Eric B. Benson, et al. - Page 17

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          MOA.16  Some of the items listed involve proprietary processes.             
          The projected prices in schedule 1 include the cost of time and             
          engineering to specify the details of the equipment, to design              
          the assembly, modifications, and installations of the equipment,            
          and to do debugging on the production process to make sure the              
          equipment worked properly.  Some of the equipment was supposedly            
          to be created by ERG.17                                                     
               On or about December 20, 1989, ERG and NPI entered into a              
          “Plant Equipment & Facilities Purchase Agreement”.  Under this              
          agreement, in exchange for $483,098, NPI agreed to purchase,                
          deliver, install, and place into operation as a “turnkey                    
          operation” the items listed on schedule 1 of the MOA, which was             
          incorporated into the agreement.  On or about December 29, 1989,            
          ERG issued check No. 20498 to NPI for $483,098.                             
               On August 8, 1990, Burton, as president of ERG, executed a             
          document entitled “Certification That Plant                                 
          Equipment/Facilitization Items Are in Place and Operational”.               
          By this document, Burton certified to Hercules that the equipment           
          listed on schedule 1 of the MOA was in place and operational at             
          ERG, or would be by December 31, 1990.                                      

               16ERG’s chief engineer, Bryan Leyda, testified that he                 
          created the prices on schedule 1 with the help of an associate              
          engineer.                                                                   
               17Mr. Leyda testified:  “There’s no way that you can buy               
          this kind of * * * [equipment] off the shelf.  You might buy                
          pieces, but not the entire piece of equipment.”                             





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