SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (Fee Required).
For the fiscal year ended June 30, 1996 or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (No Fee Required)
For the transition period from ___________to __________.
Commission File No. 1-8680
HIGH PLAINS CORPORATION
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(Exact name of registrant as specified in its charter)
Kansas 48-0901658
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 W. Douglas, Suite #820, Wichita, Kansas 67202
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(Address and zip code of principal executive offices)
(316) 269-4310
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(Registrant's telephone number, including area code)
Securities Registered Pursuant to Section 12 (b) of the Act:
NONE
Securities Registered Pursuant to Section 12 (g) of the Act:
Common Stock, $0.10 par value
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(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding twelve (12)
months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past ninety (90) days.
YES X NO
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Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of the Registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ].
As of September 30, 1996, there were 15,856,111 outstanding common
shares of the Registrant. As of September 30, 1996, the aggregate
market value of voting stock of High Plains Corporation held by
nonaffiliates was approximately $71,984,573.
Documents Incorporated by Reference:
Portions of the Registrant's definitive Proxy Statement for the
1996 Annual Meeting of Stockholders (the "Proxy Statement"), which
is anticipated to be filed with the Securities and Exchange
Commission within 120 days after the end of the Registrant's fiscal
year end, are incorporated by reference in Part III.
Portions of the Registrant's 1996 Annual Report to Stockholders for
the fiscal year ended June 30, 1996 (the "Annual Report") which is
anticipated to be filed with the Securities and Exchange Commission
within 120 days after the end of the Registrant's fiscal year end,
are incorporated by reference in Parts I, II and IV.
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PART I
Item 1 BUSINESS
High Plains Corporation (the "Company") was incorporated under the
laws of the State of Kansas on February 28, 1980. The Company's
principal offices are located at 200 W. Douglas, Suite 820,
Wichita, Kansas 67202 and its telephone number is (316) 269-4310.
(Financial information concerning the Company's operations is
incorporated by reference from Management's Discussion and Analysis
of Financial Condition and Results of Operations (Management's
Discussion and Analysis) and the Financial Statements and Notes
thereto in the Company's Annual Report.)
The Company manufactures and sells ethanol for blending with
gasoline as a motor fuel. The Company believes it is currently the
sixth largest ethanol producer in the United States. Ethanol
increases the oxygen level in gasoline, reducing pollutants,
including carbon monoxide and hydrocarbon particulate emissions.
Industry sources estimate that 1.5 billion gallons of ethanol were
used to oxygenate United States fuel supplies in 1995. In
addition, the Company sells distiller's grains (DDG), its primary
by-product. Selling prices of DDG generally varies with sorghum
and corn prices with primary markets for the Company's DDG
continuing to be feed manufacturers of animal and pet foods, and
direct consumers such as feedlots and dairies.
Since fiscal 1992, ethanol production capacity at the Colwich plant
has exceeded 17 million gallons per year. Production at the York
facility during fiscal 1996 exceeded 29.1 million gallons compared
to 15.7 million gallons for the last eight months of fiscal 1995,
its start-up year. Actual production in fiscal 1996, for both
plants was below capacity due to the temporary shutdown of the
plants in May 1996. (For information regarding the temporary
shutdown of the Company's plants see "Temporary Shutdown of Plant
Operations" discussion in Management's Discussion and Analysis in
the Company's Annual Report which is incorporated by reference
herein.)
The Company's production process depends upon a substantial
uninterrupted supply of natural gas. The Company has contracted
with one natural gas provider to supply both its Colwich and York
plants, and believes these supplies will be sufficient for its
production needs. Should this source of supply be interrupted, the
market is very competitive, and the Company believes alternative
supplies could be contracted with little or no interruption to
normal operations. Other materials used in the production of
ethanol are readily available from numerous suppliers.
In addition, the Company is dependent on rail transportation to
ship its ethanol and DDG to its customers. Any interruption of
rail transportation due to a rail strike or any other circumstance
would have a significant detrimental effect on the Company's
operations.
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In prior years, the Company has maintained sufficient on-site grain
storage for three to five days of production. The Company believes
that the continuing exclusive grain supply agreement with Farmland
Industries, Inc., will allow the Company to minimize grain
inventory levels on-site. At fiscal year end 1996 the Company had
zero grain inventories due to the temporary shutdown of its
production facilities. (Also see the discussion of raw materials
and the temporary shutdown of the Company's plants in Management's
Discussion and Analysis in the Company's Annual Report, which is
incorporated by reference herein.)
Historically, the maximum finished ethanol inventory which the
Company has attempted to keep in stock equal approximately four to
five days of production. Also, typical payment terms in the
industry are "Net 10 days from delivery". As such, low inventories
of finished goods and quick payment terms from customers help to
minimize the working capital needs of the Company. At June 30,
1996, the Company's ethanol inventory levels met or exceeded
typical maximum levels as finished goods were held for delivery in
partial satisfaction of future contract commitments during the
temporary shutdown of the Company's production facilities. (For
more information see "Temporary Shutdown of Plant Operations "
discussion in Management's Discussion and Analysis in the Company's
Annual Report which is incorporated by reference herein.)
The market price of ethanol is not related to grain prices, but has
historically been determined by gasoline prices and federal tax
incentives. Therefore, High Plains is generally not able to
compensate for increases in the cost of grain feedstock through
upward adjustments in prices charged for its ethanol. (For
information regarding the seasonality of the Company's business see
"Seasonality" discussion in Management's Discussion and Analysis in
the Company's Annual Report which is incorporated by reference
herein.)
For the fiscal year ended June 30, 1996, the Company's sales to
three customers represented in the aggregate approximately 45.8% of
the Company's total product sales and revenues. Through February
1996, virtually all of the Company's DDG production was brokered
under an exclusive agreement with ICM, Inc. However, in March
1996, the Company terminated the ICM, Inc. agreement and entered
into a new brokerage agreement with ConAgra, Inc. for the sale of
the Company's DDG production. This exclusive agreement will
automatically renew for successive one-year terms unless written
notice of termination is issued 90 days prior to the end of a term.
The Company is in direct competition with other ethanol producers,
many of which have greater resources than the Company. The largest
ethanol producers include Archer Daniels Midland, Pekin Energy Co.,
and New Energy Co. of Indiana which are capable of producing
approximately 700 million, 100 million, and 75 million gallons of
ethanol per year, respectively. In addition, there are several
other competitors of a similar size and with similar resources to
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the Company. Recent estimates place total domestic ethanol
production capacity at 1.5 billion gallons per year. However, the
Company is unable to accurately predict the number and production
capacity of the plants which may ultimately be constructed by third
parties, or the effect of resulting production, upon the demand or
price for ethanol. Additionally, in response to increasing grain
prices Archer Daniels Midland, other producers and the Company
announced reduced ethanol production compared to prior years.
The Company competes with the other ethanol producers on the basis
of price and, to a lesser extent, delivery and service. High
Plains believes that it is able to compete favorably with other
ethanol producers due to its proximity to ample grain supplies and
the efficiencies of the plants. The Company also believes that its
locations offer an advantage over other ethanol producers in that
the Company has ready access by rail to growing ethanol markets,
which reduces its cost of sales.
The Company is also in competition with producers of MTBE, a
petrochemical derived from methanol which costs less to produce
than ethanol. Many major oil companies produce MTBE, and because
it is petroleum based, its use is strongly supported by such oil
companies. These companies have significant resources to market
MTBE and to influence legislation and public perception of MTBE.
These companies also have sufficient resources to begin production
of ethanol should they choose to do so.
The Company is subject to extensive environmental regulation at the
federal, state and local levels. Air quality at the Colwich plant
is regulated by the Environmental Protection Agency and the
Division of Environment of the Kansas Department of Health and
Environment (the "KDHE"). The KDHE regulates emission of volatile
organic compounds into the air. Volatile organic compound
emissions are tested on a monthly basis at the Colwich plant, and
the Company must submit semi-annual reports to the KDHE regarding
these emissions tests. The Company is required to obtain an air
operating permit from the KDHE and must obtain KDHE approval to
make plant alterations that could change the emission levels. The
KDHE also regulates the water usage, waste water discharge and
hazardous waste at the Colwich plant under Kansas water pollution
control and hazardous waste laws. Water usage and waste water
effluent quality are tested daily. Monthly reports regarding water
usage and quality are filed with the KDHE. The Company is also
required to submit periodic reports pursuant to the Kansas and
Federal Emergency Planning Community Right-to-Know Act. At the
local level, the Company files semi-annual reports with the
Sedgwick County Community Health Department regarding air quality
at the Colwich plant.
The York facility is subject to similar environmental regulations
at the federal, state and local level. Air quality at the York
plant is regulated by the Environmental Protection Agency and the
Nebraska Department of Environmental Quality (the "NDEQ"). The
Company submits various reports routinely throughout the year
concerning emissions of volatile compounds. The Company was
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required to obtain an air operating permit from the NDEQ and must
obtain approval to make any plant alternations that could change
the emission levels. Consequently, the Company's Air Quality
Operating Permit was revised for the industrial ethanol plant
modifications. The Company has made application for a construction
permit and the NDEQ has authorized construction to commence during
their review and comment period. The NDEQ also regulates waste
water discharge at the York Plant. Waste water effluent quality is
tested daily, and monthly reports are filed with NDEQ. The York
facility is also required to submit periodic reports pursuant to
the Nebraska and Federal Emergency Planning Community Right-to-Know
Act. The Company has received air quality permits, water discharge
permits, and all other environmental permits required for
operations at the York location.
At June 30, 1996, the Company employed 27 persons. These included
8 employees at the Colwich, Kansas plant, 14 employees at the York,
Nebraska plant, and 5 employees in the Wichita, Kansas corporate
office. The total number of employees is significantly lower
compared to prior years due employees furloughed during the
temporary shutdown of both production facilities. (For information
regarding the temporary shutdown of the Company's plants see
"Temporary Shutdown of Plant Operations" discussion in Management's
Discussion and Analysis in the Company's Annual Report which is
incorporated by reference herein.)
Item 2 PROPERTIES
The Company's principal executive offices at 200 W. Douglas, Suite
820, Wichita, Kansas are leased and cover approximately 2,800
square feet.
The Company presently owns the approximately 70 acres of land and
the improvements thereon which comprise its Colwich, Kansas plant.
The Company's primary lender holds a mortgage on this land, as well
as the ethanol production plant as security for its loan to the
Company.
Additionally, the Company owns approximately 142 acres of land and
the improvements thereon in York, Nebraska. Approximately 59 acres
of this land was required for the Company's ethanol facility in
York which was completed in November, 1994. The Company's primary
lender holds a mortgage on these aforementioned 59 acres as well as
the ethanol production plant as security for its loan to the
Company.
Item 3 LEGAL PROCEEDINGS
Commodity Specialist Company, (CSC) is a distributor of
agricultural products which, from 1988 until April 1994, marketed
and sold DDG produced by the Company. A dispute developed between
the Company and CSC after the termination of the contract under
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which CSC sold the Company's DDG. In early September 1995, the
Company filed suit in the U.S. District Court for the District of
Kansas, against CSC in an attempt to collect approximately $110,000
which the Company believes it is owed by CSC for DDG sold but not
paid for by CSC. Subsequently, CSC filed a suit in the U.S.
District Court for the District of Minnesota, Fourth Division,
against the Company claiming damages in excess of $1.2 million for
lost profits, costs and expenses allegedly resulting from the
termination of the contract and from the Company's alleged delivery
of contaminated DDG to CSC for re-sale. The two cases have now been
consolidated for trial in the Minnesota Court. No reserves have
been made for fiscal years 1994, 1995, or 1996 for any amounts
which may be payable to CSC; although for accounting purposes, a
receivable of approximately $100,000 due from CSC to the Company
was written down in fiscal 1994. The Company's product liability
insurance carrier has taken the position that its policy does not
cover the claims made by CSC. However, the Company intends to
pursue the issue of insurance coverage, and is vigorously defending
the action filed by CSC. The Company believes that the ultimate
resolution of this dispute will not have a material adverse effect
on the Company's financial condition.
On March 22, 1996, the Company filed suit against Summit Resource
Management, Inc., Commodity Trading Incorporated, and Abbott
Laboratories, in the United States District Court for the District
of Kansas, as Civil Action No. 96-1105-FGT. The suit alleges that
the defendants are liable to the Company for damages suffered as a
result of their sale to the Company of contaminated alcohol, which
was processed into the Company's DDG by-product, and which caused
damage to certain of the Company's customers who purchased this DDG
for cattle feed. Most of these damage claims with the Company's
DDG customers have now been settled (except for several claims
which the Company considers to be immaterial and the CSC litigation
described above) and as a result of this incident, the Company
incurred expenses totaling $859,848 in fiscal 1994, and $108,000 in
fiscal 1995. The current suit by the Company against the providers
of the contaminated alcohol seeks to recover these damages, as well
as other losses incurred by the Company in connection with this
incident.
The Company is also involved in two other pending lawsuits which
have arisen in the course of normal business operations, neither of
which are expected to have a material adverse effect on the
Company's financial condition.
Item 4 SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS
No matters were submitted to a vote of the stockholders of the
Company during the fourth quarter of the fiscal year ended June 30,
1996.
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PART II
Item 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED SECURITY HOLDER MATTERS
The Company's Common Stock is traded on the NASDAQ National Market
System under the symbol HIPC.
The number of holders of record of the Company's common stock as of
September 30, 1996, was approximately 9,190 determined by an
examination of the Company's transfer book and through broker
search.
The Company has not declared or paid any cash dividends on its
Common Stock since its organization in 1980.
The Company is currently restricted by loan covenants from paying
dividends on its capital stock if an event of default or unmatured
event of default has occurred and continues or would occur by
reason of payment of any such dividend.
The Company does not intend to declare or pay any cash dividends in
the foreseeable future. The payment and rate of future cash
dividends on the Company's Common Stock, if any, would be subject
to review by the Board of Directors in light of the Company's
financial condition, results of operations, capital requirements
and other factors deemed relevant at that time.
Additional information relating to this item is hereby
incorporated by reference from the "Market For Registrant's Common
Equity" section of the 1996 High Plains Corporation Annual Report
to Stockholders for the year ended June 30, 1996 which is
anticipated to be filed with the Securities and Exchange Commission
within 120 days after the end of the Company's fiscal year ended
June 30, 1996.
Item 6 SELECTED FINANCIAL DATA
The information relating to this item is hereby incorporated by
reference from the "Five Year Summary of Selected Financial Data"
in the 1996 High Plains Corporation Annual Report to Stockholders
for the year ended June 30, 1996 which is anticipated to be filed
with the Securities and Exchange Commission within 120 days after
the end of the Company's fiscal year ended June 30, 1996.
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Item 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information relating to this item is hereby incorporated by
reference from the "Management's Discussion and Analysis" in the
1996 High Plains Corporation Annual Report to Stockholders for the
year ended June 30, 1996 which is anticipated to be filed with the
Securities and Exchange Commission within 120 days after the end of
the Company's fiscal year ended June 30, 1996.
Item 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information relating to this item is hereby incorporated by
reference from the Financial Statements and Notes thereto in the
1996 High Plains Corporation Annual Report to Stockholders for the
year ended June 30, 1996 which is anticipated to be filed with the
Securities and Exchange Commission within 120 days after the end of
the Company's fiscal year ended June 30, 1996.
Item 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10 DIRECTORS AND EXECUTIVE OFFICERS OF
THE REGISTRANT
Under the securities laws of the United States, the Company's
directors, executive officers, and any persons holding more than
ten percent of the Company's securities are required to report to
the Securities and Exchange Commission and to the NASDAQ National
Market System by a specified date his or her ownership of or
transactions in the Company's securities. To the Company's
knowledge, based solely on information filed with the Company, all
of these requirements have been satisfied, except that Daniel O.
Skolness failed to timely file one Form 4 reflecting a total of 20
transactions in the month of June 1996. Nine of the these
transactions involving an estate for which Mr. Skolness is the
executor. The remaining transactions involved Mr. Skolness's minor
children. The Form 4 reflecting these transactions was filed in
August 1996.
The balance of information relating to this item is hereby incorpo-
rated by reference from the "Directors and Executive Officers"
section of the High Plains Corporation definitive Proxy Statement
for the 1996 Annual Meeting of Stockholders, which is anticipated
to be filed with the Securities and Exchange Commission within 120
days after the end of the Company's fiscal year ended June 30,
1996.
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Item 11 EXECUTIVE COMPENSATION
The information relating to this item is hereby incorporated by
reference from the "Executive Compensation" section of the High
Plains Corporation definitive Proxy Statement for the 1996 Annual
Meeting of Stockholders, which is anticipated to be filed with the
Securities and Exchange Commission within 120 days after the end of
the Company's fiscal year ended June 30, 1996.
Item 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The information relating to this item is hereby incorporated by
reference from the "Security Ownership of Certain Beneficial Owners
and Management" section of the High Plains Corporation definitive
Proxy Statement for the 1996 Annual Meeting of Stockholders, which
is anticipated to be filed with the Securities and Exchange
Commission within 120 days after the end of the Company's fiscal
year ended June 30, 1996.
Item 13 CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
The information relating to this item is hereby incorporated by
reference from the "Certain Relationships and Related Transactions"
section of the High Plains Corporation definitive Proxy Statement
for the 1996 Annual Meeting of Stockholders, which is anticipated
to be filed with the Securities and Exchange Commission within 120
days after the end of the Company's fiscal year ended June 30,
1996.
PART IV
Item 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a) Documents Filed as a Part of This Report
(1) Financial Statements
Statements of Operations - Years Ended
June 30, 1996, 1995, and 1994 *
Statements of Stockholder's Equity - Years
Ended June 30, 1996, 1995, and 1994 *
Balance Sheets - June 30, 1996 and 1995 *
Statements of Cash Flows - Years
Ended June 30, 1996, 1995, and 1994 *
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Notes to Financial Statements *
Independent Auditors' Report on Financial Statements *
*Incorporated by reference from the Company's 1996 Annual
Report to Stockholders for the year ended June 30, 1996
which is anticipated to be filed with the Securities and
Exchange Commission within 120 days after the end of the
Company's fiscal year ended June 30, 1996.
(2) Financial Statement Schedules
None.
(3) Exhibits
See Index to Exhibits attached hereto and incorporated by
reference herein.
(b) Reports on Form 8-K
During the quarter for which this report is filed, these
reports on Form 8-K have been filed.
May 8, 1996 Concerning record fourth quarter net
revenues resulting from additional sales
of forward grain contracts.
April 26, 1996 Disclosure of increased fourth quarter
earnings and earnings per share estimates,
achieved by the sale of forward grain contracts.
April 4, 1996 Company disclosed reduction in ethanol
production to approximately 80%, to not
exceed grain supplies under forward contracts.
(c) Exhibits
Exhibits are listed in Item 14(a)(3) and filed as part of
this report.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized in
Wichita, Kansas on the 10th day of October, 1996.
HIGH PLAINS CORPORATION
By: /Stanley E. Larson/
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on the behalf
of the Registrant and in the capacities and on the date indicated.
Signature Title Date
-------------------- ------------------------- -----------------
President, Chairman
of the Board and a
Director (Principal
/Stanley E. Larson/ Executive Officer) October 10, 1996
/H. Tom Ritchie/ Director/Secretary October 10, 1996
/Roger D. Skaer/ Director/Treasurer October 10, 1996
/John F. Chivers/ Director October 10, 1996
/Daniel O. Skolness/ Director October 10, 1996
/Donald M. Wright/ Director October 10, 1996
Executive Vice President
/Raymond G. Friend/ Chief Financial Officer October 10, 1996
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Page 1 of 3
Index to Exhibits
3-1 Articles of Incorporation of the Company, as amended
through February 4, 1993 (incorporated herein by reference from the
Company's Registration Statement on Form S-1, dated February 9,
1993).
3-2 Amended Bylaws of the Company, dated January 15, 1981.
(incorporated by reference from Exhibit 3-5 to the Company's
Registration Statement on Form S-1, dated April 18, 1988).
3-3 Amendment to Article III, Sections 1 and 2 of Bylaws of
the Company. (incorporated by reference from Exhibit 3-6 to the
Company's Registration Statement on Form S-1, dated April 18,
1988).
3-4 Certificate of Amendment to Articles of Incorporation of
the Company dated October 14, 1994, increasing the number of shares
which the Company may issue to fourteen million shares of Common
Stock and twenty-five thousand shares of Preferred Stock
(incorporated by reference from Exhibit 3-7 to the Company's annual
filing on Form 10-K dated June 30, 1995).
3-5 Certificate of Amendment to Articles of Incorporation of
the Company dated November 22, 1994 increasing the number of shares
which the Company may issue to fifty million shares of Common Stock
and five million shares of Preferred Stock (incorporated by
reference from Exhibit 3-8 to the Company's annual filing on Form
10-K dated June 30, 1995).
3-6 Certificate of Correction of Certificate of Amendment to
Articles of Incorporation of the Company, dated March 22, 1993,
(incorporated by reference from Exhibit 4-2 to the Company's
Registration Statement on Form S-8, dated January 16, 1996.)
4-1 Form of Common Stock Certificate (incorporated by
reference from Exhibit 4-1 to the Company's Registration Statement
on Form S-1, dated April 18, 1988).
10-1 Ethanol production credit agreement with the State of
Nebraska Department of Revenue dated October 9, 1992 (incorporated
by reference from Exhibit 10-7 to the Company's annual filing on
Form 10-K, dated June 30, 1994).
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Page 2 of 3
10-2 High Plains Corporation 1990 Stock Option Plan
(incorporated by reference from Exhibit 10-8 to the Company's
Registration Statement on Form S-1, dated February 9, 1993).
10-3 High Plains Corporation 1992 Stock Option Plan
(incorporated by reference from Exhibit 10-14 to the Company's
Registration Statement on Form S-1, dated February 9, 1993).
10-4 Lease dated April 12, 1993 between High Plains
Corporation and Garvey Center L.C. (incorporated by reference from
Exhibit 10-8 to the Company's annual filing on Form 10-K, dated
June 30, 1994).
10-5 Exchange and Release Agreements dated October 18, 1994,
providing conversion rights for the 11 1/2% Cumulative Preferred
Stock to Common Stock (incorporated by reference from Exhibit 10-2
to the Company's quarterly filing on Form 10-Q, dated September 30,
1994).
10-6 Promissory Note, converting construction loan to term
loan dated October 31, 1994, between Bank One, Indianapolis, N.A.,
and the Company (incorporated by reference from Exhibit 10-3 to the
Company's quarterly filing on Form 10-Q dated September 30, 1994).
10-7 Amendment to the Company's 1990 Stock Option Plan, dated
November 18, 1994, increasing the number of shares available under
the plan and granting of additional options to replace certain
options when exercised (incorporated by reference from Exhibit 10-11
to the Company's annual filing on Form 10-K dated June 30,
1995).
10-8 Amendment to the Company's 1992 Stock Option Plan, dated
November 18, 1994, increasing the number of shares available under
the plan and granting of additional options to replace certain
options when exercised (incorporated by reference from Exhibit 10-12
to the Company's annual filing on Form 10-K dated June 30,
1995).
10-9 Real Estate Installment Agreement dated January 19, 1995,
between David J. Vander Griend and the Company, regarding sale of
certain real estate (incorporated by reference from Exhibit 10-5 to
the Company's filing on Form 8-K dated January 19, 1995).
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Page 3 of 3
10-10 Asset Purchase Agreement dated January 19, 1995, between
ICM, Inc. and the Company, regarding sale of various tangible and
intangible property (incorporated by reference from Exhibit 10-6 to
the Company's filing on Form 8-K dated January 19, 1995).
10-11 Employment Agreement dated April 1, 1995, between the
Company and Stanley E. Larson, for the continuation of employment
through July 1, 2000 (incorporated by reference from Exhibit 10-17
to the Company's annual filing on Form 10-K dated June 30, 1995).
10-12 Employment Agreement dated April 1, 1995, between the
Company and Raymond G. Friend, for the continuation of employment
through July 1, 2000 (incorporated by reference from Exhibit 10-18
to the Company's annual filing on Form 10-K dated June 30, 1995).
10-13 Agreement between Farmland Industries, Inc., and the
Company, commencing July 1, 1995, for the exclusive supply of grain
feedstock (incorporated by reference from Exhibit 10-19 to the
Company's annual filing on Form 10-K dated June 30, 1995).
10-14 Agreement between the Company and ConAgra, Inc., for sale
of Dried Distiller's Grains and Wet Distiller's Grains, dated March
7, 1996 attached hereto.
11-1 Statement on Computation of Per Share Earnings
(incorporated by reference from the Company's 1996 Annual Report to
Stockholders for the fiscal year ended June 30, 1996 which is
anticipated to be filed with the Securities and Exchange Commission
within 120 days after the end of the Company's fiscal year ended
June 30, 1996).
18-1 Accountants Letter re: Change in Accounting Estimate
incorporated by reference from Exhibit 18-1 to the Company's
quarterly filing on Form 10-Q dated September 30, 1994).
24-1 Consent of Allen, Gibbs, and Houlik, L.C., independent
certified public accountants.
27-1 Financial Data Schedule.
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Exhibit 10-14
Page 1
AGREEMENT
THIS AGREEMENT, made this 7th day of March, 1996, by
and between HIGH PLAINS CORPORATION, a Kansas corporation
("Seller"), and CONAGRA, INC. dba ConAgra Feed Ingredient
Merchandising, a Delaware corporation ("Buyer").
WITNESSETH:
WHEREAS, Seller desires to sell and Buyer desires to purchase
the Distiller's Dried Grains ("DDGS") and Wet Distillers Grain
("WDG") output of Seller's plant at Colwich, Kansas and York,
Nebraska; and
WHEREAS, Seller and Buyer wish to agree in advance of such sale
and purchase to the price formula, payment, delivery and other
terms thereof in consideration of the mutually promised
performance of the other;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and conditions herein contained, and for other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged by both parties, it is hereby agreed:
1. PURCHASE AND SALE. Seller agrees to sell to Buyer and Buyer
agrees to purchase from Seller the bulk feed grade DDGS and WDG
output from Seller's plants at Colwich, Kansas and York,
Nebraska (hereinafter the "Plants"), subject to all the terms
and conditions set forth in this Agreement. Seller agrees to
sell to Buyer hereunder its entire bulk feed grade DDGS and WDG
output from the Plants and Buyer agrees to purchase from Seller
hereunder Seller's entire bulk feed grade DDGS and WDG output
from the plants.
2. TRADE RULES. All purchases and sales made hereunder shall
be governed by the Feed Trade Rules of the National Grain and
Feed Association unless otherwise agreed to by the parties.
Said Trade Rules shall, to the extent applicable, be a part of
this Agreement as if fully set forth herein. Notwithstanding
the foregoing, the Arbitration Rules of the National Grain and
Feed Association shall not be applicable to this Agreement and
nothing herein contained shall be construed to constitute an
agreement between the parties to submit disputes arising
hereunder to arbitration before any organization or tribunal.
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Exhibit 10-14
Page 2
3. INITIAL AND RENEWAL TERMS. The Initial Term of this
Agreement shall be one (1) year, commencing on March 7, 1996 and
terminating on March 6, 1997 ("Initial Term"). Thereafter, this
Agreement shall be automatically renewed for successive one-year
terms ("Renewal Term") without action or notice by either party;
provided, however, that either party may terminate this
Agreement after the Initial Term or any Renewal Term hereof by
giving written notice of termination to the other party at least
ninety (90) calendar days prior to the termination of the then
current term.
4. DELIVERY AND TITLE.
A. The place of delivery for all DDGS and WDG sold
pursuant to this Agreement shall be the rail site or truck loading
facilities FOB Seller's Plants. Buyer and Buyer's agents shall
be given access to Seller's Plants in a manner and at all times
reasonably necessary and convenient for Buyer to take delivery
as provided herein. Buyer shall schedule loading and shipping
of all outbound DDGS and WDG purchased hereunder, but all labor
and equipment necessary to load rail cars or trucks shall be
supplied by Seller without charge to Buyer. Seller agrees to
handle the DDGS and WDG in a good and workmanlike manner in
accordance with Buyer's requirements and normal industry
practice. Seller warrants that both rail and truck loading
facilities shall be continuously maintained in safe, operating
condition.
B. Seller further warrants that storage space for not less
than five (5) days production of DDGS under normal operating
capacity shall be reserved for Buyer's use at or near the
loading facilities and shall be continuously available for
storage of DDGS purchased by Buyer hereunder. Seller shall be
responsible at all times for the quantity, quality and condition
of all DDGS in storage at Seller's Plant. Buyer shall be
responsible for taking delivery of the DDGS and WDG prior to the
expiration of this 5 day period.
C. On Friday of each week during any term hereof, Buyer shall
give to Seller a schedule of quantities of DDGS and WDG to be
removed by rail by Buyer during the next loading week (Monday
through Sunday). For removal of DDGS and WDG by truck, Buyer
shall give Seller sufficient advance notice to allow Seller to
provide the required services. Seller shall provide the labor,
equipment and facilities necessary to meet Buyer's loading
schedule and shall be responsible for Buyer's additional costs
resulting from Seller's failure to do so; provided, however,
that Seller is obligated only to use its best efforts to
accommodate Buyer's request for loading when Seller has not
received advance notice as hereinabove provided. Buyer shall
arrange all railcars required to meet Buyer's loading schedule
for rail shipments; Buyer shall arrange all trucks as scheduled
for truck shipments. All freight charges shall be the
responsibility of Buyer and shall be billed directly to Buyer.
Demurrage charges shall be the responsibility of Seller if
incurred as a result of Seller's failure to fill or move
railcars as projected or obligated under this agreement.
Demurrage charges shall be the responsibility of Buyer if
incurred as a result of Buyer's failure to timely move railcars,
to timely notify Seller of railcar schedules, or to supply
railcars in a manner reasonably designed to meet Seller's
loading schedule.
<PAGE>
Exhibit 10-14
Page 3
D. Buyer shall provide loading orders as necessary to permit
Seller to maintain Seller's usual production schedule; provided,
however, that Buyer shall not be responsible for failure to
schedule removal of DDGS and WDG unless Seller shall have
provided to Buyer production schedules as follows: Five (5)
days prior to the beginning of each calendar month during any
term hereof, Seller shall provide to Buyer a tentative schedule
for production in the next calendar month. On Wednesday of each
week during any term hereof, Seller shall provide to Buyer a
schedule for production during the next production week (Monday
through Sunday).
E. Title, risk of loss and full shipping responsibility shall
pass to Buyer upon completion of loading the DDGS and WDG into
truck or rail equipment and delivery to Buyer of the bill of
lading for each such shipment.
5. PRICE AND PAYMENT.
A. For all quantities of DDGS and WDG to be sold to Buyer
hereunder, Seller shall receive ninety-eight and 1/2 percent
(98-1/2%) of the "Product Price". Buyer shall receive one and
one-half percent
(1 1/2%) of the "Product Price" which shall total a minimum of
Three Hundred Thousand Dollars ($300,000) and a maximum of Four
Hundred Fifty Thousand Dollars ($450,000) during the term of
this Agreement. After this maximum is reached, Seller shall
receive one hundred percent (100%) of the "Product Price". For
the purposes of this Agreement, "Product Price" shall equal FOB
Plant current market bid price for product of like grade and
quality. Buyer agrees to use reasonable commercial efforts to
achieve the highest resale price available under prevailing
market conditions. Buyer agrees to maintain accurate records in
relation to this Agreement. Seller shall have the option to
audit said records to support shipping and market prices
referenced in Section 5A. The time of any such audit shall be
negotiated by the Buyer and Seller, upon notification from the
Seller of their desire to audit, and shall only occur between
the 10th and 25th of any given month.
B. On each business day, holidays excluded, Seller shall
provide Buyer with certified weight certificates for the
previous day's shipments. Seller shall send these to Buyer via
facsimile. These certificates shall determine the tonnage
shipped from Seller's Plants during the previous pricing day.
Buyer shall pay Seller each Thursday for the prior production
week's (Monday through Sunday) properly documented shipments
pursuant to paragraph 5A above. With each payment, Buyer shall
send to Seller a detail of the shipments that are included in
the payment. This report shall include ship date, weight, and
purchase price of each shipment. Any weight certificates not
received by Buyer by the Tuesday following the production week
in which the load was shipped shall be included in the following
week's payment.
<PAGE>
Exhibit 10-14
Page 4
C. In the event of an intentional shutdown of either Plant for
more than two weeks, other than for normal repairs and/or
maintenance and exluding plant construction or expansion, the
minimum of Three Hundred Thousand Dollars ($300,000) referenced
in 5A shall be reduced by an amount pro-rated for the time of
the shutdown. Seller agrees to give Buyer forty-five (45) days
notice before any intentional shutdown.
6. QUANTITY AND WEIGHTS.
A. The weight of DDGS and WDG delivered to Buyer from Seller's
Plants shall be established by weight certificates. Seller
shall obtain truck weights on the scales at the Seller's Plants,
which shall be certified and maintained by Seller as required by
applicable laws, rules and regulations, and rail weights shall
be obtained on any certified railroad scales. Whenever Seller's
truck scales are unavailable or inoperable, any certified scales
may be used, at Seller's expense, until Seller's scales are
restored. The outbound weight certificates shall be
determinative of the quantity of DDGS and WDG for which Buyer is
obligated to pay pursuant to Section 5 hereof.
B. All rail cars loaded at Seller's Plants shall be grain
hopper cars. Seller agrees that such cars shall be loaded to
full visible capacity at Seller's Plants. If not loaded to full
visible capacity, Seller shall pay in full the portion of
freight charges allocable to the unused capacity of the car.
7. QUALITY.
A. Seller understands that Buyer intends to sell the DDGS and
WDG purchased from Seller as a primary animal feed ingredient
and that said DDGS and WDG is subject to minimum quality
standards for such use. Seller agrees and warrants that DDGS
and WDG produced at its plants and delivered to Buyer shall be
accepted in the feed trade under current industry standards and
shall be of merchantable quality.
B. Seller warrants that all DDGS and WDG sold to Buyer
hereunder shall, at the time of delivery to Buyer, conform to
the following quality standards:
Colwich, Kansas - Milo DDGS York, Nebraska - Corn DDGS
Component Maximum % Minimum % Component Maximum % Minimum %
--------- --------- --------- --------- --------- ---------
Protein -- 29% Protein -- 28%
Fat -- 7.5% Fat -- 7.5%
Fiber 15% -- Fiber 15% --
Ash 8% -- Ash 8% --
Moisture 15% -- Moisture 15% --
<PAGE>
Exhibit 10-14
Page 5
York, Nebraska - Corn WDGS
Component Maximum % Minimum %
--------- --------- ---------
Protein -- 10.5%
Fat -- 3.0%
Fiber 5.0% --
Ash 2.5% --
Moisture 68.0% --
C. Seller guarantees that at the time of loading the DDGS and
WDG is not adulterated or misbranded within the meaning of the
Federal Food, Drug and Cosmetic Act and that it may lawfully be
introduced into interstate commerce under said Act. Payment of
invoice does not waive Buyer's rights if goods do not comply
with terms of specifications of this Agreement. Unless
otherwise agreed between the parties to this Agreement, and in
addition to other remedies permitted by law, the Buyer may,
without obligation to pay, reject either before or after
delivery, any of the DDGS and WDG which when inspected or used
is found by Buyer to fail in any way to conform to this
Agreement. Should any of the WDG or DDGS be seized or condemned
by any federal or state department or agency for any reason
except the negligence or intentional actions or omissions by
Buyer, such seizure or condemnation shall operate as a rejection
by Buyer of the DDGS seized or condemned and Buyer shall not be
obligated to offer any defense in connection with the seizure or
condemnation. When rejection occurs either before or within a
reasonable time after delivery, at its option, Buyer may:
(1) Dispose of the rejected WDG or DDGS after first offering
Seller a reasonable opportunity of examining and taking
possession of rejected WDG or DDGS if its condition reasonably
appears to Buyer to permit such delay in making disposition; or
(2) Dispose of the WDG or DDGS in any manner directed by
Seller which Buyer can accomplish without violation of
applicable laws, rules, regulations or property rights; or
(3) If Buyer has no available means of disposal of rejected
WDG or DDGS and Seller fails to direct Buyer to dispose of it as
provided herein, Buyer may return the rejected WDG or DDGS to
Seller, upon which event Buyer's obligations with respect to
said rejected WDG or DDGS shall be deemed fulfilled. Title and
risk of loss shall pass to Seller promptly upon notification to
Seller of rejection by Buyer.
<PAGE>
Exhibit 10-14
Page 6
(4) Seller shall reimburse Buyer for all costs reasonably
incurred by Buyer in storing, transporting, returning and
disposing of the rejected WDG or DDGS. Buyer shall have no
obligation to pay Seller for rejected WDG or DDGS and may deduct
costs and expenses to be reimbursed by Seller from amounts
otherwise owed by Buyer to Seller.
D. If Seller produces WDG or DDGS which comply with the
warranty in Section 7C above but which do not meet applicable
industry standards, Buyer agrees to purchase such WDG or DDGS
for resale but makes no representation or warranty as to the
price at which such product can be sold. If the product
deviates so severely from industry standards as to be unsaleable
in Buyer's reasonable judgment, then it shall be disposed of in
the manner provided for rejected WDG or DDGS in Section 7C above.
E. If Seller knows or reasonably suspects that any WDG or DDGS
produced at its Plants is adulterated or misbranded, or outside
of industry quality standards, Seller shall promptly so notify
Buyer so that such product can be tested before entering
interstate commerce. If Buyer knows or reasonably suspects that
any WDG or DDGS produced by Seller at its plants is adulterated,
misbranded or outside of industry quality standards, then Buyer
may obtain independent laboratory tests of the affected WDG or
DDGS. If such WDG or DDGS are tested and found to comply with
all warranties made by Seller herein, then Buyer shall pay all
testing costs; and if the WDG or DDGS are found not to comply
with such warranties, Seller shall pay all testing costs.
F. Seller shall be responsible for inspecting all railcars and
trucks before loading to ensure non-contamination. If Seller
knows or suspects of any contamination in railcars and/or trucks
to be loaded, Seller shall promptly so notify Buyer so that
arrangements for replacement railcars and/or trucks can be made
by Buyer.
8. INSURANCE.
Both parties agree to maintain the following types and limits
of insurance coverages, or in the case of the Buyer, to
self-insure, for any of its employees, agents, representatives,
or subcontractors which have occasion to come onto Seller's
property:
A. Worker's compensation insurance as required by law in
Nebraska for the plant in York, Nebraska, and as required by law
in Kansas for the plant in Colwich, Kansas. Parties shall also
maintain employer's liability insurance with minimum limits of
One Million Dollars ($1,000,000).
<PAGE>
Exhibit 10-14
Page 7
B. Commercial general liability insurance against claims for
bodily injury, death, and property damage occurring in or about
the Plants for a minimum protection of Two Million Dollars
($2,000,000) with respect to personal injury or death and
property damage occurring or resulting from one occurrence.
This policy shall also maintain endorsements for contractual
liability, for products and completed operations. Seller's
policies of comprehensive general liability insurance shall be
endorsed to require at least thirty (30) days advance notice to
Buyer prior to the effective date of material change or
cancellation of coverage.
C. Automobile Liability Insurance with Bodily Injury and
Property Damage limits of at least Two Million Dollars
($2,000,000) per occurrence.
D. Upon request, Seller shall supply Buyer with certificates of
insurance to support that all required coverages and policies
are in place.
9. REPRESENTATIONS AND WARRANTIES.
A. Seller represents and warrants that all DDGS and WDG
delivered to Buyer shall not be adulterated or misbranded within
the meaning of the Federal Food, Drug and Cosmetic Act and that
said DDGS and WDG may lawfully be introduced into interstate
commerce pursuant to the provisions of the Act. Seller further
warrants that the DDGS and WDG shall fully comply with any
applicable state laws governing quality, naming and labeling of
product. Payment of invoice shall not constitute a waiver by
Buyer of Buyer's rights as to goods which do not comply with
this Agreement or with applicable laws and regulations.
B. Seller represents and warrants that DDGS and WDG delivered
to Buyer shall be free and clear of liens and encumbrances.
10. EVENTS OF DEFAULT. The occurrence of any of the following
shall be an event of default under this Agreement: (1) failure
of either party to make payment to the other when due; (2)
default by either party in the performance of the covenants,
conditions and agreements imposed upon that party by this
Agreement; (3) if either party shall become insolvent, or make a
general assignment for the benefit of creditors or to an agent
authorized to liquidate any substantial amount of its assets, or
be adjudicated a bankrupt, or file a petition in bankruptcy, or
apply to a court for the appointment of a receiver for any of
its assets or properties with or without consent, and such
receiver shall not be discharged within sixty (60) days
following appointment.
<PAGE>
Exhibit 10-14
Page 8
11. REMEDIES. Upon the happening of an event of default, the
parties hereto shall have all remedies available under
applicable law. Without limiting the foregoing, the parties
shall have the following remedies whether in addition to or as
one of the remedies otherwise available to them: (1) to declare
all amounts owed immediately due and payable; and (2) to
immediately terminate this Agreement effective upon receipt by
the party in default of the notice of termination.
Notwithstanding any other provision of this Agreement, Buyer may
offset against amounts otherwise owed to Seller the price of any
product which fails to conform to any requirements of this
Agreement.
12. FORCE MAJEURE. Neither Seller nor Buyer will be liable to
the other for any failure or delay in the performance of any
obligation under this Agreement due to events beyond its
control, including, but not limited to, fire, storm, flood,
earthquake, explosion, act of the public enemy, riots, civil
disorders, sabotage, strikes, lockouts, labor disputes, labor
shortages, war, stoppages or slowdowns initiated by labor,
transportation embargoes, failure or shortage of materials, acts
of God, or acts or regulations or priorities of the federal,
state or local government or branches of agencies thereof.
13. INDEMNIFICATION. Seller agrees to indemnify and hold Buyer
harmless from any and all third-party claims, damages, causes of
action liabilities and expenses, including but not limited to
reasonable attorney's fees, arising by Seller's breach of
obligations of this Agreement, unless the same shall be due to
the negligence or intentional acts or omissions of Buyer. Buyer
agrees to indemnify and hold Seller harmless from any and all
third-party claims, damages, causes of action liabilities and
expenses, including but not limited to reasonable attorney's
fees, arising by Buyer's breach of obligations of this
Agreement, unless the same shall be due to the negligence or
intentional acts or omissions of Seller.
14. RELATIONSHIP OF PARTIES. This Agreement creates no
relationship other than that of buyer and seller between the
parties hereto. Specifically, there is no agency,
employee/employer relationship, partnership, joint venture or
other joint or mutual enterprise or undertaking created hereby.
Nothing contained in this Agreement authorizes one party to act
for or on behalf of the other and neither party is entitled to
commissions from the other.
15. MISCELLANEOUS.
A. This writing is intended by the parties as a final
expression of their agreement and a complete and exclusive
statement of the terms thereof. If terms of any other documents
used in the course of this Agreement conflict with this
Agreement, this Agreement shall control.
B. No course of prior dealings between the parties and no
usage of trade, except where expressly incorporated by
reference, shall be relevant or admissible to supplement,
explain, or vary any of the terms of this Agreement.
C. Acceptance of, or acquiescence in, a course of performance
rendered under this or any prior agreement shall not be relevant
or admissible to determine the meaning of this Agreement even
though the accepting or acquiescing party has knowledge of the
nature of the performance and an opportunity to make objection.
<PAGE>
Exhibit 10-14
Page 9
D. No representations, understandings or agreements have been
made or relied upon in the making of this Agreement other than
as specifically set forth herein.
E. This Agreement can only be modified by a writing signed by
all of the parties or their duly authorized agents.
F. The paragraph headings herein are for reference purposes
only and shall not in any way affect the meaning or
interpretation of this Agreement.
G. This Agreement shall be construed and performed in
accordance with the laws of the State of Kansas.
H. The respective rights, obligations and liabilities of the
parties under this Agreement are not assignable or delegable
without the prior written consent of the other party.
I. Notice shall be deemed to have been given to the party of
whom it is addressed when received after it is deposited in
certified U.S. mail, postage prepaid, return receipt requested,
addressed as follows or by facsimile transmission:
Buyer: ConAgra, Inc. Seller: High Plains Corporation
Feed Ingredient 200 W. Douglas
Merchandising Company Suite 820
Nine ConAgra Drive Wichita, Kansas 67202-3008
Omaha, Nebraska 68102 Fax: 316/269-4008
Fax: 402/595-4360
<PAGE>
Exhibit 10-14
Page 10
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed the day and year first above written.
CONAGRA, INC.
By: Greg A. Heckman
----------------------------------
Vice President
HIGH PLAINS CORPORATION
By: Stanley E. Larson
----------------------------------
Title: President
----------------------------------
Exhibit 24-1
REPORT AND CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Stockholders and Board of Directors
High Plains Corporation
We hereby consent to the incorporation by reference in this annual report
on Form 10-K of High Plains Corporation for the year ended June 30, 1996
of our report dated August 23, 1996 which appears in the annual report to
stockholders for the year ended June 30, 1996.
ALLEN, GIBBS & HOULIK, L.C.
Wichita, Kansas
October 7, 1996
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<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 8,889,246
<SECURITIES> 0
<RECEIVABLES> 1,946,361
<ALLOWANCES> 100,000
<INVENTORY> 1,680,843
<CURRENT-ASSETS> 13,471,880
<PP&E> 78,062,128
<DEPRECIATION> 17,573,003
<TOTAL-ASSETS> 75,096,095
<CURRENT-LIABILITIES> 6,898,730
<BONDS> 14,460,274
0
0
<COMMON> 1,624,729
<OTHER-SE> 51,956,614
<TOTAL-LIABILITY-AND-EQUITY> 75,096,095
<SALES> 68,365,273
<TOTAL-REVENUES> 87,925,409
<CGS> 69,414,221
<TOTAL-COSTS> 71,938,456
<OTHER-EXPENSES> 2,022,095
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<INTEREST-EXPENSE> 2,220,427
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