<PAGE>
 
 
                               ENERGY INDUSTRIES
 
            NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
months ended September 30, 1994, Energy Industries sold a total of $8.3 million
on these receivables. To date, Energy Industries has not experienced any
significant recourse losses.
 
 Operating Leases Receivable
 
  Energy Industries maintains a fleet of natural gas compressor packages for
rental under operating leases. At September 30, 1994, the net book value of
such property was $46.3 million (accumulated depreciation totalled $3.5
million). Future minimum lease payments receivable under remaining
noncancelable operating leases as of September 30, 1994 are as follows:
$3,256,000 in 1995, $782,000 in 1996 and $190,000 in 1997.
 
 Operating Leases Payable
 
  Energy Industries leases certain buildings and equipment under noncancelable
operating leases. Future minimum payments under these operating lease
obligations aggregate $1.3 million, and for the four years ending September 30,
1998 are:
 

<TABLE>
<CAPTION>
                                                             1995 1996 1997 1998
                                                             ---- ---- ---- ----
<S>                                                          <C>  <C>  <C>  <C>
Lease obligations........................................... $487 $414 $309 $102
</TABLE>

 
  Rental expenses for operating leases were $533,000 for the eleven months
ending September 30, 1994.
 
 Claims and Litigation
 
  Energy Industries is defending various claims and litigation arising from
operations. In the opinion of management, uninsured losses, if any, resulting
from theses matters will not have a material adverse effect on Energy
Industries' results of operations or financial position.
 
 Foreign Representation
 
  Energy Industries entered into a contract with Atlas Copco to represent
Energy Industries in countries and markets where Energy Industries did not have
sales contracts or convenient access. Atlas Copco receives a commission on
sales that Energy Industries makes internationally, whether they made the
initial contact or not. The contract specifically excludes sales to Canada or
Mexico. The contract is in effect until July 15, 1998 and renews automatically
for successive one year terms unless terminated by one of the parties in
advance.
 
  Energy Industries is also under contract with a former affiliate company.
Energy Industries LTD, located in Calgary, Alberta, Canada. Pursuant to this
agreement, Energy Industries is required to supply Energy Industries LTD with
proprietary compressor components used in the fabrication of gas compressor
packages. Also, according to this agreement, Energy Industries LTD cannot buy
similar components from other manufacturers. The companies also are bound by
non-compete agreements in each other's respective country. This agreement
remains in effect through 1996, after which time, Energy Industries will be
obligated to sell compressor components to Energy Industries LTD until 2002,
but not on an exclusive basis in Canada. In addition, after 1996 either company
may compete in the other's country for sales of new compressor packages or any
other product or service.
 
NOTE. 11. RELATED PARTY TRANSACTIONS
 
  Energy Industries purchases Caterpillar engines and parts form Holt Company
of Texas, a corporation owned by the CEO of Energy Industries, and a major
stockholder and a director of the Company. During 1994, Energy Industries
purchased $7.3 million of parts and engines from Holt Company of Texas. At
September 30, 1994, Energy Industries owned the Holt Company $663,000 related
to these purchases.
 
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