. Hill. 10.8 (3)
<PAGE>
Item 6. OFFICERS AND DIRECTORS (Continued)
Part III. Compensation of Directors and Executive Officers (Continued)
Split Dollar Death Benefits Agreement, dated
April 1, 1991, with Richard Hare. 10.9 (6)
Amendment to April 1, 1991 Death Benefits
Agreement, dated January 8, 1996, with
Richard Hare. 10.12 (8)
Split Dollar Death Benefits Agreement, dated
April 1, 1991, with Philip C. Ackerman. 10.10 (6)
Amendment to April 1, 1991 Death Benefits
Agreement, dated January 8, 1996, with
Philip C. Ackerman. 10.11 (8)
Death Benefits Agreement, dated August 28,
1991, with Bernard J. Kennedy. 10-TT (2)
Amendment to Death Benefit Agreement of
August 28, 1991, with Bernard J. Kennedy,
dated March 15, 1994. 10.11 (7)
Summary of Annual At Risk Compensation
Incentive Program. 10.10 (4)
Administrative Rules with Respect to At Risk
Awards under the 1993 Award and Option
Plan. 10.14 (8)
Excerpts of Minutes from the National Fuel
Gas Company Board of Directors Meeting of
December 5, 1991 regarding change in
control agreements, non-employee director
retirement plan, and restrictions on
restricted stock. 10-UU (2)
Excerpts from Minutes from the National
Fuel Gas Company Board of Directors
Meeting of September 19, 1996,
regarding compensation of non-employee
directors and related amendments of By-Laws. 3.1 (8)
Administrative Rules of the Compensation
Committee of the Board of Directors of
National Fuel Gas Company as amended through
December 11, 1996. 10.15 (8)
<PAGE>
Item 6. OFFICERS AND DIRECTORS (Continued)
Part III. Compensation of Directors and Executive Officers (Concluded)
(Notes)
(1) Incorporated by reference from the Exhibit filed with the Annual
Report on Form 10-K for fiscal year ended September 30, 1989 in
File No. 1-3880.
(2) Incorporated by reference from Exhibit filed with the Annual
Report on Form 10-K for fiscal year ended September 30, 1991 in
File No. 1-3880.
(3) Incorporated by reference from Exhibit filed with the Annual
Report on Form 10-K for fiscal year ended September 30, 1992 in
File No. 1-3880.
(4) Incorporated by reference from Exhibit filed with the Annual
Report on Form 10-K for fiscal year ended September 30, 1993 in
File No. 1-3880.
(5) Incorporated by reference from Exhibit filed with the Quarterly
Report on Form 10-Q for quarterly period ended March 31, 1993 in
File No. 1-3880.
(6) Incorporated by reference from Exhibit filed with the Annual
Report on Form 10-K for fiscal year ended September 30, 1994 in
File No. 1-3880.
(7) Incorporated by reference from Exhibit filed with the Annual
Report on Form 10-K for fiscal year ended September 30, 1995 in
File No. 1-3880.
(8) Incorporated by reference from Exhibit filed with the Annual
Report on Form 10-K for fiscal year ended September 30, 1996 in
File No. 1-3880.
(D) Indebtedness to System Companies: None
(E) Participation in Bonus and Profit-Sharing Arrangements and Other
Benefits:
The information required by this item appears under "Directors'
Compensation," and "Executive Compensation," on Pages 29 to 30 and C-1 to
C-2 and pages 9 to 19, respectively, of the National Fuel Gas Company
Proxy Statement, dated December 30, 1996, included as exhibit A(3) to
this Form U5S and incorporated herein by reference.
(F) Rights to Indemnity:
The information required by this item appears in Article II, Paragraph 8
of the National Fuel Gas Company By-Laws as amended through June 9, 1994.
Such By-Laws are listed as Exhibit B(1)(iii) to this Form U5S and are
incorporated herein by reference as indicated.
<PAGE>
Item 6. OFFICERS AND DIRECTORS (Concluded)
Part III. Compensation of Directors and Executive Officers (Concluded)
The Company also purchases directors and officers liability insurance
with a primary limit of $35 million and $40 million in excess coverage,
and, in recognition of the scope of the foregoing by-law indemnification,
certain other errors and omissions and general liability insurance
coverages which are applicable to all employees as insureds, including
directors and officers.
<PAGE>
ITEM 7. CONTRIBUTIONS AND PUBLIC RELATIONS
<TABLE>
<CAPTION>
Amount
Name of Recipient Accounts Charged Per Books Fiscal Year Ended
Name of Company or Beneficiary Purpose of Disbursing Company September 30, 1996
--------------- ----------------- ------- -------------------------- ------------------
Tabulation showing expenditures, disbursements, or payments during the year, in
money, goods or services, directly or indirectly to or for the account of:
(1) Any political party, candidate for public office or holder of such office,
or any committee or agent therefor:
<S> <C> <C> <C> <C>
Distribution Corporation N/A *FEDPAC Misc. Income Deductions $8,393
Distribution Corporation N/A *NYPAC Misc. Income Deductions $5,070
Distribution Corporation N/A *PAPAC Misc. Income Deductions $4,897
Supply Corporation N/A *FEDPAC Misc. Income Deductions $3,266
Supply Corporation N/A *NYPAC Misc. Income Deductions $3,063
Supply Corporation N/A *PAPAC Misc. Income Deductions $2,350
* Company labor and expenses relating to administration of political action funds.
(2) Any citizens group or public relations counsel:
Distribution Corporation Greater Buffalo
Partnership Civic Operation Expense $30,643
Distribution Corporation 46 Beneficiaries Civic Operation Expense $28,699
Supply Corporation 6 Beneficiaries Civic Operation Expense $ 4,088
National Fuel Resources 3 Beneficiaries Civic Operation Expense $ 1,470
Seneca Resources 2 Beneficiaries Civic Operation Expense $ 1,634
</TABLE>
The information called for by instruction 2 to Item 7 was compiled, and
memoranda from the applicable System Companies were received and are preserved
by the Registrant.
<PAGE>
ITEM 8. SERVICE, SALES AND CONSTRUCTION CONTRACTS
Part I. Intercompany sales and services
(1) Salaries of officers of the Registrant
<TABLE>
<CAPTION>
NATIONAL FUEL GAS COMPANY
REPORT OF OFFICERS' SALARIES
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
--------------------------------------------
Distribution Supply Seneca Leidy Data-
Parent Corp. Corp. Resources Hub Highland Horizon Track NFR Total
----- ------------ ------ --------- ----- -------- ------- ----- --- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
B. J. Kennedy $79,741 $293,791 $444,883 $10,493 $ - $2,098 $ - $4,197 $4,197 $839,400
P. C. Ackerman 23,500 376,000 - 61,100 - 4,700 4,700 - - 470,000
A. M. Cellino 6,738 128,012 - - - - - - - 134,750
J. P. Pawlowski 10,600 118,658 58,564 23,216 - 776 - 60 126 212,000
G. T. Wehrlin 10,600 27,479 13,562 5,376 6,360 180 148,400 14 29 212,000
</TABLE>
<PAGE>
THIS PAGE LEFT BLANK INTENTIONALLY
<PAGE>
ITEM 8. SERVICE, SALES AND CONSTRUCTION CONTRACTS (Continued)
Part I. Intercompany sales and services (Continued)
(2) Services rendered by Statutory Subsidiaries
<TABLE>
<CAPTION>
DISTRIBUTION CORPORATION
REPORT OF INTERCOMPANY SALES AND SERVICES
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
(THOUSANDS OF DOLLARS)
----------------------
Common Expenses
-----------------------------------------------------------------------------------
Public
Relations Materials Industrial
Receiving Company Executive Purchasing Common Management Accounting Engineering
- - ----------------- --------- ---------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Supply Corporation $ 786 $228 $272 $72 $1,202 $183
Seneca Resources 297 17 10 - 125 -
Highland 24 1 1 - 10 -
Data-Track 2 - - - 1 -
NFR 6 - - - 2 -
------ ---- ---- --- ------ ----
$1,115 $246 $283 $72 $1,340 $183
====== ==== ==== === ====== ====
</TABLE>
<TABLE>
<CAPTION>
Clearing Accounts and Direct Charges
---------------------------------------------------------------------------------
Data Cust. Serv., Material,
Processing Telecom- Risk Operations & Issues &
Receiving Company - Other munications Land Management Construction Transfers
- - ----------------- ---------- ----------- ---- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Supply Corporation $1,342 $156 $215 $253 $1,804 $719
Seneca Resources 131 23 2 - 3 4
UCI - - - - - -
Highland - - - - - -
Data-Track - 3 - - 49 1
NFR 7 4 - - - 4
Leidy Hub - - - - - -
Horizon - - - - - -
------ ---- ---- ---- ------ ----
$1,480 $186 $217 $253 $1,856 $728
====== ==== ==== ==== ====== ====
</TABLE>
<TABLE>
<CAPTION>
Clearing Accounts and Direct Charges Continued
--------------------------------------------------------------------------------
Total Convenience or
Facilities Clearing Accommodation
Receiving Company Management Accounting Postage Rent and Direct Payments *
- - ----------------- ---------- ---------- ------- ---- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Supply Corporation $133 $ - $10 $30 $5,141 $8,165
Seneca Resources - - 4 - 210 1,788
UCI - - - - 3 100
Highland - - - - 9 4
Data-Track - - - - 81 47
NFR - - 2 (1) 33 36
Leidy Hub - - - - 14 -
Horizon - 17 - - 356 242
---- ---- --- --- ------ -------
$133 $ 17 $16 $29 $5,847 $10,382
==== ==== === === ====== =======
</TABLE>
* Analysis of Convenience or Accommodation Payments is presented on page 23.
<PAGE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------
Corporate Data Human Government Benefit
Communications Processing Resources Legal Finance Affairs Services Total
- - -------------- ---------- --------- ----- ------- ---------- -------- -----
<C> <C> <C> <C> <C> <C> <C> <C>
$29 $427 $330 $38 $1,242 $61 $270 $5,140
- 10 125 15 129 - 102 830
- 1 10 1 10 - 8 66
- - 1 - 1 - 1 6
- - 2 - 2 - 2 14
--- ---- ---- --- ------ --- ---- ------
$29 $438 $468 $54 $1,384 $61 $383 $6,056
=== ==== ==== === ====== === ==== ======
</TABLE>
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------
Messenger Revenue Government Gas Materials Training & Gas Used By
Expense Legal Executive Recovery Engineering Finance Affairs Control Management Development the Company
- - --------- ----- --------- -------- ----------- ------- ---------- ------- ---------- ----------- -----------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$55 $ 1 $ 42 $ - $7 $137 $167 $18 $46 $6 $-
3 - 14 - - 26 - - - - -
- - - - - - - - - - 3
- - 9 - - - - - - - -
- - - 28 - - - - - - -
- 17 - - - - - - - - -
- - 14 - - - - - - - -
- 16 180 - - 143 - - - - -
--- --- ---- --- -- ---- ---- --- --- -- --
$58 $34 $259 $28 $7 $306 $167 $18 $46 $6 $3
=== === ==== === == ==== ==== === === == ==
</TABLE>
- - -------------------------
Total
Services Rendered
By Statutory Subsidiaries
- - -------------------------
$18,446
2,828
103
79
134
83
14
598
-------
$22,285
=======
<PAGE>
ITEM 8. SERVICE, SALES AND CONSTRUCTION CONTRACTS (Continued)
Part I. Intercompany sales and services (Continued)
(2) Services rendered by Statutory Subsidiaries (Continued)
<TABLE>
<CAPTION>
DISTRIBUTION CORPORATION
ANALYSIS OF CONVENIENCE OR ACCOMMODATION PAYMENTS
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
(THOUSANDS OF DOLLARS)
----------------------
Receiving Company
------------------------------------------------------------------
Supply Seneca Data-
Corporation Resources UCI Highland Track NFR Horizon Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Material $ 660 $ 5 $ 6 $- $ 4 $ - $ - $ 675
Rents 325 10 - - - - - 335
Transportation 11 - - - - - - 11
Utilities 184 28 - - 13 - 4 229
Contractors &
Outside Services 780 34 2 - - 1 5 822
Equipment Purchases
& Rentals 877 56 1 - 27 27 1 989
Employee Benefits 2,613 332 28 4 - - 1 2,978
Office Expense 601 97 52 - 2 4 9 765
Dues & Subscriptions 424 - - - - - - 424
Postage 2 - - - - - - 2
Other Insurance 978 1,206 - - - - - 2,184
Injuries and Damages 21 - 3 - - - - 24
Advertising 1 - - - - - - 1
Environmental 5 - - - - - - 5
Other 683 20 8 - 1 4 222 938
------ ------ ---- -- --- --- ---- -------
$8,165 $1,788 $100 $4 $47 $36 $242 $10,382
====== ====== ==== == === === ==== =======
</TABLE>
<PAGE>
ITEM 8. SERVICE, SALES AND CONSTRUCTION CONTRACTS (Continued)
Part I. Intercompany sales and services (Continued)
(2) Services rendered by Statutory Subsidiaries (Continued)
SUPPLY CORPORATION
REPORT OF INTERCOMPANY SALES AND SERVICES
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
(THOUSANDS OF DOLLARS)
---------------------
Clearing Accounts and Direct Charges
----------------------------------------------------------
Cust. Serv.,
Human Operations Production
Receiving Company Engineering Resources Land Construction Clearing Rent
Distribution Corp. $595 $151 $296 $2,360 $ - $2,600
Seneca Resources 1 - 94 54 350 11
Horizon - - - - - -
Highland - - - - - -
Data Track - - - - - -
NFR - - - - - -
---- ---- ---- ------ ---- ------
$596 $151 $390 $2,414 $350 $2,611
==== ==== ==== ====== ==== ======
<TABLE>
<CAPTION>
Clearing Accounts and Direct Charges Continued
-------------------------------------------------------------------------
Total Services
Material Total Convenience or Rendered By
Issues & Gas Clearing Accommodation Statutory
Receiving Company Transfers Control Executive and Direct Payments* Subsidiaries
<S> <C> <C> <C> <C> <C> <C>
Distribution Corp. $728 $716 $ 17 $7,463 $2,195 $ 9,658
Seneca Resources 6 - 2 518 444 962
Horizon - - 148 148 - 148
Highland - - 4 4 - 4
Data Track - - 6 6 3 9
NFR - - 2 2 1 3
---- ---- ---- ------ ------ -------
$734 $716 $179 $8,141 $2,643 $10,784
==== ==== ==== ====== ====== =======
</TABLE>
* Analysis of Convenience or Accommodation Payments is presented on page 25.
<PAGE>
ITEM 8. SERVICE, SALES AND CONSTRUCTION CONTRACTS (Continued)
Part I. Intercompany sales and services (Continued)
(2) Services rendered by Statutory Subsidiaries (Continued)
SUPPLY CORPORATION
ANALYSIS OF CONVENIENCE OR ACCOMMODATION PAYMENTS
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
(THOUSANDS OF DOLLARS)
----------------------
Receiving Company
-------------------------------------------
Distribution Seneca Data
Corporation Resources NFR Track Total
Material $ 100 $385 $- $- $ 485
Rents 1 54 - - 55
Transportation 7 2 - - 9
Utilities 55 23 - 1 79
Contractors &
Outside Services 166 20 - 1 187
Equipment Purchases
& Rentals 318 6 - - 324
Employee Benefits 260 9 1 1 271
Office Expense 94 16 - - 110
Dues & Subscriptions 27 - - - 27
Environmental - 5 - - 5
Other 1,167 (76) - - 1,091
------ ---- -- -- ------
$2,195 $444 $1 $3 $2,643
====== ==== == == ======
<PAGE>
ITEM 8. SERVICE, SALES AND CONSTRUCTION CONTRACTS (Continued)
Part I. Intercompany sales and services (Continued)
(2) Services rendered by Statutory Subsidiaries (Continued)
SENECA RESOURCES
REPORT OF INTERCOMPANY SALES AND SERVICES
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
(THOUSANDS OF DOLLARS)
----------------------
<TABLE>
<CAPTION>
Total
Services
Clearing Convenience or Rendered By
Timber or Direct Accommodation Statutory
Receiving Company Sales Charges Operations Payments Subsidiaries
<S> <C> <C> <C> <C> <C>
Distribution Corporation $ - $- $ - $1,092 $1,092
Supply Corporation - - - 429 429
Highland 4,385 - - 47 4,432
Horizon - - 23 - 23
NFR - 1 - 163 164
Leidy Hub - - - 3 3
------ -- --- ------ ------
$4,385 $1 $23 $1,734 $6,143
====== == === ====== ======
</TABLE>
ANALYSIS OF CONVENIENCE OR ACCOMMODATION PAYMENTS
-------------------------------------------------
Receiving Company
------------------------------------------------------
Distribution Supply Leidy
Corporation Corporation Highland NFR Hub Total
Material $ - $ 87 $ - $ - $- $ 87
Employee Benefits 1,077 340 (36) 4 3 1,388
Rent - - - 9 - 9
Office Expense - 1 3 - - 4
Contractors and
Outside Services 4 - (15) 6 - (5)
Other Insurance - - 95 - - 95
Utilities - - - 6 - 6
Other 1 1 - 138 - 140
Equipment Purch. 10 - - - - 10
------ ---- --- ---- -- ------
$1,092 $429 $47 $163 $3 $1,734
====== ==== === ==== == ======
CLEARING OR DIRECT CHARGES
--------------------------
Receiving Company
-----------------
NFR
Telecommunications $1
--
$1
==
<PAGE>
ITEM 8. SERVICE, SALES AND CONSTRUCTION CONTRACTS (Continued)
Part I. Intercompany sales and services (Continued)
(2) Services rendered by Statutory Subsidiaries (Continued)
UCI
REPORT OF INTERCOMPANY SALES AND SERVICES
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
(THOUSANDS OF DOLLARS)
Construction
Receiving Company Services
Distribution Corporation $6
==
HIGHLAND
REPORT OF INTERCOMPANY SALES AND SERVICES
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
(THOUSANDS OF DOLLARS)
---------------------
Total Services
Right-of-Way Rendered By
Clearing and Convenience Statutory
Receiving Company Logging Payments Subsidiaries
Supply Corporation $ 3 $ - $ 3
Seneca Resources 409 1,246 1,655
---- ------ ------
$412 $1,246 $1,658
==== ====== ======
NFR
REPORT OF INTERCOMPANY SALES AND SERVICES
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
(THOUSANDS OF DOLLARS)
---------------------
Convenience Total Services
or Rendered By
Accommodation Statutory
Receiving Company Direct Charges Payments Subsidiaries
Distribution Corporation $3 $ 2 $ 5
Supply Corporation 2 25 27
-- --- ---
$5 $27 $32
== === ===
<PAGE>
ITEM 8. SERVICE, SALES AND CONSTRUCTION CONTRACTS (Continued)
Part I. Intercompany sales and services (Concluded)
(2) Services rendered by Statutory Subsidiaries (Concluded)
DATA-TRACK
REPORT OF INTERCOMPANY SALES AND SERVICES
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
(THOUSANDS OF DOLLARS)
--------------------
Convenience Total Services
or Rendered by
Accommodation Collection Statutory
Receiving Company Payments Services Subsidiaries
Distribution
Corporation $4 $359 $363
Supply Corporation 1 - 1
Seneca Resources 1 - 1
-- ---- ----
$6 $359 $365
== ==== ====
ANALYSIS OF CONVENIENCE OR ACCOMMODATION PAYMENTS
Receiving Company
----------------------------------------------
Distribution Supply Seneca
Corporation Corporation Resources Total
Material $- $- $1 $1
Utilities $4 $1 - 5
-- -- -- --
$4 $1 $1 $6
== == == ==
(3) Services rendered by Registrant
No services were rendered for a charge by the Registrant to any
of its subsidiaries during the fiscal year ended September 30,
1996.
<PAGE>
ITEM 8. SERVICE, SALES AND CONSTRUCTION CONTRACTS (Concluded)
Part II. Contracts to purchase services or goods between any System
company and any affiliate at September 30, 1996:
None
Part III. Employment of any person by any System company for the
performance on a continuing basis of management services:
Description of Contract and Annual
Name Scope of Services Consideration
--------------- --------------------------- -------------
Joseph Maljovec Performs management and $57,757
consulting services for
Highland.
Vladimir Prerad Performs management and $37,200*
consulting services for
Horizon relating to the
development, ownership and
operation of energy-related
assets of Horizon and its
subsidiaries in the Czech
Republic.
* Represents consideration for the period of June 25, 1996 (date of
acquisition of Bruwabel) through September 30, 1996 and is exclusive of
out-of-pocket expenses.
ITEM 9. WHOLESALE GENERATORS AND FOREIGN UTILITY COMPANIES
Part I. Interests in exempt wholesale generators (EWG) or foreign utility
companies (FUCO)
(a) Identification of Company:
Company: Fauji Kabirwala Power Company Limited
(FKPCL)
EWG or FUCO: EWG
Location: Rawalpindi, Pakistan
Business address: 38 Main Harley Street
P.O. Box 84
Rawalpindi, Pakistan
Description of facilities: Not applicable. No facilities currently in
place. FKPCL is not, as yet, an operational
EWG.
System company that holds
interest and description
of interest held: Registrant's affiliate KPP owns 48.19% of the
voting stock of FKPCL. On August 30, 1996,
Registrant's affiliate,
<PAGE>
SKLLC, the Managing Member of KPP, announced
a disinclination to make the equity
investment in FKPCL which is requisite to
render FKPCL an operational EWG. On December
16, 1996 Registrant, SKLLC, KPP and an
unassociated third party (Third Party), among
others, entered into an agreement in
principle (Agreement in Principle) pursuant
to which, if ultimately consummated, KPP
would transfer 100% of its interest in the
voting stock of FKPCL to the Third Party.
(b) Capital investment in FKPCL by the Registrant, direct or indirect:
Type of capital: Cash advances
Amount: Although the Registrant has directly or
indirectly advanced FKPCL approximately $7.3
million, all amounts so advanced have been
written off to earnings because of the
Registrant's affiliate's disinclination to
make an equity investment in FKPCL as
discussed above.
Debt or other financial
obligation with recourse
to Registrant or other
system company: None
Direct or indirect
guarantee of a security: On May 30, 1996, Registrant guaranteed, to
the extent of $1.7 million, a $3.6 million
letter of credit issued by ABN-AMRO Bank,
N.V. for the account of FKPCL for the benefit
of the Pakistan Water and Power Development
Authority. The Third Party has indemnified
Registrant to the extent of 1/6 of its
obligation under the guarantee. If the
transactions contemplated in the Agreement in
Principle are consummated, Registrant will be
indemnified by the Third Party in respect of
the balance of its obligation under the
guarantee.
Transfer of assets to an
affiliated EWG or FUCO: None.
(c) Ratio of debt to common equity of FKPCL: FKPCL's June 30, 1996 financial
statements are included at exhibit I to this Form U5S. At June 30, 1996, FKPCL
is capitalized with 0.46% equity and 99.54% debt.
Earnings of FKPCL: Not applicable, FKPCL is not an operating EWG and has no
earnings.
<PAGE>
(d) Services, sales or construction contracts: None.
Part II. Relationship of EWGs and FUCOs to system companies and financial data
An organization chart showing the relationship of FKPCL to system companies is
provided as exhibit H to this Form U5S.
Financial data is provided as exhibit I to this Form U5S.
Part III. Aggregate investment in EWGs and FUCOs
As noted in Part I(b) above, the Registrant has directly or indirectly advanced
$7.3 million to FKPCL, all such amounts having been written off to earnings by
the Registrant.
<PAGE>
ITEM 10. FINANCIAL STATEMENTS AND EXHIBITS
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
Page
----
Report of Independent Accountants 33
Consolidating Balance Sheet at September 30, 1996 35-38
Consolidating Statement of Income for the Fiscal Year Ended
September 30, 1996 39-40
Consolidating Statement of Earnings Reinvested in the Business
for the Fiscal Year Ended September 30, 1996 41-42
Consolidating Statement of Cash Flows for the Fiscal Year
Ended September 30,1996 43-44
Horizon:
Consolidating Balance Sheet at September 30, 1996 45
Consolidating Statement of Income for the Fiscal Year Ended
September 30, 1996 46
Consolidating Statement of Earnings Reinvested in the Business
for the Fiscal Year Ended September 30, 1996 47
Consolidating Statement of Cash Flows for the Fiscal Year
Ended September 30,1996 48
Bruwabel:
Consolidating Balance Sheet at September 30, 1996 49
Consolidating Statement of Income for the Fiscal Year Ended
September 30, 1996 50
Consolidating Statement of Earnings Reinvested in the Business
for the Fiscal Year Ended September 30, 1996 51
Consolidating Statement of Cash Flows for the Fiscal Year
Ended September 30,1996 52
Power Development:
Consolidating Balance Sheet at September 30, 1996 53
Consolidating Statement of Income for the Fiscal Year Ended
September 30, 1996 54
Consolidating Statement of Earnings Reinvested in the Business
for the Fiscal Year Ended September 30, 1996 55
Consolidating Statement of Cash Flows for the Fiscal Year
Ended September 30,1996 56
Notes to Consolidated Financial Statements *
* The Notes to Consolidated Financial Statements included in Item 8 of
National Fuel Gas Company's Form 10-K for the fiscal year ended September
30, 1996, are incorporated herein by reference.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of
National Fuel Gas Company
In our opinion, the consolidated financial statements listed in the index
appearing under Item 10 on Page 32 present fairly, in all material respects, the
financial position of National Fuel Gas Company and its subsidiaries at
September 30, 1996, and the results of their operations and their cash flows for
the year then ended, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for the opinion expressed
above.
Our audit was made for the purpose of forming an opinion on the consolidated
financial statements taken as a whole. The consolidating information on Pages 35
through 56 is presented for purposes of additional analysis rather than to
present financial position, results of operations and cash flows of the
individual companies. Accordingly, we do not express an opinion on the financial
position, results of operations and cash flows of the individual companies.
However, the consolidating information on Pages 35 through 56 has been subjected
to the auditing procedures applied in the audit of the consolidated financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the consolidated financial statements taken as a whole.
PRICE WATERHOUSE LLP
Buffalo, New York October 30, 1996, except as to
Note H, which is as of November 8, 1996
<PAGE>
THIS PAGE LEFT BLANK INTENTIONALLY
<PAGE>
<TABLE>
<CAPTION>
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
AT SEPTEMBER 30, 1996
(THOUSANDS OF DOLLARS)
----------------------------------------------------------------------------
National National
National Fuel Gas Fuel Gas Seneca Highland
Fuel Gas Distribution Supply Resources Leidy Hub, Land &
Company Corporation Corporation Corporation Inc. Minerals, Inc.
ASSETS
<S> <C> <C> <C> <C> <C> <C>
PROPERTY, PLANT & EQUIPMENT:
Gas Utilities $ - $1,138,853 $690,558 $ - $ - $ -
Non-Utilities 132 82 13 635,363 3 3,489
---------- ---------- -------- -------- ------ ------
132 1,138,935 690,571 635,363 3 3,489
Less: Accumulated Depreciation,
Depletion and Amortization 118 283,774 238,266 236,837 3 1,376
---------- ---------- -------- -------- ------ ------
14 855,161 452,305 398,526 - 2,113
---------- ---------- -------- -------- ------ ------
CURRENT ASSETS:
Cash and Temporary Cash Investments 7,243 4,041 2,465 2,758 6 253
Notes Receivable-Intercompany 219,800 - - - - 2,100
Allowance for Uncollectible Accounts - (6,708) - (107) - -
Accounts Receivable-Intercompany 11,972 9,127 9,135 1,837 - 170
Accounts Receivable 7,803 71,894 7,150 11,715 1 275
Unbilled Utility Revenue - 20,778 - - - -
Dividends Receivable-Intercompany 15,069 - - - - -
Materials and Supplies - at
average cost - 7,703 13,149 349 - 380
Gas Stored Underground - 34,727 - - - -
Prepayments 544 17,539 4,942 4,316 6 97
---------- ---------- -------- -------- ------ ------
262,431 159,101 36,841 20,868 13 3,275
---------- ---------- -------- -------- ------ ------
OTHER ASSETS:
Recoverable Future Taxes - 84,113 4,719 - - -
Unamortized Debt Expense 4,874 15,916 4,403 - - -
Other Regulatory Assets - 38,627 18,459 - - -
Deferred Charges 2,978 2,282 3,622 490 2 -
Investment in Associated Companies 778,607 - 61 - - -
Notes of Subsidiaries 624,965 - - - - -
Other 4,685 9,105 5,607 1,031 1,060 -
---------- ---------- -------- -------- ------ ------
1,416,109 150,043 36,871 1,521 1,062 -
---------- ---------- -------- -------- ------ ------
$1,678,554 $1,164,305 $526,017 $420,915 $1,075 $5,388
========== ========== ======== ======== ====== ======
</TABLE>
See Notes to Consolidated Financial Statements included in Item 8 of National
Fuel Gas Company's Form 10-K for the fiscal year ended September 30, 1996,
incorporated herein by reference.
<PAGE>
<TABLE>
<CAPTION>
Horizon
National Energy
Utility Data-Track Fuel Development, Total Before Eliminations Consolidated
Constructors, Account Resources Inc. Eliminations & Adjustments Company and
Inc. Services, Inc. Inc. (Consolidated) & Adjustments Dr (Cr) Subsidiaries
<C> <C> <C> <C> <C> <C> <C>
$ - $ - $ - $ - $1,829,411 $ - $1,829,411
655 111 69 1,735 641,652 - 641,652
------ ---- ------- ------ ---------- ----------- ----------
655 111 69 1,735 2,471,063 - 2,471,063
585 9 28 461 761,457 - 761,457
------ ---- ------- ------ ---------- ----------- ----------
70 102 41 1,274 1,709,606 - 1,709,606
------ ---- ------- ------ ---------- ----------- ----------
60 67 1,462 317 18,672 648 19,320
1,600 500 8,900 - 232,900 (232,900) -
(292) - (564) - (7,671) - (7,671)
12 35 42 - 32,330 (32,330) -
403 - 2,928 341 102,510 1,901 104,411
- - - - 20,778 - 20,778
- - - - 15,069 (15,069) -
- - - - 21,581 (37) 21,544
- - - - 34,727 - 34,727
14 1 384 54 27,897 (25) 27,872
------ ---- ------- ------ ---------- ----------- ----------
1,797 603 13,152 712 498,793 (277,812) 220,981
------ ---- ------- ------ ---------- ----------- ----------
- - - - 88,832 - 88,832
- - - - 25,193 - 25,193
- - - - 57,086 - 57,086
- 3 104 68 9,549 (2,172) 7,377
- - - - 778,668 (778,668) -
- - - - 624,965 (624,965) -
2,141 - 1,605 1,338 26,572 14,125 40,697
------ ---- ------- ------ ---------- ----------- ----------
2,141 3 1,709 1,406 1,610,865 (1,391,680) 219,185
------ ---- ------- ------ ---------- ----------- ----------
$4,008 $708 $14,902 $3,392 $3,819,264 $(1,669,492) $2,149,772
====== ==== ======= ====== ========== =========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
AT SEPTEMBER 30, 1996
(THOUSANDS OF DOLLARS)
----------------------------------------------------------------------------
National National
National Fuel Gas Fuel Gas Seneca Highland
Fuel Gas Distribution Supply Resources Leidy Hub, Land &
Company Corporation Corporation Corporation Inc. Minerals, Inc.
<S> <C> <C> <C> <C> <C> <C>
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common Stock, $1 Par Value
Authorized-100,000,000 Shares;
Issued and Outstanding-37,851,655
Shares $ 37,852 $ - $ - $ - $ - $ -
Capital Stock of Subsidiaries - 59,170 25,345 500 4 5
Paid in Capital 395,272 121,668 35,894 104,035 1,365 445
Earnings Reinvested in the Business 422,874 219,746 157,969 34,057 (690) 4,198
---------- ---------- -------- -------- ------ ------
Total Common Stock Equity 855,998 400,584 219,208 138,592 679 4,648
Long-Term Debt 574,000 - - - - -
Notes Payable-Intercompany - 326,000 180,965 118,000 - -
---------- ---------- -------- -------- ------ ------
Total Capitalization 1,429,998 726,584 400,173 256,592 679 4,648
---------- ---------- -------- -------- ------ ------
CURRENT AND ACCRUED LIABILITIES:
Notes Payable to Banks and
Commercial Paper 199,700 - - - - -
Notes Payable-Intercompany 13,100 114,000 31,500 66,400 300 -
Accounts Payable 155 40,630 7,688 10,719 - 7
Amounts Payable to Customers - 3,771 847 - - -
Accounts Payable-Intercompany 7,829 13,540 6,745 2,117 11 581
Dividends Payable-Intercompany - 9,106 5,528 - - 200
Other Accruals and Current
Liabilities 25,546 41,169 12,119 5,007 (111) (66)
---------- ---------- -------- -------- ------ ------
246,330 222,216 64,427 84,243 200 722
---------- ---------- -------- -------- ------ ------
DEFERRED CREDITS:
Accumulated Deferred Income Taxes (411) 148,157 52,488 81,142 196 (11)
Taxes Refundable to Customers - 20,809 196 - - -
Unamortized Investment Tax Credit - 12,311 400 - - -
Other Deferred Credits 2,637 34,228 8,333 (1,062) - 29
---------- ---------- -------- -------- ------ ------
2,226 215,505 61,417 80,080 196 18
---------- ---------- -------- -------- ------ ------
$1,678,554 $1,164,305 $526,017 $420,915 $1,075 $5,388
========== ========== ======== ======== ====== ======
</TABLE>
See Notes to Consolidated Financial Statements included in Item 8 of National
Fuel Gas Company's Form 10-K for the fiscal year ended September 30, 1996,
incorporated herein by reference.
<PAGE>
<TABLE>
<CAPTION>
Horizon
National Energy
Utility Data-Track Fuel Development, Total Before Eliminations Consolidated
Constructors, Account Resources, Inc. Eliminations & Adjustments Company and
Inc. Services, Inc. Inc. (Consolidated) & Adjustments (Dr) Cr Subsidiaries
<C> <C> <C> <C> <C> <C> <C>
$ - $ - $ - $ - $ 37,852 $ - $ 37,852
1 1 10 1 85,037 (85,037) -
4,959 499 3,490 3,249 670,876 (275,604) 395,272
(1,569) 138 5,735 (9,590) 832,868 (409,994) 422,874
------ ---- ------- ------ ---------- ---------- ----------
3,391 638 9,235 (6,340) 1,626,633 (770,635) 855,998
- - - - 574,000 - 574,000
- - - - 624,965 (624,965) -
------ ---- ------- ------ ---------- ---------- ----------
3,391 638 9,235 (6,340) 2,825,598 (1,395,600) 1,429,998
------ ---- ------- ------ ---------- ---------- ----------
- - - - 199,700 - 199,700
- - - 7,600 232,900 (232,900) -
17 8 2,561 3,186 64,971 (361) 64,610
- - - - 4,618 - 4,618
- 14 1,119 831 32,787 (32,787) -
200 - 35 - 15,069 (15,069) -
152 46 1,304 (2,646) 82,520 - 82,520
------ ---- ------- ------ ---------- ---------- ----------
369 68 5,019 8,971 632,565 (281,117) 351,448
------ ---- ------- ------ ---------- ---------- ----------
(397) (6) (554) (43) 280,561 646 281,207
- - - - 21,005 - 21,005
- - - - 12,711 - 12,711
645 8 1,202 804 46,824 6,579 53,403
------ ---- ------- ------ ---------- ---------- ----------
248 2 648 761 361,101 7,225 368,326
------ ---- ------- ------ ---------- ---------- ----------
$4,008 $708 $14,902 $3,392 $3,819,264 $(1,669,492) $2,149,772
====== ==== ======= ====== ========== =========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
(THOUSANDS OF DOLLARS)
--------------------------------------------------------------------------
National National
National Fuel Gas Fuel Gas Seneca Highland
Fuel Gas Distribution Supply Resources Leidy Hub, Land &
Company Corporation Corporation Corporation Inc. Minerals, Inc.
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Gas Sales $ - $900,773 $ - $ 926 $ - $ -
Other Operating Revenues - 53,553 176,553 118,361 - 7,411
-------- -------- -------- -------- ---- ------
- 954,326 176,553 119,287 - 7,411
-------- -------- -------- -------- ---- ------
OPERATING EXPENSE:
Purchased Gas - 520,200 4,625 580 - -
Operation 3,222 183,538 59,866 22,549 23 6,284
Maintenance - 17,879 7,466 11 - -
Property, Franchise & Other
Taxes 465 85,962 11,740 1,137 - 93
Depreciation, Depletion and
Amortization 4 31,491 19,942 46,318 - 238
Income Taxes - Net 524 31,870 21,873 15,222 74 400
-------- -------- -------- -------- ---- ------
4,215 870,940 125,512 85,817 97 7,015
-------- -------- -------- -------- ---- ------
Operating Income (Loss) (4,215) 83,386 51,041 33,470 (97) 396
-------- -------- -------- -------- ---- ------
OTHER INCOME:
Unremitted Earnings of
Subsidiaries 44,501 - - - - -
Dividends from Subsidiaries 59,476 - - - - -
Interest-Intercompany 53,974 38 118 - - 120
Other 467 1,137 975 465 243 45
-------- -------- -------- -------- ---- ------
158,418 1,175 1,093 465 243 165
-------- -------- -------- -------- ---- ------
Income (Loss) Before
Interest Charges 154,203 84,561 52,134 33,935 146 561
-------- -------- -------- -------- ---- ------
INTEREST CHARGES:
Interest on Long-Term Debt 40,872 - - - - -
Interest-Intercompany 778 26,795 16,635 10,355 18 -
Other Interest 7,882 6,531 1,097 214 - -
-------- -------- -------- -------- ---- ------
49,532 33,326 17,732 10,569 18 -
-------- -------- -------- -------- ---- ------
Net Income (Loss) Available
for Common Stock $104,671 $ 51,235 $ 34,402 $ 23,366 $128 $ 561
======== ======== ======== ======== ==== ======
</TABLE>
See Notes to Consolidated Financial Statements included in Item 8 of National
Fuel Gas Company's Form 10-K for the fiscal year ended September 30, 1996,
incorporated herein by reference.
<PAGE>
<TABLE>
<CAPTION>
Horizon
National Energy
Utility Data-Track Fuel Development, Total Before Eliminations Consolidated
Constructors, Account Resources, Inc. Eliminations & Adjustments Company and
Inc. Services, Inc. Inc. (Consolidated) & Adjustments (Dr) Cr Subsidiaries
<C> <C> <C> <C> <C> <C> <C>
$ - $ - $59,234 $ - $ 960,933 $ (2,949) $ 957,984
196 359 1,024 286 357,743 (107,710) 250,033
---- ---- ------- ------- ---------- --------- ----------
196 359 60,258 286 1,318,676 (110,659) 1,208,017
---- ---- ------- ------- ---------- --------- ----------
- - 55,725 - 581,130 103,773 477,357
292 331 1,523 14,563 292,191 8,347 283,844
- - - 6 25,362 - 25,362
17 - 40 2 99,456 - 99,456
223 6 13 (4) 98,231 - 98,231
81 23 1,260 (5,006) 66,321 - 66,321
---- ---- ------- ------- ---------- --------- ----------
613 360 58,561 9,561 1,162,691 112,120 1,050,571
---- ---- ------- ------- ---------- --------- ----------
(417) (1) 1,697 (9,275) 155,985 1,461 157,446
---- ---- ------- ------- ---------- --------- ----------
- - - - 44,501 (44,501) -
- - - - 59,476 (59,476) -
81 27 395 - 54,753 (54,753) -
394 - 48 49 3,823 46 3,869
---- ---- ------- ------- ---------- --------- ----------
475 27 443 49 162,553 (158,684) 3,869
---- ---- ------- ------- ---------- --------- ----------
58 26 2,140 (9,226) 318,538 (157,223) 161,315
---- ---- ------- ------- ---------- --------- ----------
- - - - 40,872 - 40,872
- - - 171 54,752 54,752 -
- - 17 31 15,772 - 15,772
---- ---- ------- ------- ---------- --------- ----------
- - 17 202 111,396 54,752 56,644
---- ---- ------- ------- ---------- --------- ----------
$ 58 $ 26 $ 2,123 $(9,428) $ 207,142 $(102,471) $ 104,671
==== ==== ======= ======= ========== ========= ==========
</TABLE>
<TABLE>
<S> <C>
Earnings Per Common Share
Net Income Available for Common Stock $2.78
=====
Weighted Average Common Shares Outstanding 37,613,305
==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF EARNINGS REINVESTED IN THE BUSINESS
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
(THOUSANDS OF DOLLARS)
National National
National Fuel Gas Fuel Gas Seneca Highland
Fuel Gas Distribution Supply Resources Leidy-Hub, Land &
Company Corporation Corporation Corporation Inc. Minerals, Inc.
<S> <C> <C> <C> <C> <C> <C>
EARNINGS REINVESTED IN THE BUSINESS
Balance at Beginning of Year $380,123 $204,935 $145,679 $10,691 $(818) $4,437
Net Income (Loss) Available
for Common Stock 104,671 51,235 34,402 23,366 128 561
Dividends on Common Stock
(1996-$1.65) (61,920) (36,424) (22,112) - - (800)
-------- -------- -------- ------- ----- ------
Balance at End of Year $422,874 $219,746 $157,969 $34,057 $(690) $4,198
======== ======== ======== ======= ===== ======
</TABLE>
At September 30, 1996
---------------------
Intercompany Eliminations:
Earnings Reinvested in the Business:
Unremitted Earnings of Subsidiaries
Since Acquisition $410,932
Earnings Reinvested in the Business
of Subsidiaries at Acquisition 7,095
Consolidating Adjustment (8,033)
--------
$409,994
========
Net Income Available for Common Stock:
Subsidiaries-Dividends on
Common Stock $ 59,476
Unremitted Earnings of Subsidiaries 44,501
Consolidating Adjustment (1,506)
--------
$102,471
========
See Notes to Consolidated Financial Statements included in Item 8 of National
Fuel Gas Company's Form 10-K for the fiscal year ended September 30, 1996,
incorporated herein by reference.
<PAGE>
<TABLE>
<CAPTION>
Horizon
National Energy
Utility Data-Track Fuel Development, Total Before Eliminations Consolidated
Constructors, Account Resources, Inc. Eliminations & Adjustments Company and
Inc. Services, Inc. Inc. (Consolidated) & Adjustments (Dr) Cr Subsidiaries
<C> <C> <C> <C> <C> <C> <C>
$(1,627) $112 $3,752 $ (162) $747,122 $(366,999) $380,123
58 26 2,123 (9,428) 207,142 (102,471) 104,671
- - (140) - (121,396) 59,476 (61,920)
------- ---- ------ ------- -------- --------- --------
$(1,569) $138 $5,735 $(9,590) $832,868 $(409,994) $422,874
======= ==== ====== ======= ======== ========= ========
</TABLE>
<TABLE>
<CAPTION>
ANALYSIS OF INVESTMENTS IN ASSOCIATED COMPANIES AT SEPTEMBER 30, 1996
Par or 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 $59,170 $121,668 $4,636 $215,110 $400,584
Supply Corporation 25,345 35,833 2,453 155,516 219,147
Seneca Resources 500 104,035 6 34,051 138,592
Leidy-Hub 4 1,365 - (690) 679
Highland 5 445 - 4,198 4,648
UCI 1 4,959 - (1,569) 3,391
Data-Track 1 499 - 138 638
NFR 10 3,490 - 5,735 9,235
Horizon 1 3,249 - (9,590) (6,340)
Consolidating Adjustment - - - 8,033 8,033
------- -------- ------ -------- --------
85,037 275,543 7,095 410,932 778,607
Supply Corporation:
Seneca Resources - 61 - - 61
------- -------- ------ -------- --------
$85,037 $275,604 $7,095 $410,932 $778,668
======= ======== ====== ======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
(THOUSANDS OF DOLLARS)
National National
National Fuel Gas Fuel Gas Seneca Highland
Fuel Gas Distribution Supply Resources Leidy-Hub, Land &
Company Corporation Corporation Corporation Inc. Minerals, Inc.
<S> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income (Loss) Available for Common Stock $104,671 $ 51,235 $34,402 $23,366 $128 $ 561
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Unremitted Earnings of Subsidiaries (44,501) - - - - -
Depreciation, Depletion and Amortization 4 31,491 19,942 46,318 - 238
Deferred Income Taxes 49 4,046 (8,494) 8,444 76 17
Other 834 691 (1,374) 4 - (12)
Change in:
Receivables and Unbilled Utility Revenue 571 (16,573) 347 (5,612) - 158
Accounts Receivable-Intercompany 456 1,290 3,155 (582) - 70
Gas Stored Underground
and Material and Supplies - (8,539) 867 1,198 - 149
Prepayments 106 4,062 400 (2,537) - 7
Accounts Payable 11 2,703 (475) 2,641 - 2
Amounts Payable to Customers - (46,770) 387 - - -
Accounts Payable-Intercompany (2,130) 75 (2,141) 216 6 223
Other Accruals and Current Liabilities (560) 13,639 191 5,434 243 (64)
Other Assets and Liabilities-Net (1,130) 3,455 598 (3,414) (244) 18
-------- -------- ------- ------- ---- ------
Net Cash Provided by (Used in) Operating
Activities 58,381 40,805 47,805 75,476 209 1,367
-------- -------- ------- ------- ---- ------
INVESTING ACTIVITIES:
Capital Expenditures - (63,730) (22,260) (86,243) - (366)
Capital Contribution - - - - 326 -
Investment in Associated Companies (1,776) - - - - -
Other - - 1,599 1,540 (705) 15
-------- -------- -------- -------- ---- -----
Net Cash Provided by (Used In)
Investing Activities (1,776) (63,730) (20,661) (84,703) (379) (351)
-------- -------- -------- -------- ---- -----
FINANCING ACTIVITIES:
Change in Notes Payable to Banks
and Commercial Paper 52,100 - - - - -
Change in Notes Payable-Intercompany (7,700) 60,900 (16,500) 10,700 100 -
Change in Notes and Dividends
Receivable-Intercompany (63,514) - 13,100 - - -
Net Proceeds from Issuance of
Long-Term Debt 99,650 - - - - -
Reduction of Long-Term Debt (88,500) - - - - -
Proceeds from Issuance of Common Stock 12,656 - - - - -
Dividends Paid on Common Stock (61,179) (35,710) (22,112) - - (800)
-------- -------- -------- -------- ---- -----
Net Cash Provided by (Used in)
Financing Activities (56,487) 25,190 (25,512) 10,700 100 (800)
-------- -------- -------- -------- ---- -----
Net Increase (Decrease) in Cash and
Temporary Cash Investments 118 2,265 1,632 1,473 (70) 216
Cash and Temporary Cash Investments
at Beginning of Year 7,125 1,776 833 1,285 76 37
-------- -------- -------- -------- ---- -----
Cash and Temporary Cash Investments at
End of Year $ 7,243 $ 4,041 $ 2,465 $ 2,758 $ 6 $ 253
======== ======== ======== ======== ==== =====
</TABLE>
See Notes to Consolidated Financial Statements included in Item 8 of National
Fuel Gas Company's Form 10-K for the fiscal year ended September 30, 1996,
incorporated herein by reference.
<PAGE>
<TABLE>
<CAPTION>
Horizon
National Energy
Utility Data-Track Fuel Development, Total Before Consolidated
Constructors, Account Resources, Inc. Eliminations Eliminations Company and
Inc. Services, Inc. Inc. (Consolidated) & Adjustments & Adjustments Subsidiaries
<S> <C> <C> <C> <C> <C> <C>
$ 58 $ 26 $2,123 $(9,428) $ 207,142 $(102,471) $ 104,671
- - - - (44,501) 44,501 -
223 6 13 (4) 98,231 - 98,231
138 (5) (408) 44 3,907 - 3,907
1 - 696 - 840 3,700 4,540
(141) - 845 (341) (20,746) (1) (20,747)
21 (12) (10) - 4,388 (4,388) -
17 - - - (6,308) - (6,308)
120 - (223) (54) 1,881 - 1,881
(33) - 1,701 3,161 9,711 1,057 10,768
- - - - (46,383) - (46,383)
- 3 269 193 (3,286) 3,286 -
1,119 18 825 (2,645) 18,200 - 18,200
(77) 11 (26) 1,377 568 (859) (291)
------ ---- ------ ------- --------- --------- ---------
1,446 47 5,805 (7,697) 223,644 (55,175) 168,469
------ ---- ------ ------- --------- --------- ---------
- - - (133) (172,732) 1,165 (171,567)
(800) - - 2,250 1,776 (1,776) -
- - - - (1,776) 1,776 -
137 - (452) (2,335) (201) (1,165) (1,366)
------ ---- ------ ------- --------- --------- ---------
(663) - (452) (218) (172,933) - (172,933)
------ ---- ------ ------- --------- --------- ---------
- - - - 52,100 - 52,100
- - - 7,600 55,100 (55,100) -
(800) (100) (4,500) - (55,814) 55,814 -
- - - - 99,650 - 99,650
- - - - (88,500) - (88,500)
- - - - 12,656 (3,700) 8,956
- - (140) - (119,941) 58,762 (61,179)
------ ---- ----- ------- --------- --------- ---------
(800) (100) (4,640) 7,600 (44,749) 55,776 11,027
------ ---- ------ ------- --------- --------- ---------
(17) (53) 713 (315) 5,962 601 6,563
77 120 749 632 12,710 47 12,757
------ ---- ------ ------- --------- --------- ---------
$ 60 $ 67 $1,462 $ 317 $ 18,672 $ 648 $ 19,320
====== ==== ====== ======= ========= ========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HORIZON ENERGY DEVELOPMENT, INC.
CONSOLIDATING BALANCE SHEET
AT SEPTEMBER 30, 1996
(THOUSANDS OF DOLLARS)
Eliminations Consolidated
and Horizon and
Horizon Sceptre Bruwabel Adjustments Subsidiaries
<S> <C> <C> <C> <C> <C>
ASSETS
Property, Plant & Equipment:
Non-Utilities $ - $ 242 $1,493 $ - $1,735
------- ------ ------ ------- ------
Accumulated DD&A - (213) (248) - (461)
------- ------ ------ ------- ------
- 29 1,245 - 1,274
------- ------ ------ ------- ------
CURRENT ASSETS:
Cash and Temporary Cash Investments 33 21 263 - 317
Notes Rec. Interco. 298 - - (298) -
Accounts Receivable - Intercompany 331 - - (331) -
Accounts Receivable 8 55 278 - 341
Prepaid Expenses - 14 40 - 54
------- ------ ------ ------- ------
670 90 581 (629) 712
------- ------ ------ ------- ------
OTHER ASSETS:
Investment in Associated Companies 4,082 - - (4,082) -
Other Assets - 70 1,268 - 1,338
Deferred Charges - 68 - - 68
------- ------ ------ ------- ------
4,082 138 1,268 (4,082) 1,406
------- ------ ------ ------- ------
$ 4,752 $ 257 $3,094 $(4,711) $3,392
======= ====== ====== ======= ======
CAPITALIZATION & LIABILITIES
CAPITALIZATION:
Common Stock $ 1 $ - $ 29 $ (29) $ 1
Paid - in - Capital 3,249 - 2,200 (2,200) 3,249
Capital Contribution from Horizon - 7,756 - (7,756) -
Earnings Reinvested in the Business (9,590) (5,807) (96) 5,903 (9,590)
------- ------ ------ ------- ------
(6,340) 1,949 2,133 (4,082) (6,340)
------- ------ ------ ------- ------
CURRENT AND ACCRUED LIABILITIES:
Notes Payable Intercompany 7,600 - - - 7,600
Accounts Payable 2,204 1,082 (116) 16 3,186
Accounts Payable - Intercompany 831 331 314 (645) 831
Other Accruals and Current Liabilities 487 (3,109) (24) - (2,646)
------- ------ ------ ------- ------
11,122 (1,696) 174 (629) 8,971
------- ------ ------ ------- ------
DEFERRED CREDITS:
Accumulated Deferred Income Taxes (43) - - - (43)
Other Deferred Credits 13 4 787 - 804
------- ------ ------ ------- ------
(30) 4 787 - 761
------- ------ ------ ------- ------
$ 4,752 $ 257 $3,094 $(4,711) $3,392
======= ====== ====== ======= ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HORIZON ENERGY DEVELOPMENT, INC.
CONSOLIDATING STATEMENT OF INCOME
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
(THOUSANDS OF DOLLARS)
Eliminations
and Consolidated
Adjustments Horizon and
Horizon Sceptre Bruwabel (Dr.) Cr. Subsidiaries
<S> <C> <C> <C> <C> <C>
OPERATING REVENUE:
Other Operating Revenues $ - $ - $286 $ - $ 286
------- ------- ---- ------ -------
- - 286 - 286
------- ------- ---- ------ -------
OPERATING EXPENSE:
Operation 5,499 8,598 466 - 14,563
Maintenance - - 6 - 6
Property, Franchise & Other Taxes 2 - - - 2
Depreciation, Depletion and
Amortization - 69 (73) - (4)
Income Taxes - Net (1,985) (3,021) - - (5,006)
------- ------- ---- ------ -------
3,516 5,646 399 - 9,561
------- ------- ---- ------ -------
Operating Loss (3,516) (5,646) (113) - (9,275)
------- ------- ---- ------ -------
OTHER INCOME:
Unremitted Earnings of Subsidiaries (5,741) - - 5,741 -
Other - 1 48 - 49
------- ------- ---- ------ -------
Income (Loss) Before Interest Charges (9,257) (5,645) (65) 5,741 (9,226)
------- ------- ---- ------ -------
INTEREST CHARGES:
Interest Intercompany 171 - - - 171
Other Interest - - 31 - 31
------- ------- ---- ------ -------
171 - 31 - 202
------- ------- ---- ------ -------
Net Loss $(9,428) $(5,645) $(96) $5,741 $(9,428)
======= ======= ==== ====== =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HORIZON ENERGY DEVELOPMENT, INC.
CONSOLIDATING STATEMENT OF EARNINGS REINVESTED IN THE BUSINESS
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
(THOUSANDS OF DOLLARS)
Eliminations
and Consolidated
Adjustments Horizon and
EARNINGS REINVESTED IN THE BUSINESS Horizon Sceptre Bruwabel (Dr.) Cr. Subsidiaries
<S> <C> <C> <C> <C> <C>
Balance at Beginning of Year $ (162) $ (162) $ - $ 162 $ (162)
Net Loss (9,428) (5,645) (96) 5,741 (9,428)
------- ------- ---- ------ -------
Balance at End of Year $(9,590) $(5,807) $(96) $5,903 $(9,590)
======= ======= ==== ====== =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HORIZON ENERGY DEVELOPMENT, INC.
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
(THOUSANDS OF DOLLARS)
Consolidated
Horizon and
Horizon Sceptre Bruwabel Eliminations Subsidiaries
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(9,428) $(5,645) $(96) $5,741 $(9,428)
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating
Activities:
Depreciation, Depletion & Amortization - 69 (73) - (4)
Deferred Income Taxes (43) 87 - - 44
Unremitted Earnings of Subsidiaries 5,741 - - (5,741) -
Change in:
Accounts Receivable - Intercompany (298) - - 298 -
Accounts Receivable (8) (55) (278) - (341)
Prepayments - (14) (40) - (54)
Accounts Payable - Intercompany 193 331 314 (645) 193
Accounts Payable 2,204 1,057 (116) 16 3,161
Other Accruals 488 (3,109) (24) - (2,645)
Other Assets and Liabilities (283) 620 709 331 1,377
------- ------- ---- ------ -------
Net Cash Provided by (Used in)
Operations (1,434) (6,659) 396 - (7,697)
------- ------- ---- ------ -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction Charges - - (133) - (133)
Investment in Associated Companies (6,655) - - 6,655 -
Capital Contribution 2,250 6,655 - (6,655) 2,250
Other (2,335) - - - (2,335)
------- ------- ---- ------ -------
Net Cash Provided by (Used in)
Investing Activities (6,740) 6,655 (133) - (218)
------- ------- ---- ------ -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in Notes Payable Intercompany 7,600 - - - 7,600
------- ------- ---- ------ -------
Net Cash Provided by Financing
Activities 7,600 - - - 7,600
------- ------- ---- ------ -------
Net Increase (Decrease) in Cash (574) (4) 263 - (315)
Cash at Beginning of Year 607 25 - - 632
------- ------- ---- ------ -------
Cash at End of Year $ 33 $ 21 $263 $ - $ 317
======= ======= ==== ====== =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRUWABEL AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
AT SEPTEMBER 30, 1996
(THOUSANDS OF DOLLARS)
Eliminations Consolidated
Power Power and Bruwabel and
Bruwabel Development International Adjustments Subsidiaries
<S> <C> <C> <C> <C> <C>
ASSETS
Property, Plant & Equipment:
Non-Utilities $ - $1,220 $ 273 $ - $1,493
------ ------ ------ ------- ------
Accumulated DD&A - (25) (223) - (248)
------ ------ ------ ------- ------
Net Property, Plant &
Equipment - 1,195 50 - 1,245
------ ------ ------ ------- ------
CURRENT ASSETS:
Cash and Temporary Cash
Investments 39 93 131 - 263
Accounts Receivable -
Intercompany - - 37 (37) -
Accounts Receivable 3 215 60 - 278
Prepayments - 8 32 - 40
------ ------ ------ ------- ------
42 316 260 (37) 581
------ ------ ------ ------- ------
OTHER ASSETS:
Investment in Associated
Companies 2,171 1,078 190 (2,171) 1,268
------ ------ ------ ------- ------
$2,213 $2,589 $ 500 $(2,208) $3,094
====== ====== ====== ======= ======
CAPITALIZATION & LIABILITIES
CAPITALIZATION:
Common Stock $ 29 $ 760 $1,879 $(2,639) $ 29
Paid in Capital 2,200 1,020 (1,436) 416 2,200
Earnings Reinvested in the
Business (96) 65 (117) 52 (96)
------ ------ ------ ------- ------
Total Common Stock Equity 2,133 1,845 326 (2,171) 2,133
------ ------ ------ ------- ------
CURRENT AND ACCRUED LIABILITIES:
Accounts Payable 35 (127) 13 (37) (116)
Accounts Payable - Intercompany 45 119 150 - 314
Other Accruals and Current
Liabilities - (6) (18) - (24)
------ ------ ------ ------- ------
Total Current Liabilities 80 (14) 145 (37) 174
------ ------ ------ ------- ------
DEFERRED CREDITS:
Other Deferred Credits - 758 29 - 787
------ ------ ------ ------- ------
- 758 29 - 787
------ ------ ------ ------- ------
$2,213 $2,589 $ 500 $(2,208) $3,094
====== ====== ====== ======= ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRUWABEL AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
(THOUSANDS OF DOLLARS)
Eliminations Consolidated
and Bruwabel
Power Power Adjustments and
Bruwabel Development International (Dr.) Cr. Subsidiaries
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Other Operating Revenues $ - $276 $ 10 $ - $286
---- ---- ----- --- ----
- 276 10 - 286
---- ---- ----- --- ----
OPERATING EXPENSES:
Operation 44 308 114 - 466
Maintenance - 2 4 - 6
Depreciation, Depletion &
Amortization - (82) 9 - (73)
---- ---- ----- --- ----
44 228 127 - 399
---- ---- ----- --- ----
Operating Income (Loss) (44) 48 (117) - (113)
---- ---- ----- --- ----
OTHER INCOME:
Unremitted Earnings of Subsidiaries (52) - - 52 -
Other - 48 - - 48
---- ---- ----- --- ----
(52) 48 - 52 48
---- ---- ----- --- ----
Income (Loss) Before Interest (96) 96 (117) 52 (65)
---- ---- ----- --- ----
INTEREST CHARGES:
Other Interest - 31 - - 31
---- ---- ----- --- ----
Net Income (Loss) $(96) $ 65 $(117) $52 $(96)
==== ==== ===== === ====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRUWABEL
CONSOLIDATING STATEMENT OF EARNINGS REINVESTED IN THE BUSINESS
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
(THOUSANDS OF DOLLARS)
Eliminations
and Consolidated
Power Power Adjustments Bruwabel and
EARNINGS REINVESTED IN THE BUSINESS Bruwabel Development International (Dr.) Cr. Subsidiaries
<S> <C> <C> <C> <C> <C>
Balance at Beginning of Year $ - $ - $ - $ - $ -
Net Income (Loss) (96) 65 (117) 52 (96)
---- --- ----- --- ----
Balance at End of Year $(96) $65 $(117) $52 $(96)
==== === ===== === ====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRUWABEL
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
(THOUSANDS OF DOLLARS)
Eliminations Consolidated
Power Power and Bruwabel and
Bruwabel Development International Adjustments Subsidiaries
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $(96) $ 65 $(117) $52 $(96)
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating
Activities:
Depreciation, Depletion & Amortization - (82) 9 - (73)
Unremitted Earnings of Subsidiaries 52 - - (52) -
Change in:
Accounts Receivable - Intercompany - - (37) 37 -
Accounts Receivable (3) (216) (59) - (278)
Prepayments - (8) (32) - (40)
Accounts Payable - Intercompany 45 119 150 - 314
Accounts Payable 35 (126) 12 (37) (116)
Other Accruals - (6) (18) - (24)
Other Assets and Liabilities 6 474 229 - 709
---- ---- ---- --- ----
Net Cash Provided by Operations 39 220 137 - 396
---- ---- ---- --- ----
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction Charges - (127) (6) - (133)
---- ---- ---- --- ----
Net Cash Used in Investing
Activities - (127) (6) - (133)
---- ---- ---- --- ----
Net Increase in Cash 39 93 131 - 263
Cash at Beginning of Year - - - - -
---- ---- ---- --- ----
Cash at End of Year $ 39 $ 93 $131 $ - $263
==== ==== ==== === ====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
POWER DEVELOPMENT, s.r.o.
CONSOLIDATING BALANCE SHEET
AT SEPTEMBER 30, 1996
(THOUSANDS OF DOLLARS)
Consolidated
Power
Eliminations Development
Power Teplarna and and
Development Kromeriz Adjustments Subsidiaries
<S> <C> <C> <C> <C>
ASSETS
Property, Plant & Equipment:
Non-Utilities $ - $1,220 $ - $1,220
------ ------ ------- ------
Accumulated DD&A - (25) - (25)
------ ------ ------- ------
- 1,195 - 1,195
------ ------ ------- ------
CURRENT ASSETS:
Cash and Temporary Cash Investments 82 11 - 93
Accounts Receivable - Intercompany 753 - (753) -
Accounts Receivable 4 211 - 215
Prepaid Expenses - 8 - 8
------ ------ ------- ------
839 230 (753) 316
------ ------ ------- ------
OTHER ASSETS:
Investment in Associated Companies 1,178 1,078 (1,178) 1,078
------ ------ ------- ------
$2,017 $2,503 $(1,931) $2,589
====== ====== ======= ======
CAPITALIZATION & LIABILITIES
CAPITALIZATION:
Common Stock $ 760 $ 36 $ (36) $ 760
Paid - in - Capital 1,020 1,092 (1,092) 1,020
Earnings Reinvested in the Business 65 50 (50) 65
------ ------ ------- ------
1,845 1,178 (1,178) 1,845
------ ------ ------- ------
CURRENT AND ACCRUED LIABILITIES:
Accounts Payable 35 355 (517) (127)
Accounts Payable - NFG (Horizon) 119 - - 119
Accounts Payable - Intercompany - 236 (236) -
Other Accruals and Current Liabilities 1 (7) - (6)
------ ------ ------- ------
155 584 (753) (14)
------ ------ ------- ------
DEFERRED CREDITS:
Other Deferred Credits 17 741 - 758
------ ------ ------- ------
17 741 - 758
------ ------ ------- ------
$2,017 $2,503 $(1,931) $2,589
====== ====== ======= ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
POWER DEVELOPMENT, s.r.o.
CONSOLIDATING STATEMENT OF INCOME
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
(THOUSANDS OF DOLLARS)
Consolidated
Eliminations Power
and Development
Power Teplarna Adjustments and
Development Kromeriz (Dr.) Cr. Subsidiaries
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Other Operating Revenues $11 $265 $ - $276
--- ---- ---- ----
11 265 - 276
--- ---- ---- ----
OPERATING EXPENSES:
Operation (4) 312 - 308
Maintenance - 2 - 2
Depreciation, Depletion & Amortization - (82) - (82)
--- ---- ---- ----
(4) 232 - 228
--- ---- ---- ----
Operating Income 15 33 - 48
--- ---- ---- ----
OTHER INCOME:
Unremitted Earnings of Subsidiaries 50 - (50) -
Other - 48 - 48
--- ---- ---- ----
50 48 (50) 48
--- ---- ---- ----
Income Before Interest 65 81 (50) 96
--- ---- ---- ----
INTEREST CHARGES:
Other Interest - 31 - 31
--- ---- ---- ----
- 31 - 31
--- ---- ---- ----
Net Income $65 $ 50 $(50) $ 65
=== ==== ==== ====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
POWER DEVELOPMENT, s.r.o.
CONSOLIDATING STATEMENT OF EARNINGS REINVESTED IN THE BUSINESS
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
(THOUSANDS OF DOLLARS)
Consolidated
Eliminations Power
and Development
Power Teplarna Adjustments and
EARNINGS REINVESTED IN THE BUSINESS Development Kromeriz (Dr.) Cr. Subsidiaries
<S> <C> <C> <C> <C>
Balance at Beginning of Year $ - $ - $ - $ -
Net Income 65 50 (50) 65
--- --- ---- ---
Balance at End of Year $65 $50 $(50) $65
=== === ==== ===
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
POWER DEVELOPMENT, s.r.o.
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
(THOUSANDS OF DOLLARS)
Consolidated
Power
Eliminations Development
Power Teplarna and and
Development Kromeriz Adjustments Subsidiaries
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 65 $ 50 $(50) $ 65
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating
Activities:
Depreciation, Depletion & Amortization - (82) - (82)
Unremitted Earnings of Subsidiary (50) - 50 -
Change in:
Accounts Receivable - Intercompany (753) - 753 -
Accounts Receivable - Customers (4) (212) - (216)
Prepayments - (8) - (8)
Accounts Payable - Intercompany 119 236 (236) 119
Accounts Payable 35 356 (517) (126)
Other Accruals 1 (7) - (6)
Other Assets and Liabilities 669 (195) - 474
---- ---- --- ----
Net Cash Provided by Operations 82 138 - 220
---- ---- --- ----
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction Charges - (127) - (127)
---- ---- --- ----
Net Cash Used in Investing Activities - (127) - (127)
---- ---- --- ----
Net Increase in Cash 82 11 - 93
Cash at Beginning of Year - - - -
---- ---- --- ----
Cash at End of Year $ 82 $ 11 $ - $ 93
==== ==== === ====
</TABLE>
<PAGE>
EXHIBITS
A. *(1) Annual Report on Form 10-K for fiscal year ended September 30,
1996 filed December 20, 1996 (File No. 1-3880).
(2) National Fuel Gas Company 1996 Annual Report to Shareholders
(paper copy submitted under cover of Form SE).
*(3) National Fuel Gas Company Proxy Statement, dated and filed
December 30, 1996 (File No. 1-03880)
B. Articles of Incorporation, By-Laws and Partnership Agreements
(1) National Fuel Gas Company
*i Restated Certificate of Incorporation of National Fuel
Gas Company, dated March 15, 1985 (Exhibit 10-00, Form
10-K for fiscal year ended September 30, 1991 in File
No. 1-3880)
*ii Certificate of Amendment of Restated Certificate of
Incorporation, dated March 17, 1992 (Exhibit EX-3(a),
Form 10-K for fiscal year ended September 30, 1992 in
File No. 1-3880)
*iii National Fuel Gas Company By-Laws as amended through
June 9, 1994. (Exhibit 3.1, Form 10-K for fiscal year
ended September 30, 1994 in File No. 1-3880)
*iv Certificate of Amendment of Restated Certificate of
Incorporation of National Fuel Gas Company, dated
March 9, 1987 (Exhibit 3.1, Form 10-K for fiscal year
ended September 30, 1995 in File No. 1-3880)
*v Certificate of Amendment of Restated Certificate of
Incorporation of National Fuel Gas Company, dated
February 22, 1988 (Exhibit 3.2, Form 10-K for fiscal
year ended September 30, 1995 in File No. 1-3880)
*vi Excerpts from Minutes from National Fuel Gas Company
Board of Directors meeting of September 19, 1996,
regarding compensation of non-employee directors and
related amendments of By-Laws (Exhibit 3.1, Form 10-K
for fiscal year ended September 30, 1996 in File No.
1-3880)
(2) National Fuel Gas Distribution Corporation
*i By-Laws, as amended (Exhibit 2(i), designated as
Exhibit EX-3(b) for EDGAR purposes, Form U5S for
fiscal year ended September 30, 1994)
*ii Restated Certificate of Incorporation of National Fuel
Gas Distribution Corporation, dated May 9, 1988
(Exhibit B-1 in File No. 70-7478)
* Incorporated herein by reference as indicated.
<PAGE>
EXHIBITS (Continued)
(3) National Fuel Gas Supply Corporation
*i By-Laws, as amended (Exhibit (3) i, Form U5S for
fiscal year ended September 30, 1989)
*ii Articles of Incorporation of United Natural Gas
Company, dated February 1, 1886 (Exhibit (3)ii, Form
U5S for fiscal year ended September 30, 1984)
*iii Certificate of Merger and Consolidation dated January
2, 1951 (Exhibit (3)iii, Form U5S for fiscal year
ended September 30, 1984)
*iv Joint Agreement and Plan of Merger, dated June 18,
1974. (Exhibit (3) iv, Form U5S for fiscal year ended
September 30, 1987)
*v Certificate of Merger and Plan of Merger of Penn-York
Energy Corporation and National Fuel Gas Supply
Corporation dated April 1, 1994. (Exhibit (3)v,
designated as Exhibit EX-99-3 for EDGAR purposes, Form
U5S for fiscal year ended September 30, 1994)
(4) Leidy Hub, Inc. (Formerly Enerop Corporation)
*i By-Laws (Exhibit A-15, File No. 70-7478)
*ii Restated Articles of Incorporation of Enerop
Corporation dated April 13, 1988 (Exhibit B-4 in File
No. 70-7478)
*iii Action by Board of Directors to amend the By-Laws
dated October 10, 1993 including a Restated
Certificate of Incorporation of Enerop Corporation
dated October 15, 1993 (Exhibit (4)iii, designated as
Exhibit EX-3 for EDGAR purposes, Form U5S for fiscal
year ended September 30, 1993)
*iv Partnership Agreement between Leidy Hub, Inc. and Hub
Services, Inc. dated September 1, 1994. (Exhibit
(4)iv, designated as Exhibit EX-99-1 for EDGAR
purposes, Form U5S for fiscal year ended September 30,
1994)
*v Ellisburg-Leidy Northeast Hub Company Admission
Agreement dated June 12, 1995. (Exhibit (4)v,
designated as Exhibit EX-99-1 for EDGAR purposes, Form
U5S for fiscal year ended September 30, 1995)
*vi Letter Agreement between Leidy Hub, Inc. and Hub
Services, Inc. dated June 12, 1995. (Exhibit (4)vi,
designated as Exhibit EX-99-2 for EDGAR purposes, Form
U5S for fiscal year ended September 30, 1995)
*vii Consent and waiver by Leidy Hub, Inc. dated June 12,
1995. (Exhibit (4)vii, designated as Exhibit EX-99-3
for EDGAR purposes, Form U5S for fiscal year ended
September 30, 1995)
* Incorporated herein by reference as indicated.
<PAGE>
EXHIBITS (Continued)
viii Limited Liability Company Agreement of Enerchange,
L.L.C. dated June 12, 1995 and related documents.
Designated as Exhibit EX-99-1 for EDGAR purposes.
[Portions of this document are subject to a request
for confidential treatment under Rule 104(b)]
(5) Seneca Resources Corporation
*i By-Laws, as amended (Exhibit (5) i, Form U5S for
fiscal year ended September 30, 1989)
*ii Articles of Incorporation of Mars Natural Gas Company
dated March 29, 1913 (Exhibit (5)ii, Form U5S for
fiscal year ended September 30, 1984)
*iii Secretary's Certificate dated January 4, 1918 (Exhibit
(5)iii, Form U5S for fiscal year ended September 30,
1984)
*iv Articles of Amendment, dated March 30, 1955 (Exhibit
(5)iv, Form U5S for fiscal year ended September 30,
1984)
*v Certificate of Amendment changing name of the Mars
Company to Seneca Resources Corporation, January 29,
1976 (Exhibit (5)v, Form U5S for fiscal year ended
September 30, 1984)
*vi Certificate of Merger and Plan of Merger of Seneca
Resources Corporation and Empire Exploration, Inc.
dated April 29, 1994. (Exhibit (5)vi, designated as
Exhibit EX-99-2 for EDGAR purposes, Form U5S for
fiscal year ended September 30, 1994)
*(6) Limited Partnership Agreement dated November 28, 1983, between
Empire Exploration, Inc. (now Seneca Resources Corporation) as
general partner and Herman P. Loonsk as limited partner
(Exhibit (8), Form U5S for fiscal year ended September 30,
1984)
*(7) Empire 1983 Drilling Program, Limited Partnership Agreement,
dated November 28, 1983, between Empire Exploration, Inc.,
(now Seneca Resources Corporation) as general partner and
those parties collectively called limited partners. (Exhibit
(9), Form U5S for fiscal year ended September 30, 1984)
*(8) Empire 1983 Joint Venture Agreement dated December 6, 1983
between Empire Exploration, Inc. (now Seneca Resources
Corporation) and Empire 1983 Drilling Program (Exhibit (10),
Form U5S for fiscal year ended September 30, 1984)
(9) Highland Land & Minerals, Inc.
*i Certificate of Incorporation, dated August 19, 1982
(Exhibit (11)i, Form U5S for fiscal year ended
September 30, 1985)
*ii By-Laws (Exhibit (11) ii, Form U5S for fiscal year
ended September 30, 1987)
* Incorporated herein by reference as indicated.
<PAGE>
EXHIBITS (Continued)
(10) Utility Constructors, Inc.
*i Articles of Incorporation, dated December 23, 1986, and
certificate of amendment dated December 31, 1986.
(Exhibit (12)i, Form U5S for fiscal year ended
September 30, 1987)
*ii By-Laws (Exhibit (12) ii, Form U5S for fiscal year
ended September 30, 1987)
(11) Data-Track Account Services, Inc.
*i Restated Articles of Incorporation, dated March 2, 1984
(Exhibit A-1, File No. 70-7512)
*ii By-Laws (Exhibit A-2, File No. 70-7512)
(12) National Fuel Resources, Inc.
*i Articles of Incorporation, dated January 9, 1991.
(Exhibit (14)i; designated as Exhibit EX-3(a) for EDGAR
purposes, Form U5S for fiscal year ended September 30,
1992)
*ii By-Laws (Exhibit (14)ii; designated as Exhibit EX-3(b)
for EDGAR purposes, Form U5S for fiscal year ended
September 30, 1992)
(13) Horizon Energy Development, Inc.
*i Certificate of Incorporation. (Exhibit (13)i,
designated as Exhibit EX-3(a) for EDGAR purposes, Form
U5S for fiscal year ended September 30, 1995)
*ii By-Laws. (Exhibit (13)ii, designated as Exhibit
EX-3(b) for EDGAR purposes, Form U5S for fiscal year
ended September 30, 1995)
*iii Partnership agreement of Sceptre Power Company, dated
September 15, 1995. (Exhibit (13)iii, designated as
Exhibit EX-99-4 for EDGAR purposes, Form U5S for fiscal
year ended September 30, 1995) [Portions of the
agreement are subject to confidential treatment under
Rule 104(b).]
(14) Beheeren-Beleggingmaatschappij Bruwabel B.V. Articles of
Incorporation. Designated as exhibit EX-99-2 for EDGAR
purposes.
(15) Power International, s.r.o. - Governing documents to be filed
by amendment when available.
(16) Power Development, s.r.o. - Governing documents to be filed
by amendment when available.
(17) Teplarna Kromeriz a.s. - Governing documents to be filed
by amendment when available.
* Incorporated herein by reference as indicated.
<PAGE>
EXHIBITS (Continued)
(18) KPP Investment, L.L.C.
i Limited Liability Company Agreement dated January 11,
1996. Designated as exhibit EX-99-3 for EDGAR purposes.
ii Certificate of Formation, dated January 15, 1997.
Designated at Exhibit EX-99-4 for EDGAR purposes.
(19) Sceptre Kabirwala, L.L.C.
i Limited Liability Company Agreement dated January 26,
1996. Designated as exhibit EX-99-5 for EDGAR purposes.
ii Certificate of Formation, dated January 10, 1997.
Designated as Exhibit EX-99-6 for EDGAR purposes.
C. Indentures
* Indenture dated as of October 15, 1974, between the Company and The
Bank of New York (formerly Irving Trust Company)
(Exhibit 2(b) in File No. 2-51796)
* Third Supplemental Indenture dated as of December 1, 1982, to
Indenture dated as of October 15, 1974, between the Company and The
Bank of New York (formerly Irving Trust Company) (Exhibit 4(a)(4)
in File No. 33-49401)
* Ninth Supplemental Indenture dated as of January 1, 1990, to
Indenture dated as of October 15, 1974, between the Company and The
Bank of New York (formerly Irving Trust Company) (Exhibit EX-4-4,
Form 10-K for fiscal year ended September 30, 1992 in File No.
1-3880)
* Tenth Supplemental Indenture dated as of February 1, 1992, to
Indenture dated as of October 15, 1974, between the Company and The
Bank of New York (formerly Irving Trust Company) (Exhibit 4(a),
Form 8-K dated February 14, 1992 in File No. 1-3880)
* Eleventh Supplemental Indenture dated as of May 1, 1992, to
Indenture dated as of October 15, 1974, between the Company and The
Bank of New York (formerly Irving Trust Company) (Exhibit 4(b),
Form 8-K dated February 14, 1992 in File No. 1-3880)
* Twelfth Supplemental Indenture dated as of June 1, 1992, to
Indenture dated as of October 15, 1974, between the Company and The
Bank of New York (formerly Irving Trust Company) (Exhibit 4(c),
Form 8-K dated June 18, 1992 in File No. 1-3880)
* Thirteenth Supplemental Indenture dated as of March 1, 1993, to
Indenture dated as of October 15, 1974, between the Company and The
Bank of New York (formerly Irving Trust Company) (Exhibit 4(a)(14)
in File No. 33-49401)
* Incorporated herein by reference as indicated.
<PAGE>
EXHIBITS (Concluded)
* Fourteenth Supplemental Indenture dated as of July 1, 1993, to
Indenture dated as of October 15, 1974, between the Company and The
Bank of New York (formerly Irving Trust Company) (Exhibit 4.1, Form
10-K for fiscal year ended September 30, 1993 in File No. 1-3880)
* Fifteenth Supplemental Indenture dated as of September 1, 1996 to
Indenture dated as of October 15, 1974, between the Company and The
Bank of New York (formerly Irving Trust Company) (Exhibit 4.1, Form
10-K for fiscal year ended September 30, 1996 in File No. 1-3880)
* Rights Agreement between National Fuel Gas Company and Marine
Midland Bank dated June 13, 1996 (Exhibit 99.1, Form 8-K dated
June 13, 1996 in File No. 1-3880)
D. * Tax Allocation Agreement pursuant to Rule 45(c). (Exhibit (D),
designated as EX-99-5 for EDGAR purposes, Form U5S for fiscal
year ended September 30, 1995)
E. * (1) Filing pursuant to Rule 48(b) (Exhibit (E), Form U5S for
fiscal year ended September 30, 1991)
(2) Enerchange, L.L.C. Audited Financial Statements as of December
31, 1995. Filed in paper only under cover of Form SE as
prescribed by Rule 16(c).
F. Schedules of Supporting Items of this Report - None.
G. Financial Data Schedules. (Designated as Exhibit EX-27 for EDGAR
purposes.)
H. Organization chart showing relationship to exempt wholesale generator
. Designated as exhibit EX-99-7 for EDGAR purposes.
I. Fauji Kabirwala Power Company Limited, Accounts for the year ended
June 30, 1996. Designated as exhibit EX-99-8 for EDGAR purposes.
* Incorporated herein by reference as indicated.
<PAGE>
S I G N A T U R E
The undersigned System company has duly caused this annual report to be
signed on its behalf by the undersigned thereunto duly authorized pursuant to
the requirements of the Public Utility Holding Company Act of 1935.
NATIONAL FUEL GAS COMPANY
By: /s/ Joseph P. Pawlowski
------------------------------------
Joseph P. Pawlowski, Treasurer
and Principal Accounting Officer
Date: January 28, 1997
----------------
<PAGE>
EXHIBIT INDEX
EX27-1 Financial Data Schedule of National Fuel Gas Company for period ending
September 30, 1996
EX27-2 Financial Data Schedule of National Fuel Gas Distribution Corporation
for period ending September 30, 1996
EX99-1 Limited Liability Company Agreement of Enerchange, L.L.C. dated June
12, 1995 and related documents.
EX99-2 Beheeren-Beleggingmaatschappij Bruwabel B.V. Articles of Incorporation
EX99-3 KPP Investment, L.L.C. Limited Liability Company Agreement, dated
January 11, 1996.
EX99-4 KPP Investment, L.L.C. Certificate of Formation, dated January 15, 1997
EX99-5 Sceptre Kabirwala, L.L.C. Limited Liability Company Agreement dated
January 26, 1996
EX99-6 Sceptre Kabirwala, L.L.C. Certificate of Formation, dated January 10,
1997
EX99-7 Organization Chart showing relationship to exempt wholesale generator
EX99-8 Fauji Kabirwala Power Company Limited, Accounts for the year ended
June 30, 1996
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NATIONAL FUEL
GAS COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,709,606
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 220,981
<TOTAL-DEFERRED-CHARGES> 7,377
<OTHER-ASSETS> 211,808
<TOTAL-ASSETS> 2,149,772
<COMMON> 37,852
<CAPITAL-SURPLUS-PAID-IN> 395,272
<RETAINED-EARNINGS> 422,874
<TOTAL-COMMON-STOCKHOLDERS-EQ> 855,998
0
0
<LONG-TERM-DEBT-NET> 574,000
<SHORT-TERM-NOTES> 109,700
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 90,000
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 520,074
<TOT-CAPITALIZATION-AND-LIAB> 2,149,772
<GROSS-OPERATING-REVENUE> 1,208,017
<INCOME-TAX-EXPENSE> 66,321
<OTHER-OPERATING-EXPENSES> 984,250
<TOTAL-OPERATING-EXPENSES> 1,050,571
<OPERATING-INCOME-LOSS> 157,446
<OTHER-INCOME-NET> 3,869
<INCOME-BEFORE-INTEREST-EXPEN> 161,315
<TOTAL-INTEREST-EXPENSE> 56,644
<NET-INCOME> 104,671
0
<EARNINGS-AVAILABLE-FOR-COMM> 104,671
<COMMON-STOCK-DIVIDENDS> 61,920
<TOTAL-INTEREST-ON-BONDS> 40,872
<CASH-FLOW-OPERATIONS> 168,469
<EPS-PRIMARY> 2.78
<EPS-DILUTED> 2.78
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NATIONAL FUEL
GAS DISTRIBUTION CORPORATION'S FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 1
<NAME> NATIONAL FUEL GAS DISTRIBUTION CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 855,161
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 159,101
<TOTAL-DEFERRED-CHARGES> 2,282
<OTHER-ASSETS> 147,761
<TOTAL-ASSETS> 1,164,305
<COMMON> 59,170
<CAPITAL-SURPLUS-PAID-IN> 121,668
<RETAINED-EARNINGS> 219,746
<TOTAL-COMMON-STOCKHOLDERS-EQ> 400,584
0
0
<LONG-TERM-DEBT-NET> 326,000
<SHORT-TERM-NOTES> 114,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 323,721
<TOT-CAPITALIZATION-AND-LIAB> 1,164,305
<GROSS-OPERATING-REVENUE> 954,326
<INCOME-TAX-EXPENSE> 31,870
<OTHER-OPERATING-EXPENSES> 839,070
<TOTAL-OPERATING-EXPENSES> 870,940
<OPERATING-INCOME-LOSS> 83,386
<OTHER-INCOME-NET> 1,175
<INCOME-BEFORE-INTEREST-EXPEN> 84,561
<TOTAL-INTEREST-EXPENSE> 33,326
<NET-INCOME> 51,235
0
<EARNINGS-AVAILABLE-FOR-COMM> 51,235
<COMMON-STOCK-DIVIDENDS> 36,424
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 40,805
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
[CONFIDENTIAL TREATMENT OF BRACKETED MATERIAL REQUESTED PURSUANT TO RULE 104(B)]
LIMITED LIABILITY COMPANY AGREEMENT
OF
ENERCHANGE, L.L.C.
(A Delaware Limited Liability Company)
(Member Managed)
TABLE OF CONTENTS
ARTICLE I
Definitions. . . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE II
Formation. . . . . . . . . . . . . . . . . . . . . . . . . .7
2.1 Organization. . . . . . . . . . . . . . . . . . .7
2.2 Certificate of Formation. . . . . . . . . . . . .7
2.3 Agreement . . . . . . . . . . . . . . . . . . . .7
2.4 Name. . . . . . . . . . . . . . . . . . . . . . .8
2.5 Effective Date. . . . . . . . . . . . . . . . . .8
2.6 Term. . . . . . . . . . . . . . . . . . . . . . .8
2.7 Registered Agent and Office . . . . . . . . . . .8
2.8 Principal Office. . . . . . . . . . . . . . . . .9
2.9 Governmental Applications . . . . . . . . . . . .9
ARTICLE III
Nature of Business . . . . . . . . . . . . . . . . . . . . .9
3.1 Purpose . . . . . . . . . . . . . . . . . . . . .9
ARTICLE IV
Accounting, Records and Reports. . . . . . . . . . . . . . 10
4.1 Records to be Maintained. . . . . . . . . . . . 10
4.2 Accounting. . . . . . . . . . . . . . . . . . . 10
4.3 Financial Reports . . . . . . . . . . . . . . . 10
4.4 Fiscal Year . . . . . . . . . . . . . . . . . . 11
4.5 Accounts. . . . . . . . . . . . . . . . . . . . 11
4.6 Access to Records . . . . . . . . . . . . . . . 11
ARTICLE V
Names and Addresses of Charter Members . . . . . . . . . . 11
ARTICLE VI
Rights and Duties of Members . . . . . . . . . . . . . . . 11
6.1 Member Requirements . . . . . . . . . . . . . . 11
6.2 Operating Fund. . . . . . . . . . . . . . . . . 12
6.3 1995 Fiscal Year Operating Budget . . . . . . . 12
6.4 Unauthorized Expenses or Contracts. . . . . . . 12
6.5 Authority of Members to Bind the Company. . . . 12
6.6 Limitation of Liability of Members. . . . . . . 13
6.7 Contract to Limit Members' Liabilities. . . . . 13
6.8 Liability of Members for Certain Acts or
Omissions . . . . . . . . . . . . . . . . . . . 13
6.9 Indemnification . . . . . . . . . . . . . . . . 13
6.10 Representations and Warranties. . . . . . . . . 15
6.11 Credit Support. . . . . . . . . . . . . . . . . 16
6.12 Insurance . . . . . . . . . . . . . . . . . . . 16
6.13 HSI Contributions . . . . . . . . . . . . . . . 16
6.14 HSI Representation as to Initial Balance
Sheet; Agreement as to Cut-Off Date. . . . . . 16
ARTICLE VII
Competition and Conflicts of Interest. . . . . . . . . . . 17
7.1 Company Opportunity . . . . . . . . . . . . . . 17
7.2 Member Dealings with the Company. . . . . . . . 18
7.3 Competition Between Members . . . . . . . . . . 19
ARTICLE VIII
Management . . . . . . . . . . . . . . . . . . . . . . . . 19
8.1 Executive Committee . . . . . . . . . . . . . . 19
8.2 Composition and Term. . . . . . . . . . . . . . 25
8.3 Annual and Regular Meetings . . . . . . . . . . 26
8.4 Special Meetings. . . . . . . . . . . . . . . . 26
8.5 Notice of Meetings. . . . . . . . . . . . . . . 26
8.6 Quorum and Manner of Acting . . . . . . . . . . 26
8.7 No Compensation . . . . . . . . . . . . . . . . 26
8.8 Officers. . . . . . . . . . . . . . . . . . . . 26
8.9 Expenses. . . . . . . . . . . . . . . . . . . . 29
ARTICLE IX
Contributions and Capital Accounts . . . . . . . . . . . . 29
9.1 Capital Contributions . . . . . . . . . . . . . 29
9.2 Additional Capital Contributions. . . . . . . . 31
9.3 Failure to Contribute . . . . . . . . . . . . . 31
9.4 Maintenance of Capital Accounts . . . . . . . . 32
9.5 Withdrawal of Capital . . . . . . . . . . . . . 33
9.6 Capital Account, Allocations, and Distributions
Attributable to Transferred Interest. . . . . . 33
9.7 Compliance with Section 704(b) of the Code. . . 33
ARTICLE X
Allocations and Distributions. . . . . . . . . . . . . . . 34
10.1 Allocations of Net Profits and Net Losses . . . 34
10.2 Allocations of Taxable Income or Taxable Loss . 34
10.3 Tax Allocations: Section 704(c). . . . . . . . 34
10.4 Distributions . . . . . . . . . . . . . . . . . 34
ARTICLE XI
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.1 Tax Elections . . . . . . . . . . . . . . . . . 34
11.2 Tax Returns . . . . . . . . . . . . . . . . . . 35
11.3 Tax Matters Member. . . . . . . . . . . . . . . 35
ARTICLE XII
Disposition of Company Interests . . . . . . . . . . . . . 36
12.1 Right of Disposition. . . . . . . . . . . . . . 36
12.2 Dispositions not in Compliance with
this Article Void. . . . . . . . . . . . . . . 36
12.3 Initial HSI Disposition . . . . . . . . . . . . 36
12.4 Disposition Between Members . . . . . . . . . . 36
12.5 Third Party Disposition Procedures. . . . . . . 37
12.6 Withdrawal from Company . . . . . . . . . . . . 38
12.7 Involuntary Regulatory Withdrawal . . . . . . . 39
ARTICLE XIII
Dissolution and Winding Up . . . . . . . . . . . . . . . . 39
13.1 Dissolution . . . . . . . . . . . . . . . . . . 39
13.2 Effect of Dissolution . . . . . . . . . . . . . 40
13.3 Distribution of Assets on Dissolution . . . . . 40
13.4 Winding Up and Certificate of Cancellation. . . 41
13.5 Termination . . . . . . . . . . . . . . . . . . 41
13.6 Use of Company Identity . . . . . . . . . . . . 41
ARTICLE XIV
Amendment. . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE XV
Miscellaneous Provisions . . . . . . . . . . . . . . . . . 42
15.1 Entire Agreement . . . . . . . . . . . . . . . 42
15.2 Successors and Assigns . . . . . . . . . . . . 42
15.3 Governing Law. . . . . . . . . . . . . . . . . 42
15.4 Notices. . . . . . . . . . . . . . . . . . . . 42
15.5 Rights of Creditors and Third Parties under
Company Agreement . . . . . . . . . . . . . . 42
15.6 No Action for Partition. . . . . . . . . . . . 42
15.7 Title to Company Property. . . . . . . . . . . 42
15.8 Company Funds. . . . . . . . . . . . . . . . . 42
15.9 Confidentiality. . . . . . . . . . . . . . . . 43
15.10 Transaction Costs . . . . . . . . . . . . . . . 44
EXHIBITS
Exhibit A Form of Certificate of Formation (Section 2.2)
Exhibit B Addresses for Notices (Section 15.4)
Exhibit C Names and Addresses of Charter Members
(Article V)
Exhibit D Initial Capital Contributions (Section 9.1)
Exhibit E Company Interest
Exhibit F Admission Agreement
Exhibit G Balance Sheet
LIMITED LIABILITY COMPANY AGREEMENT
OF
ENERCHANGE, L.L.C.
This Limited Liability Company Agreement of Enerchange, L.L.C., a limited
liability company organized pursuant to the Delaware Limited Liability Company
Act, is entered into this 12th day of June, 1995, by and among Hub Services,
Inc., a Delaware corporation with its principal offices at 13430 Northwest
Freeway, Suite 1200, Houston, Texas 77040 ("HSI"), and NICOR Hub Services, Inc.,
a Delaware corporation with its principal offices at 1844 Ferry Road,
Naperville, Illinois 60563 ("NHS") (referred to jointly herein as "Charter
Members," and together with any Additional Members admitted pursuant to this
Agreement, as the "Members").
W I T N E S S E T H
WHEREAS, HSI and NHS desire to create a limited liability company pursuant
to the Delaware Limited Liability Company Act, for the purpose of developing,
owning, managing, and operating interests in natural gas market hubs located in
North America; coordination and participation in the development, implementation
and operation of an electronic trading system; natural gas market making
activities; and all other activities permitted by law;
NOW THEREFORE, in consideration of the mutual agreements, promises and
undertakings hereinafter set forth, the Members agree as follows:
ARTICLE I
Definitions
The following terms, as used herein, shall have the following meanings:
1. Act means the Delaware Limited Liability Company Act, 6
Del. C. Sections 18-101, et seq., and all amendments to the
Act, as in effect from time to time.
2. Additional Member means a Person other than a Charter Member who has
acquired a Company Interest from the Company or from another Member in
accordance with Section 12 of this Company Agreement pursuant to an
Admission Agreement.
3. Admission Agreement means the Agreement between an Additional Member
and the Company described in Section 9.1(d), substantially in the form
set forth as Exhibit F hereto.
4. Affiliate means, with respect to any Person, another Person that
directly or indirectly through one or more intermediaries controls or
is controlled by or is under common control with such Person. For
purposes of this Company Agreement control means an interest in excess
of fifty percent (50%).
5. Allocable Share means, as to any Member, that percentage which, from
time to time, such Member's Capital Account then bears to the total of
the Capital Accounts of all Members.
6. Bankruptcy means, with respect to a Person: (i) the commencement
against such Person of proceedings for any relief under any bankruptcy
or insolvency law, or any law relating to the relief of debtors,
readjustment of indebtedness, reorganization, arrangement, composition,
or extension of debts, provided such proceeding shall not have been
dismissed, nullified, stayed, or otherwise rendered ineffective (but
only so long as such ineffectiveness shall continue in force) within
ninety (90) days after the commencement of such proceedings; (ii) the
commencement by such Person of proceedings for any relief under any
bankruptcy or insolvency law, or any law relating to the relief of
debtors, readjustment of indebtedness, reorganization, arrangement,
composition, or extension of debts; (iii) a decree or order of a court
having jurisdiction in the premises for the appointment of a receiver,
liquidator, or trustee or assignee in bankruptcy or insolvency of such
Person or of a substantial part of such Person's property, or for the
winding up or liquidation of its affairs, which decree or order remains
in force undischarged and unstayed for a period of ninety (90) days; or
(iv) a general assignment by such Person for the benefit of creditors
or the admission by such Person in writing of its inability to pay its
debts generally as they become due.
7. California Energy Hub means the natural gas market hub created and
described in that certain California Hub Agreement dated March 15, 1994
executed by Southern California Gas Company and Hub Services, Inc.
8. Capital Account means the account maintained for a Member determined in
accordance with Section 9.4.
9. Capital Contribution means the value of Property contributed, from time
to time, to the Company by any one Member pursuant to Section 6.2, 9.1,
9.2 or 9.3; provided that such value, in the case of Property other
than cash, shall be the fair market value of such Property as
reasonably determined by the Member contributing such Property and the
Executive Committee.
10. Certificate of Formation shall have the meaning set forth in Section
2.2.
11. Charter Members has the meaning set forth in the
preamble hereof.
12. Chicago Hub means the natural gas market hub created and described in
that certain Chicago Hub Agreement dated May 26, 1993 executed by
Northern Illinois Gas Company and Hub Services, Inc.
13. Code means the Internal Revenue Code of 1986, as from time to time
amended, or any successor thereto; any reference to a section of the
Code or the Regulations shall mean such section or any successor
thereto as in effect at the time or times in question.
14. Company means Enerchange, L.L.C., a limited liability company formed
under the laws of Delaware.
15. Company Agreement means this Limited Liability Company Agreement,
including all amendments adopted in accordance with this Company
Agreement and the Act.
16. Company Interest means a Limited Liability Company Interest, defined by
the Act as a Member's share of the profits and losses of the Company,
and a Member's right to receive distributions (liquidating and
otherwise) of the Company's assets, which Company Interests are as set
forth on Exhibit E attached hereto.
17. Company Property means all Property owned of record or beneficially by
the Company.
18. Delinquent Member shall have the meaning set forth in Section 9.3.
19. Disposition (Dispose) means any sale, assignment, transfer, exchange,
mortgage, pledge, grant, hypothecation, or other transfer, absolute or
as security or encumbrance (including dispositions by operation of
law).
20. Dissolution Event shall have the meaning set forth in Section 13.1
hereof.
21. EEI means Energy Exchange Inc., a corporation incorporated pursuant
to the laws of the Province of Alberta.
22. Effective Date shall have the meaning set forth in Section 2.5 hereof.
23. Electronic Trading System means the electronic natural gas trading and
nomination system that the Company expects to develop and operate on a
joint ownership basis with EEI.
24. Ellisburg-Leidy Northeast Hub means the natural gas market hub created
and described in that certain Pre- Partnership Agreement dated
September 1, 1993 and Partnership Agreement dated September 1, 1994,
executed by Leidy Hub, Inc. and Hub Services, Inc.
25. Executive Committee shall have the meaning set forth in Section 8.2(a)
hereof.
26. Executive Committee Representative or Representative means the
representative appointed by a Member to serve on the Executive
Committee.
27. Fiscal Year shall have the meaning set forth in Section 4.4 hereof.
28. Hub means natural gas transportation and interchange facilities located
in the vicinity of two or more interstate or intrastate pipelines,
solely to the extent such facilities are utilized in connection with a
venture (the hub company) that (i) takes delivery of natural gas from a
large number of suppliers and provides these suppliers with a wide
variety of markets in which to sell natural gas; and/or (ii) provides
hub customers with wheeling, loaning, parking and in some instances
title transfer services. Wheeling refers to the simultaneous transfer
of natural gas from one location on a pipeline to another, while
loaning occurs when one party allows another party to borrow natural
gas. Parking services allow a customer to receive natural gas from a
pipeline, store natural gas in a hub for future redelivery and
redeliver natural gas to a pipeline, while title transfer services
allow a customer to assign title to natural gas that is in storage.
Notwithstanding the foregoing, a Hub shall not include such facilities
to the extent they are used to provide services that are explicitly
excluded from the scope of "Hub Transactions" pursuant to the Hub
Agreements relating to the California Energy Hub, Chicago Hub or
Ellisburg-Leidy Northeast Hub.
29. Hub Agreement means any of the agreements described in the definitions
of "California Energy Hub," "Chicago Hub" or "Ellisburg-Leidy Northeast
Hub," or any similar agreement that may be entered into from time to
time by a Member or Affiliate of a Member and the Company, as each such
agreement may be amended or modified from time to time.
30. Initial Capital Contribution means the initial capital contribution
made by the Charter Members and any Additional Members, as described in
Section 9.1 and Exhibit D attached hereto.
31. LHI means Leidy Hub, Inc., a New York corporation with its principal
offices at 10 Lafayette Square, Buffalo, New York 14203.
32. Liquidating Trustee means the Member or such other Person as all
Members agree (or, in the absence of such agreement, the Executive
Committee), charged with carrying out the winding up of the Company.
33. Majority Vote means approval by more than fifty percent (50%) of the
votes of all Representatives comprising the Executive Committee.
34. Market-Making means acting as an intermediary between Persons desiring
to sell natural gas and Persons desiring to purchase natural gas and
includes, without limitation, electronic solicitation of transactions
between anonymous sellers and buyers, implementation and documentation
of such transactions, buying and selling natural gas for immediate or
delayed delivery or options or other financial instruments related
thereto, and assuming the performance and credit risks associated with
such transactions.
35. Member shall have the meaning set forth in the preamble hereof.
36. Member Loan shall have the meaning set forth in Section 9.3 hereof.
37. Member Loan Rate means the rate of interest equal to the Prime Rate as
reported in the Wall Street Journal plus two (2) percent, changing when
and as such Prime Rate changes. For purposes of this Company Agreement,
each change in the Member Loan Rate shall take effect on the published
date of the change in the Prime Rate. If the Prime Rate is no longer
published in the Wall Street Journal, for any reason, then the Member
Loan Rate shall be the Prime Rate (or comparable base rate on corporate
loans) as reported in a widely recognized business publication with
national U.S. circulation that is selected by the Member then making
the Member Loan.
38. Net Losses means the losses and deductions of the Company determined in
accordance with generally accepted accounting principles consistently
applied.
39. Net Profits means the income and gains of the Company determined in
accordance with generally accepted accounting principles consistently
applied.
40. Officer shall have the meaning set forth in Section 8.8(a).
41. Operating Budget shall have the meaning set forth in Section 8.1(c)(4)
hereof.
42. Operating Fund shall have the meaning set forth in Section 6.2 hereof.
43. Operating Policy shall have the meaning set forth in Section 8.1(c)(18)
hereof.
44. PE means Pacific Enerchange, a California corporation with its
principal offices at Los Angeles, California.
45. Person means an individual, trust, governmental authority, estate, or
any incorporated or unincorporated company, corporation, limited
liability company, partnership or other organization.
46. Principal Office shall have the meaning set forth in Section 2.8
hereof.
47. Proceeding means any administrative or judicial adversary proceeding or
hearing, civil, criminal or investigative, the result of which may be
that a court, arbitrator, mediator or governmental agency may enter a
judgment, order, decree, or other determination which, if not appealed
and reversed, would be binding.
48. Property means any property, real or personal, tangible or intangible,
including cash and any legal or equitable interest in such property,
but excluding services and promises to perform services in the future.
49. Regulations means, except where the context indicates otherwise, the
permanent and temporary regulations of the United States Department of
the Treasury under the Code, including any amendments thereto.
50. Representative shall have the meaning set forth in Section 8.2(a)
hereof.
51. Selling Member shall have the meaning set forth in Section 12.5 hereof.
52. Supermajority Vote means approval by no less than seventy-two percent
(72%) of all votes of all Representatives comprising the Executive
Committee.
53. Taxable Year shall mean the Fiscal Year unless changed by the Executive
Committee by Supermajority Vote.
54. Tax Matters Member shall have the meaning set forth in Section 11.3
hereof.
55. Unanimous Vote means the approval by one hundred percent (100%) of the
votes of all Representatives comprising the Executive Committee.
56. Withdrawing Member has the meaning set forth in Section 12.6 hereof.
ARTICLE II
Formation
2.1 Organization. The Charter Members hereby form, and agree to jointly
operate, a Delaware limited liability company pursuant to the provisions of the
Act. The Charter Members intend that the Company be construed as a partnership
or flow through tax organization for purposes of federal, state, and other
taxes.
2.2 Certificate of Formation. Concurrently with or as soon as possible after
the execution of this Company Agreement, the Members shall cause the Certificate
of Formation, in the form attached hereto as Exhibit A (the "Certificate of
Formation"), to be filed in the Office of the Secretary of the State of Delaware
in accordance with the requirements of the Act. From time to time, the Members
shall cause to be filed, and the Members agree to execute, such further
certificates of formation, qualification to do business, or like filings in such
jurisdictions as may be necessary or appropriate in connection with the conduct
of the Company's business or to provide notification of the limitation of
liability of Members.
2.3 Agreement. For and in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Members hereby agree to the
terms and conditions of this Company Agreement, as it may from time to time be
amended according to its terms. It is the express intention of the Members that
this Company Agreement, as it may be amended from time to time in accordance
with its terms, shall be the sole source of agreement of the parties with
respect to the subject matter thereof, and, except to the extent a provision of
this Company Agreement expressly incorporates federal income tax rules by
reference to sections of the Code or Regulations or is expressly prohibited or
ineffective under the Act, this Company Agreement shall govern, even when
inconsistent with, or different than, the provisions of the Act or any other law
or rule. To the extent any provision of this Company Agreement is prohibited or
ineffective under the Act, this Company Agreement shall be considered amended to
the smallest degree possible in order to make this Company Agreement effective
under the Act. In the event the Act is subsequently amended or interpreted in
such a way to make any provision of this Company Agreement that was formerly
invalid valid, such provision shall be considered to be valid from the effective
date of such interpretation or amendment.
2.4 Name. The name of the Company is Enerchange, L.L.C.
2.5 Effective Date. This Company Agreement shall become effective on the
date (the "Effective Date") the Certificate of Formation is accepted and the
Company is duly formed as certified by the Secretary of State of the State of
Delaware.
2.6 Term. The Company shall dissolve five (5) years after the Effective Date
unless (i) sooner dissolved as hereinafter provided; or (ii) extended for an
additional three (3) year term on one or more occasions as hereinafter provided.
Not later than one hundred and twenty (120) days prior to the expiration of the
then effective term, or such other date selected by the Executive Committee by
Supermajority Vote, the Executive Committee shall meet for the purpose of
determining whether or not the term will be extended for an additional three
years. Extension of the term shall require a Unanimous Vote.
2.7 Registered Agent and Office. The registered agent for the service of
process and the registered office shall be that Person and location reflected in
the Certificate of Formation as filed in the Office of the Secretary of State.
The Executive Committee, may, from time to time, change the registered agent or
office through appropriate filings with the Secretary of State. In the event the
registered agent ceases to act as such for any reason or the registered office
shall change, the Executive Committee shall promptly designate a replacement
registered agent or file a notice of change of address as the case may be. If
the Executive Committee shall fail within thirty (30) days to designate a
replacement registered agent or change of address of the registered office, any
Member may designate a replacement registered agent or file a notice of change
of address.
2.8 Principal Office. The principal office of the Company(the "Principal
Office") shall be at such place as the Executive Committee may from time to time
decide.
2.9 Governmental Applications. The Members agree to cooperate and exercise
due diligence in securing any necessary regulatory approvals and such other
matters as may be necessary or appropriate for purposes of effectuating the
business of the Company. Notwithstanding the foregoing, in the event any Member
is a regulated entity, as defined below, or has an Affiliate that is a regulated
entity, nothing in this Section 2.9 shall be construed to obligate that Member
to seek, or join in, any regulatory approval if that Member concludes that such
action may have a material adverse impact on that Member or any Affiliate or to
accept any issued approval if such issued approval contains conditions not
requested by such Member and unacceptable to such Member. For purposes of this
Section, a regulated entity is one whose ongoing business is subject to review,
approval or oversight by a federal or state regulatory body or agency.
ARTICLE III
Nature of Business
3.1 Purpose. The Company is empowered to (a) coordinate and participate in
the development, implementation and operation of the Electronic Trading System;
(b) manage, own and operate the Company's interests in the Chicago Hub, the
California Energy Hub and the Ellisburg-Leidy Northeast Hub and promote and
participate in transactions on those Hubs; (c) promote and participate in
transactions involving the use of the Electronic Trading System; (d) develop and
manage Hubs owned by third parties; (e) engage in Market-Making activity; (f)
engage in all other activities permitted by law if approved by a Supermajority
Vote of the Executive Committee, or, subject to Section 8.1(d)(5), a Unanimous
Vote of the Executive Committee; and (g) engage in any and all activities
incidental to the foregoing. The Company is empowered to take any and all action
necessary, appropriate, or convenient for the accomplishment of its purposes,
and for the benefit of the Company and its Property, including, but not limited
to:
(1) Entering into and performing contracts of any kind;
(2) Acquiring, selling, conveying, pledging, constructing, operating
maintaining, owning, transferring, renting, or leasing any
Property;
(3) Applying for and obtaining governmental authorizations and
approvals; and
(4) Bringing and defending actions at law or equity.
ARTICLE IV
Accounting, Records and Reports
4.1 Records to be Maintained. The Company shall maintain the following
accurate and complete records at the Principal Office or at such other locations
as may be provided by the Members:
(a) a current list of the full name and last known
business address of each Member;
(b) a copy of the Certificate of Formation and all
amendments thereto;
(c) copies of each of the Company's Federal, state and
local tax returns and reports, as filed, for the last
seven taxable periods;
(d) copies of this Company Agreement, including all
amendments thereto;
(e) Company audited financial statements for the last
seven Fiscal Years; and
(f) books and records of the Company.
4.2 Accounting. Books and records of the Company shall be maintained on an
accrual accounting basis, and the Company's net profit or net loss shall be
determined on the basis of the Fiscal Year and in accordance with generally
accepted accounting principles consistently applied.
4.3 Financial Reports. The Executive Committee shall cause the following
financial statements to be prepared, in each case in accordance with generally
accepted accounting principles consistently applied on a consolidated and
consolidating (i.e., by line of business) basis, and shall cause to be delivered
to each Person who was a Member during the applicable period described below:
(a) a balance sheet and statement of income, cash flow and Member's
capital account as of the end of or for, as the case may be, each
month, each within fifteen (15) days after the end of each month;
(b) (i) a balance sheet as of the end of each fiscal quarter; (ii) an
income statement for such quarter and year-to-date; (iii) a statement
of each Member's Capital Account as of the end of such quarter; and
(iv) a statement of cash flows for such quarter and year-to-date
(including sufficient information to permit the Members to calculate
their tax accruals), each within thirty (30) days after the end of such
fiscal quarter (or more frequently if agreed by the Executive
Committee);
(c) (i) a balance sheet as of the end of each Fiscal Year; (ii) an
income statement for such Fiscal Year; (iii) a statement of each
Member's Capital Account as of the end of such Fiscal Year; (iv) such
federal, state and local income tax returns and such other accounting
tax information and schedules as shall be necessary for the preparation
by each Member of its income tax return for such Fiscal Year; and (v) a
statement of cash flows for such Fiscal Year, each within sixty (60)
days after the end of such Fiscal Year of the Company; and
(d) audited annual financial statements prepared by a national CPA firm
selected by the Executive Committee by Supermajority Vote within ten
(10) days after such statements are furnished to the Company but in no
event later than sixty (60) days after the end of each Fiscal Year.
4.4 Fiscal Year. The fiscal year of the Company (the "Fiscal Year") shall
end on December 31.
4.5 Accounts. The Company shall maintain a record of each Member's Capital
Account in accordance with Section 9.4.
4.6 Access to Records. Each Member or its authorized representative shall
have unrestricted access at the Company's principal place of business and other
appropriate locations, during ordinary business hours, to all properties, books,
records, accounts and information regarding the Company.
ARTICLE V
Names and Addresses of Charter Members
The name and addresses of the Charter Members are as reflected on Exhibit C
attached hereto.
ARTICLE VI
Rights and Duties of Members
6.1 Member Requirements. A Member must remain a Member until the date five
(5) years after the Effective Date and may not Dispose of all or any portion of
its Company Interest except in strict accordance with the terms and conditions
of this Company Agreement (including, without limitation, Article XII). Any
attempted Disposition of all or any portion of its Company Interest, other than
in strict accordance with this Company Agreement, shall be, and is hereby
declared, null and void ab initio. The Members agree that breach of the
provisions of this Section 6.1 may cause irreparable injury to the Company for
which monetary damages (or other remedy at law) are inadequate in view of (i)
the complexities and uncertainties in measuring the actual damages that would be
sustained by reason of the failure of a Member to comply with such provisions,
and (ii) the uniqueness of the Company business and the relationship among the
Members. Accordingly, the Members agree that the provisions of this Section 6.1
may be enforced by specific performance.
6.2 Operating Fund. Subject to Section 9.1(e), on or before the close of
business on the first business day of each Fiscal Year, each Member will
contribute, as a Capital Contribution, its Allocable Share of an amount
determined by a Supermajority Vote of the Executive Committee to a fund
established as the annual operating fund (the "Operating Fund") of the Company.
The contribution with respect to the 1995 Fiscal Year of the Company shall be
made by each Member within thirty (30) business days of the date on which the
Executive Committee determines the 1995 Fiscal Year Operating Budget, as
provided in Section 6.3 hereof (which contribution shall not be in excess of
$[XXXXXX] in aggregate for all Members and shall be in addition to [CONFIDENTIAL
TREATMENT OF BRACKETED MATERIAL REQUESTED PURSUANT TO RULE 104(B)] the Initial
Capital Contribution set forth in Section 9.1(a) and the additional Capital
Contributions set forth in 9.1(b) hereof).
6.3 1995 Fiscal Year Operating Budget. Within thirty (30) business days of
the execution of this Company Agreement, the Executive Committee by
Supermajority Vote shall determine the amount of the 1995 Fiscal Year Operating
Budget and any allocation of such Operating Budget among programs or uses.
6.4 Unauthorized Expenses or Contracts. A Member may not, without the prior
approval of the Executive Committee, cause the Company to enter into or make any
contract, security agreement, financing statement, note or similar instrument,
mortgage or guaranty, incur any obligation, or expend any money, except and
unless an expenditure is required by the terms of a contract or instrument
theretofore duly entered into by the Company and authorized in accordance with
this Company Agreement. Should a Member breach this Section 6.4, such Member
will indemnify, defend and hold the other Members harmless from all liabilities,
costs, and damages resulting from such breach.
6.5 Authority of Members to Bind the Company. The Members hereby agree that
no individual Member or Members can bind the Company unless such Member or
Members are acting with the express authority of the Executive Committee, in
either case pursuant to a resolution of the Executive Committee.
6.6 Limitation of Liability of Members. Except as provided for in Section
6.4 hereof, no Member shall be liable for the debts, obligations or liabilities
of the Company, including under a judgment, decree or order of court, except as
may be otherwise expressly agreed to in writing by such Member directly to the
applicable third Person.
6.7 Contract to Limit Members' Liabilities. Unless approved by Unanimous
Vote of the Executive Committee, no contract, lease, sublease, note, deed or
other agreement or instrument shall be executed and delivered by or on behalf of
the Company if there is contained therein any provision whatsoever that states
or suggests that the claims of all parties thereto and other beneficiaries
thereunder are not limited solely to the assets of the Company, and any
contract, lease, sublease, note, deed or other agreement or instrument
containing any such provision shall be null and void and shall not constitute a
valid obligation of the Company.
6.8 Liability of Members for Certain Acts or Omissions. Any act or omission
by a Member, the effect of which may cause or result in loss or damage to the
Company, shall not subject the Member to any liability to the Company or any
other Member so long as such act or omission was not done fraudulently or in bad
faith or as a result of willful and wanton misconduct or gross negligence.
6.9 Indemnification.
(a) The Company shall defend, indemnify and hold harmless any Member,
Executive Committee Representative (or alternate), or Company officer,
employee or agent, who was or is a party to, or is threatened to be
made a party to, or is involved in, any threatened, pending or
completed Proceeding, by a third party (including any action by or in
the right of the Company) by reason of any acts, omissions or alleged
acts or omissions by such Member, Executive Committee Representative
(or alternate), or Company officer, employee or agent undertaken on
behalf of the Company, against and from losses, damages, claims and
expenses for which such Member, Executive Committee Representative (or
alternate), or Company officer, employee or agent has not otherwise
been reimbursed (including (i) reasonable attorneys' fees, judgments,
and fines in all cases and (ii) amounts paid in settlement if agreed to
by Supermajority Vote of the Executive Committee) actually and
reasonably incurred in connection with such Proceeding, so long as such
act or omission was not done fraudulently or in bad faith or as a
result of willful and wanton misconduct or gross negligence or, with
respect to any criminal Proceeding, such Person had no reasonable cause
to believe his conduct was unlawful.
(b) Subject to limitations and conditions as provided in this Article
VI, each Person who was or is a party to, or is threatened to be made a
party to, or is involved in, any threatened, pending or completed
Proceeding, by reason of the fact that, such Person is or was serving
at the request of the Company as a member, officer, employee, or agent
of another foreign or domestic limited liability company, corporation,
partnership, joint venture, sole proprietorship, or other enterprise,
shall be defended, indemnified and held harmless by the Company to the
fullest extent permitted by the Act, against and from losses, damages,
claims and expenses for which such Person has not otherwise been
reimbursed (including (i) reasonable attorneys' fees, judgments, and
fines in all cases and (ii) amounts paid in settlement if agreed to by
Supermajority Vote of the Executive Committee) actually and reasonably
incurred in connection with such Proceeding, so long as the acts or
omissions or alleged acts or omissions forming the basis for such
Proceeding were not done fraudulently or in bad faith or as a result of
willful and wanton misconduct or gross negligence or, with respect to
any criminal Proceeding, such Person had no reasonable cause to believe
his conduct was unlawful.
(c) Indemnification under this Article VI shall continue as to a Person
who has ceased to serve in the capacity which initially entitled such
Person to indemnity hereunder. The rights granted pursuant to this
Article VI shall be deemed contract rights, and no amendment,
modification or repeal of this Article VI shall have the effect of
limiting or denying any such rights with respect to actions taken or
Proceedings arising prior to any such amendment, modification or
repeal. It is expressly acknowledged that the indemnification provided
in this Article VI could involve indemnification for negligence but
cannot involve indemnification for any act or omission done
fraudulently or in bad faith or as a result of willful and wanton
misconduct or gross negligence or, with respect to any criminal
Proceeding, if such Person had reasonable cause to believe his conduct
was unlawful.
(d) The right to indemnification conferred in this Article VI shall not
be exclusive of any other right which a Member or other Person
indemnified pursuant to this Section 6.9 may have or hereafter acquire
under any law, any provision of the Certification of Formation, this
Company Agreement, any agreement, any vote of Members or otherwise.
6.10 Representations and Warranties. Each Member hereby represents and
warrants to the Company and each other Member that: (a) if such Member is an
organization, that it is duly organized, validly existing, and in good standing
under the law of its state of incorporation or organization and that it has full
organizational power to execute and agree to this Company Agreement and to
perform its obligations hereunder; (b) except as provided in Section 12.3, such
Member is acquiring its Company Interest for such Member's own account as an
investment and without an intent to distribute the interest; (c) such Member
acknowledges that such interests have not been registered under the Securities
Act of 1933 or any state securities laws, and may not be resold or transferred
by the Member without appropriate registration or the availability of an
exemption from such requirements; (d) such Member, by itself or together with
its advisors, is experienced in making investments comparable to its investment
in the Company and is capable of judging for itself the risks inherent in such
investment; (e) such Member has the financial capacity to hold its investment in
the Company for an indefinite period of time and to meet its obligations to make
Capital Contributions hereunder, and acknowledges that the disposition of such
investment is restricted both pursuant to federal and state securities laws and
pursuant to the terms of this Company Agreement; (f) such Member acknowledges
that it has received access to all information that it deems necessary in order
to make its decision to invest in the Company; (g) this Company Agreement has
been duly executed and delivered by it and constitutes its valid and binding
obligation, enforceable in accordance with its terms; (h) neither the execution
and delivery of this Company Agreement nor the consummation of the transactions
contemplated hereby nor compliance by it with any provisions hereof (1)
conflicts with, or results in a breach or contravention of, or in a default or
the creation of any lien under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, license, agreement, or other instrument or
obligation to which it is a party or by which it or its properties are bound, or
(2) violates any law, order, writ, injunction or decree applicable to it or any
of its properties; and (i) no consent, approval or other action by any court,
governmental authority or third party is required in connection with its
execution, delivery and performance of this Company Agreement. The parties agree
that no representations are made as to Southern California Gas Company, an
Affiliate of PE. The parties agree that no representations are made as to
Northern Illinois Gas Company ("NI-Gas"), an Affiliate of NHS, and acknowledge
that NI-Gas expects to request the consent and approval of the Illinois Commerce
Commission in connection with the assignment by HSI to the Company of its rights
under the Chicago Hub Agreement referred to in the definition of Chicago Hub and
that if NI-Gas fails to obtain such consent on terms satisfactory to NI-Gas and
NHS, NHS may elect to dispose of its interest in the Company or NI-Gas may elect
to terminate the Chicago Hub Agreement.
6.11 Credit Support. HSI acting alone or through one or more of its
Affiliates, hereby agrees to exercise commercially reasonable efforts to provide
credit support on acceptable terms to the extent required to support the
Company's commercial operations. Such credit support may include, but is not
limited to, a guaranty of the Company's performance or a letter of credit.
6.12 Insurance. To the extent not inconsistent with the Act and other laws
and public policies of the State of Delaware, the Company will purchase and
maintain its own policies of insurance at levels appropriate to cover potential
liabilities of the Company for the benefit of the Company and any Person who is
or was a Member or officer, employee or agent against any liability asserted
against or expenses incurred (in connection with an asserted liability) by the
Company or such Person in any such capacity or arising out of such Person's
service with the Company, whether or not the Company would have the power to
indemnify such Person against such liability.
6.13 HSI Contributions. HSI, acting alone or through its Affiliate, Natural
Gas Clearinghouse, or one or more other Affiliates, hereby agrees to (1) second
or otherwise make available to the Company officers and employees for the
exclusive use of the Company (subject to change only upon agreement of each of
the Members other than HSI) having the experience and expertise to develop and
carry out the activities described in Section 3.1 hereof (and cause the Company
to vote its Company Interest to the extent necessary to engage such officers and
employees), and (2) provide to the Company access to and use of an electronic
nomination system known as the Gas Trading System, for a monthly fee not to
exceed [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXX] and otherwise on commercially reasonable terms and
conditions.
[CONFIDENTIAL TREATMENT OF BRACKETED MATERIAL REQUESTED PURSUANT TO RULE 104(B)]
6.14 Representation as to Initial Balance Sheet; Agreement
as to Cut-Off Date.
(a) HSI represents and warrants that the balance sheet of the Company
as of the Effective Date is as set forth in Exhibit G hereto, and that
except as so disclosed on such balance sheet the Company has no
liabilities, debts, claims or obligations, whether accrued, absolute,
contingent or otherwise, whether due or to become due. HSI hereby
agrees to indemnify and hold harmless the Company from and against any
such liabilities, debts, claims or obligations (subject to clause (b)
below).
(b) Each of the parties agree (1) that each agreement, contract,
transaction or other arrangement entered into under each Hub Agreement
prior to June 1, 1995 (the "Cut-Off Date") shall be for the sole
benefit of and the asset of HSI and shall be the sole responsibility
and liability of HSI, and that the Company shall not receive any such
benefits, assets, responsibilities or liabilities notwithstanding HSI's
contribution of its rights under such Hub Agreements to the Company in
accordance with this Agreement and (2) that each agreement, contract,
transaction or other arrangement entered into under each Hub Agreement
on or after the Cut-Off Date (collectively, "Post-Cut-Off
Transactions") shall be for the sole benefit of and the asset of the
Company and shall be the sole responsibility and liability of the
Company and that HSI shall not receive any of such benefits, assets,
responsibilities or liabilities.
(c) HSI represents and warrants that the note to the balance sheet set
forth in Exhibit G hereto accurately and completely sets forth all
Post-Cut-Off Transactions, and that no other Post-Cut-Off Transactions
have occurred or exist.
ARTICLE VII
Competition and Conflicts of Interest
7.1 Company Opportunity. The assets of the Company shall at all times be
dedicated exclusively to the benefit of the Company. Subject to the foregoing
and except as otherwise set forth below, any Member or Affiliate of any Member
may participate in other business activities, whether or not any such activities
are competitive with the business of the Company. No Officer, Executive
Committee Representative or employee of the Company, so long as such individuals
remain in such capacity, shall participate in business activities in competition
with the business of the Company. Subject to the Supermajority Vote requirement
of Section 8.1(c)(16) below, no transaction with the Company shall be voidable
solely because a Member has a direct or indirect interest in the transaction if
either the transaction is arms-length and fair to the Company or the
disinterested Members (knowing the material facts of the transaction and the
Member's interest) or their Representatives on the Executive Committee
authorize, approve, or ratify the transaction.
Notwithstanding the foregoing, in the absence of the approval of the
Executive Committee by Unanimous Vote, no Member or Affiliate of any Member
shall engage in, or own, operate, manage or invest in any Person who engages as
a material line of business in (x) the ownership and management of a Hub located
in North America or (y) any electronic natural gas trading system which, in
either case, the Company does not own an interest in or does not operate or
manage. Nothing set forth herein shall restrict any Member or Affiliate from (i)
engaging in the operation, ownership or management of the Chicago Hub, the
California Energy Hub or the Ellisburg-Leidy Northeast Hub (or, before or after
termination of the relevant Hub Agreement creating any such Hub, the operation,
ownership or management of the assets or business constituting such Hub); (ii)
contracting with third parties for services associated with any Hub or
electronic natural gas trading and/or nomination system; or (iii) owning an
interest in, operating, managing or engaging in any electronic natural gas
nomination system including, without limitation, NHS' Affiliate's interest in
"Gas Exchange" and PE's Affiliate's interest in "GasSelect." In the event any
such electronic natural gas nomination system of a Member or its Affiliate
installs an electronic interface with an electronic natural gas trading and
nomination system that competes with the Company's system, such Member or its
Affiliate will, for not more than a comparable total economic cost, attempt to
provide an opportunity to install an electronic interface for the Electronic
Trading System with essentially equivalent contractual terms and conditions to
those applicable to the competing electronic natural gas trading and nomination
system. Nothing in this Article VII shall be construed to place any limitations
on any Affiliate's ability to comply with and offer services in accordance with
the laws, regulations and tariffs applicable to it as an interstate natural gas
pipeline or a state-regulated public utility. For example, potential Company,
California Energy Hub, Chicago Hub, or Ellisburg-Leidy Hub customers will be
able to make requests for services directly to a Member's Affiliate that may be
in competition with the services offered by the Company, California Energy Hub,
Chicago Hub or Ellisburg- Leidy Northeast Hub, respectively, and such Affiliate
may perform and be paid for those services.
7.2 Member Dealings with the Company. The Members expect that Members and/or
Affiliates may become customers of the Company, and otherwise engage in natural
gas marketing or transportation activities which may compete with the Company.
Other than the specific prohibition in Section 7.1 above, nothing in this
Company Agreement is intended to prohibit or limit such competition.
7.3 Competition Between Members. Except as specifically
provided in this Article VII, nothing shall limit or restrict the
Members' ability to compete with each other.
ARTICLE VIII
Management
8.1 Executive Committee.
(a) Except as otherwise provided in this Company Agreement, the
property, business and affairs of the Company shall be under the
direction of the Executive Committee. Except for matters requiring the
action of the Members under the terms of this Company Agreement, the
Executive Committee shall have the power to take any action that the
Members may take under law, subject to any restrictions set forth in
this Company Agreement.
(b) The approval by a Majority Vote shall be required before any of the
following acts involving the Company may be taken:
<PAGE>
(1) entering into, amending, modifying, or terminating an
agreement with a term in excess of one year or involving
aggregate consideration (including assumed actual and contingent
liabilities) or receipts, or delivery or receipt of goods or
services having a value, in excess of $50,000, but not to exceed
$100,000, over the term of the agreement (other than an agreement
for the transportation, balancing, storage, parking, wheeling,
purchase, or sale of natural gas);
(2) entering into, amending, modifying, or terminating any
contract or commitment to acquire or transfer any asset, the fair
market value or aggregate consideration (including assumed actual
and contingent liabilities) of which exceeds $50,000, unless such
fair market value or aggregate consideration exceeds $250,000, in
which case any acquisition or transfer requires a Unanimous Vote;
(3) (A) filing any claim or lawsuit against any Person
except where the amount claimed is for less than $50,000, or (B)
settling any claim or lawsuit except where the fair market value
of the settlement amount is less than $50,000; or
(4) taking action in its capacity as a shareholder, partner
or member of any joint venture between the Company and EEI to the
extent such action is the equivalent of an act requiring a
Majority Vote under this Section 8.1 (in the case of an action to
which a monetary value can be assigned, determined by reference
to the impact of such action on the Company).
(c) The approval by a Supermajority Vote shall be required before any
of the following acts involving the Company may be taken:
(1) entering into, or amending, modifying, or terminating,
an agreement involving aggregate consideration (including assumed
actual and contingent liabilities) or receipts, or delivery or
receipt of goods or services having a value, in excess of
$100,000 over the term of the agreement (other than an agreement
for the transportation, balancing, storage, parking, wheeling,
purchase, or sale of natural gas);
(2) any amendment or modification of any provision of the
Operating Policy described in subsection (d)(12) below, except to
the extent the Operating Policy states that such provision may be
amended or modified only by Unanimous Vote;
(3) borrowing any principal amount in excess of $25,000,
incurring any contingent liability whatsoever in excess of
$25,000, lending or guaranteeing any third party indebtedness
(including, without limitation, under any contract or arrangement
referred to in this Section 8.1), it being understood that such
limitation shall not be a limitation on the amount or type of
trade payables that may be incurred in the ordinary course of
business consistent in all respects with past practices by the
Company;
(4) approving a capital budget, an operating budget (the
"Operating Budget") and contributions to the Operating Fund for
each Fiscal Year, which shall not be exceeded without the express
consent of a Supermajority Vote of the Executive Committee
(except with respect to capital expenditures of less than $25,000
as provided in subsection (5) below);
(5) making any capital expenditure in excess of $25,000
unless such expenditure is reflected in a capital budget for the
current Fiscal Year that has been approved by the Executive
Committee;
(6) incurring aggregate general and administrative expenses,
as defined and calculated in accordance with generally accepted
accounting principles, in any Fiscal Year in excess of one
hundred and five percent (105%) of the general and administrative
expenses reflected in the Operating Budget;
(7) the indemnification of any Officer,
employee, agent or any other Person except as
specifically provided herein;
(8) executing or otherwise entering into, or amending,
modifying, or terminating, any employment agreement, the election
or removal of any Officer or the hiring or firing of other
similarly compensated person with or without cause, and the
borrowing of a Member's employee(s) on a temporary basis in
accordance with Section 8.8(j) below for a period in excess of
five consecutive days;
(9) setting or amending the compensation level of any
Officer or other similarly compensated person;
(10) revaluing any property or asset;
(11) taking any action in its capacity as a shareholder,
partner or member of any Person except any joint venture between
the Company and EEI, which is addressed in the following
subsection (b)(12);
(12) taking any action in its capacity as a shareholder,
partner or Member of any joint venture between the Company and
EEI to the extent that such action is the equivalent of an action
requiring a Supermajority Vote under this Section 8.1(c) (in the
case of an action to which a monetary value can be assigned,
determined by reference to the impact of such action on the
Company);
(13) taking action that will result in any Company Property
being burdened by a lien or other encumbrance;
(14) subject to Section 8.1(d), entering into, amending or
terminating any contract or commitment to acquire or transfer any
asset, the fair market value or aggregate consideration
(including assumed actual and contingent liabilities) of which
exceeds $250,000;
(15) approving the distribution of Company Property to
Members in accordance with Section 10.4 below;
(16) executing or otherwise entering into, or amending,
modifying, or terminating, any agreement with a Member, an
Officer or employee of the Company, an Affiliate of a Member, or
a person related by blood or marriage to an Officer or employee
of the Company, involving aggregate consideration (including
assumed actual and contingent liabilities) or fair market value
or actual or contingent liability in excess of $25,000, except
that this subsection shall not apply to any contract or
commitment for the transportation, balancing, storage, parking,
wheeling, purchase, or sale of natural gas, in each case in the
ordinary course of business, provided that no such contract or
commitment may be executed until the Operating Policy described
in subsection (d)(12) below is adopted;
(17) (A) filing any claim or lawsuit against any Person in an
amount claimed in excess of $50,000, or (B) settling any claim or
lawsuit where the fair market value of the settlement amount
exceeds $50,000;
(18) entering into any material amendment or modification of
a Hub Agreement or the extension or renewal of a Hub Agreement
other than the agreements described in the definitions of
"California Hub," "Chicago Hub" or Ellisburg-Leidy Hub"; or
(19) subject to Section 8.1(d)(5), any decision that the
Company shall engage in any activities other than (i) activities
involving the transportation or storage of natural gas, or (ii)
activities related to the supply of natural gas, including
exploration, development, production, marketing, manufacture or
similar activities related to the supply of natural gas, or (iii)
those described in clauses (a)-(e) and (g) of Section 3.1.
(d) The approval by a Unanimous Vote shall be required before any of
the following acts involving the Company may be taken:
(1) the admission of an Additional Member;
(2) transferring all or substantially all of the assets of
the Company;
(3) dissolving the Company;
(4) the filing of a petition as debtor in a United States
Bankruptcy Court or taking any material affirmative act that
would result in the
Company's Bankruptcy;
(5) making an aggregate expenditure in excess of $5,000,000
during the first five (5) years following the Effective Date for
purposes of entering a business, or line of business, other than
one described in clauses (a)-(e) and (g) of Section 3.1;
(6) merging or consolidating the Company with or into any
other Person;
(7) a change in the name of the Company;
(8) approving the Company's participation in any venture
between the Company and EEI relating to the development and
operation of the Electronic Trading System;
(9) entering into, amending, modifying or terminating any
contract or commitment for the transportation, balancing,
storage, parking, wheeling, purchase or sale of natural gas prior
to (A) adopting the Operating Policy described in subsection
(d)(12) below and (B) amending or otherwise modifying the
Partnership Agreement relating to the Ellisburg-Leidy Northeast
Hub, in order to reflect the substitution of the Company for HSI
as a partner thereunder, in form and substance satisfactory to
the Members;
(10) taking any action in its capacity as a shareholder,
partner or member of any joint venture between the Company and
EEI to the extent that such action is the equivalent of an action
requiring a Unanimous Vote under this Section 8.1(d) (in the case
of an action to which a monetary value can be assigned,
determined by reference to the impact of such action on the
Company);
(11) entering into any modification or amendment of this
Company Agreement;
(12) approving and adopting written Company operating
procedures (the "Operating Policy"), which Operating Policy shall
be approved and adopted within forty-five days of the execution
of this Company Agreement (the Executive Committee may, by
Unanimous Vote, approve and adopt interim operating procedures to
be effective until the approval and adoption of the Operating
Policy), addressing, among other areas, procedures for the
execution and approval of agreements binding the Company
(including specific authority levels of Members, Officers, and
Company employees), forms used in connection with derivatives
transactions, procedures for the execution and approval of
agreements between the Company and Members, Affiliates, Officers,
and/or Company employees, tax recording and accounting procedures
(including procedures for calculating Net Profit and Net Loss),
retention and audit policies which effectively monitor and
control risks associated in particular with market-making
agreements, and location of business headquarters; amending or
modifying any provision of the Operating Policy to the extent the
Operating Policy states that such provision may be amended or
modified only by Unanimous Vote (any other amendment or
modification of the Operating Policy requires a Supermajority
Vote); or taking any actions in contravention of the restrictions
or limitations in the Operating Policy;
(13) extending or renewing any of the agreements described
in the definitions of "California Energy Hub," "Chicago Hub" or
"Ellisburg-Leidy Hub"; or
(14) extension of the term of the Company in accordance with
Section 2.6.
(e) Any other action required or permitted by the Executive Committee
under this Company Agreement and not specifically addressed in this
Section 8.1 may be taken only with the approval in advance by a
Supermajority Vote of the Executive Committee.
(f) The Executive Committee by a Supermajority Vote may from time to
time adopt such rules, not inconsistent with the provisions hereof, as
it may deem useful and appropriate to implement this Company Agreement
and to manage the Company's business and affairs. The Executive
Committee by a Supermajority Vote may adopt accounting and financial
control procedures and policies, not inconsistent with this Company
Agreement, that are appropriate for the Company with respect to such
matters.
8.2 Composition and Term.
(a) The executive committee (the "Executive Committee") shall be the
Member's management committee of the Company and shall be comprised of
one individual representative for each Member (such Member's
"Representative"). All Representatives shall be entitled to receive
notices and agendas of upcoming Executive Committee meetings, attend
all Executive Committee meetings and participate in all discussions,
and receive minutes from previous Executive Committee meetings. A
Member may bring support staff to Executive Committee meetings. Such
staff shall be subject to confidentiality requirements deemed
appropriate by the Executive Committee. The Representative selected by
each Member shall be entitled to cast the following number of votes on
matters requiring the approval of the Executive Committee: such
Representative shall have one vote, or fractional part thereof, for
each percentage point, or fractional part thereof, of Company Interest
credited to the Member appointing such Representative. For example, a
Representative appointed by a Member credited with a ten and one-half
percent (10.5%) Company Interest would have ten and one-half (10-1/2)
votes of a total number of one hundred (100) votes.
(b) Until replaced pursuant to the terms of this Company Agreement,
NHS's Representative shall be Thomas Nardi. HSI's Representative shall
be Stephen Bergstrom. Each Representative shall be entitled to hold
office until death, resignation or removal. A Member may replace the
Representative appointed by such Member in the event of a vacancy. Any
Representative may be removed at any time, with or without cause, by
the Member entitled to appoint such Representative, but not otherwise.
Any Representative on the Executive Committee may appoint a proxy
(including another Representative) to attend meetings and vote
(including, without limitation, voting on any matter before the
Executive Committee). Without limiting the generality of the foregoing,
in determining if a quorum is present, all Representatives in
attendance by means of a proxy shall be included in the count of a
quorum.
8.3 Annual and Regular Meetings. The Executive Committee shall hold an
annual meeting, and may hold regular meetings, at such time and place as the
Executive Committee determines by resolution but in any event the Executive
Committee shall, unless the Executive Committee otherwise agrees, hold regular
meetings at the offices of the Company during the months of January, April, July
and October of each year.
8.4 Special Meetings. Special meetings of the Executive Committee may be
called by the Chairman, Vice Chairman, the Executive Committee or any Member,
upon notice to all Representatives on the Executive Committee.
8.5 Notice of Meetings. Notice of a special meeting shall state the purpose
of the meeting and notice of special, annual and regular meetings must be given
in writing at least ten days in advance of such meeting. Notice of such meeting
may be waived in writing by Unanimous Vote.
8.6 Quorum and Manner of Acting. The presence of all Representatives shall
constitute a quorum. If a quorum is present, the action of those present, in
accordance with Section 8.1 above, shall constitute the action of the Executive
Committee. No action may be taken at a meeting of the Executive Committee in the
absence of a quorum. In the event a Representative receives notice of an annual,
regular or special meeting and does not participate in such meeting either in
person or by proxy, such Representative shall be deemed to have attended such
meeting and voted not to take action submitted to the Executive Committee for
approval at such meeting. Any action the Executive Committee may take may be
taken without a meeting by unanimous written consent of the Representatives.
Meetings of the Executive Committee may take place by telephone or any means
where any persons attending can hear and speak to each other.
8.7 No Compensation. No Representative on the Executive Committee shall be
entitled to compensation for his/her services, or any reimbursement of expenses
incurred, as a Representative on the Executive Committee.
8.8 Officers.
(a) Generally. The Company shall have agents, referred to as "Officers"
of the Company. These agents (whose authority is limited pursuant to
the following sentence) shall be appointed in the manner specified
below, shall have the titles and authority specified in this Section
8.8 and shall not be considered "managers" for purposes of the Act or
the Code. Each Officer shall have only the authority specified below,
and shall not be a general agent of the Company.
(b) Titles and Number. The Officers shall be the Chairman, Vice
Chairman, President, the Secretary and the Treasurer. There shall be
appointed from time to time, in accordance with subsection (c) below,
such Vice Presidents, Assistant Secretaries, and Assistant Treasurers
as the Executive Committee may desire. Any person may hold two or more
offices, except that the offices of President and Secretary may not be
held by the same person.
(c) Election and Term of Office. The Officers shall be elected by the
Executive Committee at the annual meeting by Supermajority Vote in
accordance with Section 8.1(c)(8) above; provided that the following
Officers are hereby installed and authorized to act until the first
such annual meeting of the Executive Committee: Miles Allen
(President), Stephen Bergstrom (Chairman), and Thomas Nardi (Vice
Chairman). Each Officer shall hold office until the annual meeting
following the date of election of such Officer. Any Officer may be
removed by the Executive Committee by Supermajority Vote with or
without cause. Vacancies in any office shall be filled by the Executive
Committee by Supermajority Vote.
(d) Chairman and Vice Chairman of the Executive Committee. Until
replaced pursuant to the terms of this Company Agreement, Stephen
Bergstrom will be the Chairman, and Thomas Nardi will be the Vice
Chairman of the Company. The Chairman, and in the absence of the
Chairman, the Vice Chairman, shall preside at meetings of the Executive
Committee, and shall exercise such powers and perform such duties as
may be assigned to him/her by this Company Agreement or the Executive
Committee.
(e) President. The President, subject to the general control of the
Executive Committee, shall be responsible for the day-to-day operation
and direction of the affairs of the Company, employees and agents,
shall supervise generally the affairs of the Company, and, subject to
the limitations imposed by this Company Agreement, any employment
agreement, any employee plan, or any resolution of the Executive
Committee, shall have full authority to execute all documents and to
take all actions that the Company may legally take. The President shall
attend all meetings of the Executive Committee (but shall not be
entitled to vote on matters before the Executive Committee) and
exercise such other powers and perform such other duties as may be
assigned to him/her by this Company Agreement or the Executive
Committee, including such duties and powers stated in any employment
agreement.
(f) Vice Presidents. In the absence of the President, the Vice
Presidents designated by the Executive Committee shall, except as
hereinafter provided, have all of the powers and duties conferred upon
the President. Each of the Vice Presidents shall, subject to the
limitations imposed by this Company Agreement, any employment
agreement, any employee plan, or any resolution of the Executive
Committee, have the same power as the President to sign certificates,
contracts and other instruments of the Company. Any Vice President
shall perform such other duties and may exercise such other powers as
may from time to time be assigned to him by this Company Agreement, the
Executive Committee, the Chairman, the Vice Chairman or the President.
(g) Secretary and Assistant Secretaries. The Secretary shall attend and
record or cause to be recorded in books provided for that purpose the
minutes of the meetings or actions of the Members and the meetings or
actions of the Executive Committee or any subcommittees thereof, shall
see that all notices are duly given in accordance with the provisions
of this Company Agreement and as required by law, shall be custodian of
all records (other than financial), shall see that the books, reports,
statements, certificates and all other documents and records required
by law are properly kept and filed, and, in general, shall perform all
duties incident to the office of Secretary and such other duties as
may, from time to time, be assigned to him/her by the Executive
Committee, the Chairman, or the Vice Chairman. The Assistant
Secretaries shall exercise the powers of the Secretary during that
Officer's absence or inability or refusal to act.
(h) Treasurer and Assistant Treasurers. The Treasurer shall keep or
cause to be kept the books of account of the Company and shall render
statements of the financial affairs of the Company in such form and as
often as required by this Company Agreement, the Executive Committee,
the Chairman, or the Vice Chairman. The Treasurer, subject to the order
of the Executive Committee, shall have the custody of all funds and
securities of the Company. The Treasurer shall perform all other duties
commonly incident to his/her office and shall perform such other duties
and have such other powers as the Executive Committee, the Chairman, or
the Vice Chairman shall designate from time to time. The Assistant
Treasurers shall exercise the power of the Treasurer during that
Officer's absence or inability or refusal to act.
(i) Powers of Attorney. The Executive Committee may grant powers of
attorney or other authority as appropriate to establish and evidence
the authority of the Officers.
(j) Borrowed Employees. Subject to Section 8.1(c)(8) above, the Company
may borrow a Member's employees, or a Member's Affiliate's employees,
with that Member or Affiliate's consent, from time to time on a
temporary basis for purposes associated with the Company's business.
Expenses, salaries and benefits associated with such borrowed employees
shall be treated as expenses, salaries and benefits incurred by the
Company, subject to the review and approval of the Executive Committee.
The lending Member shall furnish all Representatives on the Executive
Committee with a monthly statement of such expenses, salaries and
benefits supported by invoices or other supporting documents, and shall
maintain adequate records in accordance with generally accepted
accounting principles supporting the allocation of expenses, salaries
and benefits between the Company and the lending Member.
(k) Seconded Employees. A Member shall have the right to request that
the Company accept placement of a Member's employee, or an Affiliate's
employee, as a seconded employee. The Company, through a Supermajority
Vote of the Executive Committee, may accept such request on written
terms and conditions acceptable to the Executive Committee. A seconded
employee will not be an employee of the Company and one hundred percent
(100%) of the expenses, salary and benefits associated with a seconded
employee shall be borne by the Member or Affiliate placing a seconded
employee with the Company.
8.9 Expenses. The Company shall pay only those expenses incurred by the
Officers and employees that are directly attributable to the Company's business.
ARTICLE IX
Contributions and Capital Accounts
9.1 Capital Contributions.
(a) In consideration for its respective Company Interest, each Charter
Member has made, or immediately shall make, the Initial Capital Contribution to
the Company. As such Initial Capital Contributions, HSI will contribute 100% of
HSI's assets, all such assets being listed on Exhibit D, for a 99% Company
Interest, and NHS will contribute a promissory note (the "NHS Note") in the
principal amount of $[XXXXXX] for a 1% Company Interest. The initial Capital
Account position of each Charter Member, after giving effect to such Capital
Contributions, is set forth on Exhibit D. [CONFIDENTIAL TREATMENT OF BRACKETED
MATERIAL REQUESTED PURSUANT TO RULE 104(B)]
(b) In addition to the Initial Capital Contributions, the Members agree to
make subsequent Capital Contributions in cash for the purpose of developing and
operating the Electronic Trading System during the year (365 days) following
execution of this Company Agreement. The Company expects that the system will be
developed by the Company and EEI pursuant to a jointly owned entity yet to be
created. The Members' Capital Contributions pursuant to this Section will in
turn be used by the Company to make a loan by the Company to the Company/EEI
entity on terms and conditions acceptable to the Executive Committee by a
Supermajority Vote. The additional Capital Contributions pursuant to this
Section will consist of an initial cash contribution in the aggregate amount of
$[XXXXXXX] to be paid by the Members in accordance with their respective
Allocable Shares at the time of such contribution. With respect to NHS's
contribution of its Allocable Share of such contribution ("NHS's EEI
Contribution"), $[XXXXXX] ( or such other amount as shall be the principal
amount of the NHS Note) of NHS's Contribution shall be applied to prepay in full
the NHS Note, and the Capital Account of NHS shall reflect NHS's EEI
contribution in full without giving effect to application of a portion thereof
to such prepayment (i.e. such Capital Account shall be increased by the amount
of the NHS Note in full and NHS's EEI Contribution in full). Such contributions
shall be made to the Company no later than ten (10) days following execution of
the agreement creating the venture between the Company and EEI. The Members
hereby commit to make additional cash Capital Contributions in one or more
installments during the first year (365 days) following execution of this
Company Agreement for purposes of the development and operation of the
Electronic Trading System in an amount not to exceed $[XXXXXXX] in aggregate, to
be paid by the Members in accordance with their respective Allocable Shares at
the time of such contribution. The timing and amount of such installments shall
be determined by the Executive Committee by Supermajority Vote. Capital
contributions for purposes of the development and operation of the Electronic
Trading System in excess of the amounts designated above during the first year
following execution of this Company Agreement and thereafter shall be subject to
Supermajority Vote. [CONFIDENTIAL TREATMENT OF BRACKETED MATERIAL REQUESTED
PURSUANT TO RULE 104(B)]
(c) In addition to the amounts set forth above, each Member shall in each
Fiscal Year contribute, as a Capital Contribution, its Allocable Share to the
Operating Fund in accordance with Section 6.2, as provided by Supermajority Vote
of the Executive Committee.
(d) Each Additional Member shall make the Initial Capital Contribution
described in such Additional Member's Admission Agreement ("Admission
Agreement"). The amount of the Additional Member's Initial Capital
Contributions, the time for making such contributions, and any changes in the
other Members' Capital Accounts and Allocable Shares that result, shall be set
forth in such Additional Member's Admission Agreement.
(e) Notwithstanding Section 6.2, this Section 9.1 or Section 9.2 or any
other provision of this Company Agreement, (i) Capital Contributions shall not
exceed an amount of $[XXXXXXXXXX] in the aggregate for all Members during the
initial five (5) year term of the Company, and any extension of such term,
unless the Executive Committee decides otherwise by Unanimous Vote, and (ii) the
Capital Contributions of any Member shall not exceed the limit set forth next to
the name of such Member on Exhibit D hereto during the initial five (5) year
term of the Company, and any extension of such term, unless such Member has so
agreed. [CONFIDENTIAL TREATMENT OF BRACKETED MATERIAL REQUESTED PURSUANT TO RULE
104(B)]
9.2 Additional Capital Contributions. As and when the Executive Committee
determines by Supermajority Vote or Unanimous Vote, as may be required by
Section 8.1, that the Company needs cash from time to time, each Member agrees
that it shall make (a) Capital Contributions to the Company in an amount in
accordance with its respective Allocable Share for the purposes determined by
the vote of the Executive Committee authorizing such Capital Contributions in
accordance with Section 8.1 and (b) Capital Contributions to the Operating Fund
in accordance with Section 6.2 hereof.
9.3 Failure to Contribute. If a Member (a "Delinquent Member") does not
contribute, within 10 days of the date required, all or any portion of a Capital
Contribution that Member is required to make as provided in this Company
Agreement:
(i) the remaining Members in proportion to their Allocable Shares or in
such other percentages as they may agree may make the Capital Contribution
that the Delinquent Member failed to make and the Allocable Shares of the
Members, including the Delinquent Member, shall be adjusted to reflect the
Delinquent Member's failure to make the Capital Contribution and the
resulting increase in the Capital Accounts of the remaining Members and
appropriate adjustments in the Members' Company Interests; and/or
(ii) the remaining Members in proportion to their Allocable Share or in
such other percentages as they may agree (the "Lending Member," whether one
or more), may advance the portion of the Delinquent Member's Capital
Contribution that is in default, with the following results:
(A) the sum advanced constitutes a loan (a
"Member Loan") from the Lending Member to the Company,
(B) the principal balance of the loan and all accrued unpaid
interest thereon will be due and payable in accordance with terms and
conditions agreed between the Member(s) advancing the Member Loan and
the Executive Committee (excluding, for these purposes, the
Representative of the Delinquent Member), and
(C) the principal amount of the Member Loan will bear interest at
the Member Loan Rate from the day that the Member Loan is made until
the date that the Member Loan, together with all interest accrued on
it, is repaid to the Lending Member; or
(iii) the remaining Members may rescind the request for a Capital
Contribution and forego the expense forming the basis of the Capital
Contribution.
(iv) in the event the remaining Members decide not to take any one or
more of the actions described in Sections 9.3(a)(i) through (iii) above, the
remaining Members may take such action (including court proceedings and the
exercise of any rights and remedies available at law or in equity) as the
remaining Members by Unanimous Vote of their Representatives to the
Executive Committee may deem appropriate to obtain payment by the Delinquent
Member of the portion of the Delinquent Member's Capital Contribution that
is in default, together with interest thereon at the Member Loan Rate from
the date that the Capital Contribution was due until the date that it is
made, all at the cost and expense of the Delinquent Member. In no event
shall the remaining Members be entitled to recover punitive, exemplary or
special damages from a Delinquent Member in any action or Proceeding
undertaken by the Remaining Members pursuant to this Section 9.3(iv).
9.4 Maintenance of Capital Accounts. The Company, acting through the
Executive Committee, shall establish and maintain Capital Account for each
Member. The Capital Account of each Member shall equal: (i) the initial Capital
Account of each Member, as set forth on Exhibit E (both before and after giving
effect to the initial HSI Dispositions described in Section 12.3; (ii) increased
by the aggregate Capital Contributions of such Member (other than Capital
Contributions reflected in the initial Capital Account in accordance with clause
(i) above and subject in the case of NHS to the fifth sentence of Section
9.1(b)); (iii) increased by the Net Profit of the Company previously allocated
to such Member under Section 10.1, (iv) decreased by the Net Losses, if any, of
the Company previously allocated to such Member under Section 10.1; and (v)
decreased by the amount of any cash and the value of any property distributed to
such Member on or before such time (net of any liabilities assumed by the Member
in conjunction with such distribution or to which the distributed property is
subject). Upon a distribution of property other than cash to any Member, the
value of such property shall be restated on the books of the Company at its fair
market value immediately prior to such distribution and the Capital Account of
each Member shall be restated to reflect such adjustment, determined as if the
Company had sold such asset for its fair market value and the resulting gain or
loss had been charged or credited to the Members' Capital Accounts as provided
in this Company Agreement. Following such adjustment to the Member's books, the
Capital Accounts of the Members receiving the distributions shall be adjusted to
reflect the amount of the distribution.
9.5 Withdrawal of Capital. Except as otherwise provided herein, no Member
shall be entitled to withdraw all or any portion of its Capital Contribution or
receive interest on its contributed capital or Capital Account.
9.6 Capital Account, Allocations, and Distributions Attributable to
Transferred Interest. At the close of business on any day that any interest in
the Company has been transferred or purchased, the transferee Member shall
succeed to the Capital Account of the transferor Member, and the Company's books
shall be closed so that Net Profits, Net Losses, credits and distributions can
be attributed to the Members based on their interests in the Company when items
were actually received, paid or incurred.
9.7 Compliance with Section 704(b) of the Code. The provisions of this
Article as they relate to the maintenance of Capital Accounts are intended, and
shall be construed, and, if necessary, modified, to cause the allocations of
profits, losses, income, gain and credit pursuant to Article XI to have
substantial economic effect under the Regulations promulgated under Section
704(b) of the Code, in light of the distributions made pursuant to this Company
Agreement. Notwithstanding anything herein to the contrary, this Company
Agreement shall not be construed as creating a deficit restoration obligation
or, except as otherwise specifically agreed herein, otherwise personally
obligating any Member to make a Capital Contribution in excess of the Initial
Capital Contribution.
ARTICLE X
Allocations and Distributions
10.1 Allocations of Net Profits and Net Losses. As of the end of each Fiscal
Year (or any other, shorter period selected by the Executive Committee), the Net
Profit or Net Loss of the Company shall be determined in accordance with
generally accepted accounting principles, as provided in Section 4.2. The Net
Profit or Net Loss of the Company for any period shall be allocated directly to
each Member in accordance with such Member's respective Allocable Share.
10.2 Allocations of Taxable Income or Taxable Loss. Except as otherwise
provided herein, for federal, state, and local income tax purposes, the taxable
income or taxable loss (and each item of income, gain, loss, deduction, or
credit) of the Company for any period shall be allocated among the Members in
proportion to the Members' respective Allocable Shares and shall otherwise be
kept in accordance with applicable United States treasury regulations
promulgated under Section 704(b) of the Code.
10.3 Tax Allocations: Section 704(c). If any Company asset has a book value
different than its adjusted tax basis to the Company for federal income tax
purposes (whether by reason of the contribution of such property to the Company,
the revaluation of such property hereunder or otherwise), allocations of income,
gain, loss, deduction, credit and tax preference under this Section 10 with
respect to such asset shall take account of any variation between the adjusted
tax basis of such asset for federal income tax purposes and its book value in
the manner prescribed by Section 704(c) of the Code or the principles set forth
in Section 1.704-1(b)(2)(iv)(g) of the treasury regulations, as the case may be,
using the remedial allocation method.
10.4 Distributions. Subject to the provisions of Article XIII, the Company
will make distributions of cash or cash equivalents or property to the Members
in such aggregate amounts and at such time or times as the Executive Committee
may determine, by Supermajority Vote. Except as otherwise provided in Section
13.3, all distributions shall be made to the Members in proportion to their
respective Allocable Shares.
ARTICLE XI
Taxes
11.1 Tax Elections. The Tax Matters Member shall, upon the filing of the
Company's first federal tax return, cause the Company to file an election under
Section 754 of the Code and the treasury regulations thereunder to adjust the
basis of the Company assets under Section 734(b) or 743(b) of the Code, and
shall cause the Company to file a corresponding election under the applicable
sections of state and local law.
11.2 Tax Returns. The Executive Committee shall cause federal, state and
local tax returns for the Company to be prepared and filed with the appropriate
authorities in a timely manner. In compliance with applicable regulations, the
Company shall cause to be delivered to each Person who was a Member at any time
during such Fiscal Year all information concerning the Company necessary for the
preparation of such Person's tax returns, including a statement showing such
Person's share of taxable gain or taxable loss (or items thereof) for such year
for federal, state and local tax purposes.
11.3 Tax Matters Member. HSI is hereby appointed the "Tax Matters Member" of
the Company for all purposes pursuant to Sections 6221 and 6231 of the Code. The
Tax Matters Member shall (i) furnish to each Member a copy of each notice or
other communication received from the Internal Revenue Service or applicable
state authority (except such notices or communications as are sent directly to
each such Member), (ii) keep each Member informed of any administrative or
judicial Proceeding, as required by Section 6223(g) of the Code, (iii) allow
each Member an opportunity to participate in all administrative and judicial
Proceedings involving the tax matters of the Company, and (iv) advise and
consult with each Member as to proposed adjustments to the federal or state
income tax returns of the Company. The Company shall not be obligated to pay any
fees or other compensation to the Tax Matters Member in its capacity as such,
provided that the Company shall reimburse the Tax Matters Member for any and all
out-of-pocket costs and expenses (including reasonable attorneys' and other
professional fees) incurred by it in its capacity as Tax Matters Member. The
Company shall indemnify, defend and hold the Tax Matters Member harmless from
and against any loss, liability, damage, cost or expense (including reasonable
attorneys' fees) sustained or incurred as a result of any act or decision
concerning Company tax matters and within the scope of such Member's
responsibility as Tax Matters Member, so long as such act or decision was not
done fraudulently or in bad faith or as a result of willful and wanton
misconduct or gross negligence or, with respect to any criminal Proceeding
against the Tax Matters Member, such Member had no reasonable cause to believe
its conduct was unlawful. The Tax Matters Member shall consult with each other
Member concerning the cost of legal services. The Tax Matters Member may resign
upon thirty (30) days written notice to the Company. Notwithstanding the
foregoing, the Tax Matters Member is not authorized to take any action with
regard to the foregoing matters which would be binding on either the Company or
the Member without a Supermajority Vote of the Executive Committee.
ARTICLE XII
Disposition of Company Interests
12.1 Right of Disposition. Each Member agrees not to Dispose of its Company
Interest, in whole or in part, or to withdraw from the Company, except as
provided in this Article. In connection with any Disposition, each Member party
to such Disposition (including any Additional Member admitted as a Member as a
result of such Disposition) shall provide to the Company the information
required to revise Exhibits B and D only as to such Members, and Exhibit E shall
be so revised and distributed.
12.2 Dispositions not in Compliance with this Article Void. Any attempted
Disposition of a Company Interest, or any part thereof, not in compliance with
this Article is null and void ab initio.
12.3 Initial HSI Disposition. Following execution of the Company Agreement,
HSI expects to Dispose of portions of its initial Company Interest to the
following Persons in the following amounts: NHS [XXXXXXXXXXXXXXXXXXXX]%) of one
hundred percent (100%) of all Company Interests; PE [XXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXX]%) of one hundred percent (100%) of all Company Interests; and LHI
fourteen and a half percent (14.5%) of one hundred percent (100%) of all Company
Interests, subject to LHI's obtaining the prior approval of the Securities and
Exchange Commission. HSI and NHS hereby agree that they, through their
Representatives to the Executive Committee, will approve HSI's sale of the
foregoing percentages of its Company Interest to NHS, PE and LHI.
Notwithstanding anything in this Article XII to the contrary, HSI's Disposition
of portions of its initial Company Interest to NHS, PE and LHI in the
percentages stated above shall not be subject to the rights to match of Section
12.5 below, and HSI shall not be under any obligation to reveal the purchase
price and other consideration associated with such Dispositions to the Company
or the Members. Following such Disposition or Dispositions, PE and LHI shall be
Additional Members for all purposes under this Company Agreement and shall be
liable for any unpaid portion of any Capital Contribution provided for herein
for which HSI was liable prior to such Disposition, in an amount based on, and
not greater than, the Allocable Share of PE or LHI, as applicable, after giving
effect to such Disposition.
[CONFIDENTIAL TREATMENT OF BRACKETED MATERIAL REQUESTED PURSUANT TO RULE 104(B)]
12.4 Disposition Between Members. Any Member may Dispose of all or any part
of its Company Interest to the other Member(s), on a per capita basis among
those Members wishing to obtain such Company Interest, upon such terms as may be
agreed between or among them. In the case of a Disposition of all of the Company
Interest of a Member, the other Members may unanimously vote to designate a
third party or parties to purchase all or part of such Company Interest and
continue the business of the Company without dissolution.
12.5 Third Party Disposition Procedures. A Member (the "Selling Member") may
sell all or any part of its Company Interest to any third party purchaser
permitted to be a member of a limited liability company under the Act, for cash
or other consideration, provided that (i) the Selling Member allows the
remaining Members to match the offer, and (ii) each Member, in the sole and
absolute discretion of such Member, approves the sale of such Company Interest
to such third party purchaser and such third party purchaser becoming an
Additional Member. No such third party purchaser may become an Additional Member
without execution of an Admission Agreement. To satisfy clause (i) above, the
Selling Member shall present a written offer to the remaining Members, through
the Executive Committee, stating the name of the proposed purchaser and all the
terms and conditions of the proposed offer, including sales price. Each of the
remaining Members shall have the right for a period of thirty (30) days from
receipt of such written offer to elect to accept such written offer on the same
terms and conditions applicable to such proposed purchaser. In the event that
more than one of the remaining Members accepts such offer to purchase such
Company Interest from the Selling Member, the remaining Members who wish to
purchase such Company Interest may do so on a per capita basis, and the Members'
Capital Accounts (and Allocable Shares) will be ratably adjusted. In the event
none of the remaining Members elect to purchase the Company Interest from the
Selling Member, one or more of the remaining Members does not approve the sale
of such Company Interest to the third party purchaser (the "Original
Purchaser"), and the Selling Member elects to continue its attempt to sell such
Company Interest, the following procedure shall apply:
(a) The Selling Member may present a written offer from a different
third party purchaser (the "Replacement Purchaser") to the remaining
Members in accordance with this Section 12.5, provided that the
Replacement Purchaser offer must be presented to the remaining Members
on or before 5:00 p.m. Central Time on the fifth business day following
the Selling Member's receipt of notice that the sale of its Company
Interest to the Original Purchaser was not approved.
(b) In the event the Selling Member does not present a written offer
from a Replacement Purchaser, or a sale of the Selling Member's Company
Interest to the Replacement Purchaser is not approved, and the Selling
Member elects to continue its attempt to sell its Company Interest, the
Selling Member and the remaining Members will engage a third party
accounting firm, investment banking firm, appraisal firm or other
valuation expert ("Third Party Appraiser") to determine the fair market
value of the Selling Member's Company Interest. If the Selling Member
and the remaining Members are unable to agree on the Third Party
Appraiser, the Selling Member shall designate a third party accounting
firm, investment banking firm, appraisal firm or other valuation expert
and the remaining Members shall designate a different such third party
and such two third parties shall select the Third Party Appraiser.
(c) The Third Party Appraiser shall, to the extent commercially
practicable, determine the fair market value of the Selling Member's
Company Interest (the "Appraised Value") by the date no more than 30
days after engagement of the Third Party Appraiser, and the Appraised
Value shall take into consideration all valuation factors that the
Third Party Appraiser considers relevant in the circumstances,
including any possible loss of value in such Company Interest that may
occur due to cessation of the Selling Member's participation as a
Member in the Company or possible cessation of participation of any
Affiliate of the Selling Member as a party to any Hub Agreement.
(d) Each of the remaining Members shall purchase the Selling Member's
Company Interest, in a percentage based on such remaining Member's
Allocable Share, for a purchase price equal to such remaining Member's
pro rata share of the lesser of (i) the fair market value determined by
the Third Party Appraiser or (ii) the lowest third party written offer
presented to the remaining Members by the Selling Member. Nothing in
this subsection shall be construed to prevent the remaining Members
from electing to purchase the Company Interest on a basis other than
their Allocable Shares.
(e) The Selling Member shall bear all fees and expenses associated with
each Third Party Appraiser or other valuation expert engaged.
(f) A Selling Member that (i) elects to sell its Company Interest
pursuant to this Section 12.5 and presents a third party offer, and
(ii) subsequently elects to attempt to discontinue its attempt to sell
its Company Interest, shall not be entitled to attempt to sell its
Company Interest again pursuant to this Section 12.5 during a period
beginning on the day it elects to discontinue its attempt to sell its
Company Interest and ending on the 180th day following such election.
12.6 Withdrawal from Company. Upon a transfer of a Member's entire Company
Interest, such Member (the "Withdrawing Member") shall be deemed to have
withdrawn as a Member and shall have no further rights or obligations as a
Member hereunder (including, without limitation, obligations under Section 7.1),
except those obligations set forth under Section 15.9. Nothing in this Section
12.6 shall alter a Member's obligations set forth in Section 6.1 or shall affect
a Member's rights under Section 12.7.
12.7 Involuntary Regulatory Withdrawal. A Member may withdraw from the
Company in the event (a) a federal or state governmental body, including,
without limitation, a legislative, regulatory or judicial body, by order,
decree, statute, or judgment (i) determines that such Member's continued
ownership of its Company Interest is contrary to statute, regulation or other
law; or (ii) imposes any condition on such Member or an Affiliate of such Member
that has a material adverse impact on the Member or its Affiliate which arises
from such Member's continued participation in the Company as a Member, such
Member's or Affiliate's participation as a party to an agreement with the
Company, or otherwise in connection with the Company. In such an event the
Withdrawing Member may sell its Company Interest to the other Members, on a per
capita basis among those Members wishing to obtain such Company Interest, upon
such terms as may be agreed between or among them. In the event (i) the
Withdrawing Member and the remaining Members are unable to agree on terms with
respect to the sale of the Withdrawing Member's Company Interest, and (ii) the
Withdrawing Member does not present a third party written offer pursuant to
Section 12.5 (thereby invoking the procedures set forth in Section 12.5), the
procedure applicable to engagement of a Third Party Appraiser and the purchase
of the Company Interest by the remaining Members established in Section 12.5(b),
(c), (d) and (e) shall apply, except that the remaining Members shall purchase
the Withdrawing Member's Company Interest at eighty-five percent (85%) of the
Appraised Value.
ARTICLE XIII
Dissolution and Winding Up
13.1 Dissolution. The Company shall be dissolved and its affairs wound up
upon the first to occur of the following events ("Dissolution Event"):
(a) the expiration of the term described in Section 2.6;
(b) the unanimous written consent of all of the Members;
(c) an event which makes it unlawful for the Company business to be
continued;
(d) the sale or disposition of all or substantially all of the
Company's assets and properties;
(e) the entry of a decree of judicial dissolution under Section
18-802 of the Act; and
<PAGE>
(f) the withdrawal, Bankruptcy or dissolution of any Member, including
the occurrence of any event that terminates the continued membership of
any Member in the Company under the Act, unless the business of the
Company is continued by Unanimous Vote of the Members (calculated
without regard to any Member that has withdrawn, become Bankrupt or
been dissolved) within ninety (90) days following the occurrence of any
such event.
13.2 Effect of Dissolution. Upon dissolution, the Company shall cease
carrying on as distinguished from winding up the Company business; however, the
Company is not terminated, but continues until the winding up of the affairs of
the Company is completed and the certificate of cancellation has been issued by
the Secretary of the State of Delaware. The Liquidating Trustee shall in an
orderly manner wind up the affairs of the Company and make an accounting of the
Capital Account of each Member and of the Company assets, liabilities and
operations from the date of the last previous accounting to the date of such
dissolution.
13.3 Distribution of Assets on Dissolution. Upon the
winding up of the Company, the Company Property shall be
distributed:
(a) to creditors, including Members who are creditors (other than by
reason of the operation and effect of Section 18-601 or Section 18-604
of the Act) to the extent otherwise permitted by law, whether as a
result of any Member Loan or otherwise, in satisfaction of the
Company's liabilities, including, without limitation, principal and
interest attributable to any Member Loan; and then
(b) to the establishment of any reserves which the Liquidating Trustee
may deem reasonably necessary for any contingent or unforeseen
liabilities or obligations of the Company arising out of or in
connection with the Company. Such reserves may be paid over by the
Liquidating Trustee to an agent, as escrowee, to be held by him for the
purpose of disbursing such reserves in payment of any of the
aforementioned contingencies, and, at the expiration of such period as
the Liquidating Trustee shall deem advisable, for distributing the
balance thereafter remaining in the manner hereinafter provided; and
then
(c) to Members in satisfaction of liabilities for
distributions under Section 18-601 or Section 18-604 of the
Act; and then
(d) thereafter, to Members to the extent of and in
proportion with their respective positive Capital
Account; and then
(e) the remainder, if any, to the Members in proportion to their
respective Allocable Shares as in effect at the moment of the event
giving rise to such dissolution.
13.4 Winding Up and Certificate of Cancellation. The winding up of the
Company shall be completed when all debts, liabilities, and obligations of the
Company have been paid and discharged or reasonably adequate provision therefor
has been made, and all of the remaining property and assets of the Company have
been distributed to the Members. Upon the completion of winding up of the
Company, a certificate of cancellation shall be delivered to the Secretary of
the State of Delaware for filing. The certificate of cancellation shall set
forth the information required by the Act.
13.5 Termination. A reasonable time shall be allowed for the orderly
liquidation of the assets of the Company and the discharge of liabilities to
creditors so as to enable the Executive Committee (or other Person winding up
the Company's affairs) to minimize the normal losses attendant upon a
liquidation. Each of the Members shall be furnished, by the Executive Committee,
with a statement setting forth the assets and liabilities of the Company as of
the date of complete liquidation. Upon compliance with the distribution plan set
forth in Section 13.3 hereof (including payment over to the agent-escrowee if
there are sufficient funds therefor), the Company terminates.
13.6 Use of Company Identity. Unless the Members agree otherwise in a signed
written agreement approved by Unanimous Vote of the Executive Committee, no
Member or Affiliate shall use the Company's telephone number, address, name (or
any deceptively similar name) or logo for twelve (12) months after the
termination of the Company.
ARTICLE XIV
Amendment
This Company Agreement may be amended or modified from time to time only by
a written instrument (including, without limitation, any Admission Agreement)
adopted by the Unanimous Vote of the Executive Committee. No Member shall have
any vested rights in this Company Agreement which may not be modified through an
amendment to this Company Agreement.
ARTICLE XV
Miscellaneous Provisions
15.1 Entire Agreement. This Company Agreement represents
the entire agreement with respect to the subject matter hereof
among all the Members and between the Members and the Company.
15.2 Successors and Assigns. Subject to the provisions on Disposition set
forth herein, this Company Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
15.3 Governing Law. THIS COMPANY AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE.
15.4 Notices. All notices required or permitted to be given or made under
this Company Agreement shall be given or made in writing. Such notices shall be
delivered by hand delivery, by facsimile or similar electronic means, by
nationally recognized overnight courier, or by certified or registered mail,
return receipt requested, addressed as set forth in Exhibit B hereof or any
amendment thereto. Any party may change its address for the purpose of this
Section 15.4 by notice to the other(s) given in the manner set forth above.
15.5 Rights of Creditors and Third Parties under Company Agreement. This
Company Agreement is entered into among the Company and the Members for the
exclusive benefit of the Company, its Members, and their successors and
permitted assignees. This Company Agreement is expressly not intended for the
benefit of any creditor of the Company or any other Person (other than any
Person with a right to indemnification under Section 6.9 hereof). Except and
only to the extent provided by applicable statute, no such creditor or third
party shall have any rights under this Company Agreement or any agreement
between the Company and any Member with respect to any Capital Contribution or
otherwise.
15.6 No Action for Partition. No Member shall have any right to maintain
any action for partition with respect to the property of the Company.
15.7 Title to Company Property. Title to Company Property shall be held in
the name of the Company or its nominee.
15.8 Company Funds. Company funds shall be deposited in one or more accounts
with a bank or banks located within the United States and approved by the
Executive Committee. Pending use in the business of the Company or distribution
to the Members, the funds of the Company may, in the discretion of the Executive
Committee, be deposited in a bank account or accounts, or invested in such
interest-bearing taxable or nontaxable investments, including without
limitation, checking and savings accounts, certificates of deposit and time or
demand deposits in commercial banks, U.S. government securities, securities
guaranteed by U.S. Government agencies, bankers' acceptances, Eurodollar
deposits and notes, both fixed rate and floating securities issued by money
market mutual funds, savings and loan association deposits, deposits in members
of the Federal Home Loan Bank System, or commercial paper, rated A-1 or better
by Standard & Poor's Corporation or Prime-1 or better by Moody's Commercial
Paper Division of Moody's Investor Services, Inc., or the successor to either of
them, provided that the Executive Committee shall not cause the Company to make
any such deposits or Investments that have a remaining maturity of more than one
year or that would require registration of the Company under the Investment
Company Act of 1940. Such funds shall not be commingled with funds of any other
Person.
15.9 Confidentiality. Except as hereinafter provided, the Company and each
Member (a) shall treat as confidential and not disclose to any unauthorized
third party (including a Member's employees or Affiliates who have no need to
know) any confidential information obtained either directly or indirectly from
any other Member pursuant to this Company Agreement and designated by such
Member as confidential in writing prior to or at the time of delivery pursuant
to this Agreement, or confidential information developed or acquired on behalf
of the Company by the Executive Committee or the Company's Officers or employees
(collectively "Confidential Information"), and (b) shall not use any such
Confidential Information for any purpose other than in connection with the
activities of the Company pursuant to this Company Agreement, or the activities
of a Member or an Affiliate pursuant to the Hub Agreements. The limitations in
this Section 15.9 shall not apply to the extent Confidential Information: (i)
was already in the possession of the receiving Member, or its Affiliate, at the
time it obtained such Confidential Information; (ii) was or is published or
otherwise is or becomes generally available to the public through no fault of
such receiving Member, or its Affiliate, (iii) was or is lawfully made available
to such Member or its Affiliate without restriction by any Person which is not
bound by an obligation of confidentiality or use with respect to the
information; (iv) was or is independently developed by such Member or its
Affiliate; or (v) is required to be disclosed by operation of law or regulation,
required in any Proceeding, requested by a regulatory body and the disclosing
Member deems it advisable, in its discretion, to comply with the request, or
deemed advisable to be disclosed in the good faith judgment of the disclosing
Member in any Proceeding. In the event disclosure is required or requested, the
disclosing Member shall exercise all reasonable efforts to disclose such
Confidential Information pursuant to a confidentiality agreement or protective
order. The Members and the Executive Committee shall establish and enforce
reasonable procedures for the protection of Confidential Information and shall
restrict disclosure of such Confidential Information to those of the Company's
employees, Officers, agents, and Affiliates of each Member and the Company who
need to know such Confidential Information in connection with their functions
and the purposes of the Company as set forth herein. Each Member and the
Executive Committee shall take such reasonable and prudent steps and
precautionary measures as may be required to ensure compliance with this Section
15.9 by such of their or the Company's employees, Officers, agents, Affiliates
and other Persons as shall be given access to such Confidential Information and
shall be responsible for compliance by its employees, officers, agents and
Affiliates. Nothing in this Section 15.9 shall be construed to prohibit a
Member's disclosure to its attorneys, auditors, or other consultants.
15.10 Transaction Costs. Each Member shall each bear and pay its own
transaction costs relating to the negotiation and execution of this Company
Agreement.
HUB SERVICES, INC.
By: /s/ Stephen Bergstrom
----------------------------------------------
Title: President
-------------------------------------------
NICOR HUB SERVICES, INC.
By: /s/ Thomas Nardi
----------------------------------------------
Title: Vice President
-------------------------------------------
EXHIBIT A
CERTIFICATE OF FORMATION
OF
ENERCHANGE, L.L.C.
This Certificate of Formation is being executed as of June 12, 1995, for
the purpose of forming a limited liability company pursuant to the Delaware
Limited Liability Company Act, 6 Del. C. Sections 18-101, et seq. (the "Act").
The undersigned, being duly authorized to execute and file this
Certificate, do hereby certify as follows:
1. Name. The name of the limited liability company is Enerchange, L.L.C.
(the "Company").
2. Registered Office and Registered Agent. The Company's registered office
in the State of Delaware is located at Corporation Trust Center, 1209 Orange
Street, Wilmington, Delaware, New Castle County, Delaware 19801. The registered
agent of the Company for service of process at such address is The Corporation
Trust Company, Inc.
3. Dissolution. The Company does not have a specific date of
dissolution.
4. Management. The business and affairs of the Company shall be
managed by or under the direction of the Members.
IN WITNESS WHEREOF, the undersigned, being all the Members of the Company,
have duly executed this Certificate of Formation as of the day and year first
above written.
HUB SERVICES, INC.
By:
----------------------------------------------
Title:
-------------------------------------------
NICOR HUB SERVICES, INC.
By:
----------------------------------------------
Title:
-------------------------------------------
EXHIBIT B
ADDRESSES FOR NOTICE
--------------------
HUB SERVICES, INC.
One O'Hare Centre
6250 Des Plaines River Road, Suite 5005
Rosemont, Illinois 60018
Attn: Miles Allen
Telephone: (708) 692-4770
Facsimile: (708) 692-4779
NICOR HUB SERVICES, INC.
1844 Ferry Road
Naperville, Illinois 60563-9600
Attn: Robert Gilpin
Daron Riebe
Telephone: (708) 983-8676
Facsimile: (708) 983-5537
PACIFIC ENERCHANGE
633 West Fifth Street
Los Angeles, California 90071
Attn: James Harrigan
Telephone: (213) 244-3840
Facsimile: (213) 244-8282
JCH\821
EXHIBIT C
NAMES AND ADDRESSES OF CHARTER MEMBERS
--------------------------------------
HUB SERVICES, INC.
One O'Hare Centre
6250 Des Plaines River Road, Suite 5005
Rosemont, Illinois 60018
Attn: Miles Allen
Telephone: (708) 692-4770
Facsimile: (708) 692-4779
NICOR HUB SERVICES, INC.
1844 Ferry Road
Naperville, Illinois 60563-9600
Attn: Robert Gilpin
Daron Riebe
Telephone: (708) 983-8676
Facsimile: (708) 983-5537
[XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
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XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX]
[CONFIDENTIAL TREATMENT OF BRACKETED MATERIAL REQUESTED PURSUANT
TO RULE 104(B)]
[XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
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[CONFIDENTIAL TREATMENT OF BRACKETED MATERIAL REQUESTED PURSUANT
TO RULE 104(B)]
EXHIBIT F
ENERCHANGE, L.L.C.
ADMISSION AGREEMENT
This Admission Agreement is entered into this ____ day of ____, 199_, by
and among Enerchange, L.L.C., a Delaware limited liability company ("the
Company") and ________________________.
WITNESSETH
WHEREAS, the Company was created pursuant to that certain Limited Liability
Company Agreement ("the Company Agreement") effective June 12, 1995, executed by
HSI and NHS; and
WHEREAS, the Company Agreement provides for the admission of Additional
Members and requires an Additional Member to execute an Admission Agreement;
NOW THEREFORE, in consideration of the mutual agreements, promises, and
undertakings hereinafter set forth, the Company and _______ agree as follows:
1. Capitalized words appearing in this Admission Agreement shall carry the
definitions set forth in the Company Agreement unless the text of this Admission
Agreement states otherwise.
2. Upon execution of this Admission Agreement, ______ shall become a Member
of the Company, shall be treated as a party to the Company Agreement for all
purposes and shall be credited with a Company Interest of fourteen _________
percent (__%) of one hundred percent (100%) of all Company Interests and an
initial Capital Account of $__________.
3. _____ hereby ratifies and adopts the entirety of the Company Agreement
and agrees to accept all benefits granted to Members of the Company and to
assume all obligations imposed on Members of the Company, including, without
limitation, the obligation to make all Capital Contributions required of Members
pursuant to Sections 9.1(b), 9.1(c) and 9.2 of the Company Agreement. The
Company and _____ hereby acknowledge that ____ is not required to make an
Initial Capital Contribution pursuant to Section 9.1(a) of the Company Agreement
[and that _____'s agreement to make all other Capital Contributions required by
the Company Agreement satisfies the requirement of Section 9.1(d) of the Company
Agreement.]
4. Exhibits B and E to the Company Agreement are hereby amended as to _____
[and the Member from which ____ acquired its Company Interest] and new Exhibits
B and E are hereby substituted to the Company Agreement, which Exhibits are
attached to this Admission Agreement, reflecting the admission of ____ as a
Member of the Company (i) owning a _____ percent Company Interest and the
reduction of the Capital Account of _____ as Seller to _____ percent (__%) and
(ii) having a Capital Account of $________ and the reduction of the Capital
Account of [seller] to $__________.
5. Except as set forth in this Admission Agreement, the original terms and
conditions of the Company Agreement shall remain in full force and effect.
ENERCHANGE, L.L.C.
By:
-----------------------------------------
Title:
--------------------------------------
By:
-----------------------------------------
Title:
--------------------------------------
By:
-----------------------------------------
Title:
--------------------------------------
JCH/ENERADM
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XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX]
[CONFIDENTIAL TREATMENT OF BRACKETED MATERIAL REQUESTED PURSUANT
TO RULE 104(B)]
<PAGE>
[XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
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XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX]
[CONFIDENTIAL TREATMENT OF BRACKETED MATERIAL REQUESTED PURSUANT
TO RULE 104(B)]
[CONFIDENTIAL TREATMENT OF BRACKETED MATERIAL REQUESTED PURSUANT TO RULE 104(B)]
ENERCHANGE, L.L.C.
ADMISSION AGREEMENT
This Admission Agreement is entered into this 23rd day of October 1995, by
and among Enerchange, L.L.C., a Delaware limited liability company ("the
Company") and Leidy Hub, Inc. ("LHI").
WITNESSETH
WHEREAS, the Company was created pursuant to that certain Limited Liability
Agreement ("the Company Agreement") effective June 12, 1995, executed by Hub
Services, Inc. ("HSI"), and Nicor Hub Services, Inc. ("NHS"); and
WHEREAS, the Company Agreement provides for the admission of Additional
Members and requires an Additional Member to execute an Admission Agreement;
NOW THEREFORE, in consideration of the mutual agreements, promises, and
undertakings hereinafter set forth, the Company and LHI agree as follows:
1. Capitalized words appearing in this Admission Agreement shall carry the
definitions set forth in the Company Agreement unless the text of this Admission
Agreement states otherwise.
2. Upon execution of this Admission Agreement, LHI shall become a Member of
the Company, shall be treated as a party to the Company Agreement for all
purposes and shall be credited with a Company Interest of 14.5 percent (14.5%)
of one hundred percent (100%) of all Company Interests and an initial Capital
Account of $[XXXXXXXXXX].
3. LHI hereby ratifies and adopts the entirety of the Company Agreement and
agrees to accept all benefits granted to Members of the Company and to assume
all obligations imposed on Members of the Company, including, without
limitation, the obligation to make all Capital Contributions required of Members
pursuant to Sections 9.1(b), 9.1(c) and 9.2 of the Company Agreement. The
Company and LHI hereby acknowledge that LHI is not required to make an Initial
Capital Contribution pursuant to Section 9.1(a) of the Company Agreement and
that LHI's agreement to make all other Capital Contributions required by the
Company Agreement satisfies the requirement of Section 9.1(d) of the Company
Agreement.
4. Exhibits B and E to the Company Agreement are hereby amended as to LHI
and HSI and new Exhibits B and E are hereby substituted to the Company
Agreement, which Exhibits are attached to this Admission Agreement, reflecting
the admission of LHI as a Member Company (i) owning a 14.5 percent Company
Interest and the reduction of the Company Interest of HSI as Seller to
[XXXXXXXXX XXXXXXX (XX]%) and (ii) having an initial Capital Account of
$[XXXXXXXXXX] and the reduction of the Capital Account of HSI to $[XXXXXXXXXX].
5. Except as set forth in this Admission Agreement, the original terms and
conditions of the Company Agreement shall remain in full force and effect.
ENERCHANGE, L.L.C.
By: /s/ Miles Allen
-------------------------------------
Title: President
----------------------------------
LEIDY HUB, INC.
By: /s/ Walter E. DeForest
-------------------------------------
Title: President
----------------------------------
EXHIBIT B
ADDRESSES FOR NOTICE
--------------------
HUB SERVICES, INC.
One O'Hare Centre
6250 Des Plaines River Road, Suite 5005
Rosemont, Illinois 60018
Attn: Miles Allen
Telephone: (708) 692-4770
Facsimile: (708) 692-4779
NICOR HUB SERVICES, INC.
1844 Ferry Road
Naperville, Illinois 60563-9600
Attn: Robert Gilpin
Daron Riebe
Telephone: (708) 983-8676
Facsimile: (708) 983-5537
PACIFIC ENERCHANGE
633 West Fifth Street
Los Angeles, California 90071
Attn: James Harrigan
Telephone: (213) 244-3840
Facsimile: (213) 244-8282
LEIDY HUB, INC.
10 Lafayette Square
Buffalo, New York 14230
Attn: Walter Deforest
Telephone: (716) 857-7881
Facsimile: (716) 857-7823
EXHIBIT E
COMPANY INTERESTS AND CAPITAL ACCOUNTS
--------------------------------------
Member Company Interest Capital Account
- - ------ ---------------- ---------------
Prior to giving effect to initial Disposition of HSI in accordance
- - ------------------------------------------------------------------
with Section 12.3
- - -----------------
Hub Services, Inc. [XXXXX XXXXXXXXXXXXX
NICOR Hub Services, Inc. XXXXX XXXXXXXXXXXXX
After giving effect to initial Disposition of HSI in accordance
- - ---------------------------------------------------------------
with Section 12.3
- - -----------------
Hub Services, Inc. XXXXX XXXXXXXXXXXX
NICOR Hub Services, Inc. XXXXX XXXXXXXXXXXX
Pacific Enerchange XXXXX XXXXXXXXXXXX
Leidy Hub, Inc. XXXXX XXXXXXXXXXXX]
[CONFIDENTIAL TREATMENT OF BRACKETED MATERIAL REQUESTED PURSUANT TO RULE 104(B)]
<PAGE>
[CONFIDENTIAL TREATMENT OF BRACKETED MATERIAL REQUESTED PURSUANT
TO RULE 104(B)]
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement"), dated as of October 23, 1995,
is made by and between Hub Services Inc., a Delaware corporation ("Seller"), and
Leidy Hub, Inc., a New York corporation ("Purchaser").
RECITALS
--------
1. On June 12, 1995, Seller and NICOR Hub Services Inc. ("NHS") formed
Enerchange, L.L.C. a Delaware limited liability company ("Company") for the
purpose of engaging in the Business, with Seller owning a 99.0% Limited
Liability Company Interest in the Company and NICOR Hub Services, Inc. ("NHS")
owning a 1.0% Limited Liability Company Interest in the Company. Subsequently,
Seller sold an additional [XX]% Limited Liability Company Interest to NHS and a
[XX]% Limited Liability Company Interest to Pacific Enerchange.
[CONFIDENTIAL TREATMENT OF BRACKETED MATERIAL REQUESTED PURSUANT
TO RULE 104(B)]
2. The Limited Liability Company Agreement provides that Seller may sell to
Purchaser a 14.5% Limited Liability Company Interest (the "Acquired Interest")
and sets forth a procedure for the approval of such sale, and Seller wishes to
sell to Purchaser, and Purchaser wishes to buy from Seller, the Acquired
Interest.
3. The Company's Executive Committee has approved Seller's sale of the
Acquired Interest to Purchaser.
In consideration of the mutual covenants, agreements and warranties herein
contained, it is agreed that Purchaser shall acquire from Seller all of the
Acquired Interest upon the terms and conditions hereinafter set forth.
ARTICLE I
DEFINITIONS
-----------
The following terms shall have the meanings set forth herein for the
purposes of this Agreement:
"Acquired Interest" is defined in the second recital.
"Act" means the Delaware Limited Liability Company Act, 6 Del. C. Sections
18101, et seq., and all amendments to the Act, as in effect from time to time.
"Affiliate" means, with respect to any Person, another Person that directly
or indirectly through one or more intermediaries controls or is controlled by or
is under common control with such Person.
"Business" means the business described in Section 3.1 of the Limited
Liability Company Agreement.
"Closing Date" means the date on which the Closing occurs or is to occur.
"Company" is defined in the first recital.
"Electronic Trading System" means the electronic gas trading and
nominations system that the Company expects to develop and operate on a joint
ownership basis with Energy Exchange Inc., a corporation incorporated pursuant
to the laws of the Province of Alberta.
"Governmental Authority" means the government of the United States or any
state or political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Hub Service Contract" means each of (a) that certain Chicago Hub Agreement
dated as of May 26, 1993, between Northern Illinois Gas Company and Seller, (b)
that certain California Hub Agreement dated as of March 15, 1994, between
Southern California Gas Company and Seller, and (c) that certain Pre-Partnership
Agreement dated as of September 1, 1993, and that certain Partnership Agreement
dated as of September 1, 1994, each between Purchaser and Seller.
"Hub Trading Purchase Price" means the sum of $[XXXXXXX] as adjusted
pursuant to Section 5.4 of the Pre-Purchase Agreement.
[CONFIDENTIAL TREATMENT OF BRACKETED MATERIAL REQUESTED PURSUANT
TO RULE 104(B)]
"Indemnified Person" shall mean the Person entitled to, or claiming a right
to, indemnification under Article VIII.
"Indemnifying Person" shall mean the Person claimed by the Indemnified
Person to be obligated to provide indemnification under Article VIII.
"Limited Liability Company Agreement" means that certain Limited Liability
Company Agreement dated as of June 12, 1995 between Seller and NHS.
"Limited Liability Company Interest" has the meaning given such term in the
Act.
"Losses" is defined in Section 8.2.
"Market Making Purchase Price" means $[XXXXXXX].
[CONFIDENTIAL TREATMENT OF BRACKETED MATERIAL REQUESTED PURSUANT
TO RULE 104(B)]
"Person" means an individual, trust, Governmental Authority, estate or any
incorporated or unincorporated company, corporation, limited liability company,
partnership or other organization.
"Pre-Purchase Agreement" means that certain Pre-Purchase Agreement dated
June 12, 1995, executed by Seller and Purchaser.
"Proceedings" is defined in Section 3.17.
"Purchaser" is defined in the preamble.
"Seller" is defined in the preamble.
"Taxes" means all taxes, charges, fees, duties, levies or other
assessments, including (without limitation) income, gross receipts, net
proceeds, ad valorem, turnover, real and personal property (tangible and
intangible), sales, use, franchise, excise, value added, stamp, leasing, lease,
user, transfer, fuel, excess profits, occupational, interest equalization,
windfall profits, severance and employees' income withholding, unemployment and
Social Security taxes, which are imposed by the United States, or any state,
local or foreign government or subdivision or agency thereof, and such term
shall include any interest, penalties or additions to tax attributable to such
Taxes.
ARTICLE II
PURCHASE AND SALE
-----------------
2.1 Purchase and Sale of The Acquired Interest. Subject to the terms and
conditions set forth in this Agreement, at the Closing, Seller shall sell,
assign, transfer, convey and deliver to Purchaser, and Purchaser shall accept,
acquire and take assignment and delivery of, all of the Acquired Interest.
2.2 Payment of Purchase Price. In consideration for such sale, assignment,
transfer, conveyance and delivery to Purchaser by Seller of all of the Acquired
Interest, on the Closing Date Purchaser will pay to Seller the Hub Trading
Purchase Price and the Market Making Purchase Price.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Seller represents and warrants to Purchaser as follows:
3.1 Ownership of Acquired Interest. Seller owns beneficially and legally
all right, title and interest in and to the Acquired Interest, free and clear of
any security interest, lien, adverse claim or other encumbrance. The Acquired
Interest in the aggregate constitutes 14.5% of the aggregate Limited Liability
Company Interests of the Company. None of the Acquired Interest is subject to
any restriction on transfer, other than as set forth in the Limited Liability
Company Agreement.
3.2 Due Organization. To the best of Seller's knowledge, the Company is a
limited liability company duly organized, validly existing and in good standing
under the laws of the State of Delaware with all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. To the best of Seller's knowledge, the Company is duly
qualified and in good standing as a foreign limited liability company to do
business in each jurisdiction where the failure to be so qualified would, in the
aggregate, have a material adverse effect on the business or operations of the
Company. Schedule 3.2 is a complete and accurate list of all jurisdictions in
which the Company is so qualified. The Company owns no equity or debt securities
of any Person, other than a 50.0% interest in the Pennsylvania general
partnership formed under the contracts described in clause (c) of the definition
of "Hub Services Contract." True, correct and complete copies of the Company's
Certificate of Formation and all other organizational documents of the Company
have been delivered to Purchaser.
3.3 Due Authorization. Seller has full power and authority to enter into
this Agreement and to carry out the transactions contemplated hereby, and this
Agreement has been duly and validly executed and delivered by Seller, and
constitutes the legal, valid and binding obligation of Seller, enforceable in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization or similar laws
from time to time in effect which affect creditors' rights generally, and by
legal and equitable limitations on the availability of specific remedies.
3.4 No conflict. The execution, delivery and performance of this Agreement
and all other instruments, agreements, certificates and documents contemplated
hereby by Seller do not: (i) violate any order, decree or judgment of any
Governmental Authority applicable to Seller, or the Acquired Interest or, to the
best of Seller's knowledge, the Company; (ii) violate any law (or regulation or
rule promulgated under any law); (iii) violate or conflict with, or result in a
breach of, or constitute a default (or an event which, with or without notice or
lapse of time or both, would constitute a default) under, or permit cancellation
of, or result in the creation of any lien or encumbrance or other contingent
liability upon any of the assets of the Company or the Acquired Interest under,
any of the terms, conditions, or provisions of any contract to which Seller or
the Company is a party, or by which either of them or any of the assets of the
Company or the Acquired Interest is bound; (iv) permit the acceleration of the
maturity of any indebtedness of the Company, or any indebtedness secured by any
of the assets of the Company or the Acquired Interest; or (v) violate or
conflict with any provision of the charter, by-laws or other organizational
documents of Seller or, to the best of Seller's knowledge, the Company.
3.5 Ownership of Interests. Prior to giving effect to Purchaser's
acquisition of the Acquired Interest pursuant to this Agreement, Seller owned a
[XXXX]% Limited Liability Company Interest in the Company. Neither Seller nor,
to the best of Seller's knowledge, the Company has granted any option, warrant,
or similar right to any Person to purchase or acquire any rights with respect to
any Limited Liability Company Interest, or any other interest whatsoever, of the
Company. [CONFIDENTIAL TREATMENT OF BRACKETED MATERIAL REQUESTED PURSUANT TO
RULE 104(B)]
3.6 Title to and Condition of Properties and the Company. The Company has
good title to and is the lawful owner of all of the assets of the Company, free
and clear of all security interests, liens, adverse claims and other
encumbrances. All of the assets of the Company as of June 12, 1995 are listed on
Schedule 3.6(a). Each of the Hub Services Contracts is in full force and effect
and constitutes a legal, valid and binding agreement of each party thereto. The
rights and obligations of Seller under each Hub Services Contract have been duly
and validly assigned to the Company by Seller. All of the liabilities of the
Company as of June 12, 1995 are listed on Schedule 3.6(b). As of June 12, 1995,
the Company has no liabilities, debts, claims or obligations, whether accrued,
absolute, contingent or otherwise, whether due or to become due, except as set
forth on Schedule 3.6(b).
3.7 No Defaults or Violations. Except as set forth on Schedule 3.7, (a) as
of June 12, 1995, the Company had not materially breached any provision of, nor
is it in material default under the terms of, any contract (including, without
limitation, any Hub Services Contract) to which it is a party or under which it
has any rights or by which it is bound, and to Seller's knowledge no other party
to any such contract is in default thereunder in any material respect, and (b)
the Company is not in material violation of or default under or with respect to
any law, governmental regulation or rule or order of any Governmental Authority
that is applicable in any way to the business or operation of the Company,
provided that, to the extent such representations and warranties in clauses (a)
and (b) above are made with respect to any breach, default or violation by the
Company that may have arisen from and after the Company's formation, such
representations and warranties are made to the best of Seller's knowledge. No
party to a Hub Services Contract has notified Seller, whether orally or in
writing, that Seller is in default under such Hub Services Contract, and Seller
is unaware of any default, actual or threatened, or any event which with or
without notice or lapse of time or both would become a default, under any Hub
Services Contract by any party to any such Hub Services Contract. Except as set
forth in Schedule 3.7, none of the assets of the Company is in material
violation of any law, building, zoning or other ordinance, code or regulation
applicable to it.
3.8 Taxes. Having been formed on June 12, 1995, the Company has not
previously filed any Federal, state and other tax returns and reports as of June
12, 1995; the Company has not been required to file any such returns; and the
Company has not been required to pay any Taxes on or prior to the Closing Date.
3.9 Condition of Assets. Except as disclosed on Schedule 3.9, all of the
assets of the Company, whether real or personal, owned or leased, are in
reasonably good operating condition (with the exception of normal wear and
tear).
3.10 Contracts. Schedule 3.10 includes all the contracts and arrangements
(including, without limitation, any employment contracts) to which, as of June
12, 1995, the Company is a party or by which it is bound or to which any of the
assets of the Company is subject. Seller has delivered to Purchaser true,
correct and complete copies of each document listed on Schedule 3.10, and a
written description of each oral arrangement so listed.
3.11 Permits, etc. The Company holds all of the licenses, certificates,
permits, franchises and rights listed on Schedule 3.11, and, to the best of
Seller's knowledge, does not require any other licenses, certificates, permits,
franchises and rights to conduct the Business and its other affairs.
3.12 Insurance Policies. Schedule 3.12 contains a list of each insurance
policy currently providing coverage for the assets or business of the Company
and a copy of each such policy has been delivered to Purchaser.
3.13 Employee Benefit Plans. Each "employee pension benefit plan," as such
term is defined in Section 3(2) of ERISA, and each "employee welfare benefit
plan," as defined in Section 3(1) of ERISA, that is maintained by the Company to
provide benefits for its employees is described on Schedule 3.13.
3.14 Compliance With Laws. Prior to the formation of the Company, Seller
conducted the Business in full compliance in all material respects with all
applicable laws and, to the best of Seller's knowledge, on and from the
formation of the Company, the Company has conducted the Business and its other
affairs in full compliance in all material respects with all applicable laws.
3.15 No Other Agreement. Other than the Sale Agreements, neither Seller nor
any its Affiliates has any contract, agreement, arrangement or understanding
with respect to the sale or other disposition of the assets of the Company or
any interests in the Company.
3.16 Consents. Except as set forth on Schedule 3.16, no notice to, filing
with, authorization of, exemption by, or consent of any Person is required in
order for Seller to consummate the transactions contemplated hereby.
3.17 Litigation.
(a) Except as disclosed in Schedule 3.17, there are no claims,
actions, suits, arbitrations, regulatory proceedings or other litigation,
proceedings or governmental investigations (collectively, "Proceedings")
pending, or to the best of Seller's knowledge, threatened against or affecting
the Company, Seller or any of its respective officers, directors, employees,
agents or stockholders thereof in their capacity as such, or any of their
respective properties or businesses relating to such Persons in such capacities,
and Seller is not aware of any facts or circumstances which may give rise to any
of the foregoing; provided that to the extent such representations and
warranties in this clause are made with respect to any Proceedings that may have
arisen against the Company from and after the Company's formation, such
representations and warranties are made to the best of Seller's knowledge.
(b) There are no Proceedings pending or, to the best of Seller's knowledge,
threatened by or against the Company or Seller with respect to this Agreement or
any Hub Services Contract, or in connection with the transactions contemplated
hereby or thereby, and Seller has no reason to believe there is a valid basis
for any such Proceeding; provided that to the extent such representations and
warranties in this clause are made with respect to any Proceedings that may have
arisen against the Company from and after the Company's formation, such
representations and warranties are made to the best of Seller's knowledge.
3.18 No Conflict of Interest. Neither Seller nor any of its Affiliates has
or claims to have any direct or indirect interest in any tangible or intangible
property used in the Business, except Seller's interest as an owner of its
Limited Liability Company Interest in the Company.
3.19 Bank Accounts. Schedule 3.19 sets forth the names and locations of
each bank or other financial institution at which the Company has an account
(giving the account numbers) or safe deposit box and the names of all Persons
authorized to draw thereon or have access thereto, and the names of all Persons,
if any, now holding powers of attorney or comparable delegation of authority
from the Company and a summary statement thereof.
3.20 Accuracy of Statements. This Agreement does not contain any untrue
statement of a material fact regarding Seller, the Company, the assets of the
Company or the Acquired Interest.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
Purchaser represents and warrants to Seller that:
4.1 Due Authorization. Purchaser has full power and authority to enter into
this Agreement and to carry out the transactions contemplated hereby, and this
Agreement has been duly and validly executed and delivered by Purchaser, and
constitutes the legal, valid and binding obligation of Purchaser, enforceable in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization or similar laws
from time to time in effect which affect creditors' rights generally, and by
legal and equitable limitations on the availability of specific remedies.
4.2 No Conflict. The execution, delivery and performance of this Agreement
and all other instruments, agreements, certificates and documents contemplated
hereby by Purchaser do not: (i) violate any decree or judgment of any
Governmental Authority applicable to Purchaser; (ii) violate any law (or
existing regulation promulgated under any law); (iii) violate or conflict with,
or result in a breach of, or constitute a default (or an event which, with or
without notice or lapse of time or both, would constitute a default) under, any
of the terms, conditions, or provisions of any contract to which Purchaser is a
party, or by which Purchaser is bound; or (iv) violate or conflict with any
provision of the charter, by-laws or other organizational documents of
Purchaser.
4.3 Investment Intent. Purchaser is acquiring the Acquired Interest for its
own account, for investment and not with a view to, or for sale or other
disposition in connection with, any "distribution" thereof, within the meaning
of the Securities Act of 1933, as amended, nor with any present intention of
selling or otherwise disposing of the Acquired Interest.
4.4 Consents. Except as set forth on Schedule 4.3, no notice to, filing
with, authorization of, exemption by, or consent of any Person is required in
order for Purchaser to consummate the transactions contemplated hereby.
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
-------------------------------
5.1 Conditions Precedent to Obligations of the Purchaser. The obligation of
Purchaser to purchase the Acquired Interest at Closing is subject to the
satisfaction of the following conditions:
5.1.1 Representations and Warranties. The representations and warranties
set forth in this Agreement made by Seller shall be accurate as of the Closing
Date as if made on the Closing Date, and Seller shall have delivered to
Purchaser a certificate so certifying.
5.1.2 Compliance with Agreements and Covenants. Seller shall have performed
and complied with all of its covenants, obligations and agreements contained in
this Agreement to be performed and complied with by Seller on or prior to the
Closing Date.
5.2 Conditions Precedent to Obligations of Seller. The obligation of
Seller to sell the Acquired Interest at Closing is subject to the satisfaction
of the following conditions:
5.2.1 Representations and Warranties. The representations and warranties
set forth in this Agreement made by Purchaser shall be accurate as of the
Closing Date as if made on the Closing Date, and Purchaser shall have delivered
to Seller a certificate so certifying.
5.2.2 Compliance with Agreements and Covenants. Purchaser shall have
performed and complied with all of its covenants, obligations and agreements
contained in this Agreement to be performed and complied with by Purchaser on or
prior to the Closing Date.
5.2.3 Company Approval. Seller shall have obtained the approval of the
Company's Executive Committee to sell the Acquired Interest to Purchaser in form
and substance satisfactory to Seller in its sole discretion.
ARTICLE VI
COVENANTS
---------
6.1 Implementing This Agreement. From the date hereof to the Closing Date,
each of Purchaser and Seller will take all necessary action to fulfill its
respective obligations under this Agreement and shall take all commercially
reasonable efforts to consummate the transactions contemplated thereby.
6.2 Payment to Seller for Hub Administration. Purchaser agrees that, if the
termination date of the Chicago Hub Agreement is extended to a date not earlier
than June 11, 2000 on substantially the same terms as those currently in effect
with respect to the Chicago Hub Agreement, Purchaser shall pay to Seller, on the
later of June 12, 1998 or the date of execution of such extension, an amount
equal to $[XXXXXX]. In addition, Purchaser agrees that, if the termination date
of the California Hub Agreement is extended to a date not earlier than June 11,
2000 on substantially the same terms as those currently in effect with respect
to the California Hub Agreement, Purchaser shall pay to Seller, on the later of
June 12, 1998 or the date of execution of such extension, an amount equal to
$[XXXXXX]. [CONFIDENTIAL TREATMENT OF BRACKETED MATERIAL REQUESTED PURSUANT TO
RULE 104(B)]
6.3 Seller to Provide Expertise. Seller acknowledges that Purchaser is
purchasing the Acquired Interest hereunder in reliance upon representations that
Seller and Seller's Affiliates have officers and employees who possess the
experience and expertise to engage successfully in Market-Making (provided that
Purchaser acknowledges that Seller has in no way guaranteed the success of the
Company's Market-Making). Seller agrees that it will, or will cause its
Affiliates to, second or otherwise make available to the Company officers and
employees (and cause the Company to engage and retain, so long as the Limited
Liability Company Agreement shall remain in effect, such officers and employees)
who have such experience and expertise, and Seller further agrees that such
officers and employees shall be reasonably acceptable to Purchaser. Without
limiting the foregoing, the parties agree that Miles Allen has such experience
and expertise (provided that Purchaser agrees that, subject to the foregoing
sentence, other officers and employees may replace Miles Allen).
6.4 That certain Assignment, Bill of Sale and Conveyance dated June 12,
1995 executed by Seller, as Assignor, and Enerchange, as Assignee (the
"Assignment"), provides that Enerchange will reassign the assigned interest in
the Ellisburg-Leidy Partnership Agreement to Seller upon Seller's election in
the event that either the Chicago Hub Agreement or the California Hub Agreement,
or both, are not extended to a date specified in the Assignment. Seller and
Purchaser hereby agree that Seller shall not elect to require Enerchange to
reassign the interest in the Ellisburg-Leidy Partnership Agreement to Seller
without the prior written consent of Purchaser.
ARTICLE VII
CLOSING
-------
7.1 Closing. The Closing shall take place on or before the third business
day following the day on which Purchaser's acquisition of the Acquired Interest
is approved by the SEC, or on such later date to which the parties hereto shall
agree.
ARTICLE VIII
INDEMNIFICATION
---------------
8.1 Survival. The representations and warranties of the parties hereto
contained herein and in this Article VIII shall survive the Closing. Such
representations and warranties shall be deemed made as of the date of this
Agreement and as of the Closing Date.
8.2 Indemnification by Seller. Seller agrees to indemnify Purchaser
against, and agrees to hold Purchaser harmless from, any and all liabilities,
losses, costs, claims, damages (including without limitation consequential
damages), penalties and expenses (including without limitation reasonable
attorneys' fees and expenses and reasonable costs of investigation)
(collectively, "Losses") incurred or suffered by Purchaser relating to or
arising out of or in connection with any of the following:
(a) any breach of or any inaccuracy in any representation or warranty
made by Seller in this Agreement;
(b) any breach of or failure by Seller to perform any covenant, or
obligation of Seller set out or contemplated in this Agreement; or
(c) any actual and/or contingent liabilities arising from, or in connection
with, or as a result of Seller's performance, act or omission prior to the
Closing Date.
8.3 Indemnification by Purchaser. Purchaser agrees to indemnify Seller
against, and agrees to hold Seller harmless from, any and all Losses incurred or
suffered by Seller relating to or arising out of or in connection with any of
the following:
(a) any breach of or any inaccuracy in any representation or warranty
made by Purchaser in this Agreement; or
(b) any breach of or failure by Purchaser to perform any covenant or
obligation of Purchaser set out or contemplated in this Agreement.
8.4 Claims. The provisions of this Section shall be subject to Section 8.5.
As soon as is reasonably practicable after becoming aware of a claim for
indemnification under this Agreement the Indemnified Person shall promptly give
notice to the Indemnifying Person of such claim and the amount the Indemnified
Person will be entitled to receive hereunder from the Indemnifying Person;
provided that the failure of the Indemnified Person to give notice shall not
relieve the Indemnifying Person of its obligations under this Article VIII
except to the extent (if any) that the Indemnifying Person shall have been
prejudiced thereby. If the Indemnifying Person does not object in writing to
such indemnification claim within 30 calendar days of receiving notice thereof,
the Indemnified Person shall be entitled to recover promptly from the
Indemnifying Person the amount of such claim, and no later objection by the
Indemnifying Person shall be permitted. If the Indemnifying Person agrees that
it has an indemnification obligation but objects on the grounds that it is
obligated to pay only a lesser amount, the Indemnified Person shall nevertheless
be entitled to recover promptly from the Indemnifying Person the lesser amount,
without prejudice to the Indemnified Person's claim for the difference.
8.5 Notice of Third Party Claims; Assumption of Defense. The Indemnified
Person shall give notice as promptly as is reasonably practicable to the
Indemnifying Person of the assertion of any claim, or the commencement of any
Proceeding, by any Person not a party hereto in respect of which indemnity may
be sought under this Agreement; provided that the failure of the Indemnified
Person to give notice shall not relieve the Indemnifying Person of its
obligations under this Article VIII except to the extent (if any) that the
Indemnifying Person shall have been prejudiced thereby. The Indemnifying Person
may, at its own expense, (a) participate in the defense of any claim, suit,
action or proceeding and (b) upon notice to the Indemnified Person and the
Indemnifying Person's delivering to the Indemnified Person a written agreement
that the Indemnified Person is entitled to indemnification for all Losses
arising out of such claim or Proceeding and that the Indemnifying Person shall
be liable for the entire amount of any Loss, at any time during the course of
any such claim or Proceeding, assume the defense thereof; provided, however,
that (i) the Indemnifying Person's counsel is reasonably satisfactory to the
Indemnified Person, and (ii) the Indemnifying Person shall thereafter consult
with the Indemnified Person upon the Indemnified Person's reasonable request for
such consultation from time to time with respect to such claim or Proceeding. If
the Indemnifying Person assumes such defense, the Indemnified Person shall have
the right (but not the duty) to participate in the defense thereof. If the
Indemnified Person reasonably determines in its judgment that representation by
the Indemnifying Person's counsel of both the Indemnifying Person and the
Indemnified Person would present such counsel with a conflict of interest, then
such Indemnified Person may employ separate counsel to represent or defend it in
any such claim or Proceeding, and the Indemnifying Person shall pay the fees and
disbursements of such separate counsel. Whether or not the Indemnifying Person
chooses to defend or prosecute any such claim or Proceeding, all of the parties
hereto shall cooperate in the defense or prosecution thereof.
8.6 Settlement or Compromise. Any settlement or compromise made or caused
to be made by the Indemnified Person or the Indemnifying Person, as the case may
be, of any such claim or Proceeding of the kind referred to in Section 8.5 shall
also be binding upon the Indemnifying Person or the Indemnified Person, as the
case may be, in the same manner as if a final judgment or decree had been
entered by a court of competent jurisdiction in the amount of such settlement or
compromise; provided, however, that no obligation, restriction or Loss shall be
imposed on the Indemnified Person as a result of such settlement without its
prior written consent.
8.7 Failure of Indemnifying Person to Act. In the event that the
Indemnifying Person does not elect to assume the defense of any claim or
Proceeding, then any failure of the Indemnified Person to defend or to
participate in the defense of any such claim or Proceeding or to cause the same
to be done, shall not relieve the Indemnifying Person of its obligations
hereunder.
ARTICLE IX
MISCELLANEOUS
-------------
9.1 Expenses. Each party hereto shall bear its own expenses with
respect to this transaction.
9.2 Amendment. This Agreement may be amended, modified or supplemented,
but only in writing signed by each of the parties hereto.
9.3 Counterparts. This Agreement may be executed simultaneously in
counterparts, each of which shall be deemed to be an original, but together
shall constitute one and the same instrument.
9.4 Headings. Section and Article headings in this Agreement are for
convenience of reference only, and shall not govern the interpretation of the
provisions of this Agreement.
9.5 Severability. Any provisions of this Agreement that are held to be
inoperative, unenforceable or invalid in any jurisdiction shall, as to that
jurisdiction, be inoperative, unenforceable, or invalid without affecting the
remaining provisions of this Agreement in that jurisdiction or the operation,
enforceability, or validity of such provisions in any other jurisdiction.
9.6 Entire Understanding. This Agreement, the Pre-Purchase Agreement and
the Company Agreement set forth the entire agreement and understanding of the
parties hereto with respect to the transaction contemplated hereby and supersede
all prior arrangements, agreements and understandings relating to the subject
matter hereof. There have been no representations or statements, oral or
written, that have been relied on by either party hereto, except those expressly
set forth in this Agreement, the Pre-Purchase Agreement and the Company
Agreement.
9.7 Applicable Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the internal laws of the State of Delaware,
without regard to the conflicts of law principles thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on the date first above written.
HUB SERVICES INC.
By: /s/ Miles Allen
---------------------------------------------
Title: Vice President
------------------------------------------
Printed Name: Miles Allen
-----------------------------------
LEIDY HUB, INC.
By: /s/ Walter E. DeForest
---------------------------------------------
Title: President
------------------------------------------
Printed Name: Walter E. DeForest
-----------------------------------
SCHEDULE 3.2
JURISDICTIONS OF QUALIFICATION
1. Delaware
<PAGE>
SCHEDULE 3.6(a)
ASSETS
1. That certain CALIFORNIA HUB AGREEMENT dated as of March 15, 1994, by
and between Southern California Gas Company and Hub Services, Inc.
2. That certain HUB OPERATING AGREEMENT dated as of May 27, 1994, by and
between Southern California Gas Company and Hub Services, Inc.
3. That certain CHICAGO HUB AGREEMENT dated May 26, 1993, by and between
Northern Illinois Gas Company and Hub Services, Inc.
4. That certain PARTNERSHIP AGREEMENT dated as of September
1, 1994, by and between Leidy Hub, Inc. and Hub Services, Inc.
5. That certain BUY-SELL CONTRACT dated November 29, 1993, by and between
Northern Illinois Gas Company and Hub Services, Inc.
<PAGE>
SCHEDULE 3.6(b)
LIABILITIES
1. None.
<PAGE>
SCHEDULE 3.7
DEFAULTS AND VIOLATIONS
1. None
<PAGE>
SCHEDULE 3.9
CONDITION OF ASSETS
1. No disclosure is made pursuant to Section 3.9.
<PAGE>
SCHEDULE 3.10
CONTRACTS
1. That certain CALIFORNIA HUB AGREEMENT dated as of March 15, 1994, by
and between Southern California Gas Company and Hub Services, Inc.
2. That certain HUB OPERATING AGREEMENT dated as of May 27, 1994, by and
between Southern California Gas Company and Hub Services, Inc.
3. That certain CHICAGO HUB AGREEMENT dated May 26, 1993, by and between
Northern Illinois Gas Company and Hub Services, Inc.
4. That certain PARTNERSHIP AGREEMENT dated as of September
1, 1994, by and between Leidy Hub, Inc. and Hub Services, Inc.
5. That certain BUY-SELL CONTRACT dated November 29, 1993, by and between
Northern Illinois Gas Company and Hub Services, Inc.
<PAGE>
SCHEDULE 3.11
LICENSES, PERMITS, FRANCHISES AND RIGHTS
1. None
<PAGE>
SCHEDULE 3.12
INSURANCE
1. None
<PAGE>
SCHEDULE 3.13
EMPLOYEE BENEFIT PLANS
1. None
<PAGE>
SCHEDULE 3.16
CONSENTS
1. In accordance with Section 12.3 of the Limited Liability Company
Agreement, HSI is obligated to obtain the consent of NHS to the disposition of
the Acquired Interest.
<PAGE>
SCHEDULE 3.17
LITIGATION
1. None
<PAGE>
SCHEDULE 3.19
BANK ACCOUNTS
1. None
CARON & STEVENS
ISSUED AS A TRUE COPY, of a document, that has been shown to me and that has
been returned to its presenter after having been compared with the original, by
me, Hendrik van Wilsum, Esq., a civil-law notary in Amsterdam. This statement
explicitly contains no judgment as to the contents of this document. Amsterdam,
July 1, 1996
UNOFFICIAL TRANSLATION
On this twenty second day of April nineteen hundred and ninety-one, there
appeared before me, Mr. Gerhard Johan Timmer, civil law notary, practicing at
Utrecht: Mr. Gerardus Johannes Beeren, bank employee, residing in Eersel,
according to his statement acting here as designated for the purpose by the
general meeting of shareholders of the closed company with limited liability:
Brussen-Wassink Beheer B.V., having its seat at Doetinchem, and representing
that company in that capacity. The appearer declared: By resolution of the
shareholders of the aforementioned company on the fifteenth day of August
nineteen hundred ninety, it has been decided to amend the articles of
association of the company.
By the aforementioned resolution the appearer was designated to have this
amendment of the articles of association carried out, as well as to perform
everything required to obtain the Ministerial declaration of non objections
required.
The aforementioned resolution of the shareholders appears from a document
attached to the present instrument. To execute the said resolution of the
general meeting of shareholders, the appearer declared by the present
instrument, on the draft of which the Ministerial declaration of non objections
was obtained on the twenty-first day of March nineteen hundred and ninety one
Main Department of Private Law, Number B. V. 150.770, which draft has been
attached to the present instrument, to fully re-establish the articles of
association of the aforementioned closed company in the following manner:
Name and domicile
Article 1
1. The company shall bear the name Beheer-en Beleggingsmaatschappij Bruwabel
B. V.
2. It shall be established at Utrecht.
Object
Article 2
1. The object of the company is the investment of capital and that among
others in securities, immovable property and mortgage debts to which also
belongs acquirement, administration and alienation of immovable property,
exploitation, administration and exercising all rights connected to those
immovables, securities and other interests, as well as participation in,
being interested in and cooperation with other enterprises, and conducting
the management of other companies, and further running a management
company all this in the widest sense.
2. Further the company is authorized to finance and to answer for debts of
subsidiaries and other companies and to do everything more that is in the
interest of the continuity, the operation and the commercial interests of
(daughter) companies, all this in the widest sense.
Duration
Article 3
The company has been formed for an indefinite period.
Capital and shares
Article 4
The share capital of the company shall amount to three hundred thousand Dutch
Guilders (Dfl. 300.000, --), divided into three hundred (300) shares of one
thousand Dutch Guilders (Dfl. 1000, --) each.
Article 5
1. The shares that have not yet been subscribed shall be issued by virtue of
a decision of the General Meeting - of shareholders, which will also fix
then, the conditions and the issue price, which shall not be below par.
Unless the General Meeting of shareholders has decided otherwise, at the
issue referred to, every shareholder shall have a right of priority in
proportion to the total amount of the shares held by him, without
prejudice to section 206a, Book 2 of the Civil Code.
2. The shares shall be in registered form. No share certificates shall be
issued.
3. If one or more shares belong to an undivided community, the persons
entitled to that undivided community may only exercise the rights arising
from those shares if they have themselves represented in that connection
vis-a-vis the company by one person.
Register of shares
Article 6
1. The Management of this company shall keep a register in which the names
and the addresses of all the holders of shares shall be entered, stating
the amount paid up on each share and everything else which is prescribed
by the law. In that register there shall also be entered the names and
addresses of those who have a right ofusufruct or a right of pledge on
those shares, stating which rights attached to the shares they are
entitled to, in accordance with paragraphs 2 and 4 of Articles 197 and 198
of Book 2 of the Netherlands Civil Code.
2. Shareholders and holders of depositary receipts, usufructuaries and
pledges of shares shall be obliged to see to it that their address is
known to the Management.
3. The term "holders of depositary receipts" shall be understood hereinafter
in these Articles of Association to mean: holders of depository receipts
for shares issued with the company's co-operation, as well as the persons
who pursuant to a pledge or usufruct established on a share have the right
as described in paragraph 4 of Articles 197 and 198, Book 2 of the
Netherlands Civil Code.
4. The register shall be regularly kept up to date.
5. The Management shall lay the register open to inspection by the
shareholders and holders of depositary receipts at the company's office.
Purchase of own shares by the company
Article 7
1. Acquisition by the company of fully paid-up shares in its own capital
shall be allowed only by gratuitous title or if:
a. the equity capital minus the purchase price does not fall to below
the amount paid up and called up on the shares plus the reserves to
be kept by virtue of the articles of association or the law;
b. the nominal amount of the shares to be acquired in the company's own
capital and those already held by the company and its subsidiaries
taken together does not exceed fifty percent of the issued capital,
and
c. authorization for such acquisition has been given to the General
Meeting of Shareholders or by any other company body, for this
purpose appointed by the General Meeting of Shareholders.
2. The validity of the acquisition shall be determined by amount of equity
capital shown by the latest balance sheet, minus the purchase price of
shares in the company's own capital and distributions of dividend or
reserves to others which became payable by the company and its
subsidiaries after balance-sheet date. If more than six months have lapsed
after the end of the financial year without the annual accounts having
been drawn up, acquisition under the present article shall not be allowed.
3. For the purposes of this article the term shares shall include depositary
receipts.
Assignment of shares
Article 8
1. If a shareholder wishes to assign shares - or if by virtue of a request
made by him shares have to be assigned - to persons other than the company
the shares concerned must first be offered for sale to the other
shareholders.
2. The offer must be made to the Management, stating the number of shares, of
which offer the Management shall forthwith inform all the shareholders.
3. The Management shall convene a general meeting for a date not earlier than
one month and not later than two months after the offer has been received
by it.
4. At this general meeting each shareholder may indicate how many shares
offered he wishes to purchase.
5. If shareholders together apply for more shares than are offered, the
Management shall divide the shares offered among the prospective
purchasers as far as possible in proportion to the numbers which they
already hold, with the proviso that a prospective purchaser may not obtain
a larger number than the number for which he was a prospective purchaser.
6. Unless the parties agree otherwise, the price of the shares to be assigned
shall be determined by one expert, to be appointed for that purpose at the
request of the most diligent party by the Cantonal Judge within whose
cantonal district the company is established according to the Articles of
Association. The Management shall give its full co-operation to the expert
in the price determination. As soon as the price is known to the
Management, it shall inform the parties thereof forthwith. Each
prospective purchaser shall be entitled until one month after receipt of
that communication to inform the Management that he withdraws (partially).
The Management shall then divide the shares thus becoming available among
the other prospective purchasers in accordance with the provisions in
paragraph 5 and shall inform the parties of the result of the forthwith.
7. If not all the shares offered are purchased in accordance with the
foregoing provisions, the Management shall be entitled until one month
after that has been established to designate one or more third parties who
shall then have the right to purchase the shares offered for sale or, as
the case may be, the remaining number of shares offered for sale. The
Management shall inform the offeror of such designation forthwith. Unless
the price has already been determined, the provisions in paragraph 6 shall
be applicable.
8. The costs of the price determination shall be borne by the company, unless
the expert lays down otherwise in reason and equity.
9. The offeror shall remain entitled to withdraw his offer, provided that he
informs the Management of this within one month after he knows
definitively to whom he may sell all the shares offered and at what price.
10. If it should finally be established that not all the shares offered are to
be purchased against payment in cash, the offeror may freely assign the
shares offered, provided that it is all of them, during a period of three
months after this has been ascertained.
11. The company may only rank as a prospective purchaser with the consent of
the offeror himself, to which consent the offeror may attach the condition
that over and above the price the company shall reimburse to him the
fiscal detriment which he suffers through assignment to the company
instead of to a third party.
12. All the communications and notifications prescribed above in this Article,
with the exception of the one referred to in paragraph 4, must be made by
registered letter.
13. The provisions in this Article may be departed from in whole or in part
with the written approval of all the shareholders, with the proviso that
any subsequent assignment of shares must take place within three months
after such approval has been given.
Change of ownership of shares
Article 9
1. If a shareholder dies or loses the power of disposition over his assets,
or if a community of property to which shares belong or a
shareholder/juridical person is dissolved, all the shares of the
shareholder concerned must be assigned. This obligation shall lapse if and
in so far as those shares, as a result of one of the happenings described
above, have passed within one year thereafter under general title to one
or more persons to whom free assignment could be made pursuant to Article
8, paragraph 1, or to one or more persons who were entered as holder(s) of
those shares in the register of shares.
2. As soon as it is established that pursuant to the provisions in paragraph
1 shares must be assigned, the persons who are obliged to make the
assignment must inform the Management thereof within one month, stating
the number of shares. This communication shall rank as an offer within the
meaning of Article 8.
3. The provisions in Article 8 shall as far as possible be correspondingly
applicable to the provisions in this Article, with the proviso that:
a. the offer may not be withdrawn;
b. the obligation to make assignment shall lapse as soon as it should be
established that not all the shares concerned are to be purchased
against payment in cash.
4. If the obligation to inform the Management as referred to in paragraph 2
has not been fulfilled in good time, the company - provided that it has
given notice of default to the shareholder concerned - shall be
irrevocably authorized, until one year after the arising of that
obligation, to assign the shares concerned in accordance with the
provisions in this Article.
Article 10
1. For the delivery of shares there shall be required a deed of delivery and
the serving of that deed on the company or written recognition of the
delivery by the company on the basis of submission to the company of that
deed.
2. The provisions of the first paragraph shall be correspondingly applicable
to the allotment of shares in the event of partition of any community.
Management
Article 11
1. The company shall be managed by a Management, consisting of one or more
Managing Directors.
2. The Managing Directors shall be appointed, suspended and removed by the
General Meeting of shareholders, which shall also determine the number of
Managing Directors and fix their salary and share in profit, if any.
3. In the event of the absence or inability to act of a Managing Director the
remaining Managing Director(s) shall be responsible for the entire
Management, whilst in the event of the absence or inability to act of all
the Managing Directors one or more persons designated for that purpose by
the General Meeting shall be temporarily responsible for the Management.
Article 12
1. Each Managing Director shall represent the company.
2. If the company has an interest conflicting with that of one or more
Managing Directors, it may nevertheless be represented by those Managing
Directors.
3. Management resolutions shall be passed by absolute majority of votes, but
the approval of the Board of Supervisory Directors sill be required for
Management resolutions if they serve for:
a. the acquisition, alienation, encumbrance, letting or in any other way
giving the use of immovable;
b. the entering into of sureties to the charge of the company and the
guaranteeing in any other way of debts of third parties;
c. the entering into of settlements out of court and compromises, in so
far as not included in standard contracts;
d. the conduct of lawsuits, both as plaintiff and as defendant, or the
acquiescence in actions at law, except the taking of measures for
conservatory attachment or urgent measures;
e. the participation in or taking of an interest in any other way in
other way in other companies and enterprises;
f. the assignment as security for the encumbrance of corporeal movable;
g. the entering into of loans to the charge of the company with the
exception of the borrowing of moneys whereby the company becomes
indebted to the banker designated with the approval of the
General Meeting of Shareholders for a total amount not higher than
the amount which has been fixed by the General Meeting of
Shareholders;
h. the lending of moneys whereby one and the same debtor becomes
indebted to the company in total, by virtue of loan, for more than an
amount fixed by the General Meeting of Shareholders;
i. the granting of power of attorney;
j. the engagement of personal for long than six months, unless this is
for an indefinite period, the granting to a member of the personnel
of a fixed annual salary higher than the annual income on which the
maximum premium under the General Old Age Pensions Act is levied at
the time of granting, or the dismissal of a member of the personnel
who receives such a fixed annual salary
k. the granting of pension rights;
l. the establishing and discontinuance of subsidiaries, the extending of
the business by a new branch of business and the closure, other than
temporarily, or discontinuance of the business or a part thereof;
m. the entering into of agreements, in so far as not already coming
under the foregoing provisions in this paragraph, of which per
transaction the interest of value to the company exceeds an amount
fixed by the General Meeting of Shareholders
4. The company is not allowed to give security, with a view to taking or
acquiring by others of shares in its capital or of certificates thereof,
to give a guarantee of price, neither to answer in another way for others
nor to bind itself severally or otherwise beside or for others. This
prohibition also applies to its daughter companies. The company is allowed
to grant loans with a view to taking or acquirement of shares in its
capital or of certificates thereof, but only up to a maximum equal to the
distributable reserves. The company shall keep a non-distributable reserve
up to the outstanding amount of said loans.
General Meeting of Shareholders
Article 13
1. The General Meeting of Shareholders shall be held at the Municipality
where the company has its legal seat. At a General Meeting held in another
Municipality, lawful resolutions may only be passed if the entire issued
capital is represented.
2. At least one General Meeting shall be held annually, namely within six
months after the end of the company's financial year.
Article 14
1. The Management shall be entitled to convene a General Meeting.
2. General Meetings must similarly be held if shareholders representing at
least one-tenth of the issued capital submit their request for such a
meeting in writing to the Management, stating the subjects to be
discussed, in which case the meeting must be held within six weeks, in
default of which the applicants may themselves convene the meeting.
Article 15
1. The convocation to a General Meeting shall take place by means of
registered letters of convocation, sent to the addresses of the
shareholders as stated in the register of shares. The convocation of
shareholders of depositary receipts may take place by an announcement in a
newspaper published in the Municipality where the company has its
domicile, or in the absence of a newspaper published in that Municipality,
in a newspaper published in the province where the company has its
domicile, or similarly by means of registered letters of convocation.
2. The convocation shall take place not later than on the fifteenth day
before that of the meeting.
3. If the convocation has not been made in good time, or if it has not taken
place, no lawful resolutions may be passed, unless this is done
unanimously at a meeting at which the entire issued capital is
represented.
4. The letters of convocation shall state the day, time and place of the
meeting, as well as the subjects to be discussed. Shareholders who wish to
have a proposal discussed at the meeting must therefore cause that
proposal to be included in the letters of convocation or in supplementary
letters of convocation, which must similarly be sent with due observance
of the time limit laid down for convocation.
Article 16
1. Each share shall carry the right to cast on vote.
2. All resolutions shall be passed by absolute majority of the votes cast,
unless a larger majority is prescribed.
3. Voting on business matters shall be done orally, and on persons by means
of unsigned sealed ballot slips, unless none of the persons entitled to
vote is opposed to a oral ballot. Blank and signed ballot slips shall be
invalid.
4. If no one has obtained the absolute majority in an election of persons, a
second free ballot shall take place. If at this ballot again no one
obtains the absolute majority, voting shall take place between persons who
obtained the largest number of votes at the last ballot, namely in such a
way that two person are eligible for each vacancy. If owing to equality of
votes more than two persons are eligible for the re-poll, it shall be
decided by an intermediate ballot which persons shall go forward to the
re-poll.
5. If there is an equality of votes in a ballot, the Management shall decide
in the case of an election of persons and in the case of any other ballot
the proposal shall be rejected; all this being unless the general meeting
resolves to entrus the decision by way of binding opinion, to an
institution or third party to be designated by it.
6. A shareholder to whom, otherwise than as a shareholder, any right
vis-a-vis the company will be granted by the passing of any resolution, or
who would thereby be released from any obligation towards the company, may
nevertheless cast a legally valid vote on such a resolution.
Article 17
the minutes of the meetings of shareholders shall be drawn up by a person to be
designated by the General Meeting.
Article 18
If no holders of depository receipts exist, shareholders may also pass outside a
meeting all the resolutions which they may pass at a meeting, but only if all
the shareholders have declared themselves in writing to be in favour of the
proposal.
Financial year and annual accounts
Article 19
1. The company's financial year shall coincide with the calendar year.
2. Annually within five months after the end of the company's financial year,
saving extension of this time limit by the General Meeting on the grounds
of special circumstances, annual accounts shall be drawn up by the
Management which shall be submitted to the General Meeting of
Shareholders.
3. The annual accounts shall be signed by the Managing Directors; if the
signature of one or more of them is missing, this shall be stated together
with the reason for its absence. The annual accounts shall be confirmed by
the General Meeting.
4. As from the day of convocation to the General Meeting intended for the
discussion of the annual accounts, until the end of that meeting, they
shall be open to inspection at the company's office by the shareholders
and the holders of depositary receipts, who may all obtain a copy thereof
free of charge.
5. The term "annual accounts" shall be understood to mean: the balance sheet
and the profit and loss account together with the explanatory notes to
these documents annexed thereto.
6. If no reservation has been made in connection therewith, the confirmation
of the annual accounts shall serve to discharge the Management from
responsibility for their activities in the financial year to which the
annual accounts relate.
Appropriation of profit
Article 20
1. The profit is at the disposal of the General Meeting of shareholders, on
the understanding that profit is only allowed to be distributed, insofar
as the own resources of the company are greater than the part paid and
called up of the capital increased by the reserves that have to be
maintained by virtue of the law.
2. Distribution of profit is effected after adoption of the yearly accounts,
from which it appears that it is allowed.
3. The company is allowed to make interim distributions of the profit,
however, with due observance of the provisions of paragraph 1.
Amendment of the Articles of Association and Dissolution
Article 21
1. If a proposal to amend the Articles of Association or to dissolve the
company is to be put to the General Meeting, this must always be stated in
the notice of convocation to the General Meeting.
2. At the same time as the convocation a copy of the proposal to amend the
Articles of Association, incorporating the proposed amendment verbatim,
must be deposited at the company's office until the end of the meeting for
inspection by each shareholder and holder of depositary receipts, who may
obtain a copy thereof free of charge during that period.
3. The General Meeting may resolve to amend the Articles of Association or to
dissolve the company. These resolutions may only be passed by a majority
of at least three-quarters of the valid votes cast at a General Meeting at
which at least two-thirds of the issued capital is represented.
4. If at such a meeting the required two-thirds of the issued capital is not
represented, a second meeting shall be convened, to be held at least
fifteen and at most thirty days after the first meeting, at which the
resolution to amend the Articles of Association or to dissolve the company
may be passed by a majority of at least three-quarters of the valid votes
cast, irrespective of the capital represented at the meeting.
Liquidation
Article 22
1. In The event of dissolution of the company by virtue of a resolution of
the General Meeting, the liquidators shall at the same time be appointed
by it.
2. The company shall continue to exist after its dissolution in so far as
this is necessary for the liquidation of its assets. In documents and
announcements emanating from it, the following must be added to its name;
in liquidation.
3. The provisions of these Articles of Association shall as far as possible
remain in force during the liquidation.
4. The amount remaining after payment of the creditors shall be distributed
to the shareholders in proportion to each one's entitlement.
5. The books and records of the dissolved company shall remain in the custody
of the person appointed for that purpose by the General Meeting for thirty
years after completion of the liquidation.
Final provision
Article 23
In all cases not provided for by the Articles of Association or by law, the
General Meeting of shareholders shall decide.
Finally the appearer declared that the issued share capital of the company
amounts to one hundred and eighty thousand Dutch Guilders (Dfl 180,000.00)
divided in one hundred and eighty (180) shares of one thousand Dutch Guilders
(Dfl 1.000,00).
The appearer is known to me, civil law notary. OF WHICH AN INSTRUMENT IN
ORIGINAL has been executed in Utrecht, on the date mentioned in the heading of
this instrument.
After the substance of the contents of the present instrument were stated to the
appearer, he has declared having taken note of the contents of the present
instrument and to abstain from full reading out of its contents. Upon limited
reading out the instruments has been signed subsequently by the appearer and by
me, civil law notary.
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
KPP INVESTMENT, L.L.C.
This AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF KPP
INVESTMENT, L.L.C. (the "Agreement") is made and entered into as of January 11 ,
1996, by and between SCEPTRE KABIRWALA, L.L.C., a Delaware limited liability
company ("SKLLC"), and ARS KABIRWALA LIMITED PARTNERSHIP, a Delaware limited
partnership ("ARS-K").
RECITALS:
WHEREAS, SKLLC and ARS-K heretofore entered into a Limited Liability
Company Agreement dated as of May 27, 1994 (the "Prior Agreement") providing for
the formation of a Delaware limited liability company to be known as KPP
Investment, L.L.C. (the "Company");
WHEREAS, SKLLC and ARS-K formed the Company by filing its Certificate
of Formation with the Secretary of State of the State of Delaware on May 27,
1994;
WHEREAS, the Prior Agreement contemplated that SKLLC and ARS-K, acting
through the Company, would join with the Fauji Foundation ("Fauji") in the
formation of a company organized under the laws of Pakistan to develop, own,
finance and operate an approximately 144 MW (net) low Btu gas-fired power plant
near Kabirwala, District Khanewal, in the Punjab Province of Pakistan (the
"Project");
WHEREAS, Sceptre Power Company, a California general partnership
("SPC"), and INTRAG, Inc., a Massachusetts corporation ("INTRAG"), entered into
a Development Agreement, thus denominated, effective as of May 25, 1994
respecting the Project, and said Development Agreement was amended and
supplemented by a Side Agreement, thus denominated, entered into by and between
SPC and INTRAG as of June 12, 1994 ("Development Agreement");
WHEREAS, SPC has assigned all of its right, title, and interest in, to
and under the Development Agreement to SKLLC, and SKLLC has assumed the
obligations of SPC under the Development Agreement;
WHEREAS, INTRAG has assigned all of its right, title and interest in,
to and under the Development Agreement to ARS-K, and ARS-K has assumed the
obligations of INTRAG under the Development Agreement;
WHEREAS, the Company and Fauji entered into a Shareholders' Agreement,
dated as of June 12, 1994 ("Shareholders' Agreement"), which provides for the
formation and governance under the laws of Pakistan of a company known as Fauji
Kabirwala Power Company Limited ("FKPC") which company is to develop, own,
finance and operate the Project;
WHEREAS, FKPC was formed under the laws of Pakistan and received its
certificate of incorporation on July 28, 1994;
WHEREAS, FKPC has entered into an Implementation Agreement with the
Government of Pakistan, a Gas Supply Agreement with the Oil & Gas Development
Corporation, a Power Purchase Agreement with the Water and Power Development
Authority and a Gas Supply/Purchase Agreement with Sui Northern Gas Pipeline
Company, which said agreements have been renegotiated;
WHEREAS, in light of the continuing development of the Project, SKLLC
and ARS-K desire to amend and restate the Prior Agreement as hereinafter set
forth, without such amendment and restatement constituting the "Operating
Agreement" contemplated in Section 2 of the Development Agreement; and
WHEREAS, this Agreement is entered into prior to, and in contemplation
of, (i) the Project attaining "Financial Closing" (as that term is defined in
the Development Agreement), and (ii) the development, negotiation and execution
of the documents requisite to attaining such "Financial Closing", hereinafter,
the "Project Documents";
NOW, THEREFORE, in consideration of the foregoing premises and of other
good and valuable consideration, receipt and sufficiency of which is hereby
acknowledged, the Members hereto do hereby agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.01. Certain Definitions. As used herein:
"Act" means the Delaware Limited Liability Company Act, as amended from
time to time.
"Adjusted Net Cash Flow" means, with respect to the period for which it
is calculated, the Company's Net Cash Flow less so much of the items of
cost and fees identified in Sections 12 and 13 of the Development
Agreement as is, pursuant to the provisions of said Sections of the
Development Agreement, payable out of Net Cash Flow during the like
period.
"Certificate" means the certificate of formation of the Company as the
same may be amended and/or restated from time to time in accordance
with the Act.
"Commercial Operations Date" bears the meaning attributable thereto in
the Development Agreement.
"Complex" bears the meaning attributable thereto in the Development
Agreement.
"Distributive Interest" means, at any particular time following the
"Commercial Operations Date", with respect to each Member, the interest
of such Member in the Adjusted Net Cash Flow of the Company expressed
as a percentage of the total of the interests of all Members in the
Adjusted Net Cash Flow of the Company, at such time. At all times
following the "Commercial Operations Date", the combined Distributive
Interests of all Members shall equal one hundred (100%) percent.
"Equity Commitment" bears the meaning attributable thereto in the
Development Agreement.
"Equity Investment" bears the meaning attributable thereto in the
Development Agreement.
"Financial Closing" bears the meaning attributable thereto in the
Development Agreement.
"Interest" means the ownership interest of a Member in the Company
(which shall be considered personal property for all purposes),
consisting of (i) such Member's interest in profits, losses,
allocations and distributions; (ii) such Member's right to vote or
grant or withhold consents with respect to Company matters as provided
herein or in the Act; and (iii) such Member's other rights and
privileges, as provided herein and in the Act.
"I.R.C." means the Internal Revenue Code of 1986, as amended.
"Lenders" bears the meaning attributable thereto in the Development
Agreement.
"Managers" means those persons appointed by the Members in accordance
with the provisions of Section 5.01 to manage the business of the
Company.
"Member" means SKLLC, ARS-K, and any other Person who has been admitted
to the Company as a Member thereof in accordance with the terms of this
Agreement.
"Minimum SKLLC Percentage" means the highest minimum SKLLC Percentage
Interest in the Company required under or stipulated in any Project
Document.
"Net Cash Flow" means, with respect to the period for which it is
computed, the Company's gross cash revenues realized or derived from
the operation of the Project and the proceeds of asset sales not
covered by Sections 9.03 or 9.04 hereof (but not including any loan
proceeds, advances, capital contributions, and payments of interest or
principal on loans made by the Company) less (i) cash used to fund cash
reserves which a majority of the Managers deems reasonably necessary
for the proper operation of the Company's business, (ii) cash used to
pay Company expenses (including, but not limited to, debt service) not
paid for out of the Company's cash reserves previously set aside, and
(iii) cash used to pay fees and expenses authorized by this Agreement
and not paid for out of the Company's reserves previously set aside,
all for the like period.
"NFGC Percentage" bears the meaning attributable thereto under the
Project Document know as the "Sponsor Support Agreement", or any other
similar Project Document.
"Person" bears the meaning attributable thereto under Section
18-101(12) of the Act.
"Percentage Interest" means at any particular time with respect to each
Member, the capital contributions made by such Member to the capital of
the Company on or before such time expressed as a percentage of the
total capital contributions of all the Members to the capital of the
Company made on or before such time. The combined Percentage Interest
of all Members shall at all times equal one hundred (100%) percent.
"Project Guarantee" means any guarantee, letter of credit, undertaking,
or other form of credit or performance support which the Lenders or the
Government of Pakistan or any agency or authority thereof may require
FKPC or the Company to provide in accordance with the terms of any
Letter of Support relating to the Project issued by the Government of
Pakistan (hereinafter, "Letter of Support") or any Project Document, as
security or further assurance in respect of any obligation or
undertaking of the Company or FKPC in reference to the Project or any
condition set forth in the Letter of Support.
"Project Guarantee Share" means, with respect to a Member, one hundred
(100%) percent of the Company's share of the amount of the Project
Guarantee in question, multiplied by such Member's Percentage Interest
in the Company. In the event that ARS-K shall fund all or any part of
the Section 10.h.(i) Contribution at a point in time following the
initial funding by or on behalf of SKLLC of any part of the Equity
Investment (hereinafter, a "Non-Synchronous Equity Infusion"), the
Members' respective Project Guarantee Shares shall, for all purposes
relevant under this Agreement, be recomputed (effective as of the date
of such initial funding by or on behalf of SKLLC) to reflect the
assumption that one hundred (100%) percent of the Section 10.h.(i)
Contribution was funded by ARS-K simultaneously with such initial
funding by or on behalf of SKLLC.
"Regulations" means the Treasury Regulations promulgated under the
I.R.C., as from time to time in effect.
"Section 10.h.(i) Contribution" bears the meaning attributable thereto
under the Development Agreement.
"Section 10. FKPC Stock Sale" means the sale by the Company of any
shares of the capital stock of FKPC then owned by the Company pursuant
to the provisions of Sections 10.h.(iii) or 10.k.(ii)(V) of the
Development Agreement.
ARTICLE 2
NAME, OFFICE AND FORMATION OF COMPANY
Section 2.01. Formation. The Members hereby ratify the formation of the
Company through the filing of the Certificate on May 27, 1994 with the Secretary
of State of the State of Delaware and hereby agree and constitute this Amended
and Restated Limited Liability Company Agreement as the limited liability
company agreement of the Company.
Section 2.02. Name. The name of the Company is KPP Investment,
L.L.C.
Section 2.03. Registered Office and Agent. The registered
office and agent of the Company are as set forth in the Certificate of
Formation.
Section 2.04. Principal Place of Business. The Company's principal
place of business, and the place where its books and records shall be kept, is 6
Hutton Centre Drive, Santa Ana, California, or such other place as may be from
time to time determined by the Managers. The Company's books and records will be
available for inspection and copying by the Members at such office, upon
reasonable notice to the Managers, during regular business hours.
Section 2.05. Powers. The Company shall have all the powers of a
limited liability company organized pursuant to the Act including, but not
limited to, the development, ownership, financing, construction and operation of
the Project, either alone or in conjunction with others, including but not
limited to the Fauji Foundation, and in connection therewith to be a shareholder
of FKPC and through FKPC to participate in developing, owning, financing,
constructing and operating the Project. The Members hereby authorize, ratify and
adopt as actions of the Company all actions taken on behalf of the Company to
form FKPC, including the execution of and entry into the Shareholders' Agreement
with the Fauji Foundation.
Section 2.06. Term. The Company shall dissolve on December 31,
2044, unless earlier dissolved in accordance with this Agreement or pursuant
to the Act.
ARTICLE 3
CAPITALIZATION
Section 3.01. Capital Contributions. The original capital
contributions of the Members are as follows:
SKLLC $7,000.00
ARS-K $7,000.00
Section 3.02. Additional Capital Contributions.
(a) Members may make additional capital contributions
under terms and conditions approved by a majority of the Managers.
(b) If a majority of the Managers determines that additional
capital contributions are required for the purposes of the Company in order to
effect the Equity Investment and/or to fund the Section 10.h.(i) Contribution,
the existing Members shall have the first right, but not the obligation, to
contribute such additional capital pursuant to, in accordance with, and subject
to the provisions of the Development Agreement and of any Project Document which
a majority of the Managers, acting in good faith, shall determine to be
applicable to the proposed capital contribution, provided, however, that (A)
anything in this Agreement or in the Development Agreement to the contrary
notwithstanding, the Minimum SKLLC Percentage shall never be or become less than
the highest applicable minimum amount or percentage (if any) set forth in the
Project Documents, and (B) all funding of the Section 10.h.(i) Contribution
shall be subject to the following conditions, to wit: (1) No such funding shall
occur other than simultaneously with, as a part of, and on the same terms and
conditions as a funding by the Company of a "Subscription Payment" (as that term
is defined in the relevant Project Document or in the then most recent draft of
the relevant Project Document), and (2) no such funding shall cause the
aggregate of all of the Company's "Subscription Payments" (as thus defined) to
exceed the "Full Subscription Amount" (as thus defined).
(c) In the event that a majority of the Managers shall
determine that additional capital contributions are required for the purposes of
the Company (other than, or in addition to, those contemplated and provided for
in sub-section (b) of this Section 3.02), hereinafter, an "Additional
Contribution Event", then, the Members shall have the right, but not the
obligation, to contribute such additional capital in proportion to their
respective Distributive Interests (if the Additional Contribution Event occurs
after the Commercial Operations Date) or their respective Percentage Interests
(if the Additional Contribution Event occurs before the Commercial Operations
Date). In the event that not all the Members exercise their rights to contribute
their proportionate share of such additional capital, the amount of additional
capital needed shall be divided among such Members desiring to contribute
additional capital in the same proportion as their respective Distributive
Interests or Percentage Interests (as the case may be) bear to the total of the
counterpart interests of all Members exercising their right to contribute such
additional capital to the Company, provided, however, that anything in this
Agreement or in the Development Agreement to the contrary notwithstanding,
SKLLC's Percentage Interest in the Company shall never be or become less than
the highest applicable minimum amount or percentage (if any) set forth in the
Project Documents.
Section 3.03. Capital Accounts.
(a) A separate capital account shall be maintained for each
Member.
(b) Each Member's capital account shall be credited with the
amount of money and the fair market value of property (net of liabilities
secured by such contributed property which the Company assumes or takes subject
to) contributed by the Member to the capital of the Company; the amount of any
Company liabilities assumed by such Member (other than in a distribution of
Company property); and such Member's allocable share of Company profits as set
forth in sub-section 6.02 hereof. Each Member's capital account shall be debited
with the amount of money and the fair market value of property (net of any
liabilities which such Member assumes or takes subject to) distributed to such
Member by the Company; the amount of any liabilities of such Member assumed by
the Company (other than in connection with a contribution); and such Member's
allocable share of Company losses as set forth in sub-section 6.02 hereof
(including items that may be neither deducted nor capitalized for federal income
tax purposes).
(c) The components of a Member's Capital Account which
represent capital contributions devoted to subscription(s) for the capital stock
of FKPC shall be thus denominated and shall reflect the number of shares of such
capital stock represented thereby, respectively. As between the Members, each
Member shall be deemed the owner of the FKPC shares thus identified in its
Capital Account, for the purposes of Section 9.04 of this Agreement.
(d) Capital Accounts may be positive, negative, or zero. No
Member shall be under any obligation to restore any deficit in its capital
account. No Member shall have any obligation to restore, or otherwise pay to the
Company, any other Member or any third party, the amount of any deficit in such
Member's capital account upon dissolution or liquidation.
(e) Each Member's capital account shall be maintained and
adjusted in accordance with the I.R.C. and the Regulations, including without
limitation, (i) the adjustments permitted or required by I.R.C. Section 704(b)
and, to the extent applicable, the principles expressed in I.R.C. Section
704(c), and (ii) the adjustments required to maintain capital accounts in
accordance with the "substantial economic effect test" set forth in the
Regulations under I.R.C. Section 704(b).
(f) Any Member who shall receive an Interest (or whose
Interest shall be increased) by means of a transfer to it of all or part of the
Interest of another Member, shall have a capital account which reflects the
capital account of the transferred Interest (or the applicable percentage
interest thereof in the case of a transfer of a part of an Interest).
(g) If distributions under this Agreement are insufficient to
return to any Member the full amount of such Member's capital contributions to
the Company, such Member shall have no recourse against any other Member or
Manager.
(h) The amount of any drawing(s) pursuant to a Project
Guarantee provided pursuant to the terms of the Letter of Support shall be
treated as a capital contribution to the Company by the Member(s) in proportion
to their respective interests in the Project Guarantee in question. The amount
of any drawing(s) pursuant to a Project Guarantee provided pursuant to the terms
of any Project Document shall be treated as a capital contribution to the
Company by the Member(s) in proportion to their respective interests in the
Project Guarantee in question if, and only if, the Lenders permit such treatment
and the Company elects to have such draw(s) receive such treatment.
Section 3.04. Return of Capital and Waiver of Partition. No Member
shall have the right to demand or receive from the Company any return of capital
contributions made pursuant to this Agreement, except with respect to
distributions during the term of this Agreement or upon dissolution of the
Company. No Member has the right to demand and receive any distribution from the
Company in any form other than cash. Except as provided in Section 4.06(a), each
Member hereby waives and renounces any right to seek a court decree of
dissolution or partition against, or to seek the appointment by a court of a
liquidator for, the Company or its property.
Section 3.05. Advances. Any Member may make advances to the Company, if
a majority of the Managers believes such advances are reasonably necessary.
However, no Member shall be obligated or required to make advances to the
Company. Advances (and if a majority of the Managers has approved the rate of
same, interest thereon) shall be repayable out of available Net Cash Flow prior
to any distributions pursuant to Section 6.01 of this Agreement. Any advances
made to the Company pursuant to this Section 3.05 shall be made upon
commercially reasonable terms and conditions.
ARTICLE 4
RIGHTS AND DUTIES OF MEMBERS
Section 4.01. Limited Liability. No Member shall be personally liable
for any debts, liabilities or obligations of the Company; provided that each
Member shall be responsible (i) for the making of any contribution to the
capital of the Company required to be made by such Member pursuant to the terms
of this Agreement, and (ii) for the amount of any distribution made to such
Member that must be returned to the Company pursuant to the Act.
Section 4.02. Project Guarantees. Each Member shall provide, fund and
be responsible for its Project Guarantee Share of any Project Guarantee
provided, and/or required to be provided, by the Company after the date of this
Agreement pursuant to the Letter of Support, the Shareholders' Agreement, as the
same may be amended from time to time, or any Project Document. The failure of a
Member to provide and fund its Project Guarantee Share of any Project Guarantee
shall constitute a material breach of this Agreement.
Section 4.03. Management of Company. The Company's business shall be
managed and controlled through the Managers appointed by the Members in
accordance with Section 5.01 and otherwise in accordance with the terms of this
Agreement.
Section 4.04. Member Approval. Notwithstanding (i) the general
authority of the Managers under Section 5.02, or (ii) any contrary provision of
the Development Agreement, the following matters (and only the following
matters) shall require the unanimous approval of the Members:
(a) any amendment of this Agreement;
(b) any merger or consolidation of or involving the
Company;
(c) any lease, sale, exchange, conveyance or other transfer or
disposition of all, or substantially all of the assets of the Company (except
that any pledge or grant of a security interest in the assets of the Company in
connection with the financing of the Project shall be within the authority of
the Managers);
(d) engaging in a business other than as provided for by
this Agreement;
(e) the assignment of any of the property of the Company in
trust for the benefit of creditors, or the making or filing, or acquiescence in
the making or filing by any other person, of a petition or other action
requesting the reorganization or liquidation of the Company under bankruptcy
law;
(f) a determination to continue the business of the
Company after the occurrence of a dissolution event;
(g) the procurement of products or services from
entities controlling, controlled by or under common control with the Managers,
the Members or their affiliates; and
(h) the volitional sale of any of the capital stock of FKPC
then owned by the Company, provided, however, that a sale of any shares of the
capital stock of FKPC pursuant to the provisions of Sections 10.h.(iii) or
10.k.(ii)(V) of the Development Agreement shall not be subject to this Section
4.04.
Section 4.05. Tax Matters Partner. The Tax Matters Partner of the
Company within the meaning of I.R.C. Section 6231(a)(7) shall be SKLLC;
provided, however, that if such person would not be treated as a party to the
proceeding within the meaning of Section 6226(c) and (d) of the Code for any
taxable year involved in a partnership proceeding, then the Tax Matters Partner
for such year shall be the Member who has the largest interest in the Company at
the time the Notice of Final Partnership Administrative Adjustment is received
who would be treated as a party to the proceeding for such year.
Section 4.06. Members Right to Terminate.
(a) Upon an adjudicated breach of the terms of this Agreement
by a Member, the non-breaching Member may, at its option, (i) treat such
material breach as the resignation of the breaching Member, or (ii) terminate
this Agreement and initiate the liquidation of the Company, provided that the
non-breaching Member shall first have provided the breaching Member and the
Company with written notice of the material breach, and the breaching Member or
the Company shall have failed to cure such material breach within 90 days after
receipt of such written notice.
(b) The provision of the rights in Section 4.06(a) does not
preclude a Member from exercising other remedies that are available at law,
before, at the same time or following the exercise of rights under Section
4.06(a). Remedies are cumulative, and the exercise of, or failure to exercise,
one or more of them by a Member shall not limit or preclude the exercise of, or
constitute a waiver of, other remedies by such Member.
ARTICLE 5
MANAGERS
Section 5.01. Appointment of Managers.
(a) Notwithstanding any contrary provision of the Development
Agreement, SKLLC shall designate three (3) Managers to act on its behalf in the
management and operation of the Company, and ARS-K shall designate two (2)
Managers to act on its behalf in the management and operation of the Company.
Such designation by a Member shall be effective upon delivery by a Member to the
other Member of a writing setting forth the name(s) of the person(s) who shall
act as Manager on behalf of such Member.
(b) Each Member may remove a Manager designated by it at any
time, with or without cause. Such removal shall be effective upon delivery by
the Member removing a Manager to the other Member(s) of a notice identifying the
Manager to be removed, stating that such Manager is to be removed, the effective
date of the removal (if no effective date is specified, the removal shall be
effective upon the date of delivery of the notice), hereinafter, the "Effective
Date", and naming the person who will replace the removed person as a Manager,
as of the Effective Date.
(c) A Manager may resign at any time by written notice to the
Members. In the event that there is a vacancy in the position of a Manager, such
vacancy shall be filled by the designee named by (i) SKLLC if such vacancy is
due to the resignation of one of the SKLLC designees, or (ii) ARS-K if such
vacancy is due to the resignation of one of the ARS-K designees.
Section 5.02. Approval of Company Actions.
(a) Except as otherwise provided in this Agreement or in the
Act, all matters relating or pertaining to the Company, its operation or its
business shall be determined by approval thereof by a majority vote of the
Managers either at a meeting duly held or by a written consent duly executed in
accordance with the terms of this Agreement, and the power to act for or to bind
the Company shall be vested exclusively in the Managers.
(b) The Managers shall, in good faith, cause the Company to
resist any action or proposed action on the part of a third-party which would
adversely impact the Interest of any Member disproportionately when compared to
its impact upon the Interest of any other Member in the Company, provided (i)
that the Managers designated by the disproportionately impacted Member shall
have given to the other Managers reasonable advance written notice describing,
with particularity, such disproportionate impact, (ii) that such good faith
endeavors shall not include actions or measures which, in the reasonable
judgment of the Managers designated by any Member, are deemed to compromise or
impact negatively either the viability of the Project or such Member's Interest
in the Company, or are inconsistent with (or would produce results which are
inconsistent with) the applicable provisions of any Project Document, (iii) that
nothing in this Agreement shall be construed to impose any obligation upon any
Member (or Manager appointed by such Member) to represent or advance any view
other than the individual economic interest or view of such Member in connection
with the negotiation, development, drafting or execution of any Project
Document, and (iv) that the provisions of this Section 5.02(b) shall not apply
in the case of a proposed Section 10. FKPC Stock Sale.
(c) The Managers shall, in good faith, cause the Company to
implement the provisions of Sections 10(h)(iii) (if required by ARS-K) and/or
10(k)(ii)(V) of the Development Agreement, subject to the provisions of Section
10(l) of the Development Agreement, and the Company shall instruct all Members
of the Board of Directors of FKPC nominated by the Company to vote in favor of
such implementation, provided, however, that nothing contained in this Section
5.02(c) shall cause (i) the Minimum SKLLC Percentage , or (ii) the NFGC
Percentage to be or become less than the highest applicable minimum amount or
percentage, respectively, (if any) set forth in the Project Documents.
(d) SKLLC hereby grants ARS-K and the Managers designated by
ARS-K a proxy to vote SKLLC's Interest in the Company as respects (i) the
"agreement of the Parties", and (ii) the selection of the "independent
consultant appointed by the Parties" referred to in the first sentence of
Section 2.2.5. of the Shareholders' Agreement, provided, however, that the
Company shall, in no event, be, become, or be deemed to be responsible to any
entity for an amount in excess of 48.19% of the "Determined Value" referred to
in Section 2.2.5. of the Shareholders' Agreement.
(e) The Managers shall have the power and authority to execute
and deliver contracts, instruments, filings, notices, certificates and other
documents on behalf of the Company, and shall have power and authority to take
such other action on behalf of the Company as a majority of the Managers deems,
in good faith, to be reasonably necessary or appropriate to defend, protect,
preserve and maintain the interests of the Company, as such interests may be
impacted by any provision or combination of provisions of any one or more of the
Project Documents. Except as otherwise required by applicable law, any such
contract, instrument, certificate or other document shall require the signature
of any three (3) Managers or the signature of such officer, employee or agent to
whom authority has been delegated by a majority of the Managers, and copies
thereof shall be provided to the Members as soon as practicable after the same
shall have been executed on behalf of the Company.
Section 5.03. Meetings of Managers. Meetings of Managers may be held in
person or by means of telephonic or video communication and shall be held upon
request of any Manager. Notice of a meeting shall be given to each Manager by
the Manager requesting the meeting at least seventy-two hours prior to the time
of the meeting. Three (3) Managers present at or participating in a meeting
shall constitute a quorum.
Section 5.04. Actions by Written Consent.
(a) Subject to the provisions of subsection
(b) of this Section 5.04, any action may be taken without a meeting if a consent
in writing, setting forth the action so taken, is signed by at least three (3)
of the Managers. Any written action may be executed in counterparts and
transmitted and executed via facsimile.
(b) Prior to any Manager signing a writing
described in Section 5.04(a) of this Agreement, each Manager shall be provided
(via facsimile or otherwise) as nearly simultaneously as may be practicable with
a writing setting forth the action proposed to be taken and shall, insofar as
may be practicable, be afforded an opportunity to consult with the other
Managers with respect to such proposed action.
Section 5.05. Reports. The Managers shall cause to be prepared and kept
at the principal office of the Company and/or distributed to the Members records
and reports in accordance with the requirements of the Act. Further, the
Managers shall cause copies of all financial and other reports concerning the
Project to be distributed to the Members as soon as practicable after receipt
thereof by the Company.
Section 5.06. Compensation; Reimbursement of Expenses. The
Managers shall not receive compensation for services rendered to the Company but
shall be reimbursed for any expense properly incurred on behalf of the Company.
Section 5.07. Books of Account. The Company's books and records shall
be maintained by the Managers and shall reflect clearly and accurately all
transactions and other matters relative to the Company's business as are usually
entered into books and records of account maintained by persons and entities
engaged in businesses of a like character. The Managers shall cause summaries of
the Company's financial condition to be provided to the Members quarterly.
Section 5.08. Bank Accounts. The Company's funds and investments shall
be held in one or more bank or other accounts, including brokerage or other
investment accounts, established in the name of the Company, as determined by
the Managers. Funds may be withdrawn from the Company's accounts upon the
signature of any officer, employee or agent to whom authority to do so has been
delegated by the Managers.
ARTICLE 6
DISTRIBUTIONS AND ALLOCATIONS
Section 6.01. Distribution of Net Cash Flow. Except as otherwise
provided in Sections 9.03 or 9.04 hereof, the Managers shall cause all of the
Company's Net Cash Flow to be distributed from time to time, first: to the
Members to recover fees and costs as provided in Sections 12 and 13 of the
Development Agreement, and; second, to the Members in accordance with their
respective interests in the Net Cash Flow as provided in Section 10(f) of the
Development Agreement, adjusted as provided in sub-sections 10(h), 10(i), 10(j)
and 10(k) of the Development Agreement.
The Mangers shall cause the Net Cash Flow to be distributed by the
Company no less frequently than quarterly, to the extent available, and, subject
to the restrictions in the Project Documents, may make such distributions more
frequently so long as doing so will not impair the working capital of the
Company.
Section 6.02. Allocation of Taxable Net Income and Loss. The taxable
net income, loss, gains, deductions and credits of the Company shall be
allocated between the Members in accordance with the Member's respective
interests in the Net Cash Flow of the Company as provided in sub-section 10(f)
of the Development Agreement, adjusted as provided in sub-sections 10(h), 10(i),
10(j) and 10(k) of the Development Agreement, all of the foregoing to be in
conformity with standard federal income tax accounting principles consistently
applied. Notwithstanding the foregoing; (i) the gain or loss realized by the
Company upon a sale of all or substantially all of the assets of the Company as
provided in Section 9.03 hereof shall be allocated equally between the Members;
and (ii) the gain on a Section 10. FKPC Stock Sale shall be allocable solely to
SKLLC.
Section 6.03. Tax Matters Handled by the Company. The Managers, acting
on behalf of the Company pursuant to the direction(s) of a majority of the
Managers, shall have full authority to negotiate with, to conclude agreements
with or to refuse to agree with any taxing authorities as to the taxable income
of the Company for any taxable period and any determination of such taxable
income shall be binding upon the Members each of whom individually shall be
liable to pay any additional tax and interest or entitled to receive any refund
and interest resulting from such determination. The Company shall not be
responsible for any loss or damage to any Member, as a result of any such
determination or failure to arrive at a determination. The Company may also make
such elections including, without limitation, an election under Section 754 of
the Code, as the Managers may determine.
ARTICLE 7
CHANGES IN MEMBERS OR INTERESTS
Section 7.01. New Members. New Members may be admitted to the Company
on terms unanimously approved by all Members and upon signing a counterpart of
this Agreement, as the same may have been amended or supplemented from time to
time.
Section 7.02. Transfer Restrictions. No Member may sell, assign,
encumber, pledge, grant a security Interest in, or otherwise dispose of,
voluntarily or involuntarily, in whole or in part, its Interest in the Company
without the prior written consent of all Members (which said consent shall not
be unreasonably withheld or delayed) and any attempt to do so without such
consent shall be void and of no force and effect.
Section 7.03. Bankruptcy of a Member. In the event of a Bankruptcy (as
defined in the Act) of a Member, such Member shall cease to be a Member of the
Company.
Section 7.04. Resignation of a Member. A Member may resign at any time
upon, and effective as of the end of, not less than six (6) months prior written
notice to the Company at its principal place of business and to each of the
remaining Members. Unless the resignation of a Member constitutes a dissolution
event under Section 9.01(a) of this Agreement, the resigning Member shall not be
entitled to any distribution or payment as a result or by virtue of such
resignation pursuant to Section 18-604 of the Act or otherwise, until such time
as the Company is liquidated, and then only as provided for in, and pursuant to,
Section 9.03(d) of this Agreement ("Resignation Distribution").
ARTICLE 8
INDEMNIFICATION
Section 8.01. Indemnification. The Company will indemnify and hold
harmless the Members, and their officers, directors, employees, agents,
shareholders, parents, partners and equity holders, the Managers and officers of
the Company (each an "Indemnified Person") from and against any and all losses,
claims, demands, costs, damages, liabilities, expenses of any nature (including
reasonable attorneys fees and charges) judgments, fines, settlements and other
amounts arising from any and all claims, demands, actions, suits or proceedings,
civil, criminal, administrative or investigative, in which the Indemnified
Person may be involved, or threatened to be involved, as a party or otherwise,
arising out of or incidental to the business of the Company, regardless of
whether the Indemnified Person continues to be in such capacity at the time any
such liability or expense is paid or incurred, if (i) the Indemnified Person
acted in good faith and in a manner it or he reasonably believed to be
consistent with the provisions of this Agreement and in, or not opposed to, the
interests of the Company, and, with respect to any criminal proceeding, has no
reason to believe his conduct was unlawful, and (ii) the Indemnified Person's
conduct did not constitute actual fraud, gross negligence or willful misconduct.
Section 8.02. Expenses. Expenses incurred by an Indemnified Person in
defending any claim, demand, action, suit or proceeding subject to Section 8.01
shall, from time to time, be advanced by the Company prior to the final
disposition of such claim, demand, action, suit or proceeding upon receipt by
the Company of an undertaking by or on behalf of the Indemnified Person to repay
such amounts if it is ultimately determined that such person is not entitled to
be indemnified as authorized in Section 8.01. The indemnification provided by
Section 8.01 shall be in addition to any other rights to which an Indemnitee may
be entitled under any agreement, as a matter of law or equity, or otherwise,
shall continue as to an Indemnified Person who has ceased to serve in such
capacity and shall inure to the benefit of the heirs, successors, assigns, and
administrators of the Indemnified Person.
Section 8.03. Development Agreement Section 18.i. Litigation.
It is expressly understood and agreed that none of the provisions of Sections
8.01 or 8.02 of this Agreement shall apply in the case of, or with respect to,
litigation referred to in Section 18.i. of the Development Agreement.
ARTICLE 9
DISSOLUTION AND ASSET SALES
Section 9.01. Events of Dissolution. The Company shall be
dissolved upon the earliest to occur of the following:
(a) the resignation, Bankruptcy (as defined in the Act) or
dissolution of any Member, or the occurrence of any other event that terminates
the continued membership of any Member in the Company under the Act (but
excluding a termination of membership resulting from a transfer of a Member's
entire Interest in accordance with Section 7.02), unless, in any such event, the
business of the Company is continued by the written consent of each remaining
Member within ninety (90) days following the occurrence of any such event;
(b) the sale of all or substantially all of the Company's
assets;
(c) the sale of all of the capital stock of FKPC then
owned by KPP;
(d) the sale of the Complex by FKPC;
(e) FKPC's distribution to its shareholders of the net
proceeds of insurance attributable to the physical destruction of substantially
the entire Complex under circumstances where the Complex is not restored or
rebuilt;
(f) any event which definitively terminates the
operations of FKPC;
(g) the unanimous written agreement of the Members to
dissolve the Company; or
(h) the end of the fixed term of the Company.
Section 9.02. Winding Up. Upon dissolution of the Company, a majority
of the Managers, or if there are no Managers, the Members, shall designate a
person, who may be one of the Managers or the Members, to wind up the affairs of
the Company (herein referred to herein as the "Liquidator"). The Liquidator
shall proceed to wind up the business and affairs of the Company in accordance
with the terms of this Agreement and the Act. A reasonable amount of time shall
be allowed for the period of winding up in light of prevailing market conditions
and so as to avoid the undue loss in connection with any sale of Company assets.
This Agreement shall remain in full force and effect during the period of
winding up. Following the completion of the winding up of the affairs of the
Company and the distribution of its assets, the Company shall be deemed
terminated and the Liquidator shall file a certificate of cancellation in the
office of the Secretary of State of the State of Delaware as required by the
Act.
Section 9.03. Distribution on Liquidation or the Sale of All or
Substantially All of the Company's Assets. Upon the sale of all or substantially
all of the assets of the Company, or in connection with the winding up of the
Company, the assets of the Company shall be distributed in accordance with the
following priority:
(a) First, to creditors, including Members and Managers who
are creditors (other than by reason of the operation and effect of Section
18-601 of the Act) to the extent otherwise permitted by law, in satisfaction of
liabilities of the Company (whether by payment or the making of reasonable
provision for payment thereof);
(b) Second, to the Members to the extent of their then
respective unsatisfied entitlements (if any) under the provisions of Sections 12
and 13 of the Development Agreement, in the order of priority set forth in
Section 13 of the Development Agreement.
(c) Third, to the Members in satisfaction of liabilities
for distributions under Section 18-601 of the Act;
(d) Fourth, to former Members in satisfaction (without
interest) of liabilities for distributions under Section 18-604 of the Act,
computed on the basis of the resigning Member's percentage interest in the Net
Cash Flow distribution next preceding the effective date of such Member's
resignation;
(e) Fifth, to the Members in proportion to their respective
capital account balances, to the extent the same are positive, up to the full
amount thereof (after giving effect to adjustments to capital accounts through
the date of distribution); and
(f) all remaining assets shall be distributed in equal shares
to SKLLC and ARS-K, unless either of them shall be entitled to a Resignation
Distribution pursuant to Section 9.03(d) of this Agreement, in which event, one
hundred (100%) percent of the remaining assets shall be distributed to such of
them as shall not be entitled to a Resignation Distribution.
Section 9.04 Distribution of Net Proceeds of Section 10. FKPC Stock
Sale. In the event of a Section 10. FKPC Stock Sale, one hundred (100%) percent
of the net proceeds of such sale shall be distributed to SKLLC. SKLLC shall be
responsible for any taxes which are levied against the Company, any of its
Members, or any of its Members' owners in connection with, or as a direct result
and consequence of, a Section 10. FKPC Stock Sale.
ARTICLE 10
GENERAL
Section 10.01. Amendment. This Agreement may be amended only by a
written agreement signed by each of the Members. Any waiver of any of the terms
thereof shall be effective only for the instance for which it is given and shall
not constitute a waiver of a subsequent occurrence or of any other provision
hereof.
Section 10.02. Notices. Any notice under the provisions hereof shall be
in writing and shall be deemed given when delivered in person, via messenger or
facsimile transmission to, or deposited in the United States mails, postage
prepaid, addressed as follows:
If to SKLLC: c/o Sceptre Power Company
Suite 1200
6 Hutton Centre Drive
Santa Ana, California 92707
Facsimile: 714-546-1801
If to ARS-K: ARS Kabirwala Limited Partnership
2 Laurel Avenue
Wellesley, Massachusetts 02181
Facsimile: 617-235-2313
Section 10.03. Binding Agreement. This Agreement shall be
binding upon the executors, administrators, estates, heirs and legal successors
of the parties hereto.
Section 10.04. Governing Law. This Agreement and all questions
arising hereunder shall be determined in accordance with the law of Delaware.
Section 10.05. Severability. If any term or other provision of this
Agreement shall be declared to be invalid, illegal, or incapable of being
enforced by any rule of law or public policy, all other terms, provisions and
conditions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party to this
Agreement. Upon any binding determination that any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties to this Agreement as closely as possible in
an acceptable and legally enforceable manner, to the end that the transactions
contemplated hereby may be effected to the full extent possible.
Section 10.06. The Development Agreement.
(a) The Development Agreement is not incorporated herein and
shall survive the execution and entry into force of this Agreement.
(b) The parties expressly acknowledge and agree that, after
the execution and entry into force of this Agreement, (i) the provisions of
Sections 2 and 3.a. of the Development Agreement shall have no further force or
effect, and (ii) the provisions of Section 3.b. of the Development Agreement
shall be suspended unless and until the Lenders' requirement that the members of
the FKPC Board of Directors nominated by the Company shall be senior officers of
National Fuel Gas Company shall have become inoperative due to (A) the
occurrence of the Release Date (as that term is defined in the Project
Documents), or (B) the Lenders' written withdrawal of such requirement.
(c) While preserving the sub-loan calculation provision of
Section 10.k.(ii) of the Development Agreement, the parties expressly
acknowledge and agree that the provisions of Sections 10.d., 10.e.(ii), and
10.k.(i) of the Development Agreement became inoperative prior to the execution
of this Agreement, given the Lenders' posture relative to sub-loans of the type
therein referred to.
(d) The parties expressly acknowledge and agree that, for all
purposes relevant under the Development Agreement, they have "determined prior
to Financial Closing that the Tax Rate will be different" and that the said "Tax
Rate" will have "change[d] prior to Financial Closing" (as the quoted phrases
are used in Section 10.k. of the Development Agreement), in the event that
Horizon Energy Development, Inc., the Managing Member of SKLLC ("Horizon"),
shall fund any portion of the Equity Investment prior to Financial Closing.
Further, the parties expressly acknowledge and agree that, in the event that
Horizon shall fund any portion of the Equity Investment prior to Financial
Closing, Section 10.k.(iii) of the Development Agreement shall be without force
or effect from and after the date on which Horizon funds the initial installment
of the Equity Investment.
(e) Without thereby implicating either the provisions of
Section 10.h.(i) of the Development Agreement or the Section 10.h.(i)
Contribution, the parties expressly acknowledge and agree that, for the purposes
of Section 10.k.(ii)(B) of the Development Agreement, any reduction of the
Equity Commitment pursuant to Section 10.k.(ii)(III) of the Development
Agreement will cause the Equity Commitment to be reduced to a level below that
which is acceptable to SPC, SKLLC and Horizon.
(f) The parties expressly acknowledge and agree that, for all
purposes relevant under the Development Agreement, the term "Shareholders'
Agreement" as therein used shall include any Project Document which supplements,
amends, restates, supersedes, or replaces the said "Shareholders' Agreement", in
whole or in part. In this connection, SKLLC agrees, subject to its sole, good
faith, individual discretionary judgment concerning the risks and the
opportunities for success attendant thereon, to attempt to resist (and, insofar
as practicable, afford ARS-K an opportunity to resist) any effort on the part of
a third-party to eliminate, through any such Project Document, the entitlement
provided for in Section 2.2.5. of the Shareholders' Agreement between Fauji
Foundation and KPP Investment, L.L.C. dated June 12, 1994, provided that ARS-K
shall have given SKLLC reasonable advance written notice describing such effort
with particularity.
(g) The parties expressly acknowledge and agree that, for the
purposes of Section 10.l.(v) of the Development Agreement, the terms
"Implementation Agreement" and "Financing Documents" as therein used shall
include any Project Document which supplements, amends, restates, supersedes, or
replaces the said "Implementation Agreement" or "Financing Documents", in whole
or in part.
(h) The parties (i) agree that Section 10.m. of the
Development Agreement shall be and that the same hereby is amended by deleting
from the first sentence thereof the parenthetical reference following the
acronym "KPP"; and (ii) expressly acknowledge that the provisions of this
Agreement appropriately implement and accordingly satisfy all of the provisions
of Section 10.m. of the Development Agreement which follow the first sentence of
that sub-section.
(i) The parties expressly acknowledge and agree that
the "non-PIDC Costs" referred to in Section 11.c. of the Development Agreement
equal $337,361.
(j) The parties expressly acknowledge and agree that they have
agreed, and hereby confirm their agreement, that, as respects the "Other INTRAG
Funded Costs" referred to Section 11.d. of the Development Agreement, (i) such
costs amount to $0.00 unless INTRAG and/or ARS-K shall have provided SPC the
"OIFC List" referred to in Section 11.d. of the Development Agreement on or
before June 30, 1996, and (ii) such costs shall in no event exceed $50,000.
(k) The parties expressly acknowledge that they have agreed,
and hereby confirm their agreement, as follows:
(i) No amount is due INTRAG or ARS-K in
respect of the "PIDC" referred to in the Development Agreement unless and until
the conditions set forth in P. 5 of the Side Agreement dated June 12, 1994 by
and between SPC and INTRAG have been satisfied, in which event, the parties
hereby acknowledge and confirm that said "PIDC" shall equal $248,000;
(ii) The "Interim Costs" referred to in
the Development Agreement shall in no event exceed the sum of $116,503;
(iii) The SPC development costs eligible for
reimbursement in accordance with the provisions of the third sentence of Section
12.a. of the Development Agreement amount to $657,624, as respects the period
September 1, 1993 through April 30, 1994;
(iv) With respect to the "Time and
Overhead Charges" referred to in the Development Agreement, the "Time and
Overhead Charges" reimbursable to ARS-K in respect of the period through May 31,
1994 equate to $1,449,875, and the "Time and Overhead Charges" reimbursable to
SPC in respect of the period through May 31, 1994 equate to $271,375;
(v) The "Non-PIDC Costs" referred to in
the Development Agreement equate to $337,361; and
(vi) The "O'Brien Cost Recovery"
referred to in the Development Agreement equates to $183,549.
(l) The parties expressly acknowledge and agree that, in the
event of a conflict (or claimed conflict) between any provision of this
Agreement or any provision of the Development Agreement, on the one hand, and
any provision or combination of provisions of any Project Document(s), on the
other hand, the provisions of the Project Document(s) shall govern.
(m) As respects the continued development of the Project, the
parties hereby expressly acknowledge, confirm and ratify the provisions of
Section 18.j. of the Development Agreement, and further expressly acknowledge
that they have equal access to the Lenders and to drafts of the Project
Documents.
(n) The parties expressly acknowledge that, except in the
event and to the extent of a Section 10.h.(i) Contribution, ARS-K's interest in
the Project and its Interest in the Company is a "carried interest" and that
therefore and in light of the provisions of Section 10. of the Development
Agreement, the interests of the Members in the Project and the Interests of the
Members in the Company may, from time to time, be at variance with each other.
Under these circumstances, the parties acknowledge and confirm that neither
SKLLC nor the Managers appointed by SKLLC shall be obligated to act or refrain
from acting (or to cause the Company to act or to refrain from acting) in any
particular manner or in a manner inconsistent with SKLLC's economic interest,
solely because SKLLC controls the Company's Board of Managers, provided,
however, that this sentence shall not relief SKLLC of any contractual obligation
under this Agreement, the Development Agreement, or any other agreement executed
by SKLLC and ARS-K on or after the date first above written.
Section 10.07. Claims.
(a) No Member or Manager appointed by such
Member, and no affiliate or officer, director, employee, agent, attorney,
shareholder, parent or partner of such Member or affiliate (hereinafter, the
"Acting Entity") shall be liable to any other Member or Manager appointed by
such Member or affiliate or officer, director, employee, agent, attorney,
shareholder, parent or partner of such Member or affiliate in respect of any
action taken or omitted in good faith by the Acting Entity and in the reasonable
belief that such action or inaction was consistent with the provisions of this
Agreement and in, or not opposed to, the interests of the Company.
(b) In the event of litigation between the
parties hereto arising out of or in connection with this Agreement, the
reasonable attorneys' fees and costs (including the costs of and attorneys' fees
in connection with an appeal) of the party prevailing in such litigation shall
be paid by the other party.
Section 10.08. Lender Minimum Requirements. Neither SKLLC nor any
Manager appointed by SKLLC shall seek to increase the NFGC Percentage or the
Minimum SKLLC Percentage above their respective highest minimum levels set
forth, from time to time, in any Project Document.
Section 10.09. Counterparts. This Agreement may be executed in several
counterparts, and all so executed shall constitute one agreement, binding on all
of the parties hereto, notwithstanding that all of the parties are not signatory
to the original or the same counterpart. Delivery of an executed agreement to
the other party by facsimile transmission shall constitute execution of a
counterpart of this Agreement.
IN WITNESS WHEREOF the undersigned have caused this Limited Liability
Company Agreement of KPP Investment, L.L.C. to be executed by their duly
authorized officers as of the day and year first above written.
ARS KABIRWALA LIMITED PARTNERSHIP
By: ARS Kabirwala Corporation
Its: General Partner
By: /s/ Tafweez E. Chauhan
--------------------------------------------
Its: President
SCEPTRE KABIRWALA, L.L.C.
By: /s/ Ken Ross
--------------------------------------------
Its: Manager
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE,
DO HEREBY CERTIFY "KPP INVESTMENT, L.L.C." IS DULY FORMED UNDER THE LAWS OF THE
STATE OF DELAWARE AND IS IN GOOD STANDING AND HAS A LEGAL EXISTENCE SO FAR AS
THE RECORDS OF THIS OFFICE SHOW, AS OF THE FIFTEENTH DAY OF JANUARY, A.D. 1997.
AND I DO HEREBY FURTHER CERTIFY THAT THE ANNUAL TAXES HAVE BEEN
PAID TO DATE.
/s/ Edward J. Freel
---------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 8286301
DATE: 01-15-97
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
SCEPTRE KABIRWALA, L.L.C.
This amended and restated limited liability company agreement of
Sceptre Kabirwala, L.L.C. (the "Agreement") is made and entered into as of
January 26, 1996, by and between Sceptre Kabirwala Power, Inc., a Delaware
corporation ("SKPI"), PPD Kabirwala, Inc., a Delaware corporation ("PPD"), and
Horizon Energy Development, Inc., a New York corporation ("Horizon").
RECITALS:
WHEREAS, SKPI and PPD heretofore entered into a limited liability
company agreement dated as of May 27, 1994 (the "Prior Agreement") which
provided for the formation of a Delaware limited liability company to be known
as Sceptre Kabirwala L.L.C. (the "Company");
WHEREAS, SKPI and PPD formed the Company by filing its Certificate of
Formation with the Secretary of State of the State of Delaware on May 27, 1994;
WHEREAS, the Prior Agreement contemplates that, together with ARS
Kabirwala Limited Partnership, a Delaware limited partnership ("ARS-K"), the
Company would form a Delaware limited liability company, KPP Investment, L.L.C.
("KPP") and that KPP would join with the Fauji Foundation ("Fauji") in the
formation of a company organized under the laws of Pakistan to develop, own,
finance and operate an approximately 144 MW (net) low Btu gas-fired plant near
Kabirwala, District of Khanewal, in the Punjab Province of Pakistan (the
"Project");
WHEREAS, Sceptre Power Company, a California general partnership
("SPC"), and INTRAG, Inc., a Massachusetts corporation ("INTRAG") entered into a
development agreement, so entitled, effective as of May 25, 1994, respecting the
Project and said Development Agreement was amended and supplemented by a Side
Agreement, so entitled, entered into by and between SPC and INTRAG as of June
12, 1994 ("Development Agreement");
WHEREAS, SPC has assigned all of its right, title and interest in, to
and under the Development Agreement to the Company, and the Company has assumed
the obligations of SPC under the Development Agreement;
WHEREAS, INTRAG has assigned all of its right, title and interest in,
to and under the Development Agreement to ARS-K, and ARS-K has assumed the
obligations of INTRAG under the Development Agreement;
WHEREAS, KPP has been formed and KPP and Fauji have entered into a
Shareholders' Agreement, dated as of June 12, 1994 ("Shareholders' Agreement"),
which provides for the formation and governance under the laws of Pakistan of a
company known as Fauji Kabirwala Power Company Limited ("FKPC") which company is
to develop, own, finance and operate the Project;
WHEREAS, FKPC was formed under the laws of Pakistan and received its
certificate of incorporation on July 28, 1994;
WHEREAS, FKPC has entered into an Implementation Agreement with the
Government of Pakistan, a Gas Supply Agreement with the Oil & Gas Development
Corporation, a Power Purchase Agreement with the Water and Power Development
Authority and a Gas Supply/Purchase Agreement with Sui Northern Gas Pipeline
Company, some of which said agreements are being or have been renegotiated;
WHEREAS, in light of the continuing development of the Project, SKPI
and PPD desire to amend and restate the Prior Agreement as hereinafter set
forth, in order to reflect, among other things, SKPI's assignment of its
Interest in the Company to Horizon, Horizon's acceptance of such assignment and
its admission to the Company as a Member thereof, and the consequent termination
of SKPI's Interest in the Company; and
WHEREAS, this Agreement is entered into prior to, and in contemplation
of, (i) the Project attaining "Financial Closing" (as that term is defined in
the Development Agreement), and (ii) the development, negotiation and execution
of the documents requisite to attaining such "Financial Closing", hereinafter,
the "Project Documents";
NOW, THEREFORE, in consideration of the foregoing premises and of other
good and valuable consideration, receipt and sufficiency of which is hereby
acknowledged, the parties hereto do hereby agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.01. Certain Definitions. As used herein:
"Act" means the Delaware Limited Liability Company Act, as amended from
time to time.
<PAGE>
"After Tax I.R.R." means the rate of discount which causes the present
value of the Equity Return (adjusted for pro forma income taxes and
calculated on a stand alone basis) to be equal to the present value of
the Investment.
"Carried Interest Computation Period" means the following respective
three (3) month periods, to wit: October through December, January
through March, April through June, and July through September, as the
case may be.
"Carried Interest Distributions" means, collectively, the distributions
to PPD provided for in Section 6.01(a) of this Agreement.
"Certificate" means the certificate of formation of the Company as the
same may be amended and/or restated from time to time in accordance
with the Act.
"Commercial Operations Date" bears the meaning attributable thereto in
the "Revised Lender Draft No. 5 Dated 20 December 1995" of the "Amended
and Restated Power Purchase Agreement", by and between The Pakistan
Water and Power Development Authority and Fauji Kabirwala Power Company
Ltd., as the same may be revised prior to execution thereof and amended
from time to time thereafter.
"Company" means Sceptre Kabirwala, L.L.C.
"Distributive Interest" means, at any particular time, following the
Commercial Operations Date, with respect to each Member, the interest
of such Member in the Net Cash Flow of the Company, expressed as a
percentage of the total of the interests of all Members in the Net Cash
Flow of the Company, at such time. At all times following the
Commercial Operations Date, the combined Distributive Interest of all
Members shall equal one hundred (100%) percent.
"Equity Return" means the cash return experienced by Horizon on its
Investment in the Project.
"Interest" means the ownership interest of a member in the Company
(which shall be considered personal property for all purposes),
consisting of (i) such Member's interest in profits, losses,
allocations and distributions; (ii) such Member's right to vote or
grant or withhold consents with respect to Company matters as provided
herein or in the Act; and (iii) such Member's other rights and
privileges, as provided herein and in the Act.
<PAGE>
"Investment" means that part of Horizon's capital contributions to the
Company which the Company has contributed to KPP, and which KPP, in
turn, has devoted to the purchase of shares of the capital stock of
FKPC.
"I.R.C." means the Internal Revenue Code of 1986, as amended.
"Managers" means those persons appointed by the Members in accordance
with the provisions of Section 5.01 for the management of the business
of the Company.
"Members" means SKPI, PPD and any other Person who shall have been
admitted to the Company as a Member thereof in accordance with the
terms of this Agreement.
"Net Cash Flow" means, with respect to the period for which it is
computed, the Company's aggregate gross receipts of cash (excluding
loan proceeds, advances, capital contributions, and payments of
principal on loans made by the Company) less (a) cash used to fund cash
reserves which the Managers deem reasonably necessary for the proper
operation of the Company's business, (b) cash used to pay Company
expenses (including, but not limited to, debt service) not paid for out
of the Company's cash reserves previously set aside, and (c) cash used
to pay fees and expenses authorized by this Agreement and not paid for
out of the Company's reserves previously set aside, all for the like
period.
"Percentage Interest" means at any particular time with respect to each
Member, the capital contributions made by such Member to the capital of
the Company on or before such time expressed as a percentage of the
total capital contributions of all the Members to the capital of the
Company made on or before such time. The combined Percentage Interest
of all Members shall at all times equal one hundred (100%) percent.
"Person" bears the meaning attributable thereto under Section
18-101(12) of the Act.
"Project" means an approximately 144 MW gas fired electricity
generating plant located near Kabirwala, Punjab Province, Pakistan.
"Project Net Cash Flow" means, with respect to the period for which it
is calculated, the Company's gross cash receipts from KPP which
represent or reflect income or other return on (but not of) KPP's
investment in the capital stock of FKPC (excluding payments of
principal and interest on loans made by the Company or KPP to FKPC),
less so much of the following items as is attributable to the Company's
ownership of an interest in KPP, computed for the like period, in
accordance with generally accepted accounting principles: (a) cash used
to fund cash reserves which the Managers deem reasonably necessary for
the proper operation of the Company's business, (b) cash used to pay
Company expenses (including, but not limited to, debt service) not paid
for out of the Company's cash reserves previously set aside, and (c)
cash used to pay fees and expenses authorized by this Agreement and not
paid for out of the Company's reserves previously set aside.
"Regulations" means the Treasury Regulations promulgated under the
I.R.C., as from time to time in effect.
ARTICLE 2
NAME, OFFICE AND FORMATION OF COMPANY
Section 2.01. Formation. SKPI and PPD hereby ratify the formation of
the Company by the filing of the Certificate on May 27, 1994 with the Secretary
of State of the State of Delaware and hereby agree and constitute this Amended
and Restated Limited Liability Company Agreement as the limited liability
company agreement of the Company.
Section 2.02. Name. The name of the Company is Sceptre Kabirwala,
L.L.C.
Section 2.03. Registered Office and Agent. The registered office
and agent of the Company are as set forth in the Certificate.
Section 2.04. Principal Place of Business. The Company's principal
place of business, and the place where its books and records shall be kept,
shall be 6 Hutton Centre Drive, Santa Ana, California, or such other place as
from time to time determined by the Members. The Company's books and records
will be available for inspection and copying by the Members at such office, upon
reasonable notice to the Managers, during regular business hours.
Section 2.05. Powers. The Company shall have all the powers of a
limited liability company organized pursuant to the Act including, but not
limited to, the development, ownership, financing, construction and operation of
the Project, either alone or in conjunction with others, including but not
limited to INTRAG, ARS-K, Fauji and their respective affiliates, and in
connection therewith to be a member, partner or shareholder of entities formed
for the development, ownership, financing, construction and operation of the
Project. The Members hereby authorize, ratify and adopt as actions of the
Company all actions taken on behalf of the Company to form KPP, including the
execution and filing of the Certificate of Formation of KPP and the execution of
and entry into by the Company of the Limited Liability Company Agreement of KPP.
Execution of such certificate and such agreement by an officer of either Member
on behalf of the Company shall constitute the same as the act of the Company.
Section 2.06. Term. The Company shall dissolve on December 31,
2044, unless earlier dissolved in accordance with this Agreement or pursuant
to the Act.
Section 2.07. Transfer of SKPI's Interest in the Company. SKPI has
assigned and transferred, and hereby assigns and transfers, one hundred (100%)
percent of its Interest in the Company to Horizon which, by executing this
Agreement, accepts such assignment. PPD hereby consents to SKPI's said
assignment and transfer of one hundred (100%) percent of its Interest in the
Company to Horizon. Upon Horizon's execution of a counterpart of this Agreement,
Horizon shall be and become a Member of the Company and SKPI's membership in the
Company shall, for all intents and purposes terminate.
ARTICLE 3
CAPITALIZATION
Section 3.01. Capital Contributions. The initial Capital
Contributions of the original Members are as follows:
SKPI $500.00
PPD $500.00
Section 3.02. Additional Capital Contributions. Members may make
additional capital contributions under such terms and conditions as may be
approved by the Managers. If the Managers determine that additional capital
contributions are required for purposes of the Company, the existing Members
shall have the first right, but not the obligation, to contribute the additional
capital. Each Member shall have the right to contribute a portion of any
additional capital in proportion to its Percentage Interest. In the event that
not all the Members exercise their rights to contribute their proportionate
share of the additional capital, the amount of additional capital needed shall
be divided among such Members desiring to contribute additional capital in the
same proportion as such respective Members' Percentage Interests bear to the
total Percentage Interests of all Members exercising their right to contribute
additional capital to the Company.
Section 3.03. Capital Accounts.
(a) A separate capital account shall be maintained for
each Member.
(b) Each Member's capital account shall be credited with the
amount of money and the fair market value of property (net of liabilities
secured by such contributed property which the Company assumes or takes subject
to) contributed by the Member to the capital of the Company; the amount of any
Company liabilities assumed by such Member (other than in a distribution of
Company property); and such Member's distributive share of Company profits. Each
Member's capital account shall be debited with the amount of money and the fair
market value of property (net of any liabilities which such Member assumes or
takes subject to) distributed to such Member by the Company; the amount of any
liabilities of such Member assumed by the Company (other than in connection with
a contribution); and such Member's distributive share of Company losses
(including items that may be neither deducted nor capitalized for federal income
tax purposes).
(c) Capital accounts may be positive, negative or
zero. No Member shall be under any obligation to restore any deficit in its
capital account.
(d) Each Member's capital account shall be maintained and
adjusted in accordance with the I.R.C. and the Regulations, including without
limitation, (i) the adjustments permitted or required by I.R.C. Section 704(b)
and, to the extent applicable, the principles expressed in I.R.C. Section
704(c), and (ii) the adjustments required to maintain capital accounts in
accordance with the "substantial economic effect test" set forth in the
Regulations under I.R.C. Section 704(b).
(e) Any Member who shall receive an Interest (or whose
Interest shall be increased) by means of a transfer to it of all or part of the
Interest of another Member, shall have a capital account which reflects the
capital account of the transferred Interest (or the applicable percentage
interest thereof in the case of a transfer of a part of an Interest).
(f) If distributions under this Agreement are insufficient to
return to any Member the full amount of such Member's capital contributions to
the Company, such Member shall have no recourse against any other Member or
Manager. No Member shall have any obligation to restore, or otherwise pay to the
Company, any other Member or any third party, the amount of any deficit in such
Member's capital account upon dissolution or liquidation.
Section 3.04. Return of Capital and Waiver of Partition. No Member
shall have the right to demand or receive from the Company any return of capital
contributions made pursuant to this Agreement, except with respect to
distributions during the term of this Agreement or upon dissolution of the
Company. No Member has the right to demand and receive any distribution from the
Company in any form other than cash. Except as provided in Section 4.05(a), each
Member hereby waives and renounces any right to seek a court decree of
dissolution or partition against, or to seek the appointment by a court of a
liquidator for, the Company or its property.
Section 3.05. Advances. Any Member may make advances to the Company, if
the Managers believe such advances are reasonably necessary. However, no Member
shall be obligated or required to make advances to the Company. Advances (and if
the Managers have approved the rate of same, interest thereon) shall be
repayable out of available Net Cash Flow prior to any distributions pursuant to
Section 6.01 of this Agreement. Any advances made to the Company pursuant to
this Section 3.05 shall be made upon commercially reasonable terms and
conditions.
ARTICLE 4
RIGHTS AND DUTIES OF MEMBERS
Section 4.01. Limited Liability. No Member shall be personally liable
for any debts, liabilities or obligations of the Company; provided that each
Member shall be responsible (i) for the making of any contribution to the
capital of the Company required to be made by such Member pursuant to the terms
of this Agreement, and (ii) for the amount of any distribution made to such
Member that must be returned to the Company pursuant to the Act.
Section 4.02. Management of Company. The Company's business shall be
managed and controlled through the Managers appointed by the Members in
accordance with Section 5.01 and otherwise in accordance with the terms of this
Agreement.
Section 4.03. Member Approval. Notwithstanding the general
authority of the Managers under Section 5.02, the following matters shall
require the unanimous approval of the Members:
(a) any amendment of this Agreement;
(b) any merger or consolidation of or involving the
Company;
(c) any lease, sale, exchange, conveyance or other transfer or
disposition of all, or substantially all of the assets of the Company (except
that any pledge or grant of a security interest in the assets of the Company in
connection with the financing of the Project shall be within the authority of
the Managers);
(d) engaging in a business other than the development,
ownership, financing, construction and operation of the Project and related
activities;
(e) the assignment of any of the property of the Company in
trust for the benefit of creditors, or the making or filing, or acquiescence in
the making or filing by any other person, of a petition or other action
requesting the reorganization or liquidation of the Company under bankruptcy
law; and
(f) a determination to continue the business of the
Company after the occurrence of a dissolution event.
Section 4.04. Tax Matters Partner. The Tax Matters Partner of the
Company within the meaning of I.R.C. Section 6231(a)(7) shall be Horizon;
provided, however, that if such person would not be treated as a party to the
proceeding within the meaning of Section 6226(c) and (d) of the Code for any
taxable year involved in a partnership proceeding, then the Tax Matters Partner
for such year shall be the Member who has the largest Percentage Interest in the
Company at the time the Notice of Final Partnership Administrative Adjustment is
received who would be treated as a party to the proceeding for such year.
Section 4.05. Members Right to Terminate.
(a) Upon an adjudicated material breach of the terms of this
Agreement by a Member, the non-breaching Member may, at its option, (i) treat
such material breach as the resignation of the breaching Member, or (ii)
terminate this Agreement and initiate the liquidation of the Company, provided
that the non-breaching Member shall first have provided the breaching Member and
the Company with written notice of the material breach, and the breaching Member
or the Company shall have failed to cure such material breach within 90 days
after receipt of such written notice.
(b) The provision of the rights in Section 4.05(a) does not
preclude a Member from exercising other remedies that are available at law,
before, at the same time or following the exercise of rights under Section
4.05(a). Remedies are cumulative, and the exercise of, or failure to exercise,
one or more of them by a Member shall not limit or preclude the exercise of, or
constitute a waiver of, other remedies by such Member.
Section 4.06. Remuneration to Members. Except as otherwise
provided in this Agreement, no Member shall be entitled to remuneration for
participating, as a Member, in the business of the Company.
ARTICLE 5
MANAGERS
Section 5.01. Appointment of Managers.
(a) PPD shall designate two (2) Managers to act on its behalf
in the management and operation of the Company, and Horizon shall designate
three (3) Managers to act on its behalf in the management and operation of the
Company. Such designation by a Member shall be effective upon delivery by a
Member to the other Member of a writing identifying the persons who shall act as
Manager on behalf of such Member. The Managers designated by SKPI shall resign
effective as of the designation by Horizon of the Managers to act on its behalf.
(b) Each Member may remove a Manager designated by it at any
time, with or without cause. Such removal shall be effective upon delivery by
the Member removing a Manager to the other Member(s) of a notice identifying the
Manager(s) to be removed, stating that such Manager(s) is (are) to be removed
and the effective date of the removal (if no effective date is specified, the
removal shall be effective upon the date of delivery of the notice) hereinafter,
the "Effective Date", and naming the person(s) who will replace the removed
person(s) as Manager(s).
(c) A Manager may resign at any time by written notice to the
Members. In the event that there is a vacancy in the position of a Manager, such
vacancy shall be filled by the designee named by (i) Horizon, if such vacancy is
due to the resignation of a Horizon or SKPI designee, or (ii) PPD, if such
vacancy is due to the resignation of the PPD designee.
Section 5.02. Approval of Company Actions.
(a) Except as otherwise provided in this Agreement or in the
Act, all matters relating or pertaining to the Company, its operation or its
business shall be determined by approval thereof by a majority vote of the
Managers either at a meeting duly held or by a written consent duly executed in
accordance with the terms of this Agreement, and the power to act for or to bind
the Company shall be vested exclusively in the Managers.
(b) The Managers shall have the power and authority to execute
and deliver contracts, instruments, filings, notices, certificates and other
documents on behalf of the Company. Except as otherwise required by applicable
law, any such contract, instrument, certificate or other document shall require
the signature of any three (3) Managers or the signature of such officer,
employee or agent to whom authority has been delegated by the Managers.
Section 5.03. Meetings of Managers. Meetings of Managers may be held in
person or by means of telephonic or video communication and shall be held upon
request of any Manager. Notice of a meeting shall be given to each Manager by
the Manager requesting the meeting at least seventy-two hours prior to the time
of the meeting. Three (3) Managers present at or participating in the meeting
shall constitute a quorum.
Section 5.04. Actions by Written Consent. Any action may be taken
without a meeting if a consent in writing, setting forth the action so taken, is
signed by three (3) of the Managers. Any written action may be executed in
counterparts and transmitted and executed via facsimile.
Section 5.05. Reports. The Managers shall cause to be prepared and kept
at the principal office of the Company and/or distributed to the Members records
and reports in accordance with the requirements of the Act. Further, the
Managers shall cause copies of all financial and other reports concerning the
Project to be distributed to the Members as soon as practicable after receipt
thereof by the Company.
Section 5.06. Compensation; Reimbursement of Expenses. The
Managers shall not receive compensation for services rendered to the Company but
shall be reimbursed for any expense properly incurred on behalf of the Company.
Section 5.07. Related Party Transactions. The Managers may cause the
Company to obtain products or services from entities controlling, controlled by
or under common control with the Managers, the Members or their affiliates and
to pay such entities reasonable fees for such products and services.
Section 5.08. Books of Account. The Company's books and records shall
be maintained by the Managers and shall reflect clearly, accurately and in
accordance with generally accepted accounting principles all transactions and
other matters relative to the Company's business as are usually entered into the
books and records of account maintained by persons and entities engaged in
businesses of a like character. The Managers shall cause summaries of the
Company's financial condition to be provided to the Members quarterly.
Section 5.09. Bank Accounts. The Company's funds and investments shall
be held in one or more bank or other accounts, including brokerage or other
investment accounts, established in the name of the Company, as determined by
the Managers. Funds may be withdrawn from the Company's accounts upon the
signature of any officer, employee or agent to whom authority to do so has been
delegated by the Managers.
ARTICLE 6
DISTRIBUTIONS AND ALLOCATIONS
Section 6.01. Distributions.
(a) The Managers shall cause to be distributed to PPD the
following amounts, on or before the end of the calendar month following the end
of each Carried Interest Computation Period during which the Company experiences
Project Net Cash Flow, to wit:
(i) With respect to the period
beginning with the initial Carried Interest Computation Period during which the
Company experiences Project Net Cash Flow and ending with the close of the
Carried Interest Computation Period (if any) during which Horizon shall first
experience a fifteen (15%) percent After Tax I.R.R. (after Carried Interest
Distributions), ten (10%) percent of the Project Net Cash Flow experienced by
the Company during the said respective Carried Interest Computation Periods;
(ii) With respect to the period
beginning with the commencement of the Carried Interest Computation Period
immediately following the Carried Interest Computation Period (if any) during
which Horizon shall have first experienced a fifteen (15%) percent After Tax
I.R.R., and ending with the end of the Carried Interest Computation Period (if
any) during which Horizon shall first experience a twenty (20%) percent After
Tax I.R.R. (after Carried Interest Distributions), fifteen (15%) percent of the
Project Net Cash Flow experienced by the Company during the said respective
Carried Interest Computation Periods; and
(iii) With respect to the period beginning with
the commencement of the Carried Interest Computation Period immediately
following the end of the Carried Interest Computation Period (if any) during
which Horizon shall first experience a twenty (20%) percent After Tax I.R.R.
(after Carried Interest Distributions), twenty-five (25%) percent of the Project
Net Cash Flow experienced by the Company.
(b) On or before October 31, January 31, April 30, and July 31
of each year, the Managers shall cause to be distributed to the Members, in
proportion to their respective Percentage Interests in the Company, so much of
the Net Cash Flow experienced by the Company during the immediately preceding
Carried Interest Computation Period as remains after the distributions (if any)
referred to in sub-section (a) of this Section 6.01 have been effected or
provided for.
Section 6.02. Allocations of Taxable Net Income and Loss. The income,
gains, deductions, losses and credits of the Company shall be determined in
accordance with the Members' respective Percentage Interests in conformity with
standard federal income tax accounting principles consistently applied.
Section 6.03. Tax Matters Handled by the Company. The Managers on
behalf of the Company shall have full authority to negotiate with, to conclude
agreements with or to refuse to agree with any taxing authorities as to the
taxable income of the Company for any taxable period and any determination of
such taxable income shall be binding upon the Members each of whom individually
shall be liable to pay any additional tax and interest or entitled to receive
any refund and interest resulting from such determination. The Company shall not
be responsible for any loss or damage to any Member, as a result of any such
determination or failure to arrive at a determination. The Company may also make
such elections including, without limitation, an election under Section 754 of
the Code, as the Managers may determine.
ARTICLE 7
CHANGES IN MEMBERS OR INTERESTS
Section 7.01. New Members. New Members may be admitted to the Company
on terms unanimously approved by the Managers and upon signing a counterpart of
this Agreement, as the same may have been supplemented or amended at the time of
such execution.
Section 7.02. Transfer Restrictions. No Member may sell, assign,
encumber, pledge, grant a security interest in, or otherwise dispose of,
voluntarily or involuntarily, in whole or in part, its Interest in the Company
without the prior written consent of all Members (which said consent shall not
be unreasonably withheld or delayed) and any attempt to do so without such
consent shall be void and of no force and effect.
Section 7.03. Bankruptcy of a Member. In the event of a Bankruptcy (as
defined in the Act) of a Member, such Member shall cease to be a Member of the
Company.
Section 7.04. Resignation of a Member. A Member may resign at any time
upon, and effective as of the end of, not less than six (6) months prior written
notice to the Company at its principal place of business and to each of the
remaining Members. Unless the resignation of a Member constitutes a dissolution
event under Section 9.01(a) of this Agreement, the resigning Member shall not be
entitled to any distribution or payment as a result, or by virtue, of such
resignation pursuant to Section 18-604 of the Act, or otherwise, except as
provided for in, and pursuant to, Section 9.03(c) of this Agreement.
ARTICLE 8
INDEMNIFICATION
Section 8.01. Indemnification. The Company will indemnify and hold
harmless the Members, and their officers, directors, employees, agents,
shareholders, parents, partners and equity holders, the Managers and officers of
the Company (each an "Indemnified Person") from and against any and all losses,
claims, demands, costs, damages, liabilities, expenses of any nature (including
reasonable attorneys fees and charges) judgments, fines, settlements and other
amounts arising from any and all claims, demands, actions, suits or proceedings,
civil, criminal, administrative or investigative, in which the Indemnified
Person may be involved, or threatened to be involved, as a party or otherwise,
arising out of or incidental to the business of the Company, regardless of
whether the Indemnified Person continues to be in such capacity at the time any
such liability or expense is paid or incurred, if (i) the Indemnified Person
acted in good faith and in a manner it or he reasonably believed to be
consistent with the provisions of this Agreement and in, or not opposed to, the
interests of the Company, and, with respect to any criminal proceeding, has no
reason to believe his conduct was unlawful, and (ii) the Indemnified Person's
conduct did not constitute actual fraud, gross negligence or willful misconduct.
Section 8.02. Expenses. Expenses incurred by an Indemnified Person in
defending any claim, demand, action, suit or proceeding subject to Section 8.01
shall, from time to time, be advanced by the Company prior to the final
disposition of such claim, demand, action, suit or proceeding upon receipt by
the Company of an undertaking by or on behalf of the Indemnified Person to repay
such amounts if it is ultimately determined that such person is not entitled to
be indemnified as authorized in Section 8.01. The indemnification provided by
Section 8.01 shall be in addition to any other rights to which an Indemnitee may
be entitled under any agreement, as a matter of law or equity, or otherwise,
shall continue as to an Indemnified Person who has ceased to serve in such
capacity and shall inure to the benefit of the heirs, successors, assigns, and
administrators of the Indemnified Person.
ARTICLE 9
DISSOLUTION
Section 9.01. Events of Dissolution. The Company shall be
dissolved upon the earliest to occur of the following:
(a) the resignation, Bankruptcy (as defined in the Act) or
dissolution of any Member or the occurrence of any other event that terminates
the continued membership of any Member in the Company under the Act (but
excluding a termination of membership resulting from a transfer of a Member's
entire Interest in accordance with Section 7.02), unless, in any such event, the
business of the Company is continued by the consent of each remaining Member
within ninety (90) days following the occurrence of any such event;
(b) the sale of all or substantially all of the Company's
assets;
(c) the unanimous written agreement of the Members to
dissolve the Company; or
(d) the end of the fixed term of the Company.
Section 9.02. Winding Up. Upon dissolution of the Company, the
Managers, or if there are no managers, the Members, shall designate a person,
who may be one of the Managers or the Members, to wind up the affairs of the
Company (herein referred to herein as the "Liquidator"). The Liquidator shall
proceed to wind up the business and affairs of the Company in accordance with
the terms of this Agreement and the Act. A reasonable amount of time shall be
allowed for the period of winding up in light of prevailing market conditions
and so as to avoid the undue loss in connection with any sale of Company assets.
This Agreement shall remain in full force and effect during the period of
winding up. Following the completion of the winding up of the affairs of the
Company and the distribution of its assets, the Company shall be deemed
terminated and the Liquidator shall file a certificate of cancellation in the
office of the Secretary of State of the State of Delaware as required by the
Act.
Section 9.03. Distribution on Sale or Liquidation. Upon the sale of all
or substantially all of the assets of the Company or in connection with the
winding up of the Company, the assets of the Company, shall be distributed in
accordance with the following priority:
(a) First, to creditors, including Members and Managers who
are creditors (other than by reason of the operation and effect of Section
18-601 of the Act) to the extent otherwise permitted by law, in satisfaction of
liabilities of the Company (whether by payment or the making of reasonable
provision for payment thereof);
(b) Second, to the Members in satisfaction of
liabilities for distributions under Section 18-601 of the Act;
(c) Third, to former Members in satisfaction (without
interest) of liabilities for distributions under Section 18-604 of the Act,
computed on the basis of the resigning Member's Distributive Interest in the
Company on the effective date of such Member's resignation;
(d) Fourth, to the Members in proportion to their respective
capital account balances, to the extent the same are positive, up to the full
amount thereof (after giving effect to adjustments to capital accounts through
the date of distribution); and
(e) all remaining assets shall be distributed to the Members
in proportion to their respective Distributive Interests in the Company
immediately preceding the dissolution event.
ARTICLE 10
GENERAL
Section 10.01 Horizon's Interest. Anything in this Agreement to the
contrary notwithstanding, neither (i) Horizon's Interest in the Company, nor
(ii) the "NFGC Percentage", as that term is defined in the Sponsor Support
Agreement by and between Fauji, KPP, SKLLC, Horizon, National Fuel Gas Company,
FKPC, Asian Development Bank, Export Development Corporation, and the Trustee,
shall ever be or become less than the highest applicable minimum amount or
percentage, respectively, (if any) set forth in the Project Documents.
Section 10.02. Amendment. This Agreement may be amended only by a
written agreement signed by each of the Members. Any waiver of any of the terms
thereof shall be effective only for the instance for which it is given and shall
not constitute a waiver of a subsequent occurrence or of any other provision
hereof.
Section 10.03. Notices. Any notice under the provisions hereof shall be
in writing and shall be deemed given when delivered in person, via messenger or
telecopy, to or deposited in the United States mails, postage prepaid, addressed
as follows:
If to PPD: c/o Sceptre Power Company
Suite 1200
6 Hutton Centre Drive
Santa Ana, California 92707
Facsimile: 714-546-1801
If to Horizon: Horizon Energy Development, Inc.
10 Lafayette Square
Buffalo, New York 14203
Facsimile: 716-857-7206
<PAGE>
Section 10.04. Binding Agreement. This Agreement shall be
binding upon the executors, administrators, estates, heirs and legal successors
of the parties hereto.
Section 10.05. Governing Law. This Agreement and all questions
arising hereunder shall be determined in accordance with the law of Delaware.
Section 10.06. Severability. If any term or other provision of this
Agreement shall be declared to be invalid, illegal, or incapable of being
enforced by any rule of law or public policy, all other terms, provisions and
conditions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party to this
Agreement. Upon any binding determination that any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties to this Agreement as closely as possible in
an acceptable and legally enforceable manner, to the end that the transactions
contemplated hereby may be effected to the full extent possible.
Section 10.07. Counterparts. This Agreement may be executed in several
counterparts, and all so executed shall constitute one agreement, binding on all
of the parties hereto, notwithstanding that all of the parties are not signatory
to the original or the same counterpart. Delivery of an executed agreement to
the other party by facsimile shall constitute execution of a counterpart of this
Agreement.
Section 10.08. Complete Agreement. This Agreement constitutes and
contains the entire agreement among the parties hereto with respect to the
subject matter hereof and replaces and supersedes all prior written and oral
agreements or statements by and between said parties respecting such subject
matter. No amendment of this Agreement shall be effective unless made in
accordance with Section 10.01 hereof.
IN WITNESS WHEREOF the undersigned have caused this Amended and
Restated Limited Liability Company Agreement of Sceptre Kabirwala, L.L.C. to be
executed by their duly authorized officers as of the day and year first above
written.
PPD KABIRWALA, INC.
By: /s/ Ken Ross
--------------------------------
Kenneth M. Ross
Its: Vice President
SCEPTRE KABIRWALA POWER, INC.
By: /s/ Ken Ross
--------------------------------
Kenneth M. Ross
Its: Vice President
HORIZON ENERGY DEVELOPMENT, INC.
By: /s/ Gerald T. Wehrlin
--------------------------------
Its:
-------------------------------
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE,
DO HEREBY CERTIFY "SCEPTRE KABIRWALA, L.L.C." IS DULY FORMED UNDER THE LAWS OF
THE STATE OF DELAWARE AND IS IN GOOD STANDING AND HAS A LEGAL EXISTENCE SO FAR
AS THE RECORDS OF THIS OFFICE SHOW, AS OF THE TENTH DAY OF JANUARY, A.D. 1997.
AND I DO HEREBY FURTHER CERTIFY THAT THE ANNUAL TAXES HAVE BEEN
PAID TO DATE.
/s/ Edward J. Freel
---------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 8280801
DATE: 01-10-97
Exhibit H
National Fuel Gas Company
Organization Chart of EWG Ownership
As of September 30, 1996
---------------------------
National Fuel Gas Company
---------------------------
100%
----------------------------------
Horizon Energy Development, Inc.
----------------------------------
60%
----------------------------------------
Sceptre Kabirwala, L.L.C.
(a Delaware limited liability company)
----------------------------------------
60%
----------------------------------------
KPP Investment, L.L.C.
(a Delaware limited liability company)
----------------------------------------
48.19%
---------------------------------------
Fauji Kabirwala Power Company Limited
(a Pakistan public limited company)
(EWG)
---------------------------------------
Note: Percents reported represent percent of voting power as of September 30,
1996
EXHIBIT I
Note: This exhibit contains amounts in Pakistan
Rupees. See Attachment A to this exhibit for amounts
in U. S. dollars.
FAUJI KABIRWALA POWER COMPANY LIMITED
ACCOUNTS FOR THE YEAR ENDED
JUNE 30, 1996
A. F. FERGUSON & CO.
CHARTERED ACCOUNTANTS
ISLAMBAD
<PAGE>
November 6, 1996
1492
The Board of Directors
Fauji Kabirwala Power Company Limited
Rawalpindi
Dear Sirs
ACCOUNTS FOR THE YEAR ENDED JUNE 30, 1996
We enclose ten copies of the above referred accounts of Fauji Kabirwala Power
Company Limited with our report thereon initialled by us for indemnification
purposes. We shall be pleased to sign our report after
(i) the accounts have been approved by the Board and signed by
the Chairman and a Director authorized in this behalf; and
(ii) we have seen the Board's specific approval in respect of
the items listed in Annexure to this letter.
We wish to place on record our appreciation of the cooperation and
courtesy extended to us by all concerned during the course of the audit.
Yours truly,
/s/ A. F. Ferguson
encls
<PAGE>
Annexure
A. F. FERGUSON & CO.
FAUJI KABIRWALA POWER COMPANY LIMITED
ACCOUNTS FOR THE YEAR ENDED JUNE 30, 1996
Items requiring the Board's approval as referred to in the first paragraph of
our letter 1492 dated November 6, 1996.
Rupees
a) Additions to fixed assets - at cost 1,267,846
b) Additions to capital work in progress - at cost
- Development cost charged by an associated
undertaking 15,376,822
- Mark up on short term finance provided by an
associated undertaking 10,833,423
- Civil works and other preproduction expenditure 118,736,604
/initialled/ AFFCo
<PAGE>
A. F. FERGUSON & CO.
AUDITORS' REPORT TO THE MEMBERS
We have audited the annexed balance sheet of Fauji Kabirwala Power Company
Limited as at June 30, 1996 together with the notes forming part thereof, and we
state that we have obtained all the information and explanations which to the
best of our knowledge and belief were necessary for the purposes of our audit
and after due verification thereof, we report that:
(a) in our opinion, proper books of account have been kept by the
Company as required by the Companies Ordinance, 1984:
(b) in our opinion
(i) the balance sheet together with the notes thereon has
been drawn up in conformity with the Companies
Ordinance, 1984, and is in agreement with the books
of account and is further in accordance with the
Company's accounting policies consistently applied;
(ii) the expenditure incurred during the year was for the
purpose of the Company's business; and
(iii) the business conducted, investments made and the
expenditure incurred during the year were in
accordance with the objects of the Company;
(c) in our opinion and to the best of our information and
according to the explanations given to us, the balance sheet,
together with the notes forming part thereof, give the
information required by the Companies Ordinance, 1984, in the
manner so required and give a true and fair view of the state
of the Company's affairs as at June 30, 1996; and
(d) in our opinion no Zakat was deductible at source under the
Zakat and Ushr Ordinance, 1980.
Chartered Accountants
/initalled/ AFFCo
Islamabad
<PAGE>
FAUJI KABIRWALA POWER COMPANY LIMITED
BALANCE SHEET AS AT JUNE 30, 1996
1996 1995
Note Rupees Rupees
SHARE CAPITAL
Authorized capital
200,000,000 (1995: 3,000,000)
ordinary shares of Rs 10 each 2,000,000,000 30,000,000
============= ==========
Issued, subscribed and paid-up
capital 83,000 (1995: 83,000)
ordinary shares of Rs 10 each 830,000 830,000
LONG TERM LOANS 3 - -
CURRENT LIABILITIES
Creditors, accrued and other
liabilities 4 181,139,925 32,118,384
CONTINGENCIES AND COMMITMENTS 5
------------- ----------
181,969,925 32,948,384
============= ==========
FIXED CAPITAL EXPENDITURE
Fixed assets 6 9,422,213 8,826,818
Capital work in progress 7 167,986,807 23,039,958
------------- ----------
177,409,020 31,866,776
PRELIMINARY EXPENSES 8 2,503,200 51,700
CURRENT ASSETS
Advances and prepayments 9 546,034 177,405
Balances with banks 1,511,671 852,503
------------- ----------
2,057,705 1,029,908
------------- ----------
181,969,925 32,948,384
============= ==========
The annexed notes form an integral part of these accounts.
/initialled/ AFFCo
Chairman/Chief Executive Director
<PAGE>
FAUJI KABIRWALA POWER COMPANY LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED JUNE 30, 1996
1. LEGAL STATUS AND OPERATIONS
The Company was incorporated in Pakistan on July 28, 1994 as a public
limited company for the principal purposes of implementing a project
comprising the establishment and operation of a 157 MW power generation
plant and sale of the electricity generated by such plant to Water and
Power Development Authority.
2. SIGNIFICANT ACCOUNTING POLICIES
2.1 Accounting convention
The accounts have been prepared under the historical cost convention.
2.2 Fixed capital expenditure
Fixed assets except freehold land are stated at cost less accumulated
depreciation. Freehold land and capital work in progress are stated at
cost.
Depreciation is provided on straight line method to write off the cost
of an asset over its estimated useful life. Full year's depreciation is
provided on additions during the first six months of the year whereas
half year's depreciation is provided on additions during the last six
months of the year. No depreciation is provided on assets deleted
during the year.
2.3 Foreign currency transactions
Transactions in foreign currencies are converted into rupees at the
rate of exchange ruling on the date of the transaction. All assets and
liabilities in foreign currencies are translated at exchange rates
prevailing at the balance sheet date.
3. LONG TERM LOANS - SECURED
The Company has executed two loan agreements of US $32 million and US
$65 million with Asian Development Bank (ADB), Philippines and a loan
agreement of US $35 million with Export Development Corporation (EDC),
Canada, which loans remained undisbursed at the year end. The loans are
secured by a charge on all the present and future assets of the
Company.
/initialled/ AFFCo
<PAGE>
-2-
4. CREDITORS, ACCRUED AND OTHER LIABILITIES
1996 1995
Rupees Rupees
Amount due to associated undertakings 179,432,437 32,005,073
Accrued liabilities 1,707,488 113,311
----------- ----------
181,139,925 32,118,384
=========== ==========
5. CONTINGENCIES AND COMMITMENTS
Capital expenditure commitments outstanding amounting to Rs 1,051,634
(1995: Nil).
/initialled/ AFFCo
<PAGE>
-3-
6. FIXED ASSETS
Cost
--------------------------------
At Additions At
July 1, June 30,
1995 1996
Freehold land 7,040,595 378,664 7,419,259
Office equipment 143,595 240,200 383,795
Electrical gas appliances 32,590 11,000 43,590
Air conditioners 42,100 - 42,100
Furniture and fixtures 93,704 17,240 110,944
Motor vehicles 1,748,702 620,742 2,369,444
--------- --------- ----------
Total Rupees 9,101,286 1,267,846 10,369,132
========= ========= ==========
1995 Rupees - 9,101,286 9,101,286
========= ========= ==========
<TABLE>
<CAPTION>
Depreciation
------------------------------ Book Value Annual
At Charge At at June 30, Rate of
July 1, for the June 30, 1996 Depreciation
1995 Year 1996 %
<S> <C> <C> <C> <C> <C>
Freehold land - - - 7,419,259 -
Office equipment 10,770 57,389 68,159 315,636 15
Electrical gas appliances 2,444 6,538 8,982 34,608 15
Air conditioners 4,695 6,315 11,010 31,090 15
Furniture and fixtures 6,616 11,094 17,710 93,234 10
Motor vehicles 249,943 591,115 841,058 1,528,386 25
------- ------- ------- ---------
Total Rupees 274,468 672,451 946,919 9,422,213
======= ======= ======= =========
1995 Rupees - 274,468 274,468 8,826,818
======= ======= ======= =========
</TABLE>
/initialled/ AFFCo
<PAGE>
-4-
1996 1995
Rupees Rupees
7. CAPITAL WORK IN PROGRESS
Civil works 1,580,881 -
Unallocated preproduction expenditure -
note 7.1 166,405,926 23,039,958
----------- ----------
167,986,807 23,039,958
=========== ==========
7.1 Unallocated preproduction expenditure
Consultancy charges 1,178,288 465,000
Fees and charges related to long term loans 104,384,833 -
Legal and professional charges* 2,805,393 575,959
Development cost charged by an associated
undertaking - note 7.2 32,340,612 16,963,790
LOS capacity extension fee 1,300,000 -
Salaries and allowances 1,837,385 370,653
Travel expenses 3,420,873 1,169,513
Office expenses 2,537,935 427,140
Bank charges and commission 2,318,675 201,970
Mark up on short term finance provided by an
associated undertaking - net of interest
income Rs 38,822 (1995: Rs nil) 13,390,812 2,596,210
Depreciation 946,919 274,468
Exchange gain (55,799) (4,745)
----------- ----------
166,405,926 23,039,958
=========== ==========
* These include audit fees of Rs 60,000 (1995: Rs 40,000).
No remuneration was paid to the Chief Executive (1995: Rs Nil).
7.2 This represents amount charged by the local sponsor only and excludes
amount, if any, to be charged by the foreign sponsor.
/initialled/ AFFCo
<PAGE>
-5-
8. PRELIMINARY EXPENSES
1996 1995
Rupees Rupees
Stamp and registration fees 2,503,200 51,700
========= =======
Registration fees of Rs 2,451,500 were paid during the year for
increase in authorized share capital.
1996 1995
Rupees Rupees
9. ADVANCES AND PREPAYMENTS
Advance for expenses to an associated
undertaking 522,034 9,405
Prepaid office rent 24,000 168,000
--------- -------
546,034 177,405
========= =======
10. BALANCES WITH BANKS
On deposit account 1,111,056 422,603
On current account 400,615 429,900
--------- -------
1,511,671 852,503
========= =======
Balances with banks include foreign currency balance of US $5,921
(1995: US $13,642)
/initialled/ AFFCo
Chairman/Chief Executive Director
<PAGE>
Attachment to
Exhibit I
Note: This attachment contains the Annexure and the Balance Sheet and annexed
notes of the Fauji Kabirwala Power Company Limited as of June 30, 1996 converted
to U. S. dollars using exchange rates of 34.96 Rupees to 1 U. S. dollar at June
30, 1996; 31.01 Rupees to 1 U. S. dollar at June 30, 1995; and, for activity
during the year ended June 30, 1996, a simple average exchange rate of 32.985
Rupees to 1 U. S. dollar. A. F. Ferguson & Company's Auditors' report does not
cover this attachment.
Annexure
A. F. FERGUSON & CO.
FAUJI KABIRWALA POWER COMPANY LIMITED
ACCOUNTS FOR THE YEAR ENDED JUNE 30, 1996
Items requiring the Board's approval as referred to in the first paragraph of
our letter 1492 dated November 6, 1996.
U.S. Dollars
a) Additions to fixed assets - at cost $ 38,437
b) Additions to capital work in progress - at cost
- Development cost charged by an associated
undertaking $ 378,032
- Mark up on short term finance provided by an
associated undertaking $ 300,420
- Civil works and other preproduction expenditure $3,383,678
<PAGE>
FAUJI KABIRWALA POWER COMPANY LIMITED
BALANCE SHEET AS AT JUNE 30, 1996
1996 1995
Note U.S. Dollars U.S. Dollars
SHARE CAPITAL
Authorized capital
200,000,000 (1995: 3,000,000)
ordinary shares of U. S. $0.322 $64,495,324 $967,430
=========== ========
Issued, subscribed and paid-up
capital 83,000 (1995: 83,000)
ordinary shares of U. S. $0.322 $ 26,765 $ 26,765
Foreign Currency Translation Adjustment (3,024) -
LONG TERM LOANS 3 - -
CURRENT LIABILITIES
Creditors, accrued and other
liabilities 4 5,181,348 1,035,743
CONTINGENCIES AND COMMITMENTS 5
---------- ----------
$5,205,089 $1,062,508
========== ==========
FIXED CAPITAL EXPENDITURE
Fixed assets 6 269,514 284,644
Capital work in progress 7 4,805,115 742,985
---------- ----------
5,074,629 1,027,629
PRELIMINARY EXPENSES 8 71,601 1,667
CURRENT ASSETS
Advances and prepayments 9 15,619 5,721
Balances with banks 43,240 27,491
------ ------
58,859 33,212
---------- ----------
$5,205,089 $1,062,508
========== ==========
The annexed notes form an integral part of these accounts.
<PAGE>
FAUJI KABIRWALA POWER COMPANY LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED JUNE 30, 1996
1. LEGAL STATUS AND OPERATIONS
The Company was incorporated in Pakistan on July 28, 1994 as a public
limited company for the principal purposes of implementing a project
comprising the establishment and operation of a 157 MW power generation
plant and sale of the electricity generated by such plant to Water and
Power Development Authority.
2. SIGNIFICANT ACCOUNTING POLICIES
2.1 Accounting convention
The accounts have been prepared under the historical cost convention.
2.2 Fixed capital expenditure
Fixed assets except freehold land are stated at cost less accumulated
depreciation. Freehold land and capital work in progress are stated at
cost.
Depreciation is provided on straight line method to write off the cost
of an asset over its estimated useful life. Full year's depreciation is
provided on additions during the first six months of the year whereas
half year's depreciation is provided on additions during the last six
months of the year. No depreciation is provided on assets deleted
during the year.
2.3 Foreign currency transactions
Transactions in foreign currencies are converted into rupees at the
rate of exchange ruling on the date of the transaction. All assets and
liabilities in foreign currencies are translated at exchange rates
prevailing at the balance sheet date.
3. LONG TERM LOANS - SECURED
The Company has executed two loan agreements of US $32 million and US
$65 million with Asian Development Bank (ADB), Philippines and a loan
agreement of US $35 million with Export Development Corporation (EDC),
Canada, which loans remained undisbursed at the year end. The loans are
secured by a charge on all the present and future assets of the
Company.
<PAGE>
4. CREDITORS, ACCRUED AND OTHER LIABILITIES
1996 1995
U.S. Dollars U.S. Dollars
Amount due to associated undertakings $5,132,507 $1,032,089
Accrued liabilities 48,841 3,654
---------- ----------
$5,181,348 $1,035,743
========== ==========
5. CONTINGENCIES AND COMMITMENTS
Capital expenditure commitments outstanding amounting to U. S. $30,081
(1995: Nil).
<PAGE>
6. FIXED ASSETS
Cost
--------------------------------------
Foreign
At Additions Currency At
July 1, Translation June 30,
1995 Adjustment 1996
Freehold land $227,043 $11,480 $(26,302) $212,221
Office equipment 4,631 7,282 (935) 10,978
Electrical gas appliances 1,051 333 (137) 1,247
Air conditioners 1,358 - (154) 1,204
Furniture and fixtures 3,022 523 (372) 3,173
Motor vehicles 56,392 18,819 (7,435) 67,776
-------- ------- -------- --------
Total U.S. Dollars $293,497 $38,437 $(35,335) $296,599
======== ======= ======== ========
1995 U.S. Dollars - 293,497 293,497
======== ======= ========
<TABLE>
<CAPTION>
Depreciation
--------------------------------------
Foreign Book Value Annual
At Charge Currency At at June 30, Rate of
July 1, for the Translation June 30, 1996 Depreciation
1995 Year Adjustment 1996 %
<S> <C> <C> <C> <C> <C> <C>
Freehold land $ - $ - $ - $ - $212,221 -
Office equipment 347 1,740 (138) 1,949 9,029 15
Electrical gas appliances 79 198 (20) 257 990 15
Air conditioners 151 191 (27) 315 889 15
Furniture and fixtures 213 336 (43) 506 2,667 10
Motor vehicles 8,060 17,921 (1,923) 24,058 43,718 25
------ ------- -------- ------- -------
Total U.S. Dollars $8,850 $20,386 $(2,151) $27,085 $269,514
====== ======= ======= ======= ========
1995 U.S. Dollars $ - $18,851 $18,851 $284,647
====== ======= ======= ========
<PAGE>
1996 1995
U.S. Dollars U.S. Dollars
7. CAPITAL WORK IN PROGRESS
Civil works $ 45,220 $ -
Unallocated preproduction expenditure -
note 7.1 4,759,895 742,985
---------- --------
$4,805,115 $742,985
7.1 Unallocated preproduction expenditure
Consultancy charges $ 33,704 $ 14,995
Fees and charges related to long term loans 2,985,836 -
Legal and professional charges* 80,246 18,573
Development cost charged by an associated
undertaking - note 7.2 925,075 547,043
LOS capacity extension fee 37,185 -
Salaries and allowances 52,557 11,953
Travel expenses 97,851 37,714
Office expenses 72,595 13,774
Bank charges and commission 66,324 6,513
Mark up on short term finance provided by an
associated undertaking - net of interest
income Rs 38,822 (1995: Rs nil) 383,032 83,722
Depreciation 27,086 8,851
Exchange gain (1,596) (153)
---------- --------
$4,759,895 $742,985
========== ========
* These include audit fees of U. S. $1,716 (1995: U.S. $1,290).
No remuneration was paid to the Chief Executive (1995: Nil).
7.2 This represents amount charged by the local sponsor only and excludes
amount, if any, to be charged by the foreign sponsor.
<PAGE>
8. PRELIMINARY EXPENSES
1996 1995
U.S. Dollars U.S. Dollars
Stamp and registration fees $71,601 $1,667
======= ======
Registration fees of Rs 2,451,500 were paid during the year for
increase in authorized share capital.
1996 1995
U.S. Dollars U.S. Dollars
9. ADVANCES AND PREPAYMENTS
Advance for expenses to an associated
undertaking $14,932 $ 303
Prepaid office rent 687 5,418
------- ------
$15,619 $5,721
======= ======
10. BALANCES WITH BANKS
On deposit account $31,781 $13,628
On current account 11,459 13,863
------- -------
$43,240 $27,491
======= =======
Balances with banks include foreign currency balance of US $5,921
(1995: US $13,642)
</TABLE>
