SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
For Annual and Transition Reports
Pursuant to Sections 13 or 15(d) of the
Securities Exchange Act of 1934
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required).
For the fiscal year ended June 30, 1998 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
(Exact name of registrant as specified in its charter)
Kansas 48-0901658
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 W. Douglas, Suite #820, Wichita, Kansas 67202
(Address and zip code of principal executive offices)
(316) 269-4310
(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
(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
<PAGE>
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, 1998, there were 15,999,444 outstanding shares of common
stock of the Registrant. As of September 30, 1998, the aggregate market value
of voting stock of High Plains Corporation held by nonaffiliates was
approximately $27,999,027.
Documents Incorporated by Reference:
Portions of the Registrant's definitive Proxy Statement for the 1998 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 1998 Annual Report to Stockholders for the fiscal
year ended June 30, 1998 (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.
<PAGE>
PART I
Item 1
GENERAL DESCRIPTION OF BUSINESS
High Plains Corporation, a Kansas corporation (the "Company") is engaged in the
production and sale of fuel grade and industrial grade ethanol. Fuel grade
ethanol is the Company's primary product, while industrial grade ethanol
represents a recent diversification.
In addition, the Company sells distiller's grains (DDG), both wet and dry, and
other solubles. The primary by-product of ethanol production is distiller's
grains.
Founded in 1980, the Company believes it is currently the seventh largest
ethanol producer in the United States. The Company built its first plant in
1982, located in Colwich, Kansas. In 1994, the construction of the Company's
second facility was completed in York, Nebraska. In December 1997, the Company
finalized negotiations with Giant Industries, Inc. to purchase a previously
closed plant in Portales, New Mexico. The Company re-opened the Portales, New
Mexico plant and began production in February 1998. (Also see the description
of High Plains' business set forth on pages 3 through 8 of the Company's Annual
Report, which is incorporated by reference herein.)
<TABLE>
NARRATIVE DESCRIPTION OF BUSINESS
<CAPTION>
For the Years Ended June 30, 1998 1997 1996
(In millions)
<S> <C> <C> <C>
Ethanol and incentive revenues $66.0 $46.3 $57.2
By-products and other sales 18.9 16.8 16.7
Revenues from forward contracts 14.0
Net sales and revenues $84.9 $63.1 $87.9
</TABLE>
Principal Products.
The Company's principal product, fuel grade ethanol, is sold for blending with
gasoline as a motor fuel. The market for this product is affected by, among
other things, the Federal excise tax incentive program. This program, which
was recently extended to December 2007, allows gasoline distributors who blend
<PAGE>
ethanol with gasoline to receive a federal excise tax rate reduction for each
blended gallon for which they sell. Under the recent extension, of this
program, the current tax rate reduction equals $.054 per blended gallon which
contains 10% or more ethanol by volume. However, the tax rate reduction
decreases to $.053, $.052 and $.051 in 2001, 2003, and 2005, respectively.
Fuel grade ethanol prices traditionally have varied directly with the wholesale
price of gasoline. However fuel grade ethanol typically sells for a higher
price per gallon than wholesale gasoline because of the aforementioned excise
tax incentives. Historically, fuel grade ethanol prices have also reflected a
premium due to the oxygenate and octane enhancing properties of this motor
fuel.
Since July 1997, the York Nebraska facility has had the ability to further
refine a portion of its fuel grade ethanol production for sale to markets such
as the industrial grade ethanol market and the food and beverage markets. The
Company had only beverage grade ethanol sales during fiscal year 1998, which
totaled approximately $4.8 million. Management?s goals for fiscal 1999,
include increased sales in the both food and beverage and industrial grade
ethanol markets. These markets may include sales for use in cosmetics,
perfume, paint thinner and vinegar.
Since March 1996, the Company has contracted with ConAgra, Inc. for the
exclusive sale of the Company's DDG production, both wet and dry. This
exclusive agreement automatically renews for successive one-year terms unless
written notice of termination is issued 90 days prior to the end of the term.
The primary markets for the Company's DDG by-products continue to be
manufacturers of animal feed, and direct consumers such as feedlots and
dairies. Selling prices for DDG generally vary with sorghum (milo) and corn
prices. For example, as grain prices have increased, the Company's DDG prices
have traditionally increased. Consequently, at the end of fiscal 1998, as the
cost of grain trended toward near record low prices, DDG prices were trending
lower as well. Subsequent to fiscal 1998 year end, the Company experienced a
decline in DDG prices of approximately 29% compared to DDG prices during the
same period in fiscal 1998. If this trend continues, or if DDG prices remain
at these historically low levels, the Company?s DDG revenues will be
significantly lower compared to prior years.
In November 1997,the Company signed an agreement with EPCO Carbon Dioxide
Products, Inc. (EPCO), of Monroe, Louisiana to capture and purchase CO2 gas
produced at the York, Nebraska plant. EPCO has contracted for the purchase of
the CO2 gases for an initial period of five years. Through September 30, 1998,
CO2 sales were insignificant due to the recent start-up of this process.
<PAGE>
Availability of Raw Materials and Supplies.
The Company's primary raw material is grain feedstock. Historically, the
Company has maintained sufficient grain supplies on-site at each of its
production facilities for approximately three to five days of continuous
production. High Plains entered into an exclusive grain supply agreement in
1997 with Centennial Trading, LLC, a grain brokerage company, for the
procurement of all the grain requirements for the Company's three plant
locations. The agreement automatically renews for one-year terms. However,
either party may terminate the agreement at any time upon thirty days? written
notice. The Company believes that this agreement eliminates the need to buy
and store grain offsite. (Also see the discussion of raw materials in
Management's Discussion and Analysis in the Company's Annual Report, which is
incorporated by reference herein.)
The Company requires a substantial uninterrupted supply of natural gas to
maintain continuous production. Consequently, the Company contracted with one
natural gas provider to supply all or part of the gas requirements at the
Colwich, Kansas and York, Nebraska plants. Because of its location, the Company
has contracted with a separate gas provider to supply natural gas to the
Company?s Portales, New Mexico facility. If these sources of natural gas
supplies were interrupted, the Company believes alternative supplies could be
contracted with little or no interruption to the Company's normal operations,
due to the competitive nature of the natural gas market.
Subsequent to fiscal 1998 year end, the Company completed testing of a natural
gas supply hook-up, which connects the Colwich, Kansas plant to a landfill
natural gas production operation. The Company?s management believes that the
natural gas supply from this landfill will eventually provide up to 80% of the
Colwich, Kansas facility's natural gas requirements. Pricing for the landfill
gas is expected to be significantly lower than the currently contracted supply
price at the Colwich, Kansas facility.
During fiscal 1998, the Company experienced a continuation of slow railcar
movement, primarily as a result of a merger between two major railroad
companies. This has caused minor delays in deliveries of the Company?s
product. The Company believes that the delays symptomatic of the railway
system for all shippers at this time. The Company remains dependent on rail
transportation to ship its ethanol and DDG to customers. Any interruption of
this means of transportation due to a rail strike or any other circumstance
would have a significant detrimental effect on the Company's operations.
Seasonal Factors in Business.
During the third quarter of fiscal 1998, fuel grade ethanol prices began to
decline earlier than anticipated, primarily in response to falling wholesale
gasoline prices. A decline in ethanol pricing has historically occurred during
the fourth quarter of each fiscal year, as the wintertime oxygenate programs
conclude.
<PAGE>
However, by the end of fiscal 1998, fuel grade ethanol sale prices
were returning to more traditional levels for the summertime season. (For
information regarding the seasonality of the Company's business, see the
"Seasonality" discussion in the Management's Discussion and Analysis section of
the Company's Annual Report which is incorporated herein by reference.)
Customers.
For fiscal year ended June 30, 1998, the Company's sales to three customers
represented in the aggregate approximately 49.3% of the Company's total product
sales and revenues. The Company?s DDG sales to ConAgra, Inc. under an
exclusive brokerage agreement represents approximately 43% of the total sales
to these three customers the remaining sales were to ethanol customers. The
Company believes that the loss of any of these customers would not have a
material adverse effect on the Company?s sales and revenues due to other
available markets for its products.
Competitive Conditions.
The Company is in direct competition with other ethanol producers. Archer
Daniels Midland is the largest ethanol producer in the United States with
approximately 856 million gallons of capacity or approximately 43% of the
industry?s total capacity of approximately 2 billion gallons. The Company,
with approximately 68 million gallons of ethanol production capacity, ranks
seventh in size, in the industry.
The top ten ranking is estimated to be as follows:
<TABLE>
Annual Capacity
<CAPTION>
Industrial
Company Fuel Grade Grade
(in millions of gallons)
<S> <C> <C>
ADM 646 210
Williams Energy Ventures 95 35
Minnesota Corn Processors 125 0
Cargil 100 0
Midwest Products 48 48
New Energy 80 0
High Plains Corporation 56 12
Grain Processing 0 60
AE Staley 40 5
AGP 30 0
</TABLE>
While the Company has diversified its operations by investing in the capability
to produce industrial and beverage grade ethanol, this segment of the ethanol
industry is also dominated by Archer Daniels Midland as noted in the table.
However, Archer Daniels Midland and the other large competitors in the
industry, do not appear to have materially affected the demand or price of
<PAGE>
either grade of ethanol. (Also see the discussion of ethanol production in
Management's Discussion and Analysis in the Company's Annual Report, which is
incorporated herein by reference.)
Environmental Disclosure.
The Company is subject to extensive environmental regulation at the federal,
state and local levels. Air quality at the Colwich, Kansas plant is regulated
by the U. S. 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,
wastewater discharge and hazardous waste at the Colwich plant under Kansas
water pollution control and hazardous waste laws. Water usage and wastewater
effluent quality is 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, Nebraska 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
throughout the year concerning emissions of volatile compounds. The Company
was required to obtain an air operating permit from the NDEQ and must obtain
approval to make any plant alterations that could change the emission levels.
The NDEQ also regulates wastewater discharge at the York plant. Wastewater
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 Portales, New Mexico facility is subject to similar environmental
regulations at the federal, state and local level. Air quality at the Portales
plant is regulated by the New Mexico Environmental Department Air Quality
Bureau. The Company submits various reports throughout the year concerning
emissions of volatile compounds. The Company was required to obtain an air
operating permit from this bureau upon start-up of the plant in February 1998.
If any plant changes are made that could change the emission levels, further
approval would be required. The City of Portales regulates wastewater discharge
to the city from the Portales plant. The Portales facility is also required to
submit periodic reports pursuant to the New Mexico and Federal Emergency
Planning Community Right-to-Know Act.
<PAGE>
Number of Employees.
As of June 30, 1998, the Company employed 149 persons. These included 43
employees at the Colwich, Kansas plant; 56 employees at the York, Nebraska
plant; 39 employees at the Portales, New Mexico plant and 11 employees in the
Wichita, Kansas Corporate Office. The total number of employees is
significantly higher compared to the fiscal year 1997 due to the acquisition of
the Portales, New Mexico facility and increased staffing at the Corporate
Office.
Item 2 PROPERTIES
The Company's principal executive offices at 200 W. Douglas, Suite 820,
Wichita, Kansas are leased and cover approximately 4,000 square feet.
The Company presently owns the approximately 70 acres of land and the
improvements thereon which comprise its Colwich, Kansas plant.
The Company also owns approximately 142 acres of land and the improvements
thereon which comprise its York, Nebraska facility. During fiscal 1998, the
Company acquired approximately 15 acres of land and the improvements thereon
which comprise the Portales, New Mexico facility.
The Company's primary lender holds a mortgage on approximately 59 acres of land
where the York facility is situated, the York ethanol production plant itself,
and both the Colwich, Kansas and Portales, New Mexico land and production
plants, as security for loans to the Company.
Item 3 LEGAL PROCEEDINGS
In October 1997, the Company resolved all on going lawsuits between itself and
Commodity Specialist Company. In addition, the Company reached a compromised
settlement with Summit Resource Management, Inc. and Commodity Trading
Incorporated during this same period. The resolution of these disputes did not
have a material effect on the Company's financial condition for fiscal 1998.
The Company is involved in two other pending administrative proceedings
regarding employee terminations, which have arisen in the course of normal
business operations. Neither of these claims is expected to have a material
adverse effect on the Company's financial condition.
<PAGE>
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, 1998.
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, 1998, was approximately 7,648 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 has no current plans 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, including historical market
prices for the Company's Common Stock, is hereby incorporated by reference from
the "Market For Registrant's Common Equity" section of the Company?s 1998
Annual Report 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, 1998.
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 Company?s 1998 Annual
Report 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, 1998.
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
<PAGE>
the "Management's Discussion and Analysis" in the Company?s 1998 Annual Report
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, 1998.
Item 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
As of the end of its latest fiscal year, the Company did not own or have a
material interest in any market risk sensitive instruments. However, in
the past, the Company has attempted to control the market risk associated
with the prices of feedstock, the Company's primary raw material by
periodically employing certain strategies, including grain trading and
forward contracting. Additional information relating to this item is
hereby incorporated by reference from the "Management's Discussion and
Analysis" in the Company's 1998 Annual Report 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, 1998.
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 on pages 9 through 20 in the
Company's 1998 Annual Report, copies of which are included in Exhibit 10-19
to this report.
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
Section 16(a) Beneficial Ownership and Reporting Compliance:
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 during fiscal 1998, except Gary R. Smith
failed to timely file one Form 3 and one Form 4, with a total of two
transactions on the Form 4, for the month of April 1998. The securities
transactions reported on these forms involved the issuance of stock options to
Mr. Smith related to his employment as Chief Executive Officer and the purchase
of the Company's stock by Mr. Smith in an over-the-counter transaction. The
Form 3 and Form 4 reflecting these transactions were filed in October 1998.
<PAGE>
The balance of information relating to this item is hereby incorporated by
reference from the "Directors and Executive Officers" section of the Company's
1998 Proxy Statement, 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, 1998.
Item 11 EXECUTIVE COMPENSATION
The information relating to this item is hereby incorporated by reference from
the "Executive Compensation" section of the Company's 1998 Proxy Statement,
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, 1998.
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 Company?s 1998 Proxy Statement, 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, 1998.
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 Company's
1998 Proxy Statement, 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, 1998.
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 Income - Years Ended
June 30, 1998, 1997, and 1996 *
<PAGE>
Statements of Stockholders' Equity - Years
Ended June 30, 1998, 1997, and 1996 *
Balance Sheets - June 30, 1998 and 1997 *
Statements of Cash Flows - Years
Ended June 30, 1998, 1997, and 1996 *
Notes to Financial Statements *
Independent Auditors' Report on Financial Statements *
* Incorporated by reference from the Company's 1998 Annual Report as
indicated under Item 8, copies of which are included in
Exhibit 10-19 to this report.
(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.
April 8, 1998 Announced appointment of Gary R. Smith as Chief
Executive Officer.
April 15, 1998 Disclosure of earnings per share for the quarter ending
March 31, 1998.
June 5, 1998 Company commented on legislative extension of federal
ethanol tax incentive. Also brief comments
concerning near-term implementation of CO2
sales, landfill gas usage and ISO 9002
certification.
June 30, 1998 Announced lower-than-forecasted fourth quarter earnings.
<PAGE>
(c) Exhibits
Exhibits are listed in Item 14(a)(3) and filed as part of this report.
All forward-looking statements made in these materials and materials
incorporated herein by reference are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Investors
are cautioned that all forward-looking statements involve risks and
uncertainty. Among the factors that could cause actual results to differ
materially from those anticipated by certain of the above statements are the
following: 1) legislative changes regarding air quality, fuel specifications or
incentive programs; 2) changes in cost of grain feedstock; and 3) changes in
market prices or demand for motor fuels and ethanol. Additional information
concerning those and other factors is contained in the Company's Securities and
Exchange Commission filings, including but not limited to, its Proxy Statement,
Annual Report, quarterly 10Q filings, and press releases, copies of which are
available from the Company without charge.
<PAGE>
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 13th day of October, 1998.
HIGH PLAINS CORPORATION
By: /s/Gary R. Smith
President/Chief Executive Officer
<PAGE>
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
Chairman of the
Board and
Daniel O. Skolness Director October 13, 1998
Raymond G. Friend Director October 13, 1998
H.T. Ritchie Director/Secretary October 13, 1998
Donald Schroeder Director/Treasurer October 13, 1998
John F. Chivers Director October 13, 1998
Donald M. Wright Director October 13, 1998
Arthur Greenberg Director October 13, 1998
Ronald D. Offutt Director October 13, 1998
<PAGE>
Christopher G. Standlee Vice President October 13, 1998
Chief Operating Officer
Dianne S. Rice Vice President October 13, 1998
Chief Financial Officer
<PAGE>
(Page 1 of 3)
Index to Exhibits
3-1 Articles of Incorporation, as amended, of the Company, (incorporated
herein by reference to Exhibits 3.1 through 3.10 to the Company's
Registration Statement on Form S-1, dated February 9, 1993).
3-2 Certificate of Amendment to Articles of Incorporation of the
Company, dated October 14, 1994 (incorporated herein by reference to
Exhibit 3-7 to the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1995).
3-3 Certificate of Amendment of Articles of Incorporation of the
Company, dated November 22, 1994 (incorporated herein by reference to
Exhibit 3-8 to the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1995).
3-4 Certificate of Correction of Certificate of Amendment to Articles
of Incorporation of the Company, dated March 22, 1993, (incorporated
herein by reference from Exhibit 4-2 to the Company's Registration
Statement on Form S-8, dated January 16, 1996).
3-5 Amended Bylaws of the Company, dated January 15, 1981, and attached
hereto.
3-6 Amendment to Article III, Section 1 and 2 of the Amended Bylaws of
the Company, dated March 6, 1986, and attached hereto.
3-7 Amendment to Article V, of the Amended Bylaws of the Company,
dated April 6, 1998, and attached hereto.
4-1 Form of Common Stock Certificate (incorporated herein 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).
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).
<PAGE>
(Page 2 of 3)
10-4 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).
10-5 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).
10-6 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).
10-7 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).
10-8 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).
10-9 High Plains Corporation 1995 Employee Stock Purchase Plan
(incorporated herein by reference from Exhibit 4-14 to the Company's
Registration statement on Form S-8, dated January 22, 1996).
10-10 High Plains Corporation 1995 Key Management Employee Stock Purchase
Plan (incorporated herein by reference from Exhibit 4-15 to the Company's
Registration Statement on Form S-8, dated January 22, 1996).
10-11 Agreement between the Company and ConAgra, Inc., for sale of Dried
Distiller's Grains and Wet Distiller's Grains (incorporated herein
by reference from Exhibit 10-14 to the Company's annual filing on
Form 10-K dated June 30, 1996).
<PAGE>
(Page 3 of 3)
10-12 Stanley E. Larson Retirement and Consulting Agreement
(incorporated herein by reference from Exhibit 10-14 to
the Company's annual filing on Form 10-K dated June 30, 1997.)
10-13 Agreement between Centennial Trading, LLC, Michael Rowan and the Company
(incorporated herein by reference from Exhibit 10-14 to the
Company's annual filing on Form 10-K dated June 30, 1997.)
10-14 Agreement between the Company and EPCO Carbon Dioxide Products, Inc.,
for the sale of raw CO2 for an initial period of one year, dated
November 6, 1997 attached hereto.
10-15 Employment agreement dated March 31, 1998, between the Company and Gary
R. Smith, for an initial period of three years, expiring March 30,
2001, attached hereto.
10-16 Amendment to employment agreement between the Company and Raymond G.
Friend, dated June 30, 1998, attached hereto.
10-17 Lease Agreement between the Company and EPCO Carbon Dioxide
Products, Inc. for the lease of land relating to CO2 Agreement listed
under 10-14
10-18 Lease dated April 17, 1989 between the Company and Center Towers L.C.
for a five year lease of office space, attached hereto.
10-19 Financial information from the High Plains Corporation 1998 Annual
Report to Stockholders, attached hereto.
11-1 Statement on Computation of Per Share Earnings (incorporated
herein by reference from the Company's 1998 Annual Report to
Stockholders for the fiscal year ended June 30, 1998 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, 1998).
24-1 Consent of Allen, Gibbs, and Houlik, L.C., independent certified
public accountants.
27-1 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 674,894
<SECURITIES> 0
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<ALLOWANCES> 75,000
<INVENTORY> 6,328,232
<CURRENT-ASSETS> 12,480,029
<PP&E> 94,140,754
<DEPRECIATION> 23,819,484
<TOTAL-ASSETS> 83,249,629
<CURRENT-LIABILITIES> 18,911,619
<BONDS> 11,702,623
0
0
<COMMON> 1,641,062
<OTHER-SE> 50,630,085
<TOTAL-LIABILITY-AND-EQUITY> 83,249,629
<SALES> 84,863,782
<TOTAL-REVENUES> 84,863,782
<CGS> 83,126,259
<TOTAL-COSTS> 84,734,820
<OTHER-EXPENSES> 2,434,725
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,535,819
<INCOME-PRETAX> (3,687,270)
<INCOME-TAX> 94,340
<INCOME-CONTINUING> (3,592,930)
<DISCONTINUED> 0
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<EPS-PRIMARY> (.22)
<EPS-DILUTED> (.22)
</TABLE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into effective as of the 31st day of
March, 1998, by and between High Plains Corporation, a Kansas corporation
("Company") and Gary R. Smith ("Employee").
WITNESSETH:
WHEREAS, Company wishes to assure itself of Employee's full-time employment
during the term specified herein; and
WHEREAS, the Employee is prepared to enter into this Agreement with Company
and to give Company the assurances it desires.
NOW, THEREFORE, in consideration of the premises and their mutual
covenants, the parties agree as follows:
1. Nature and Capacity of Employment. The Company hereby employs the
Employee, and the Employee hereby accepts employment with the Company as its
Chief Executive Officer (CEO).
(a) Employee will render exclusive and full-time services to the Company
and its subsidiaries (any later reference to Company shall be deemed to
include subsidiaries, of which Employee shall act as President and/or CEO).
In his capacity as Chief Executive Officer he will be responsible for
management of the Company as described in the Bylaws of the Company to the
extent not inconsistent with the provisions of Paragraph 1(b) hereof.
Employee will report to the Board of Directors and (in addition to his other
responsibilities) will be responsible for implementing all orders and
resolutions of the Board of Directors, for the conduct of the business of the
Company, and the compliance with all federal and state laws, rules and
regulations. Employee acknowledges that the Board of Directors shall have
final authority in matter affecting the interests of the Company.
(b) Employee shall have responsibility and authority to make routine
operational decisions on behalf of the Company, and to act on behalf of the
Company in implementation of the budget, and in furtherance of the goals and
directions as approved or set forth by the Board of Directors from time to
time.
2. Term. Subject to earlier termination in accordance with this Agreement,
Employee's employment shall be for a three-year period commencing this date
and ending on March 30, 2001 ("Employment Period").
<PAGE>
3. Compensation. As compensation for all of the Employee's services under
this Agreement, the Company agrees to pay Employee, and Employee agrees to
accept:
(a) Base Salary. A base salary of: (i) One Hundred Eighty Thousand
Dollars ($180,000.00) per annum for months 1-12; (ii) Two Hundred Thousand
Dollars ($200,000.00) per annum for months 13-24; and (iii) Two Hundred
Twenty-five Thousand Dollars ($225,000.00) per annum for months 25-36. The
Base salary set forth above is hereinafter referred to as the "Base Salary."
The Base Salary shall be payable in accordance with the Company's standard
payroll practices.
(b) Bonus. In addition to the Base Salary for each year or part thereof
that the Employee is employed by the Company, the Employee may be paid a
bonus (the "Bonus") in such amount as may be determined by the Board of
Directors in its discretion.
(c) Benefits.
(i) Expenses. The Company shall reimburse the Employee for any ordinary,
necessary and reasonable business expenses that the Employee incurs in
connection with the performance of his responsibilities under this Agreement,
including entertainment and travel expenses provided, however, that the
Employee provide the Company documentation for these expenses in a form
sufficient to sustain the Company's deduction for these expenses under
Section 162 of the Internal Revenue Code of 1986, or any successor statute,
and, provided further, that the Employee abides by all policies of the
Company regarding such business expenses.
(ii) Medical, Life and Disability Insurance. The Company shall provide the
Employee with the medical, life and disability insurance currently provided
to all other employees of the Company similarly situated.
(iii) Membership in a Wichita, Kansas Country Club.
On or after May 1, 1999, the Company shall pay the initiation fees incurred
by the Employee at a Wichita, Kansas country club, which the Employee elects
to join in the promotion of, or in the furtherance of, the Company's
business. Appropriate expenses incurred for the Company's business purposes,
properly documented by Employee as described in subparagraph (i) above, shall
also be reimbursed. Further, Company shall reimburse Employee for his
monthly dues at said club.
(iv) Vacation. Employee shall be entitled to a vacation period of three (3)
weeks each year.
(v) 401K Plan. Employee will participate in the Company's existing 401K
Plan in accordance with the terms and conditions of the plan.
<PAGE>
(vi) Benefit Changes. No reference in this Agreement to any policy or any
employee benefit (under this Paragraph 3 (c)) established or maintained by
the Company or its affiliate generally shall preclude the Company or such
affiliate from changing that policy or amending or terminating that benefit
if the amendment or termination applied to the other employees of the Company
similarly situated.
(vii) Other Plans. The Company agrees that nothing contained herein is
intended to or shall be deemed to be granted to Employee in lieu of any
rights and privileges which Employee may be entitled
to as an Employee of the Company under any other plans which may hereafter be
adopted (which benefits all Employees), it being understood that Employee
shall have the same rights and privileges to participate in such plans or
benefits as any other employee similarly situated.
(viii) Relocation and Temporary Living Expenses.
The Company shall reimburse Employee for reasonable and customary relocation
expenses incurred in connection with the changing of Employee's primary
residence to Wichita, Kansas. These costs shall be defined as: actual
expenses incurred for moving household goods of Employee and his family; real
estate commissions incurred in connection with the sale of Employee's current
Ohio residence; closing costs (excluding real estate commissions) on the
purchase of a Wichita, Kansas residence by Employee; Employee's temporary
housing expenses in Wichita during the transitional period; and expenses
incurred for reasonable travel between Wichita and Ohio during this
transitional period. However, the parties agree that the temporary living
portion of expense reimbursement to Employee (pursuant to this section 3viii)
shall not exceed $20,000.
(ix) Vehicle. The Company shall provide Employee with a vehicle suitable to
his position for his use during the term of this Agreement.
(d) Upon approval of Employee's employment by Company's Board of Directors,
the Company shall grant to Employee options to acquire 25,000 shares of the
Company's common stock at an exercise price equal to the closing market price
reported on April 6, 1998 (the date of Board approval of employment). Such
options shall be granted as Incentive Stock Options pursuant to the Company's
1992 Stock Option Plan, and an Option Agreement pursuant to said plan shall
be entered into between Employee and the Company simultaneously with the
execution of this Agreement. Conditioned upon Employee remaining employed by
the Company, the Company shall grant to Employee additional Incentive Stock
Options to acquire 15,000 shares of the Company's common stock each on
December 31, 1998, and again on December 31, 1999. Conditioned upon the
execution of a new employment agreement agreeable to both The Company and
Employee which extends his employment for at least 12 months beyond April 1,
2001, Company shall grant to Employee options to acquire an additional 15,000
shares of The Company's common stock at an exercise price equal to the
closing market price reported on December 31, 2000. Such options shall all
be granted as Incentive Stock Options pursuant to the Company's 1992 Stock
Option Plan. In the event any grant date shall occur on a weekend or
holiday, the grant and pricing of options shall occur on the following
business day.
<PAGE>
4. Termination. This Agreement may not be terminated prior to the end of
its term except as follows:
(a) By Company for Cause. The Company may terminate this Agreement for
cause upon Employee's material breach of this Agreement. Except as to
subparagraphs (iv) and (vi) below, where the ability to cure is not allowed,
the Company shall give Employee thirty (30) days' advance written notice of
such termination, which notice shall describe in detail the acts or omissions
which the Company believes constitute such breach; provided that such
termination shall not take effect if Employee is able to cure such breach
within thirty (30) days following delivery of such notice. Any failure to
give notice shall not be deemed an approval by the Company of any conduct or
a waiver by the Company of any of its rights. Acts or omissions which
constitute material breach of this Agreement shall be limited strictly to the
following:
(i) Any material breach by Employee of his obligations under this Agreement.
(ii) Willful failure of Employee to perform duties assigned to him by the
Board of Directors.
(iii) Willful failure of Employee to cease any other
Activity which materially conflicts with the
interests of the Company or materially and
adversely affects the performance of his duties.
(iv) Employee commits any fraud, theft or embezzlement of the Company's
assets, any other act of dishonesty against the Company (or its affiliates),
or any crime which is punishable as a felony.
(v) Employee's habitual insobriety or use of controlled substances.
(b) Death. This Agreement shall terminate upon Employee's death.
(c) Disability. This Agreement shall terminate upon Employee's Total
disability as determined under Paragraph 5.
5. Termination Payment.
(a) Death. In the event that this Agreement is terminated due to the death
of the Employee, the Employee's Base Salary shall cease as of the end of the
month in which his death occurred and in lieu of all other compensation due
the Employee hereunder the Employee or his representatives shall be paid (i)
the compensation due the Employee under the Bonus Plan for the year in which
his death occurred, pro-rated to the date of his death; (ii) accrued but
unpaid vacation pay for the year in which the Employee died pro-rated to the
date of the Employee's death; and (iii) any unpaid expense reimbursement.
<PAGE>
(b) Total Disability. As used herein, the term "Total Disability" shall
mean the inability of the Employee to substantially perform the duties of his
employment hereunder by reason of any medically determinable physical or
mental impairment which can be expected to result in death or which has
lasted or can be expected to last for a continuous period of not less than
six (6) months. The determination of the Employee's Total Disability shall
be made by the Board and an examining physician acceptable to the Company and
the Employee. If the Employee and the Company cannot agree as to a physician
or if the Employee is unable to select a physician, then a physician shall be
designated by the American Arbitration Association office nearest Wichita,
Kansas. In the event that this Agreement is terminated due to Total
Disability, the Employee shall be paid in lieu of all other compensation (i)
the Base Salary, as adjusted, due Employee to the date it was determined that
Employee became totally disabled, (ii) the compensation due the Employee
under the Bonus Plan for the year in which such Total Disability occurred
pro-rated to the date that the Employee was terminated, (iii) accrued by
unpaid vacation pay for the Employee for the year in which the Employee
became Totally Disabled pro-rated to the date that the Employee was
terminated, and (iv) any unreimbursed expenses. Upon such Total Disability,
the Company shall have the right to terminate any insurance that it has owned
and maintained on the life of the Employee provided, however, that if the
Company elects to maintain such insurance, the proceeds thereof shall be the
sole property of the Company.
(c) Termination by Company for Cause. If Employee is terminated under the
terms of this Agreement, the Company shall be relieved of all obligations and
liabilities to Employee under this Agreement effective the date written
notice has been given to Employee pursuant to Paragraph 4(a) provided that
Employee has not cured said breach pursuant to said paragraph.
However, payments owing Employee under any Profit Sharing Plan shall still be
payable to Employee by Company in accordance with the terms and conditions of
the specific plan.
6. Covenants of Employee. Employee agrees to comply with the provisions of
this Paragraph 6 during the term of this Agreement and for one (1) full year
after the expiration or termination thereof.
(a) Assistance in Litigation. Employee agrees that he shall, upon
reasonable notice furnish such information and proper assistance to Company
as may be required in connection with any litigation in which it or any of
its subsidiaries or affiliates is, or may become, a party.
(b) Confidential Information. Employee agrees that he shall not, to the
detriment of the Company, knowingly disclose or reveal to any unauthorized
person any trade secret or other confidential information relating to the
company, its subsidiaries or affiliates, or to any business operated by them'
including, without limitation, confidential customer information, sales and
marketing strategies, process information, or other similar confidential
information, and Employee confirms that such information constitutes the
exclusive property of the Company.
<PAGE>
(c) Conflicts of Interest. During the Employment Period, including any
Extension Period, the Employee shall not, directly or indirectly, own,
manage, operate, join, control or participate in the ownership, management,
operation or control of, or be connected in any manner with any business,
whether in corporate, partnership or proprietorship form, that provides any
service or product in competition with any service or product provided by the
Company or any of its subsidiaries from time to time without prior approval
of the Board, provided, however, that the Employee may acquire up to one
percent (1%) of the debt or equity securities of any corporation or other
entity, if such debt or equity securities are traded on a national or
regional securities exchange or quoted on the NASDAQ system.
(d) Proprietary Information. During or after the Employment Period,
including any Extension-Period, the Employee shall not disclose any
Proprietary Information of the Company or its subsidiaries or affiliates to
any person not authorized by the Company's or such subsidiary's or
affiliates' Board, as the case may be, to receive the information, nor shall
the Employee make use of any Proprietary Information for his own purposes or
for the benefit of any person, firm, corporation or other entity except the
Company. Proprietary Information of the Company, its subsidiaries and
affiliates includes, but is not limited to, trade secrets and other
confidential information, development projects, customer lists, billing and
other customer information, pricing, process, product and market information,
marketing strategies, computer programs, financial data and any other
information about the Company, its subsidiaries and affiliates and their
interests, affairs or business which is not in the public domain. Upon the
termination of his employment hereunder, the Employee shall deliver to the
Company and its subsidiaries all correspondence, mailing lists, letters,
records and any and all other documents pertaining to or containing
information relative to the Company's business, and the Company shall not
remove any of such records either during the course of his employment or upon
the termination thereof.
(e) Inventions, Designs, Etc. Employee agrees that all inventions,
discoveries, designs, product developments, patent applications, computer
software, copyrightable material and any similar property developed or
conceived by the Employee during the Employment Period, including any
Extension Period, either solely or jointly with others, and relating to, or
capable of being used or adopted for use in, the business of the Company, or
developed or conceived by the Employee in the course of duties for the
Company, shall inure to and be the property of the Company and must be
promptly disclosed to the Company. The Employee agrees that both during the
Employment Period, including any Extension Period, and thereafter the
Employee will execute such documents and do such things as the Company
reasonably may request to enable the company or its nominee (i) to apply for
patent, registered design, trademark, copyright or equivalent protection in
the United States, Canada and elsewhere for any invention, discovery, design
or product development hereinabove referred to in this subparagraph (e), or
(ii) to be vested with exclusive title, free and clear of any liens or
encumbrance, to any such inventions, discoveries, designs, product
developments, patents, registered designs or equivalent rights, computer
software, tradenames, trademarks and copyrights and any similar property of
the Employee.
<PAGE>
This paragraph does not apply to an invention for which no equipment,
supplies, facility or trade secret information of the Company was used and
which was developed entirely on the Employee's own time and (1) which does
not relate (a) directly to the business of the company or (b) to the
Company's actual or demonstrably anticipated research or development, or (2)
which does not result from any work performed by the Employee for the
Company.
(f) Covenants Not to Compete, Etc. The Employee agrees that for a period of
two (2) years after the termination of his Employment (the "Termination
Date"), for whatever reason, neither he nor any entity with which the
Employee is affiliated anywhere in the United States (the "Territory") will,
directly or indirectly, own, manage, operate, join, control, be employed by
or participate in the ownership, management, operation or control of, or be
connected in any manner with, any business whether in corporate,
proprietorship or partnership form or otherwise, as more than ten percent
(10%) owner in such business, or member of a group controlling such business,
where such business is engaged in any activity which competes with the
business of the company, as conducted on the Termination Date or which will
Compete with any proposed business activity of the Company in the Planning
stage on the Termination Date. From the date of this Agreement until the
second anniversary of the Termination Date, neither the Employee nor any
entity with which the Employee is affiliated shall solicit within the
Territory business from, or perform services for, except on behalf of the
Company, any company or other business entity which at any time during such
period was a client of the Company (including, without limitation, any lessee,
vendor, supplier or lender of or to the Company), except on behalf of the
Company. Neither the Employee nor any entity with which the Employee is
affiliated shall within the Territory, at any time within three (3) years from
the Termination date, provide employment, either on a full-time, part-time or
consulting basis, to any person who is employed by the Company on the
Termination Date, unless the Employee shall have received the prior written
consent of the Company to do so, in which written permission the name of the
person to be employed following the Termination Date by the Employee or by
any entity with which the Employee is affiliated is specifically identified.
As used herein, the term "entity with which the Employee is affiliated" shall
include, without limitation, the Employee's spouse and any other member of
his immediate family.
Notwithstanding the preceding, in the event that the Employer terminates this
Agreement without cause or the Employee terminates this Agreement with cause,
the provisions of this paragraph shall only continue for the period of time
that the Employee is paid his Base Salary. In the event that the provisions
of this subparagraph (f) should ever be judicially determined to exceed the
limitations permitted by applicable law, than the parties hereto agree that
such provision shall be reformed to set forth the maximum limitations
permitted.
<PAGE>
(g) Secrecy. The Employee agrees that he shall hold in strict confidence
and shall not disclose to any third person any of the terms or provisions of
his employment arrangements with the Company, except to the extent required
by applicable law.
Injunctive Relief. The parties hereto specifically acknowledge and agree
that the remedy at law for any breach of the provisions of this Paragraph 6
will be inadequate and that the Company, in addition to any other relief
available to it, shall be entitled to temporary and permanent injunctive
relief upon application by the Company to any arbitrator or directly to any
court, without the necessity of proving actual damages.
7. Miscellaneous.
(a) Successors and Assigns. This Agreement is binding on and inures to the
benefit of the Company's successors and assigns, all of which are included in
the term "Company" as it is used in the Agreement. The Company may assign
this Agreement only in connection with a merger, consolidation, assignment,
sale or other disposition of substantially all of its assets or business.
This Agreement will be deemed materially breached by the Company if its
successor or assign does not assume all of the company's obligations under
this Agreement.
(b) Modification. This Agreement may be modified or amended only by a
writing signed by both the Company and the Employee.
(c) Construction. Wherever possible, each provision of this Agreement will
be interpreted so that it is valid under the applicable law. If any
provision of this Agreement is to any extent invalid under the applicable
law, the remainder of that provision will still be effective to the extent it
remains valid. The remainder of this Agreement also will continue to be
valid, and the entire Agreement will continue to be valid in other
jurisdictions.
(d) Waivers. No failure or delay by either the Company or the Employee in
exercising any right or remedy under this Agreement will waive any provision
of this Agreement, nor will any single or partial exercise by either the
Company or the Employee of any right or remedy under this Agreement preclude
either of them from otherwise or further exercising these rights or remedies,
or any other rights or remedies granted by any law or any related document.
(e) Captions. The headings in this Agreement are for convenience only and
do not affect the interpretation of this Agreement.
(f) Entire Agreement. This Agreement supersedes all previous and
contemporaneous oral negotiations, commitments, writings and understandings
between the parties concerning the matters in this Agreement.
<PAGE>
(g) Notices. All notices and other communications required or permitted
under this Agreement shall be in writing and either hand delivered, or sent
by registered first class mail, postage prepaid, and shall be effective upon
receipt in the event of hand delivery, or five (5) days after mailing to the
addresses stated below, or to such other addresses as may be furnished in
writing from time to time by the party to be served:
If to the Company: High Plains Corporation
200 W. Douglas, Suite 820
Wichita, Kansas 67202
ATTN: Christopher G. Standlee
If to the Employee: Gary R. Smith
2638 Radford Avenue
North Canton, Ohio 44720
With a copy to: Gary R. Smith
7627 E. 37th St. North, #1402
Wichita, Kansas 67226
IN WITNESS WHEREOF, Company and Employee have executed this Agreement as of
the date first above written.
COMPANY: EMPLOYEE:
HIGH PLAINS CORPORATION
By: /s/Christoper G. Standlee _________________________
Vice President /s/Gary R. Smith
ATTEST:
____________________________
/s/H.T. Ritchie, Secretary
CO2 Purchase and Sale
Agreement
WHEREAS, High Plains Corporation (hereinafter referred to as "SELLER")
operates an ethanol production facility in York, Nebraska which produces as a
by-product raw carbon dioxide (CO-2) in gaseous form; and
WHEREAS, EPCO Carbon Dioxide Products, Inc. ("EPCO") will be manufacturing
liquid CO2 at a CO2 Liquefaction Plant to be constructed by EPCO on premises
leased or owned by EPCO in York, Nebraska; and
WHEREAS, EPCO desires to purchase Raw CO-2 gas from SELLER; and
WHEREAS, SELLER desires to sell such CO-2 gas on the terms and conditions
set forth in this agreement;
NOW THEREFORE, in consideration of the foregoing premises, the mutual
covenants set forth below, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows, superceding all prior agreements:
1. Definitions:
(a) EPCO CO2 Plant - The CO2 Liquefaction Plant to be constructed by EPCO
in York, Nebraska;
(b) SELLER'S Facility - The ethanol production facility and related
operations located on the premises of SELLER in York,
Nebraska which produces as a by-product quantities of CO-2 in
gas form;
(c) Contract year - shall mean a twelve (12) month period beginning on
the first day of the first month after the EPCO CO2 Plant begins
producing food grade liquid CO2, and every year thereafter
for succeeding periods of twelve (12) months.
<PAGE>
(d) Matchpoint - The flange or other point on the necessary services and
process facility conduits into and out of the EPCO CO2 Plant Site and shown
on Exhibit A. Installation costs on the EPCO CO2 Plant side of the Matchpoint
shall be borne by EPCO. Installation costs on the SELLER'S Facility side of
the Matchpoint will be borne by SELLER. EPCO will fund the costs for SELLER's
improvements and will recover those costs in the form of deductions from the
funds due to SELLER from the first product sales. Unless agreed otherwise,
this Matchpoint shall be located as near as practicable to the boundary of
the EPCO CO2 Plant Site.
(e) SELLER'S Facility Site - That parcel of land constituting the entire
premises upon which the SELLER'S Facility in York, Nebraska
is located, all as more particularly set out and described on
Exhibit B, attached hereto and made a part hereof.
(f) EPCO CO2 Plant Site - a parcel of land designated by EPCO on which its
CO-2 Plant Site is located all as more particularly set out
and described on Exhibit B, attached hereto and made a part
hereof.
2. Term: The primary term of this agreement shall begin on the first day of
operation of the EPCO CO-2 Plant and shall end on the last day of
the tenth contract year thereafter. Provided, however, that this
agreement shall automatically renew for additional term(s) of 5
years each until either SELLER or EPCO provides written
notification of termination to the other at least six months prior
to the end of the primary or any renewal term. Should SELLER during
the initial term of this contract, or any extension thereto, file a
voluntary petition under any chapter of the United States
Bankruptcy code, or if a petition in Bankruptcy or under any
debtors relief law shall be filed against SELLER, or if SELLER
becomes insolvent, or if proceedings are begun by or against SELLER
seeking the appointment of a receiver, or if SELLER should cease
operations for a period of more than thirty consecutive days,
except for events of Force Majeure, then EPCO shall have the right
to terminate this agreement and retain all money owed by it to
SELLER.
3. Quantity and Price: SELLER agrees to supply to EPCO at the Matchpoint at
6 p.s.i.g. at least 200 tons of CO-2 gas per day. The price for
such CO2 shall be $7.00 per short ton.
4. Take or Pay Minimum: EPCO agrees to Take or Pay ("Take or Pay") for,
whether taken or not, a minimum of 70% of 200 short tons, or 140
short tons per day, of CO2 during each six month period of this
contract. EPCO's obligation to Take or Pay shall abate in the
event of force majeure or cessation of operation of SELLER'S
facility.
<PAGE>
5. Measurement: The quantity of CO2 gas purchased by EPCO shall be measured
by the number of tons of liquid CO-2 produced by EPCO's plant,
determined on certified truck and rail scales located on the EPCO
Plant Site. Title to and risk of loss of CO2 gas shall pass from
SELLER to EPCO at the Matchpoint, as defined herein, but the
quantity of CO-2 sold and purchased shall nonetheless be measured
on the truck and rail scales stated above. EPCO will furnish
certified Bills of Lading to SELLER, omitting the customer names
and addresses, which shall establish the billable tons of product
used by EPCO. EPCO shall not vent CO2 gas, and shall maximize
recovery of condensation gas. EPCO shall keep a record of daily
production, and of each individual shipment, a copy of which shall
be given to SELLER on a daily basis. SELLER shall have the right
to an independent audit of production and shipment information at
SELLER's sole expense. SELLER is hereby granted a security
interest in EPCO's inventory of all finished product prior to sale,
to secure any amounts due SELLER. SELLER shall be entitled to
purchase up to 10 tons of finished CO2 liquid product per day
during the term of this agreement for $26.50 per ton utilized. High
Plains will be furnished copies of any product quality tests
performed by EPCO.
6. Payment and Terms: SELLER shall bill EPCO monthly for the Tons of Product
shipped from the EPCO Facility. EPCO shall pay net thirty (30) days
from billing date.
7. Force Majeure: Neither party shall be liable for failure to perform or
for delay in performing this Agreement, where such failure or delay
is occasioned by events constituting force majeure, and the parties
shall use all reasonable efforts to minimize the duration of any
event of force majeure. For purposes of this agreement force
majeure shall include the following: (a) fire, explosion, strike,
lock-out, labor dispute, casualty, accident or mechanical
failure(s); (b) lack or failure in whole or in part of
transportation facilities; (c) storm, flood or drought; (d) acts
of God or of the public enemy, war, riots, police action, or civil
commotion. The party asserting that an event of force majeure has
occurred shall send the other party notice thereof by cable,
telecopy or telex no later than three (3) days after the beginning
of such claimed event setting forth a description of the event of
force majeure, an estimate of its effect upon the party's ability
to perform its obligations under this Agreement and the duration
thereof. The notice shall be supplemented by such other
information or documentation as the party receiving the notice may
reasonably request. As soon as possible after the cessation of any
event of force majeure, the party which asserted such event shall
give the other party written notice of such cessation. Whenever
possible, each party shall give the other party notice of any
threatened or impending event of force majeure, and the parties
shall use all reasonable efforts to minimize the duration of any
event of force majeure.
In the event of force majeure affecting SELLER, EPCO shall have the right
to the first 200 tons of CO2 per day produced by the SELLER'S
Plant.
<PAGE>
It is agreed that if the SELLER'S Facility or EPCO's Plant is destroyed by
some force beyond their control, they shall not be required to
rebuild their facility and this Agreement will be terminated
without penalty.
8. Confidentiality and Non-Competition: The parties hereby acknowledge
that in the course of engaging in the sale and purchase of CO-2 gas
at the York, Nebraska location, each will have access to
Confidential Information which includes but is not limited to each
other's business, the identity of customers, the quantity of liquid
CO-2 used by such customers, shipping records, pricing, customer
lists, production methods, technical and non-technical data,
formulae, patterns, compilations, programs, devices, methods,
techniques, drawings, processes, financial data, information
regarding actual and potential customers of each party and actual
and potential suppliers of each party. The parties agree that all
such Confidential Information shall be kept secret and
confidential.
The parties further acknowledge that violation of the provisions of this
Section shall constitute irreparable injury and shall entitle the
non-violating party to temporary preliminary and/or permanent
injunctive relief, in addition to any other remedy at law or in
equity.
9. Insurance: Prior to construction of the CO-2 Liquefaction Plant EPCO
shall furnish SELLER Certificates of Insurance with thirty days
notice of cancellation and/or change in coverage clause as evidence
of the following coverages:
1. Worker's Compensation as prescribed by law and Employer's Liability
Insurance with a limit of not less than $1,000,000 per
person and $1,000,000 per accident;
2. Comprehensive Public Liability and Automobile Liability, including
broad form contractual liability provision to cover any liability assumed by
EPCO under this Contract, with a combined single limit of $5,000,000 Property
Damage and Bodily Injury;
3. SELLER shall be named as an additional insured on these policies of
insurance.
10. Assignment: Subject to the terms and conditions set forth herein, no
assignment by the parties of all or part of its rights and
obligations shall be made without the consent of the non-assigning
party, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, in the event the SELLER sells its
Facility in York, Nebraska EPCO may, at its sole option, terminate
this agreement without any penalty.
<PAGE>
11. Entire Agreement: The entire Agreement is contained herein and there
are no oral promises, representations, or other warranties affecting
it. No amendment or modifications of any of the terms and
provisions of this Agreement shall be binding upon either SELLER or
EPCO unless the same be expressed in writing and signed by both
parties.
12. Miscellaneous: This Agreement and the agreements referred to herein
comprise the entire agreement between the parties relating to the
subject matter hereof and there are no agreements, understandings,
conditions, warranties or representations concerning the subject
matter hereof which are not set forth or referred to herein.
Headings are for reference only, and do not affect the meaning of
any paragraph. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction. The failure of either party to
require strict compliance with any of the terms and conditions of
this agreement in any one situation shall not constitute a waiver
of any of the terms and conditions of this agreement.
13. Notices: Notices and other communications between the parties hereto
shall be in writing (by mail, telex, telecopy or telegraph unless a
particular mode is specified herein), postage or transmission costs
prepaid, and shall be addressed to the parties hereto at the
addresses set forth below:
To SELLER: High Plains Corporation
200 West Douglas, Suite 820
Wichita, Kansas 67202
To EPCO: EPCO Carbon Dioxide Products, Inc.
1500 Lamy Lane
Monroe, Louisiana 71201
Telephone: (318) 361-0870
FAX: (318) 361-0047
All such Notices and communications shall be deemed effective on (i) the
date of transmission, if sent by telecopy or if sent by telex, with
confirmed answer back, or (ii) the date that is five (5) calendar
days after the date on which deposited or sent, if sent by mail or
telegraph. Each party hereto may change its address for purposes
hereof by Notice given to the other party in the manner prescribed
herein.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed, this 6th day of November, 1997.
EPCO CARBON DIOXIDE PRODUCTS, INC.
By: /s/Eric P. Wiesemann
President
Attest: /s/Emmett W. Averett
HIGH PLAINS CORPORATION
By: /s/Christopher G. Standlee
Title: Vice President
Attest: /s/H.T. Ritchie
AMENDED EMPLOYMENT AGREEMENT
This Amended Employment Agreement ("Amendment") is made and entered into as
of June 30, 1998 by and between High Plains Corporation, a Kansas Corporation
("Company") and Raymond G. Friend ("Employee").
WHEREAS, the parties hereto are the same parties to that certain Employment
Agreement dated April 1, 1995, and both parties wish to amend and modify the
terms of that Employment Agreement as set forth herein.
NOW, THEREFORE, in consideration of the terms, covenants and conditions set
forth herein, the parties agree as follows:
1. Except as otherwise specifically set forth herein, both Company and
Employee each hereby waive all rights and benefits under the Employment
Agreement dated April 1, 1995, as well as under any other employment
agreements between the parties, whether written, oral, or otherwise, and each
specifically releases the other from any other obligations thereunder. Each
party further waives and releases any claims which he might currently have
against the other arising out of the employment, or the modification of that
employment arrangement by this amendment. Employee hereby resigns as
President of Company effective June 30, 1998.
2. Employee will continue to be employed by Company on a non-exclusive basis
commencing July 1, 1998 and continuing through June 30, 2000. During this
period he will be free to obtain other employment, and his only employment
obligations with Company shall be generally to promote the best interests of
Company, and specifically to advise and cooperate with the Company on an as
needed basis at mutually agreeable times, defined to at least include
meetings with Company representatives not more than twice monthly and not
more than two hours in duration. Additionally, for a period of ten years
from the date hereof, Employee will cooperate with Company in any litigation
involving Company, and in which he is either subpoenaed, or requested by
Company to testify.
During the period of this continued employment, Employee shall not become an
employee of (or independent contractor for) any other ethanol manufacturer
within the continental United States. However, Company acknowledges that
Employee may engage in the business of buying and selling ethanol for others
on a brokerage basis during this period, provided that Company shall have a
first right of refusal to supply ethanol to Employee for Employee's needs,
and provided further that Company will also have a first right of refusal on
any ethanol related business opportunities which Employee might procure or
develop. If Company does not exercise its first right of refusal within a
reasonable time after presentation of the proposal, Employee may proceed with
that transaction on an individual basis with no further obligation or duty
therein to Company.
<PAGE>
3. Employee may, at his option, continue to serve as an employee director of
the Company, with all the rights and responsibilities of that position, but
acknowledges that he will receive no additional compensation therefor unless
compensation is later paid to other employee directors of Company, or unless
the Board adopts a policy to provide for compensation to other employee
directors. Company does agree to pay reasonable expenses incurred by
Employee for attendance of out of town board meetings.
4. As compensation for this continued employment, Employee shall be paid the
total sum of $600,000 (less taxes and other lawful or agreed deductions),
with $300,000 of that amount payable on June 30, 1998, and the remaining
$300,000 payable ratably on the Company's normal payroll dates over the
twenty-four month term of employment.
During the continued employment, Employee shall continue to receive the
following employment benefits as if he were an employee officer under the
Company's current plans, or as those plans are amended, provided such
amendments apply uniformly throughout the company:
Health and Dental Insurance
Life Insurance
Disability Insurance
401(k) plan
Employee Stock Purchase Plan (continued as a 10 year employee officer)
Upon execution of this amendment, Employee shall pay Company an amount equal
to the cash surrender value of any key man life insurance policies owned by
Company, at which time Company shall assign ownership of said policies to
Employee. Company also grants to Employee the option to purchase the GMC
Suburban vehicle owned by the Company, and which is currently provided to
Employee, for the sum of $29,000, provided that this option is exercised on
the date of the execution of this amendment. Employee may also purchase the
cellular phone and charger/car adapter equipment installed in the Suburban
for the additional sum of $300. If Employee elects not to purchase this
vehicle or phone equipment, the items not purchased and all keys thereto,
shall be delivered to Company immediately. Employee may also keep the same
cellular phone number and account provided that the contract is assigned to
him personally, and Company is no longer responsible therefor.
Employee acknowledges receipt of all amounts and benefits due or accrued from
Company for wages, salary, bonus, vacation, expense reimbursement, or other
compensation or benefit of any kind whatsoever, through June 30, 1998, and
releases Company for any claims therefor. No additional vacation will accrue
during the term of continued employment, and any and all other employment
benefits from Company not specifically set forth herein are specifically
waived by Employee. Employee acknowledges that he has no authority to bind
the corporation to any contracts or agreements as of the date hereof, and
will not purport to commit the Company in any way. Employee will not be
entitled to reimbursement of any further expenses by the corporation unless
specifically provided herein, or approved in writing in advance by an
appropriate corporate officer, or the Company's Board of Directors.
<PAGE>
In connection with this continued employment, Employee shall surrender all of
his existing stock options previously issued by the Company. All such
options (except the options described in the following sentence) shall be
reissued by Company to Employee as non-qualified options on terms set forth
in the Company's 1992 Stock Option plan, retaining the same exercise price
and re-load rights (if any) as the previous options, but eligible for
immediate exercise, and with an expiration date of September 30, 2000.
However, the parties agree that in return for Employee's surrender of the
72,000 stock options which he currently holds, and which have an exercise
price of $5.382 and an expiration date of 12/10/2002, Company shall issue
employee 36,000 new non-qualified stock options under the terms of the
Company's 1992 Stock Option Plan, with an exercise price of $2.625, and an
expiration date of 12/10/2001.
5. The letter of recommendation attached hereto as Exhibit A shall be
maintained in Employee's personnel file, and shall constitute the
recommendation letter disseminated by Company regarding Employee for all
future inquiries. The parties specifically agree that Company's employment
file on Employee shall not contain anything derogatory of Employee, and
Employee agrees that he shall not make any negative or derogatory statements
regarding Company, its officers, directors, or employees. Company agrees to
instruct its employees and directors not to make any negative or derogatory
statements regarding Employee, and further agrees to use reasonable efforts
to enforce that instruction. Provided, however, that the foregoing shall not
be construed to prevent full, fair, and complete discussion of grievances and
any future business among the parties, or to inhibit either party or its
representatives from testifying under subpoena or in the context of any
criminal or civil court proceeding.
6. Any press releases announcing Employee's resignation as president, or the
change in Employee's relationship with the Company pursuant to this
amendment, shall be subject to approval by Employee prior to release.
7. All material correspondence directed to Employee and received by Company
during the term of this agreement shall be copied and/or logged and provided
to Employee within a reasonable time after receipt. Regarding phone calls
received by the Company for Employee during the term of this agreement,
Company agrees to ask its staff to respond as set forth in the attached
Exhibit B.
8. All payments to Employee set forth herein (exclusive of employment
benefits) shall continue in the event of the death or disability of Employee,
during the term of this Amended Employment Agreement. All such payments
shall be paid directly to Employee's heirs at law under the same terms and
conditions.
9. This agreement represents the sole agreement of the parties hereto,
incorporating all other agreements, whether written or oral, no modifications
of this agreement shall be effective unless in writing and signed by both
parties, and no other prior agreements between the parties shall be of any
further force or effect.
<PAGE>
10. In the event the Company terminates the Employee, whether with or
without cause, then Company agrees that it shall still be obligated to
specifically perform all the terms and conditions herein.
IN WITNESS WHEREOF, the parties have executed this agreement as of the day
and year first written above.
EMPLOYEE: COMPANY:
/s/Raymond G. Friend HIGH PLAINS CORPORATION
By: /s/Gary R. Smith, C.E.O.
<PAGE>
Exhibit A
(On Company letterhead)
To: Whom it may concern
Re: Raymond G. Friend
Employment History
Date: June 18, 1998
Ray Friend was initially employed by our company in June 1985 as
Controller. In April of 1990, he became an officer in our company, being
elected to the positions of Vice President of Finance and Marketing and
Chief Financial Officer of the company. In 1995, Mr. Friend was elected
Executive Vice President and retained his title of Chief Financial
Officer. In April 1997, he was elected President of High Plains
Corporation and in May of 1997 was appointed to the Company's Board of
Directors. In November of 1997, he was elected by shareholders to the Board
for a three year term.
Mr. Friend resigned as President in June of 1998 for personal reasons and
continues as a Director for the company, serving on both the Finance and
Capital Expenditures and the Mergers and Acquisition committees of the
Board.
Mr. Friend was active within the Industry, serving for eleven years on the
Board of The Clean Fuels Development Coalition (CFDC), a national
organization with headquarters in Washington, DC that was formed to promote
the development and use of clean alternative fuel sources. During this time,
he served as Chairman of CFDC for two terms. He has also served as
President of the Kansas Ethanol Association, an organization of ethanol
producers which operate plants in the state of Kansas, for twelve years.
He was part of a three person team that took over management of this publicly
owned company in 1985, when the company was essentially bankrupt, and through
their combined efforts turned the company around, increasing the market
capitalization from $47 thousand to a level as high as $150 million.
Mr. Friend has been a dedicated employee during the thirteen years he has
worked here performing an assortment of duties. We would highly recommend
him to any potential future employer for almost any facet of business
management or marketing.
Sincerely,
/s/Daniel O. Skolness
Chairman of the Board
High Plains Corporation
<PAGE>
Exhibit B
MEMO RE TELEPHONE REQUESTS
FOR RAY FRIEND
To: High Plains Corporation Office Staff
In the event you receive telephone calls asking to speak with Ray Friend,
please respond as follows:
"Mr. Friend is no longer involved in the daily operations of the Company. I
would be happy to direct your call to the appropriate department. If you
need to speak directly with Mr. Friend, his new phone number is 681-0080."
If further questioned as to Ray's status, refer the calls to Gary Smith or
Chris Standlee.
Responses by Gary and/or Chris will essentially state that "Ray is no longer
officing here. We have retained his services on a consulting basis to assist
with ongoing business. What may I do to help you."
LEASE AGREEMENT
This Lease Agreement, ("Agreement"), is made and entered into as of the 6th
day of November, 1997, between High Plains Corporation ("High Plains"), with
offices at 200 W. Douglas, Suite 820, Wichita, KS 67202, and EPCO Carbon
Dioxide Products, Inc. ("EPCO"), with offices at 1500 Lamy Lane, Monroe,
Louisiana 71201.
WHEREAS, EPCO and High Plains have entered into an agreement whereby High
Plains will sell to EPCO and EPCO will purchase from High Plains raw gaseous
CO2 produced at High Plains ethanol production facility located in York,
Nebraska;
WHEREAS, EPCO desires to lease from High Plains certain land and
improvements thereon, upon which EPCO desires to construct and operate a
liquefaction plant; and
WHEREAS, High Plains desires to lease to EPCO certain land and
improvements thereon and allow EPCO to construct and operate a liquefaction
plant on one of the Properties;
NOW, THEREFORE, in consideration of the foregoing promises, the mutual
covenants set forth below and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. DEFINITIONS:
(a) CO2 Purchase and Sale Agreement shall mean the CO2 Purchase and Sale
Agreement entered into by High Plains and EPCO, dated November 6, 1997.
(b) Contract Year shall mean a twelve (12) month period beginning on the
first day that EPCO begins to manufacture liquid CO2 and every year
thereafter for succeeding periods of twelve (12) months.
(c) EPCO's Liquefaction Plant shall mean the CO2 liquefaction plant, owned
by EPCO and to be located on Exhibit A Property owned by High Plains and
leased to EPCO.
(d) High Plains' Facility shall mean the ethanol production facility and
related operations located on the premises of High Plains in York,
Nebraska, which produces as a byproduct quantities of CO2 in gaseous
form.
2. PROPERTY LEASED: High Plains hereby leases to EPCO and EPCO hereby leases
from High Plains a parcel of land, ("Property"), the location of which is more
particularly described in Exhibit A, attached hereto and made a part of this
Agreement.
3. TERM: The primary term of this Agreement shall begin on the date of
execution of this Agreement and shall end on the close of business of the last
day of the tenth Contract Year. Within 30 days after EPCO begins producing
liquid CO2, EPCO shall provide High Plains written notice of the date on which
EPCO began producing liquid CO2. This Agreement shall automatically renew
for successive five-year terms which shall be concurrent with the Contract
Years, unless written notice is given by either party of its intent not to
renew at least six (6) months prior to the expiration of the then current term.
<PAGE>
4. USE OF THE PREMISES:
(a) High Plains agrees to lease the Property to EPCO only for the
purposes of constructing, operating, maintaining, disassembling, and
removing EPCO's Liquefaction Plant and for transporting EPCO's products to
and from EPCO's Liquefaction Plant as well as parking, storing and
maintaining trucks, trailers and other vehicles used in operating EPCO's
Liquefaction Plant. The adjoining pipeline shall be used only to carry raw
CO2 gas from High Plains' ethanol plant to EPCO's Liquefaction Plant.
(b) EPCO may, at EPCO's sole expense, construct improvements on the
Property. All buildings and any alterations or modifications to the
Property shall comply with OSHA or other applicable regulations or local
codes in the jurisdiction in which the Property is located.
(c) EPCO agrees to obtain from the appropriate governmental agencies, at
EPCO's sole expense, any and all permits, licenses, and the like, required
to permit EPCO to construct the improvements and to otherwise occupy the
Property for the purposes stated in paragraph 4 of this Agreement.
(d) EPCO shall make all repairs and do all acts of maintenance in or upon
the Property as it becomes necessary during the term of this Agreement to
ensure the Property remains in compliance with all applicable regulations
or local codes in the jurisdiction in which the Property is located. EPCO
shall be responsible for fencing the Liquefaction Plant. Existing fencing
may be used, but any relocation or maintenance of fencing shall be the
responsibility of EPCO. All fencing shall remain the property of High
Plains upon termination of this Lease Agreement. EPCO further agrees to
purchase from High Plains the spare truck scale currently located on High
Plains facility for the agreed sum of $20,000.00.
(e) Once construction of any improvement upon the Property has begun by
EPCO, EPCO shall with reasonable diligence prosecute the work to
completion.
5. WARRANTIES BY EPCO:
(a) EPCO represents and warrants that EPCO is familiar with and has
knowledge of applicable and relevant environmental, health, and safety
laws, statutes, regulations, and ordinances, whether federal, state, or
local, pertaining to the handling, storage, use, transportation, or other
disposition of gaseous CO2 and liquid CO2. EPCO hereby assumes full
responsibility for handling, storage, use, transportation, or other
disposition of gaseous CO2 and liquid CO2 in compliance with all applicable
and relevant environmental, health, and safety laws, statutes,
regulations, and ordinances, whether federal, state, or local, pertaining
to the handling, storage, use, transportation, or other disposition of
gaseous CO2 and liquid CO2.
<PAGE>
(b) EPCO further represents and warrants that EPCO is familiar with and
has knowledge of, applicable and relevant transportation, environmental,
health, and safety laws, statutes, regulations, and ordinances, whether
federal, state, or local, pertaining to the construction and maintenance
of EPCO's Liquefaction Plant. EPCO hereby assumes full responsibility for
constructing and maintaining EPCO's Liquefaction Plant in such a condition
which ensures that EPCO's Liquefaction Plant is in compliance with all
federal, state, and local laws, statutes, and regulations pertaining to
the construction and maintenance of EPCO's Liquefaction Plant. EPCO
further assumes full responsibility for the operation of the Liquefaction
Plant in compliance with all federal, state, and local laws, statutes and
regulations pertaining to the operation of EPCO's Liquefaction Plant.
6. AGREEMENT AND COVENANTS OF EPCO:
(a) EPCO shall under no circumstances cause, suffer, or allow the release
or disposal of any hazardous or nonhazardous wastes, substances, or other
materials on, at, or in the Property and shall be and remain fully
responsible for the ultimate disposition of such materials during and
after the term of this Agreement. EPCO shall comply with any and all past,
present, and future laws, rules, regulations, ordinances and the like,
directly or indirectly relating to environmental protection, conservation,
hazardous or non hazardous waste, substances, or other materials,
emissions, discharges, releases, verbal or written notification or
reporting, wildlife, natural resources, permitting, cleanup or
remediation, onsite or offsite transportation, disposal, reclamation,
recycling, or other disposition of such materials to the extent directly
or indirectly relating or applying to EPCO's actions or inactions on, at,
in or near the Property. EPCO shall maintain complete records of all
materials relating to the foregoing during the term of this Agreement.
(b) EPCO shall not use the Property for any disorderly or unlawful
purpose, but only for the purposes stated in paragraph 4 of this
Agreement.
7. CONDITIONS OF PREMISES: EPCO acknowledges that EPCO has had full
opportunity to inspect the Properties and is fully informed, independent of
High Plains to the character and construction of the Property. EPCO accepts
the premises as is, and in their present condition.
8. TRADE FIXTURES AND EQUIPMENT: The parties agree that all fixtures and
equipment installed or brought onto the Property shall not become or be
deemed to be a part of the Property, but shall remain EPCO's property and
may be removed from the Property by EPCO at any time during the term of
this Agreement. Subject to the other provisions herein, repairs to EPCO's
equipment shall be at EPCO's sole discretion and expense. High Plains
covenants that any interest High Plains may now or hereafter have in
EPCO's property located on the Property and any rights incident thereto
shall be subordinate to the security interest of any secured party
pursuant to a security agreement.
9. ANNUAL RENTAL FEE: EPCO agrees to pay High Plains as rental for the use and
occupancy of the Property, at the times and in the manner provided, a
rental fee of $1.00 each Contract Year. EPCO will pay any and all taxes
resulting from the equipment or improvements being placed upon the leased
premises, including all personal property taxes on equipment, and any
increase in real property taxes for the leased premises resulting from the
equipment or improvements.
<PAGE>
10. PAYMENT OF RENT: The annual rental fee shall be paid in advance on or
before the first day of a Contract Year. If the correct amount is not paid on
or before the first day of a Contract Year, interest on any unpaid amount
shall accrue at the rate of 10% for each Contract Year, and if such
default continues for more than thirty (30) days after written notice from
High Plains to EPCO, High Plains may terminate this Agreement without
prejudice to its other remedies.
11: UTILITIES:
(a) EPCO shall, at its sole cost and expense, cause to be installed in,
on, and about the Property all facilities necessary to supply thereto all
water, sewerage, gas, electricity, telephone, and other services required
in EPCO's operations hereunder; and during the term of this Lease, EPCO
agrees to pay all charges and expenses in connection therewith and to
protect High Plains and the Property therefrom. High Plains represents
that such services are or will be available at or near the perimeter of
the Property before construction of EPCO's Liquefaction Plant is begun.
(b) EPCO shall pay all charges for all utilities, including but not
limited to electricity, gas, fuel, water, sewer charges, telephone
services used in or on the premises, as they become due and payable and to
establish all accounts therefor in EPCO's name at the outset of the term
of this Agreement. EPCO shall reimburse High Plains for the actual
charges made by the City of York for direct wastewater disposal (currently
estimated to be $.50/1,000 gallons), or for High Plains prorated actual
costs if wastewater is treated by High Plains prior to discharge to the
City. High Plains agrees to treat EPCO's waste water only if required by
the City of York.
12. RESTORATION OF THE PROPERTY: Within one hundred eighty (180) days of the
termination of this Agreement, EPCO shall, at EPCO's sole expense, restore
the Property and return possession of the Property to High Plains.
Restoration of the Property shall mean the removal of all roads, parking
lots, curbs, above ground structures, pilings, foundations, pipes and
other underground structures placed on the Property by EPCO to at least
one (1) foot below ground level. In the event EPCO fails to remove its
personality from the Property and restore the Property as required in the
preceding sentence, then High Plains may remove, or cause to have removed,
EPCO's personality from the Property and restore the Property or cause to
have the Property restored. EPCO shall reimburse High Plains for any
reasonable costs High Plains may incur for removing EPCO's personality and
restoring the Property. If requested by High Plains within 30 days after
termination, EPCO shall leave certain specific improvements, which are
integrally incorporated into the premises, such as roads, paving, curbs,
foundations, etc.
13. INDEMNITY:
(a) High Plains does not assume any liability for any acts or omissions
of EPCO or EPCO's drivers, agents or employees. EPCO shall fully protect,
indemnify, defend and hold High Plains, its affiliates, and their
respective officers, directors, agents, servants and employees harmless
<PAGE>
from and against any and all claims and actions by third parties for
personal injury, property damage or death caused by any liquid CO2 while
at EPCO's Liquefaction Plant; any and all claims and actions by any third
parties, against High Plains for personal injury, property damage or death
sustained by anyone, arising out of or in connection with the maintenance,
operation, control or use of the Property; all loss or damage to the High
Plains facility, arising out of the ownership, maintenance, operations,
control or use of the Property by EPCO; all taxes, penalties, fines,
interest, liens or indebtedness or claims against High Plains property for
work performed, or measured by the work performed, growing out of or
incident to EPCO's operations under this Agreement. Third parties shall
include, but not be limited to High Plains and EPCO employees, contractors
and subcontractors. EPCO's duty to protect, indemnify, defend and hold
High Plains harmless shall not extend to any action for which High Plains
is insured through a Worker's Compensation plan. Additionally, EPCO shall
not be held liable for any punitive damages assessed against High Plains.
14. INSURANCE:
(a) EPCO shall maintain at its own cost and expense such insurance of a
type and in the amounts to insure EPCO's indemnification and other
obligations under this Agreement which will protect High Plains from all
claims for damages to persons and to property which may arise from the
operation of the liquefaction Plant, or from work performed pursuant to
this Agreement or any subcontracts related to this Agreement. EPCO shall
maintain during the entire term of this Agreement insurance policies with
minimum limits of coverage, all as set forth on Exhibit B which is made a
part hereof by reference.
(b) Such insurance shall also name High Plains as an additional insured.
15. ASSIGNMENT AND SUBLEASING: Neither party may assign its rights and
obligations under without the consent of the non-assigning party, which
consent shall not be unreasonably withheld.
16. TERMINATION AND DAMAGES:
(a) High Plains and EPCO may terminate this Agreement or any provision
herein by mutual consent upon such terms as they may agree in writing.
(b) If either party breaches any provision of this Agreement, the
nonbreaching party shall provide the breaching party with written notice
of the alleged breach. The notice of alleged breach shall sufficiently
describe the conduct which constitutes the alleged breach, the
nonbreaching party's expectation of remedial action to be taken by the
breaching party, the alleged damages suffered by the nonbreaching party
and the time, which shall not be less than thirty (30) days, within which
the breach must be cured. If the breaching party fails to cure the breach
within the time specified in the notice of alleged breach; the non-
breaching party may terminate this Agreement.
(c) If High Plains sells High Plains' Facility, EPCO may, at its sole
discretion, terminate this Agreement without penalty assessed to EPCO.
<PAGE>
(d) If EPCO fails to have completed, or made substantial progress toward
completion and beginning of operation of the plant on or before May
31, 1998, High Plains may terminate this agreement.
(e) If the CO2 Purchase and Sale Agreement of even date herewith is
terminated for any reason, then this lease shall also be considered
terminated.
17. FORCE MAJEURE:
(a) Neither party shall be liable for failure to perform or for delay in
performing this Agreement, where such failure or delay is occasioned by
(i) fire, explosion, breakdown of plant, failure of machinery, strike,
lock-out, labor dispute, casualty or accident; (ii) storm, flood or
drought; (iii) lack or failure in whole or in part of the sources of
supply, labor, raw materials, or power, or other utilities; (iv) acts of
God or of the public enemy, war, riots, police action, or civil commotion;
or (v) any law regulation, ordinance, demand, judgment, injunction,
arbitral award, or other requirement or regulation of any government or
governmental agency or instrumentality; (vi) any other act, whatsoever,
whether similar or dissimilar to those above-enumerated, beyond the
reasonable control of the party suffering such event of force majeure.
The party asserting that an event of force majeure has occurred shall send
the other party notice thereof by cable, telecopy or telex no later than
fourteen (14) days after the beginning of such claimed event, setting
forth a description of the event of force majeure, an estimate of its
effect upon the party's ability to perform its obligations under this
Agreement, and the duration thereof. The notice shall be supplemented by
such other information or documentation as the party receiving the notice
may reasonably request. As soon as possible after the cessation of any
event of force majeure, the party which asserted such event shall give the
other party written notice of such cessation. Whenever possible, each
party shall give the other party notice of any threatened or impending
event of force majeure, and the parties shall use all reasonable efforts
to minimize the duration of any event of force majeure.
(b) It is agreed that if High Plains' Facility or EPCO's Liquefaction
Plant is destroyed by some force beyond their control, neither shall be
required to rebuild its facility, and this Agreement will be canceled
without penalty to either party.
18. EMINENT DOMAIN: EPCO agrees that if the Property, or any part thereof,
shall be taken or condemned for public or quasipublic use or purpose by any
competent authority, EPCO shall have no claim against High Plains and
shall not have any claim or right to any portion of the amount that may be
awarded to High Plains as damages or paid as a result of any such
condemnation. In the event that the Property or any substantial part
thereof shall be taken or condemned by an governmental authority, then
this Agreement shall terminate on the date on which EPCO is forced by such
taking to cease carrying on the operation of EPCO's Liquefaction Plant.
19. LEASE SUBORDINATION:
(a) This lease shall at all times be subject, subordinate, and inferior
to a first mortgage, if any, that may be placed on the land owned by High
Plains; and the recording of such mortgage shall be deemed prior to this
lease, irrespective of the recording date of such mortgage, and EPCO will,
upon demand, without cost, execute any instrument necessary to effectuate
such subordination, and if EPCO, within five (5) days after submission of
such instrument fails to execute the same, High Plains is hereby
authorized to execute same as attorney-in-fact for EPCO.
<PAGE>
(b) It is a condition, however, to the foregoing subordination that so
long as EPCO shall faithfully discharge the obligations on its part to be
kept and performed under the terms of this lease, its tenancy will not be
disturbed nor this lease affected by any default under such mortgage or
mortgages; and in the event of foreclosure, or any enforcement of such
mortgage, the right of EPCO hereunder shall expressly survive and not be
cut off, and this lease shall, in all respects, continue in full force and
effect, provided always, however, that EPCO fully performs all of its
obligations hereunder.
20. EASEMENTS AND RESTRICTIONS OF RECORD: This lease is subject to all
statutes, ordinances, and regulations, including, without limitation, those
relating to zoning now or hereafter applicable to the Property, and to all
covenants, easements, reservations, and restrictions of record applicable
to the Property. High Plains agrees to provide EPCO with a survey which
discloses easements and restrictions of record.
21. ENTIRE AGREEMENT: This Agreement comprises the entire agreement between
the parties and there are no oral promises, representations, or other
warranties affecting it. No amendment or modifications of any of the terms
and provisions of this Agreement shall be binding upon either High Plains
or EPCO unless the same be expressed in writing and signed by both
parties.
22. MISCELLANEOUS:
(a) Headings are for reference only and do not affect the meaning of any
paragraph. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(b) Nothing herein shall be construed to create a partnership, joint
venture, or agency relationship between the parties hereto. Neither party
shall have the authority to enter into agreements of any kind on behalf of
the other, nor shall either party have the power or authority to bind or
obligate the other in any manner to any third party.
(c) The failure of either party at any time to require performance by the
other party of any provision of this Agreement shall in no way affect the
right of such party to require performance of that provision. Any waiver
by either party of any breach or any provision of this Agreement shall not
be construed as a waiver of any continuing or succeeding breach of such
provision, a waiver of the provision itself, or a waiver of any right
under this Agreement.
23. CHOICE OF LAWS: This Agreement shall in all respects be governed by and
construed in accordance with the laws of the State of Nebraska.
<PAGE>
24. NOTICES: Notices and other communications between the parties hereto shall
be in writing (by mail, telex, telecopy or telegraph unless a particular
mode is specified herein), postage or transmission costs prepaid, and
shall be addressed to the parties hereto at the addresses set forth below:
To High Plains: High Plains Corporation
200 West Douglas, Suite 820
Wichita, Kansas 67202
To EPCO: EPCO Carbon Dioxide Products, Inc.
1500 Lamy Lane
Monroe, Louisiana 71201
All such Notices and communications shall be deemed effective on (i) the
date of transmission, if sent by telecopy or if sent by telex, with confirmed
answer back, or (ii) the date that is five (5) calendar days after the date on
which deposited or sent, if sent by mail or telegraph. Each party hereto may
change its address for purposes hereof by Notice given to the other party in
the manner prescribed herein.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, this 6th day of November, 1997.
HIGH PLAINS CORPORATION EPCO CARBON DIOXIDE PRODUCTS, INC.
By: /s/Christopher G. Standlee By: /s/Eric P. Wiesemann
Title: Vice President Title: President
Attest: /s/H.T. Ritchie Attest: /s/Emmett W. Averett
LEASE
4/17/98
This Lease is entered into on this 17th day of April, 1998 between
CENTER TOWERS L. C., hereinafter called LANDLORD, and HIGH PLAINS
CORPORATION hereinafter called TENANT.
WITNESSETH:
In consideration of the mutual covenants and promises hereinafter
contained, the parties hereby mutually agree as follows:
1. LEASED PREMISES: TENANT will use as office space that portion of
the 8th floor of the O.W. Garvey Building, which is so indicated on
Exhibit "A" attached hereto (herein the "Leased Premises") and made part
hereof, hereinafter referred to as the Building, Wichita, Sedgwick County,
Kansas. Tenant leases from Landlord approximately 3842 Rentable Square Feet
and will pay rent based thereon.
Rentable Square Feet means the square footage of the tenant's office
space reflected in Exhibit "A" plus tenant's pro rata share of the
common area of the total square footage of the second floor of the
building to which all tenants have common access thereto.
2. TERM: The rent paying term of this Lease shall be approximately
Five years, commencing June 1, 1998 and ending May 31, 2003.
3. RENT:
(A) Subject to escalation as provided in paragraph 3 (B) below,
TENANT agrees to pay as Base Rent, the sum of $8.11 multiplied by the
Rentable Square Feet as shown in paragraph 1 herein. The Annual Base
Rent will be $31,158.62 payable at a rate of $2,596.55 per month, with
the rent for the first month payable in advance and payments thereafter
to be made on the first day of each calendar month during the term.
The rent for any fractional calendar month shall be prorated.
(B) Change of Base Rent Due to Cost of Living. Base Rent as
provided herein shall be adjusted by adjusting the Base Rent in the
same proportion as the fluctuation in the Consumer Price Index. The
adjustment provided herein shall be in addition to any scheduled
increase in Base Rent and shall be cumulative from year to year. See
Annual Base Rent.
As used in this Article, the term "Consumer Price Index" shall mean
the Consumer Price Index for All Urban Consumers (1982 to 1984 = 100)
released by the United States Department of Labor, Bureau of Labor
Statistics, relating to Consumer Prices, all urban consumers, United
States city average. The statistical methods used for computing the
Consumer Price Index shall be such as are chosen by the United States
Department of Labor for that purpose irrespective of whether the
methods are changed from time to time. If the base year selected by
the United States Department of Labor shall be changed, then the
resultant Index shall be readjusted so as to reflect the base initially
established under this section. If the said Index shall no longer be
published or cannot be readjusted, then another Index generally
recognized as authoritative shall be substituted by Landlord.
For purposes of this paragraph, the base month will be the month
next preceding the first full month of the term of this Lease, and in
the event of any renewal, the month prior to the first month of such
renewal. Such proportion shall be computed annually for the first
month following the completion of each twelve (12) months of the Lease,
and the new rent derived from such computation shall be in effect for
the next (12) months. In no event, however, will an adjustment be made
which would reduce the Base Rent to an amount less than the immediately
preceding Lease Year. The necessary calculation for the adjustment
required herein will be made as quickly as possible, but in the event a
rent paying date occurs before the adjustment can be calculated, an
amount equal to the current unadjusted Base Rent will be paid by Tenant
to Landlord on the rent payment date, and as soon as the calculation of
the adjustment is made, an additional payment will be immediately paid
by Tenant to Landlord.
<PAGE>
(C) In addition to the Base Rent specified in paragraph 3 (A), and
subject to the escalation specified in paragraph 3 (B) above, Tenant
shall pay as additional rent, its proportionate share of any increase
in the real property taxes as provided for in paragraph twenty-three
(23).
4. LATE FEE: In the event any installment of the rent is not paid
within fifteen days after it becomes due, a late fee of ten percent of
the monthly installment will be charged. In addition, TENANT shall be
responsible for any attorney's fees incurred by LANDLORD in connection
with the collection of late fees, which sums shall be deemed additional
rent. The payment of any late fee shall not cure or excuse any default
by TENANT under this Lease.
5. SECURITY FOR PAYMENT OF RENT AND OTHER LEASE OBLIGATIONS: TENANT
shall deposit with LANDLORD the sum of $0000.00 (Security Deposit)
which may be commingled by LANDLORD with its other funds and which
shall be received by LANDLORD, without liability for any interest, as
security for the payment of rent hereunder and the full and faithful
performance of all the terms , covenants and conditions of this Lease.
6. IMPROVEMENT OF THE LEASED PREMISES: TENANT agrees to accept the
Leased Premises in its present condition, subject to improvements,
alterations and decorations to be made by the LANDLORD as set forth in
Exhibit B to this Lease which is attached hereto and made a part
hereof. No alterations, additions or improvements to the Leased
Premises (including signs), except those as specifically set forth in
Exhibit B, shall be made without first having the written consent of
the LANDLORD. Any improvements, additions or alterations made to the
Leased Premises shall become a part of the realty and shall not
thereafter be removed from the premises by the TENANT, with the sole
exception that TENANT shall have the right to install trade fixtures
which may be removed by the TENANT upon payment to LANDLORD of the cost
for repairing any damage caused by the removal of said trade fixtures.
Any mechanics or materialmen's lien filed against the Leased Premises
for work claimed to have been done for, or for materials claimed to
have been furnished to TENANT, shall be discharged by TENANT within ten
days thereafter, at TENANT'S expense, by filing the bond required by
law or otherwise.
7. USE OF PROPERTY: TENANT shall occupy the Leased Premises only as a
business office and shall use it in a careful, safe and proper manner.
TENANT shall not use the Leased Premises for any unlawful purpose or
for any purpose deemed extra hazardous by the fire insurance company
that has coverage on the premises. LANDLORD shall have the right to
enter the Leased Premises at reasonable hours of the day to examine the
same, or to make such repairs and alterations as may be necessary.
8. UTILITIES AND MAINTENANCE: LANDLORD agrees to furnish, during
ordinary business hours, except Sundays and holidays, such heat, water,
electricity, air conditioning, elevator service and cleaning service as
in LANDLORD'S sole judgement is necessary for the comfortable use and
occupancy of said Leased Premises by TENANT; all at LANDLORD'S cost
and expense. TENANT agrees that the LANDLORD shall not be liable for
failure to supply any such heat, water, electricity, air conditioning,
elevator service and cleaning service resulting from causes beyond the
control of LANDLORD. Should any equipment or machinery fail to
function properly, LANDLORD shall use reasonable diligence to repair
same promptly, but TENANT shall have no claim for rebate of rent or
damages on account of any interruption in service occasioned thereby or
resulting therefrom. TENANT shall be responsible for all damage to the
Leased Premises caused by TENANT'S use, other than damage caused by
ordinary wear and tear and for all redecorating, remodeling and
alteration required by it during the term of this Lease.
<PAGE>
9. AFTER HOURS H.V.A.C.: For the purpose hereof, the term "ordinary
hours" shall mean 7:00 a.m. until 7:00 p.m. Monday through Saturday.
Sundays and holidays shall not constitute ordinary business hours.
Ordinary business hours may be modified from time to time. The
furnishing of heating, ventilation and air conditioning during other
than normal business hours, holidays and Sundays may be available at a
rate to be established by LANDLORD, but at a rate that will be known
prior to said furnishing by LANDLORD.
10. POSSESSION: If LANDLORD is unable to give TENANT possession at
the beginning of the lease term, then rent shall abate until occupancy
is available to TENANT, which abatement in rent shall be accepted by
TENANT as full settlement of all damages occasioned by such delay. If
the Leased Premises is not ready for occupancy within three months
after the commencement date specified in Section 2, TENANT may cancel
this Lease by giving written notice to LANDLORD. TENANT may have
access to the Leased Premises prior to the commencement date for the
purpose of installing office equipment, services and other necessary
items.
11. UNIFORM RULES AND REGULATIONS: LANDLORD shall have the right to
prescribe, and TENANT agrees to abide by, uniform rules and regulations
for the "Building" as LANDLORD may reasonably deem necessary, advisable
and appropriate.
12. CASUALTY DAMAGE: If the Leased Premises is partially damaged by
fire, the elements or other casualty, then LANDLORD shall promptly
repair all damage and restore the Leased Premises to its prior
condition. If TENANT is deprived of the use of any substantial portion
of the Leased Premises, either by reason of said damage or during
restoration, the rent shall be proportionately reduced according to the
extent to which TENANT is deprived of such use. If the Leased Premises
is damaged by fire, the elements or other casualty to the extent of 50%
or more of the replacement cost thereof, LANDLORD may terminate the
Lease as of the date of the damage by written notice to TENANT within
sixty days after said date of the damage.
13. LIABILITY INSURANCE:
(a) TENANT shall procure a comprehensive general liability insurance
policy, at TENANT'S cost, for the Leased Premises, covering bodily
injury of at least $100,000 to each person and $300,000 for each
accident, and property damage of at least $100,000.
(b) TENANT agrees to bring itself within the elective provisions of
the Workman's Compensation Law and to carry insurance covering its
liability under said law at TENANT'S expense.
(c) Any and all insurance held by TENANT shall be with insurance
companies acceptable to LANDLORD. TENANT shall furnish LANDLORD with
certificates of insurance evidencing said coverage, with each
certificate bearing acknowledgment by the insurance company agreeing to
give LANDLORD ten days notice before cancellation of such policy. Each
of such comprehensive general liability policies shall name Center
Towers L. C. as an insured thereunder.
14. INDEMNITY: LANDLORD shall not be liable for any injury , loss or
damage to persons or property resulting from fire, theft, explosion,
steam, gas, electricity, water, rain or snow or leaks from any part of
the Building or any cause of whatever nature unless caused by or due to
the negligence of LANDLORD or its employees. TENANT will indemnify
and hold harmless LANDLORD from all liability for damages, claims or
expenses which TENANT may be assessed on account of injuries or damage
to the person or property of any other tenant of the Building or to any
other person rightfully in the Building where the injuries or damages
are caused by misconduct or negligence of TENANT, its agents, employees
or guests.
<PAGE>
15. CONDEMNATION: In the event that the whole or part of the Leased
Premises should be condemned or seized by any governmental authority,
or any transfer in lieu thereof, the rent specified in this Lease shall
be abated to the extent that the Leased Premises is no longer available
for use by the TENANT. This Lease shall not otherwise be affected by
such condemnation or seizures, and the TENANT agrees that it is to
receive no part of any damages or rentals which may be awarded as a
result of such condemnation or seizure.
16. LIEN ON TENANT'S PROPERTY: At all times, LANDLORD shall have a
first lien, for all rent and other sums of money due hereunder from
TENANT, upon all goods, wares, equipment, fixtures, furniture and other
property of TENANT situated on the Leased Premises. Said property
shall be evidenced by Schedule 1, affixed hereto, which constitutes an
inventory of said property. The LANDLORD'S lien herein shall attach to
all after-acquired property and TENANT shall inform LANDLORD when such
after-acquired property is situated on the Leased Premises. In
addition to the first lien, LANDLORD shall have, and cause to be
perfected, a security interest in all property identified in Schedule
1, and all after-acquired property. TENANT shall execute all documents
required under the terms of the Uniform Commercial Code.
17. TERMINATION: LANDLORD shall have the right to terminate this
Lease in the event of bankruptcy, insolvency or receivership of TENANT
or an assignment by TENANT for the benefit of the creditors of the
TENANT.
18. DEFAULT: The occurrence of any of the following shall constitute
a default under this Lease by the TENANT:
(a) Failure by TENANT to pay any money as rent or taxes due when the
same becomes payable in accordance with this Lease and the continuation
of such failure for a period of ten days after written notice thereof
from LANDLORD to TENANT.
(b) Default by TENANT in the due, prompt and complete performance or
observance of any other covenant , agreement or obligation of TENANT
contained in this Lease and the continuation of such default for a
period of thirty days after written notice thereof from LANDLORD to
TENANT specifying the nature of such default, except that if such
default cannot reasonably be cured within such thirty day period.
TENANT shall not be deemed to be in default if it shall within such
period commence such cure and thereafter diligently prosecute the same
to completion.
(c) TENANT'S abandonment of the Leased Premises.
19. TERMINATION OF LEASE AND REMOVAL OF TENANT: In the event of
TENANT'S breach of and default under this Lease as provided in Section
18 above, LANDLORD may, at LANDLORD'S option , and without limiting
LANDLORD in the exercise of any other right or remedy LANDLORD may have
on account of such breach and default, and without further demand or
notice:
(a) Re-enter the Leased Premises, with or without process of law, and
remove all persons therefrom, and without terminating this Lease at any
time and from time to time, relet the Leased Premises or any part or
parts thereof for the account of TENANT or otherwise; receive and
collect the rents therefore, applying the same first to the payment of
such expenses as LANDLORD may have paid, assumed or incurred in
recovering possession of the Leased Premises, including costs, expenses
and attorneys' fees, and for placing the same in good order and
condition, or repairing or altering the same for reletting and all
other expenses, commissions and charges paid, assumed or incurred by
LANDLORD in or about reletting the Leased Premises, and then to the
fulfillment of the agreements of TENANT hereunder. Any such reletting,
as provided herein, may be for such term or terms (which may be for a
term extending beyond the term of this Lease) and at such rental or
rentals and upon such other terms and conditions as LANDLORD, in its
sole discretion, may deem advisable. In any event, and whether or not
the Leased Premises or any part thereof is relet, TENANT shall pay to
LANDLORD all such sums required to be paid by TENANT up to the time of
re-entry by LANDLORD and, thereafter, TENANT shall, if required by
LANDLORD, pay to LANDLORD, until the end of the term of this Lease, the
equivalent of the amount of all rent and other charges required to be
paid by TENANT under the terms hereof, less the avails of such
reletting, if any, after payment of the expenses of LANDLORD as
aforesaid.
<PAGE>
(b) Terminate this Lease and re-enter the Leased Premises, with or
without process of law, and remove all persons therefrom, and LANDLORD
shall thereupon be entitled to recover from TENANT all damages it may
incur by reason of such breach, including the cost of recovery of the
Leased Premises.
20. ACCELERATION OF RENT: In any action for rent, or in any case
where the TENANT has abandoned the Leased Premises and fails to pay
rent, the total sums due for the balance of the Lease term shall be due
and payable in their entirety as damages, specifically notwithstanding
any other duty imposed by law upon TENANT.
21. NO ACCEPTANCE OF SURRENDER: Notwithstanding anything to the
contrary set forth herein, LANDLORD'S reentry to perform acts of
maintenance or preservation of, or in connection with efforts to relet,
the Leased Premises or any portion thereof, or the appointment of a
receiver upon LANDLORD'S initiative to protect LANDLORD'S interest
under this Lease shall not terminate TENANT'S right to possession of
the Leased Premises or any portion thereof and, until LANDLORD does
elect to terminate this Lease, this Lease shall continue in full force
and LANDLORD may pursue all of its remedies hereunder including,
without limitation, the right to recover from TENANT as they become due
hereunder all rent, additional rent and other charges required to be
paid by TENANT under the terms hereof.
22. ATTORNEY'S FEES: In the event of any litigation between LANDLORD
and TENANT to enforce any of the provisions of this Lease or any right
of either party hereto, the unsuccessful party to such litigation
agrees to pay to the successful party all costs and expenses, including
reasonable attorney's fees, incurred therein by the successful party,
all of which shall be included in and as a part of the judgment
rendered in such litigation. If LANDLORD engages the services of an
attorney for the purpose of collecting any rent, or other sums due from
TENANT hereunder, having first given the TENANT five days' notice of
its intention of doing so, TENANT shall pay the reasonable fees of such
attorney regardless of the fact that no legal proceeding or action may
have been commenced.
23. REAL PROPERTY TAXES: LANDLORD agrees to pay all real property
taxes on the Building, with possible reimbursement by TENANT of a
portion thereof as hereafter provided. For the purpose of this
paragraph, the tax year 1998 is hereinafter referred to as the Base
Year. If the real property taxes for the Building for any tax year
exceed the real property taxes for the Base Year, then TENANT shall
reimburse LANDLORD for TENANT'S share of such excess, provided LANDLORD
requests such reimbursement not later than sixty days after the
delinquent date for such taxes. TENANT'S share shall be a fraction of
such excess, the numerator of which fraction shall be the total number
of rentable square feet of TENANT, and the denominator of which shall
be the total number of rentable square feet in the Building. TENANT
shall reimburse LANDLORD within thirty days after receipt of
satisfactory evidence of LANDLORD'S payment of such taxes and the
amount due from TENANT.
24. HOLDING OVER: If TENANT remains in possession of the Leased
Premises after the expiration of this Lease, such continued possession
shall create a month-to-month tenancy on the same terms specified
herein and said tenancy may be terminated at any time by either party
providing to the other party a thirty day written notice of
termination.
<PAGE>
25. RIGHT TO SHOW PREMISES: LANDLORD may, at any time within sixty
days of the expiration of this Lease, enter the Leased Premises at all
reasonable hours for the purpose of offering and showing the premises
for lease.
26. ASSIGNMENT: TENANT may not assign this Lease or sub-lease the
Leased Premises or any part thereof without the written consent of
LANDLORD. Such consent shall not be unreasonably withheld.
27. RECAPTURE OF ASSIGNMENT OR LEASE PROFIT: If the rental reserved
in any lease or assignment of all or any part of the Leased Premises
exceeds the rental or prorated portion of the rental, as the case may
be, for such space reserved in the Lease, TENANT shall pay LANDLORD
each month, as additional rent, at the same time as the monthly
installments of rent become due hereunder, one-half of the excess of
the rental reserved in the lease or assignment over the rental reserved
in this Lease.
28. CONSTRUCTION OF LEASE: The terms and provisions of this Lease
shall be construed in accordance with laws of the State of Kansas.
29. ENTIRE AGREEMENT AND MODIFICATIONS: This Lease contains the
entire agreement between the parties hereto, and no agent,
representative, salesman or officer of the parties hereto has authority
to make, or has made, any statement, representation or agreement, oral
or written, which modifies, adds to, or changes the terms of this
Lease. No modifications of any of the terms and conditions of this
Lease shall be effective unless reduced to writing and executed by the
parties hereto.
30. FIRST RIGHT OF REFUSAL: TENANT shall have a continuous right of
first offer on all space which becomes, or is vacant on the 8th floor
of the O.W. Garvey Building during the term of this Lease. Upon
presentation of a bona fide third party offer acceptable to LANDLORD
from a prospective tenant to lease space on the 8th floor, TENANT will
be notified in writing of such offer and shall have three (3) business
days after receipt of such notice within to exercise its right to
either accept or refuse to lease the applicable space upon the same
terms of the lease so offered, except that such lease shall be
coterminous with this Lease.
This Lease shall be binding on the heirs, executors, administrators and
successors of the parties hereto.
IN WITNESS HEREOF, the parties hereto have caused this Lease to be
executed the day and year first above written.
CENTER TOWERS L.C.
LANDLORD ATTEST: /s/Cheryl Gillenwater
By: /s/James H. Childers
Executive Vice President
HIGH PLAINS CORPORATION
TENANT ATTEST: /s/Raymond G. Friend
By:
Christopher G. Standlee
Vice President
<PAGE>
EXHIBIT A
4/14/98
RE: Center Towers L.C. / High Plains Corporation Lease Suite 820 Eighth Floor
O.W. Garvey Building, Wichita, KS 4/14/98
Olive W. Garvey Building
8th Floor Composite Drawing
<PAGE>
EXHIBIT B
4/14/98
RE: Center Towers L.C. / High Plains Corporation Lease Suite 820 Eighth Floor
O.W. Garvey Building, Wichita, KS 4/1/4/98
TENANT agrees to take possession of space as it is.
<PAGE>
Lease Amendment 1
4/17/98
Ref: Garvey Center, Inc. / High Plains Corporation Storage Lease, 3/28/94
Paragraph 1 LEASED PREMISES is changed to read "is designated Leased Premise
and identified as part of Suite 835 on the Eighth Floor of the O.W. Garvey
Building, TENANT shall use approximately 180 square feet as shown on Exhibit A
dated 4/17/98, which"
Paragraph 3 RENT is changed to read "said Leased Premises, $97.50 per month"
CENTER TOWERS L.C.
LANDLORD ATTEST:/s/Cheryl Gillenwater
By: /s/James H. Childers
Executive Vice President
HIGH PLAINS CORPORATION
TENANT ATTEST:/s/Raymond G. Friend
By: /s/Christopher G. Standlee
Vice President
<PAGE>
Lease Amendment 1
Exhibit A
4/17/98
Ref: Garvey Center, Inc. / High Plains Corporation Storage Lease, 3/28/94
Storage Space
Olive W. Garvey Building
8th Floor Composite Drawing
<PAGE>
Lease Amendment 1
7/15/98
Ref: Center Towers, Inc. / High Plains Corporation - Eighth Floor O.W. Garvey
Building - 4/17/98
To reflect that High Plains Corporation has on deposit with Center Towers LC
a deposit of $1,904.38 from a preceding lease paragraph five (5) will be
amended as follows:
Paragraph 5 SECURITY FOR PAYMENT OF RENT AND OTHER LEASE OBLIGATIONS: TENANT
has on deposit with LANDLORD the sum of $1,904.38 (Security Deposit) which
may be commingled by LANDLORD with its other funds and which shall be received
by LANDLORD, without liability for any interest, as security for the payment
of rent hereunder and the full and faithful performance of all the terms,
covenants and conditions of this Lease.
CENTER TOWERS L.C. ATTEST
By: /s/Larry Weber /s/Mindy Rowsey
Vice President & General Manager
HIGH PLAINS CORPORATION ATTEST
By: /s/Christopher G. Standlee /s/Dianne S. Rice
Vice President
AMERICAN GASOHOL REFINERS, INC.
AMENDED BYLAWS
ARTICLE I
OFFICES
Section 1. The principal office shall be in the City of Wichita, Kansas
and the name of the resident agent in charge thereof is L. D. Klenda.
Section 2. The corporation may also have offices at such other places
both within and without the State of Kansas as the Board of Directors may from
time to time determine, or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for any purpose may be
held at such time and place, within or without the State of Kansas, as shall
be stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
Section 2. An annual meeting of stockholders commencing with the year
1981, shall be held on the 2nd Wednesday of October of each year if not a
legal holiday, and if a legal holiday, then on the next secular day following
at 10 o'clock a.m., at which time the stockholders shall elect by a plurality
vote a Board of Directors and transact such other business as may properly be
brought before the meeting.
Section 3. Written notice of the annual meeting shall be served upon or
mailed to each stockholder entitled to vote thereat at such address as appears
on the books of the corporation at least seven (7) days prior to the meeting.
Section 4. At least ten (10) days before every election of directors, a
complete list of the stockholders entitled to vote at said election, arranged
in alphabetical order, with the residence of each and the number of voting
shares held by each, shall be prepared by the secretary. Such list shall be
open at the place or in the city where the election is to be held for said ten
(10) days, to the examination of any stockholder, and shall be produced and
kept at the time and place of election during the whole time thereof, and
subject to the inspection of any stockholder who may be present.
Section 5. Special meetings of the stockholders for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request, in writing, of a majority of the Board
of Directors, or at the request in writing of stockholders owning a majority
in amount of the entire capital stock of the corporation issued and
outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.
Section 6. Written notice of a special meeting of stockholders, stating
the time and place and object thereof, shall be served upon or mailed to each
stockholder entitled to vote thereat at such address as appears on the books
of the corporation, at least seven (7) days before such meeting.
<PAGE>
Section 7. Business transacted at all special meetings shall be
confined to the objects stated in the call.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall be requisite and shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise provided by
statute, by the certificate of incorporation or by these Bylaws. If, however,
such quorum shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented any business may be transacted which might
have been transacted at the meeting as originally notified.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which, by express provision of the statutes or
of the certificate of incorporation or of these Bylaws, a different vote is
required in which case such express provision shall govern and control the
decision of such question.
Section 10. At any meeting of the stockholders, every stockholder
having the right to vote shall be entitled to vote in person, or by proxy
appointed by an instrument in writing subscribed by such stockholder and
bearing a date not more than three (3) years prior to said meeting, unless
said instrument provides for a longer period. Each stockholder shall have one
vote for each share of stock having voting power, registered in his name on
the books of the corporation.
Except where the transfer books of the corporation shall have been
closed or a date shall have been fixed as a record date for the determination
of its stockholders entitled to vote, no share of stock shall be voted on at
any election of directors which shall have been transferred on the books of
the corporation within twenty (20) days next preceding such election of
directors.
Section 11. Whenever the vote of stockholders at a meeting thereof
is required or permitted to be taken in connection with any corporate action
by any provisions of the statutes or of the certificate of incorporation or of
these Bylaws, the meeting and vote of stockholders may be dispensed with, if
all the stockholders who would have been entitled to vote upon the action if
such meeting were held, shall consent in writing to such corporate action
being taken.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
Board shall be set from time to time as determined by the Board of Directors.
The directors shall be elected at the annual meeting of the stockholders
except as provided in Section 2 of this Article and each director elected
shall hold office until his successor shall be elected and shall qualify.
Directors need not be stockholders.
Section 2. If any vacancies occur in the Board of Directors caused by
death, resignation, retirement, disqualification or removal from office of any
directors or otherwise, or any new directorship is created by any increase in
the authorized number of directors, a majority of the directors then in
office, though less than a quorum, may choose a successor or successors, or
fill the newly created directorship and the directors so chosen shall hold
office until the next annual election of directors and until their successors
shall be duly elected and qualified, unless sooner displaced.
<PAGE>
Section 3. The property and business of the corporation shall be
managed by its board of directors which may exercise all such powers of the
corporation and do all such lawful acts and things as are not, by statute or
by the certificate of incorporation or by these Bylaws, required to be
exercised or done by the stockholders.
MEETINGS OF THE BOARD
Section 4. The directors of the corporation may hold their meetings,
both regular and special, either within or without the state of Kansas.
Section 5. The first meeting of each newly elected Board shall be held
at such time and place as shall be fixed by the vote of the stockholders at
the annual meeting and no notice of such meeting shall be necessary to the
newly elected directors in order legally to constitute the meeting, provided a
quorum shall be present, or they may meet at such place and time as shall be
fixed by the consent in writing of all the directors.
Section 6. Regular meetings of the Board may be held without notice at
such time and place as shall from time to time be determined by the Board.
Section 7. Special meetings of the Board may be called by the president
on seven (7) days' notice of each director, either personally or by mail or by
telegram; special meetings shall be called by the president or secretary in
like manner and on like notice on the written request of two (2) directors.
Special meetings may be held without notice if all directors consent in
writing to any such meeting, and the place and time for such meeting shall be
fixed by the written consent to the particular meeting.
Section 8. At all meetings of the Board, the presence of a majority of
the directors shall be necessary and sufficient to constitute a quorum for the
transaction of business and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the Board of
Directors except as may be otherwise specifically provided by statute or by
the certificate of incorporation or by these Bylaws. If a quorum shall not be
present at any meeting of directors, the directors present thereat may adjourn
the meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present. The directors shall choose one of
their number to serve as Chairman of the Board of Directors.
COMMITTEES OF DIRECTORS
Section 9. The Board of Directors, by resolution passed by a majority of
the whole Board, may designate one or more committees with each committee to
consist of two or more of the directors of the corporation which, to the
extent provided in side resolution, shall have and may exercise the powers of
the Board of Directors in the management of the business and affairs of the
corporation, and may have power to authorize the seal of the corporation to be
affixed to all papers which may require it. Such committee or committees shall
have such name or names as may be determined from time to time by resolution
adopted by the Board of Directors.
<PAGE>
COMPENSATION OF DIRECTORS
Section 10. Directors, as such, shall not receive any stated salary for
their services but by resolution of the Board, a fixed sum and expenses of
attendance, if any, may be allowed for attendance at each regular or special
meeting of the Board; provided that nothing herein contained shall be
construed to preclude any director from serving the corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending committee meetings.
ARTICLE IV
NOTICES
Section 1. Whenever under the provisions of the statutes or of the
certificate of incorporation or of these Bylaws, notice is required to be
given to any director or stockholder, it shall not be construed to mean
personal notice but such notice may be given in writing, by mail, addressed to
such director or stockholder at such address as appears on the books of the
corporation and such notice shall be deemed to be given at the time when the
same shall be thus mailed.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation, or by these
Bylaws, a waiver thereof in writing signed by the person or persons entitled
to said notice whether before or after the time stated therein, shall be
deemed equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the
directors and shall be a president, executive vice president, vice president,
secretary and treasurer. The Board of Directors may also choose additional
vice presidents and one or more assistant secretaries and assistant
treasurers. Two or more offices may be held by the same person; except that
the offices of president and secretary shall not be held by the same person.
Section 2. The Board of Directors, at its first meeting after each
annual meeting of stockholders shall choose a president from its members, and
shall choose an executive vice president, one or more vice presidents, a
secretary and a treasurer, none of whom need be a member of the Board.
Section 3. The Board may appoint such other officers and agents as it
shall deem necessary who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time
to time by the Board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify in their stead. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the whole Board of Directors. If the office
of any officer becomes vacant for any reason, the vacancy shall be filled by
the Board of Directors.
<PAGE>
THE PRESIDENT
Section 6. The president shall be the chief executive officer of the
corporation; he shall preside at all meetings of the stockholders, shall be ex
officio a member of all standing committees, shall have general and active
management of the business of the corporation and shall see that all orders
and resolutions of the Board are carried into effect.
Section 7. He shall execute deeds and conveyances of real or personal
property, assignments and releases of oil and gas leases, bonds, mortgages and
other contracts requiring a seal, under the seal of the corporation, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the Board of Directors to some other officer or agent of the corporation.
VICE PRESIDENTS
Section 8. The vice presidents in the order of their seniority shall, in
the absence or disability of the president, perform the duties and exercise
the powers of the president and shall perform such other duties as the Board
of Directors shall prescribe.
SECRETARY AND ASSISTANT SECRETARIES
Section 9. The secretary shall attend all sessions of the Board and all
meetings of the stockholders and record all votes and the minutes of all
proceedings in a book to be kept for that purpose and shall perform like
duties for the standing committees when required. He shall give, or cause to
be given, notice of all meetings of the stockholders and special meetings of
the Board of Directors and shall perform such other duties as may be pre-
scribed by the Board of Directors or president under whose supervision he
shall be. He shall keep in safe custody the seal of the corporation and when
authorized by the Board, affix the same to any instrument requiring it and
when so affixed, it shall be attested by his signature or by the signature of
the Treasurer or an assistant secretary.
Section 10. The assistant secretaries in order of their seniority
shall, in the absence or disability of the secretary, perform the duties and
exercise the powers of the secretary and shall perform such other duties as
the Board of Directors shall prescribe.
TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all
monies and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the Board of
Directors.
Section 12. He shall disburse the funds of the corporation as may be
ordered by the Board, taking proper vouchers for such disbursements and shall
render to the president and directors at the regular meetings of the Board, or
whenever they may require it, an account of all his transactions as treasurer
and of the financial condition of the corporation.
<PAGE>
Section 13. If required by the Board of Directors, he shall give
the corporation a bond (which shall be renewed every six (6) years) in such
sum and with such surety or sureties as shall be satisfactory to the Board for
the restoration to the corporation, in case of his death, resignation,
retirement or removal from office of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control
belonging to the corporation.
Section 14. The assistant treasurers in the order of their seniority
shall, in the absence or disability of the treasurer, perform the duties and
exercise the powers of the treasurer and shall perform such other duties as
the Board of Directors shall prescribe.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. The certificates of stock of the corporation shall be
numbered and shall be entered in the books of the corporation as they are
issued. They shall exhibit the holder's name and number of shares and shall be
signed by the president or vice president and the treasurer or an assistant
treasurer or the secretary or an assistant secretary. If any stock certificate
is signed (i) by a transfer agent or an assistant transfer agent, or (ii) by a
transfer clerk acting on behalf of the corporation and a registrar, the
signature of any such officer may be facsimile.
LOST CERTIFICATES
Section 2. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost or destroyed. When authorizing such issue of a
new certificate or certificates, the Board of Directors may in its discretion
and as a condition precedent to the issuance thereof, require the owner of
such lost or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require
and/or give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost or destroyed.
TRANSFERS OF STOCK
Section 3. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall
be the duty of the corporation to issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction upon
its books.
CLOSING OF TRANSFER BOOKS
Section 4. The Board of Directors may close the stock transfer books of
the corporation for a period not exceeding fifty (50) days preceding the date
of any meeting of stockholders or the date for payment of any dividend or the
date for the allotment of rights or the date when any change or conversion or
exchange of capital stock shall go into effect or for a period of not
exceeding fifty (50) days in connection with obtaining the consent of
stockholders for any purpose. In lieu of closing the stock transfer books as
aforesaid, the Board of Directors may fix in advance a date not exceeding
fifty (50) days preceding the date of any meeting of stockholders or the date
for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent, as a record date for the determination of the
stockholders entitled to notice of and to vote at any such meeting and any
adjournment thereof, or entitled to receive payment of any such dividend or to
<PAGE>
any such allotment of rights or to exercise the rights in respect of any such
change, conversion or exchange of capital stock or to give consent and in such
case such stockholders and only such stockholders as shall be stockholders of
record on the date so fixed shall be entitled to such notice of and to vote at
such meeting and any adjournment thereof, or to receive payment of such
dividend or to receive such allotment of rights, or to exercise such rights or
to give consent as the came may be, notwithstanding any transfer of any stock
on the books of the corporation after such record date fixed as aforesaid.
REGISTERED STOCKHOLDERS
Section 5. The corporation shall be entitled to treat the holder of
record of any share or shares of stock as the holder in fact thereof and
accordingly, shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether
or not it shall have express or other notice, except an otherwise provided by
the laws of Kansas.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject
to the provisions of the certificate of incorporation, if any, may be declared
by the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as
the directors from time to time in their absolute discretion think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
Section 3. The Board of Directors shall present at each annual meeting
and when called for by vote of the stockholders at any special meeting of the
stockholders, a full and clear statement of the business and condition of the
corporation.
CHECKS
Section 4. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
<PAGE>
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of
the corporation, the year of its organization and the word "Kansas." Said
seal may be used by causing it or a facsimile thereon to be impressed or
affixed or reproduced cc otherwise.
ARTICLE VIII
AMENDMENTS
Section 1. These Bylaws may be altered or repealed at any regular
meeting of the stockholders or at any special meeting of the stockholders at
which a quorum is present or represented, provided notice of the proposed
alteration or repeal be contained in the notice of such special meeting, by
the affirmative vote of a majority of the stock entitled to vote at such
meeting and present or represented thereat or by the affirmative vote of a
majority of the stock entitled to vote at such meeting and present or
represented thereat, or by the affirmative vote of a majority of the Board of
Directors at any regular meeting of the Board or at any special meeting of
the Board if notice of the proposed alteration or repeal be contained in the
notice of such special meeting; provided, however, that no change of the time
or place of the meeting for the election of directors shall be made within
sixty (60) days next before the day on which such meeting is to be held, and
that in case of any change of such time or place, notice thereof shall be
given to each stockholder in person or by letter mailed to his last known
address at least twenty (20) days before the meeting is held.
The above constitutes the
Bylaws adopted by the Board of
Directors at their meeting old
on the 15th day of January 1981.
By: /s/ L. D. Klenda
L.D. Klenda
<PAGE>
Exhibit 3.6
AMENDMENT TO ARTICLE III
SECTION ONE AND TWO OF BYLAWS OF
HIGH PLAINS CORPORATION
____________________________________________________________
SECTION ONE
The number of directors which shall constitute the whole board shall be set
from time to time as determined by the Board of Directors. There shall be
three classes of directors, with an equal number of directors elected to each
class. The term of office of the first class of directors shall expire at the
first annual meeting of stockholders following the adoption of this amended
Section One; the term of office of the second class shall expire at the second
annual meeting following the adoption of this amended Section One; the term of
office of the third class shall expire at the third annual meeting following
the adoption of this amended Section One. Thereafter, each class of directors
shall, upon the expiration of their respective terms, be elected for three
year terms to expire on the date of the third annual meeting following their
election. The directors shall be elected at the appropriate annual meetings
of the stockholders except as provided in Section Two of this Article, and
each director elected shall hold office until his successor shall be elected
and shall qualify. Directors need not be stockholders.
SECTION TWO
If any vacancies occur in the Board of Directors caused by death,
resignation, retirement, disqualification or removal from office of any
directors or otherwise, or any new directorship is created by any increase in
the authorized number of directors, a majority of the directors then in
office, though less than a quorum, may choose a successor or successors, or
fill the newly created directorship, and the directors so chosen shall hold
office until the next scheduled election for the class of directors in which
the position was assumed, and until their successors shall be duly elected and
qualified, unless sooner displaced.
I certify that the Bylaws of High Plains Corporation were amended, in the
manner specified above, at the annual meeting of Stockholders held on March 6,
1986.
/s/ Gerald J. Kathol
Secretary-Treasurer
<PAGE>
Exhibit 3.7
AMENDMENT TO ARTICLE V
OF THE BYLAWS OF
HIGH PLAINS CORPORATION
The following sections of Article V of the High Plains Corporation Bylaws
are hereby amended and restated in their entirety to read as follows:
OFFICERS
Section 1. The officers of the corporation shall be chosen by the
directors and, at the discretion of the directors, such officers shall include
a chief executive officer, president, executive vice president, vice
president, secretary and treasurer. The Board of Directors may also choose
additional vice presidents and one or more assistant secretaries and assistant
treasurers. Two or more offices may be held by the same person, except that
the offices of president and secretary shall not be held by the same person.
Section 2. The Board of Directors, at its first meeting after each annual
meeting of stockholders shall choose a chief executive officer, president,
executive vice president, one or more vice presidents, a secretary and a
treasurer, each of whom may, but need not be a member of the Board.
CHIEF EXECUTIVE OFFICER
Section 6. The chief executive officer shall preside at all meetings of
the stockholders, shall be ex officio a member of all standing committees,
shall have general and active management of the business of the corporation
and shall see that all orders and resolutions of the Board are carried into
effect.
Section 7. The chief executive officer shall execute deeds and
conveyances of real or personal property, assignments and releases of oil and
gas leases, bonds, mortgages and other contracts requiring a seal, under the
seal of the corporation, except where required or permitted by law to be
otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the Board of Directors to some other
officer or agent of the corporation.
THE PRESIDENT
Section 8. The president shall, in the absence or disability of the chief
executive officer, perform the duties and exercise the powers of the chief
executive officer and shall have such other duties, powers and
responsibilities as shall be directed from time to time by the Board of
Directors and by the chief executive officer of the corporation.
Section 9. The president may, at the discretion of the Board of
Directors, also serve as the chief executive officer of the corporation.
VICE PRESIDENTS
Section 10. The vice presidents in the order of their seniority shall, in
the absence or disability of the chief executive officer or president, perform
the duties and exercise the powers of the chief executive officer or the
president and shall perform such other duties as the Board of Directors shall
prescribe.
<PAGE>
The sections of Article V which are currently numbered as sections 9 through
14, shall be renumbered as sections 11 through 16, and all section references
in Article V shall be changed accordingly.
Except as otherwise provided above, the provisions of Article V of the
Bylaws shall remain in full force and effect.
The undersigned hereby certifies that the Bylaws of High Plains Corporation
were amended, in the manner described above, at the Special Meeting of the
Board of Directors held on April 6, 1998.
/s/ H.T. Ritchie
H.T. Ritchie, Secretary
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
High Plains Corporation
We have audited the accompanying balance sheets of High Plains Corporation as
of June 30, 1998 and 1997, and the related statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended June 30, 1998. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of High Plains Corporation as
of June 30, 1998 and 1997, and the results of their operations and cash flows
for each of the three years in the period ended June 30, 1998 in conformity
with generally accepted accounting principles.
ALLEN, GIBBS & HOULIK, L.C.
August 28, 1998 (Except for the last paragraph in Note 5,
which is as of September 24, 1998)
Wichita, Kansas
<PAGE>
HIGH PLAINS CORPORATION
BALANCE SHEETS
June 30, 1998 and 1997
<TABLE>
ASSETS
<CAPTION>
1998 1997
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 674,894 $ 2,389,758
Accounts receivable:
Trade (less allowance of $75,000
in 1998 and 1997) 4,500,579 4,102,173
Production credits and incentives 829,849 1,536,541
Inventories 6,328,232 4,246,783
Current portion of long-term notes
receivable 31,307 117,417
Prepaid expenses 85,168 309,350
Refundable income tax 30,000 145,328
Total current assets 12,480,029 12,847,350
PROPERTY, PLANT AND EQUIPMENT, AT COST
Land and land improvements 433,496 323,496
Ethanol plants 92,906,633 85,055,215
Other equipment 473,345 393,683
Office equipment 279,278 202,135
Leasehold improvements 48,002 48,002
94,140,754 86,022,531
Less accumulated depreciation (23,819,484) (20,444,381)
Net property, plant and equipment 70,321,270 65,578,150
OTHER ASSETS
Equipment held for resale 264,554 427,432
Deferred loan costs (less accumulated
amortization of $38,095 and $10,857
in 1998 and 1997) 117,890 103,623
Long-term notes receivable, less
current portion -- 41,742
Other 65,886 76,235
Total other assets 448,330 649,032
$83,249,629 $79,074,532
</TABLE>
<PAGE>
<TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
1998 1997
CURRENT LIABILITIES
<S> <C> <C>
Revolving lines-of-credit $ 9,000,000 $ 6,200,000
Current maturities of capital
lease obligations 500,852 519,384
Accounts payable 8,364,074 5,114,452
Accrued interest 223,722 298,551
Accrued payroll and property taxes 822,971 644,846
Total current liabilities 18,911,619 12,777,233
Revolving line-of-credit 9,700,000 7,700,000
Capital lease obligations, less
current maturities 2,002,623 2,500,014
Other 364,240 441,109
12,066,863 10,641,123
STOCKHOLDERS' EQUITY
Common stock, $.10 par value, authorized
50,000,000 shares; issued 16,410,622
shares and 16,396,622 shares at
June 30, 1998 and 1997, respectively, of
which 411,178 shares were held as treasury
stock at June 30, 1998 and 1997 1,641,062 1,639,662
Additional paid-in capital 37,457,167 37,348,072
Retained earnings 14,170,697 17,763,627
53,268,926 56,751,361
Less:
Treasury stock - at cost (863,911) (863,911)
Deferred compensation (133,868) (231,274)
Total stockholders' equity 52,271,147 55,656,176
$83,249,629 $79,074,532
<FN>
The accompanying notes are an integral
part of these financial statements
</TABLE>
<PAGE>
HIGH PLAINS CORPORATION
STATEMENTS OF OPERATIONS
Years Ended June 30, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Product sales and revenues $84,863,782 $63,121,510 $73,920,096
Revenues from forward contracts -- -- 14,005,313
Net sales and revenues 84,863,782 63,121,510 87,925,409
Cost of products sold 83,126,259 59,414,514 69,414,221
Expense (recovery) from
futures/forward contracts 1,608,561 (610,069) 2,524,235
Total costs and expenses 84,734,820 58,804,445 71,938,456
Gross profit 128,962 4,317,065 15,986,953
Selling, general and
administrative expenses 1,834,725 1,653,681 2,022,095
Management restructuring costs 600,000 -- --
Operating (loss) income (2,305,763) 2,663,384 13,964,858
Other income (expense):
Interest and other income 128,155 276,345 175,296
Interest expense (1,535,819) (1,354,983) (2,220,427)
Gain on sale of equipment 26,157 129,649 256,606
(1,381,507) (948,989) (1,788,525)
Net (loss) earnings
before income taxes (3,687,270) 1,714,395 12,176,333
Income tax benefit (expense) 94,340 18,895 (355,256)
Net (loss) earnings $(3,592,930) $ 1,733,290 $11,821,077
(Loss) earnings per share-basic $ (.22) $ .11 $ .75
(Loss) earnings per share-
assuming dilution $ (.22) $ .11 $ .74
</TABLE>
[FN]
The accompanying notes are an integral
part of these financial statements.
<PAGE>
HIGH PLAINS CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended June 30, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Common Stock
Number Additional
of Paid-In Retained Treasury Deferred
Shares Amount Capital Earnings Stock Compensation Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1995 15,470,947 $1,547,095 $34,738,760 $ 4,209,260 $(244,377) $ -- $40,250,738
Exercise of stock options 776,342 77,634 1,897,884 1,975,518
Purchase of common stock (493,283) (493,283)
Employee stock purchase (141,937) (141,937)
Amortization of deferred compensation 53,230 53,230
Income tax benefit from the exercise of
stock options 116,000 116,000
Net earnings for year 11,821,077 11,821,077
Balance, June 30, 1996 16,247,289 1,624,729 36,752,644 16,030,337 (737,660) ( 88,707) 53,581,343
Exercise of stock options 149,333 14,933 516,560 531,493
Purchase of common stock (126,251) (126,251)
Employee stock purchase (273,750) (273,750)
Amortization of deferred compensation 131,183 131,183
Compensation expense on stock
options granted 78,868 78,868
Net earnings for year 1,733,290 1,733,290
Balance, June 30, 1997 16,396,622 1,639,662 37,348,072 17,763,627 (863,911) (231,274) 55,656,176
Exercise of stock options 14,000 1,400 19,600 21,000
Amortization of deferred compensation 97,406 97,406
Compensation expense on stock options
granted 89,495 89,495
Net loss for year (3,592,930) (3,592,930)
Balance, June 30, 1998 16,410,622 $1,641,062 $37,457,167 $14,170,697 $(863,911) $(133,868) $52,271,147
</TABLE>
[FN]
The accompanying notes are an integral
part of these financial statements.
<PAGE>
HIGH PLAINS CORPORATION
STATEMENTS OF CASH FLOWS
Years Ended June 30, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) earnings $ (3,592,930) $ 1,733,290 $11,821,077
Adjustments to reconcile net (loss)
earnings to net cash provided by
operating activities:
Depreciation and amortization 3,484,573 3,405,364 2,869,699
Gain on sale of equipment (26,157) (129,649) (256,606)
Amortization of deferred
compensation 46,204 107,923 53,230
Compensation expense on stock
options granted 89,495 78,868 --
Payments received on notes
receivable 127,852 236,552 96,691
Changes in operating assets and
liabilities:
Accounts receivable 336,561 (3,773,905) 1,953,952
Inventories (2,081,449) (2,565,940) 964,434
Equipment held for resale 157,540 105,794 606,353
Refundable income tax 115,328 264,931 (294,259)
Prepaid expenses 224,182 235,821 (160,312)
Accounts payable 3,249,622 4,422,317 (3,103,913)
Estimated contract commitments -- (629,093) 629,093
Accrued liabilities 103,296 168,262 (385,670)
Net cash provided by
operating activities 2,234,117 3,660,535 14,793,769
Cash flows from investing activities:
Proceeds from sale of property,
plant and equipment 167,090 43,620 54,477
Acquisition of property, plant
and equipment (8,359,325) (4,802,664) (4,947,663)
Decrease (increase) in other
non-current assets 10,349 (19,217) 5,591
Net cash used in
investing activities (8,181,886) (4,778,261) (4,887,595)
Cash flows from financing activities:
Payments on long-term debt -- (17,345,238) (5,273,810)
Payments on revolving
lines-of-credit (4,900,000) (3,100,000) (1,000,000)
Proceeds from revolving
lines-of-credit 9,700,000 15,000,000 3,000,000
Payments on capital lease
obligations (520,923) (295,330) (332,828)
Increase in other non-current assets (41,505) (207,558) --
(Decrease) increase in other
non-current liabilities (25,667) 97,996 13,811
Issuance of common stock -- 49,500 --
Proceeds from exercise of options 21,000 418,868 1,975,518
Net cash provided by
(used in) financing
activities 4,232,905 (5,381,762) (1,617,309)
(Decrease) increase in cash
and cash equivalents (1,714,864) (6,499,488) 8,288,865
Cash and cash equivalents:
Beginning of year 2,389,758 8,889,246 600,381
End of year $ 674,894 $ 2,389,758 $ 8,889,246
</TABLE>
[FN]
The accompanying notes are an integral
part of these financial statements.
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents - High Plains Corporation, the "Company," considers
all highly liquid investments with a maturity of three months or less
when purchased to be cash equivalents.
The Company maintains its cash in bank deposit accounts which, at
times, may exceed federally insured limits. The Company has not
experienced any losses in such accounts. The Company believes it is
not exposed to any significant credit risk on cash and cash equivalents.
Inventories - Inventories are stated at the lower of cost (first-in,
first-out) or market. During the year ended June 30, 1997, the Company
began hedging certain commodity transactions related to anticipated
production requirements. This was done to reduce risk due to market
price fluctuations. Readily marketable exchange-traded futures
contracts were the designated hedge instruments since there is a high
correlation between the market value changes of such contracts and the
price changes on grain commodities. Gains or losses arising from open
and closed hedging transactions were included as an adjustment to the
value of inventories and reflected in cost of products sold in the
statements of operations when the underlying purchase contracts were
fulfilled. At the end of the year ending June 30, 1998, the Company
stopped purchasing futures contracts as hedge instruments, and sold all
of its then held positions, resulting in a loss of approximately $1.6
million.
Property, Plant and Equipment - Property, plant and equipment are
recorded at cost. The cost of internally-constructed assets includes
direct and allocable indirect costs. Plant improvements are
capitalized, while maintenance and repair costs are charged to expense
as incurred. Periodically, a plant or a portion of a plant's equipment
is shut down to perform certain maintenance projects which are expected
to improve the operating efficiency of the plant over the next year.
These expenses are generally incurred once a year and thus are
capitalized and amortized over the future 12-month period benefited.
Included in prepaid expenses at June 30, 1998 and 1997 were $-0- and
$220,523, respectively, of these expenditures.
Provisions for depreciation of property, plant and equipment are
computed using the straight-line method over the following estimated
useful lives:
<TABLE>
<S> <C>
Ethanol plants 5 - 40 years
Other equipment 5 - 10 years
Office equipment 3 - 10 years
Leasehold improvements 5 years
</TABLE>
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Whenever events or changes in circumstances indicate that the carrying
amount of a long-lived asset may not be fully recoverable, the Company
reviews that asset for impairment. Scheduled future expirations of
state incentive payments and federal fuel tax incentive programs are
not considered to be such an event or change because of the
government's history of extending the expirations of these incentives.
Capitalized Interest - The Company capitalized interest of $46,147 in
1998 as part of the cost of construction and refurbishing at the
Portales, New Mexico facility and $115,585 in interest in 1997 as part
of the cost of construction at the York, Nebraska facility.
Equipment Held for Resale - The Company acquired ethanol processing
equipment located in New Iberia, Louisiana to be utilized in the
construction of the York, Nebraska facility. Amounts allocated for
equipment not utilized for the Nebraska facility are recorded as
equipment held for resale and these amounts are decreased as sales
occur. Management expects a gain upon its ultimate disposition and,
accordingly, no loss has been provided for.
Deferred Loan Costs - The Company incurred certain costs in connection
with obtaining financing. The Company is amortizing these costs over
sixty months, the life of the debt.
Fair Value of Financial Instruments - The fair values of financial
instruments recorded on the balance sheet are not significantly
different from the carrying amounts.
Income Taxes - The Company uses an asset and liability approach to
financial accounting and reporting for income taxes. Deferred income
tax assets and liabilities are computed annually for differences
between the financial statement and tax bases of assets and liabilities
that will result in taxable or deductible amounts in the future based
on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation
allowances are established when considered necessary to reduce deferred
tax assets to the estimated amount expected to be realized. Income tax
expense is the tax payable or refundable for the period plus or minus
the change during the period in deferred tax assets and liabilities.
Under FASB Statement No. 109, Accounting for Income Taxes, (FAS 109)
the tax benefit from utilization of loss carryforwards is not reflected
as an extraordinary item.
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Deferred Compensation - Under the Employee Stock Purchase Plan (Note 9),
compensation is recognized as an expense in the period in which the
employee performs the services, which is generally the period over
which the stock appreciation is vested or earned. With the exception
of certain officers, the participating employees must continue to work
for five years to acquire the full amount of the stock. Compensation
expense attributable to future services has been recorded as deferred
compensation in the equity section of the balance sheets and is
amortized over the period of future services. Officers who have ten
years of continuous service are allowed to prepay their obligation and
receive the stock immediately and thus, the compensation attributable
to their election is recognized immediately upon their election to
participate in the plan.
Stock-Based Compensation - The Company has chosen to continue to
account for stock-based compensation for employees using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, and related Interpretations.
Accordingly, compensation cost for stock options is measured as the
excess, if any, of the quoted market price of the Company's stock at
the date of grant over the amount an employee must pay to acquire the
stock. However, the Company accounts for stock-based compensation for
non-employees as provided under FASB Statement No. 123, Accounting for
Stock-Based Compensation (FAS 123). The fair value of the option grant
is estimated on the date of grant using the Black-Scholes option
pricing method.
Earnings Per Share - The Company implemented FASB Statement No. 128,
Earnings Per Share (FAS 128) for the interim periods and years ended
after December 15, 1997. Under FAS 128, the presentation of primary
earnings per share (EPS) is replaced by the "basic" EPS. Basic per
share amounts are computed by dividing net (loss) income by the
weighted average number of common shares outstanding. In addition, a
diluted EPS continues to be required and is computed similarly to
"fully diluted" EPS as defined under APB Opinion No. 15 (See Note 11).
Also, in accordance with FAS 128, the Company has restated all prior
period EPS data presented in these financial statements.
Recently Issued Accounting Standards - At June 30, 1998, pronouncements
issued by the Financial Accounting Standards Board with future
effective dates are either not applicable or not material to the
financial statements of the Company.
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Management Restructuring Costs - These costs include severance expenses
related to management changes during fiscal year ending 1998.
Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect: 1) the reported amounts of assets
and liabilities, 2) disclosures such as contingencies, and 3) the
reported amounts of revenues and expenses included in such financial
statements. Actual results could differ from those estimates.
Contingencies - In the normal course of business, the Company becomes
party to litigation and other contingencies that may result in loss or
gain contingencies. The Company follows Statement of Financial Accounting
Standards No. 5 , Accounting for Contingencies. Under FAS No. 5, loss
contingencies are accrued if available information
indicates that it is probable that a loss is incurred and the amount of
such loss can be reasonably estimated.
2. DESCRIPTION OF BUSINESS
Ethanol Production Business - The Company's principal business is the
operation of three plants in Kansas, Nebraska and New Mexico for the
distillation and production of industrial grade and fuel grade ethanol
for sale to customers concentrated primarily in the Western United
States for mixture with gasoline to be used as a motor fuel. The
Portales, New Mexico plant was acquired in December 1997. The facility
had been closed for approximately two years, was refurbished, and began
operations in March 1998. The Company's operations are dependent upon
state governmental incentive payments. Kansas production incentive
payments recorded as product sales and revenues in the accompanying
financial statements were $1,126,386 for fiscal 1996, $1,160,141 for
fiscal 1997 and $1,238,545 for fiscal 1998. The Kansas incentive
program is currently scheduled to expire July 1, 2001.
The State of Nebraska offers a transferable production tax credit in
the amount of $.20 per gallon of ethanol produced for a period of sixty
months from date of first eligibility. The credit is only available to
offset Nebraska motor fuels excise taxes. The Company transfers these
credits to a Nebraska gasoline retailer which then reimburses the
Company for the credit amounts less a handling fee. Not less than two
million gallons and not more than twenty-five million gallons of
ethanol produced annually at the Nebraska facility are eligible for the
tax credit. The Company will no longer be eligible for this credit
after December 31, 1999. Nebraska production tax credit amounts
recorded as revenues in the accompanying financial statements were
$4,428,437 in fiscal 1996, $4,019,584 in fiscal 1997 and $5,069,722 in
fiscal 1998.
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
2. DESCRIPTION OF BUSINESS (CONTINUED)
The market for the Company's ethanol product is affected by the Federal
government's excise tax incentive program. This program, originally
scheduled to expire in 2000, has been extended to December 31, 2007.
Under this program, gasoline distributors who blend gasoline with
ethanol receive a federal excise tax rate reduction for each blended
gallon, resulting in an indirect pricing incentive to ethanol. Under
the recent extension, the current tax rate reduction equals $.054 per
blended gallon containing 10% or more ethanol by volume.
Alternatively, blenders may currently claim an income tax credit of
$.54 per gallon of ethanol blended with gasoline. However, in 2001,
the tax rate reduction begins to decrease over the remaining life of
the program. The rate decreases to $.053 in 2001, $.052 in 2003 and
$.051 in 2005. The market for the Company's product is also affected
through Federal regulation by the Environmental Protection Agency under
the Clean Air Act and the Reformulated Gasoline Program.
Shut Down of Plant Operations - Due to increasing corn and milo-
feedstock prices, management temporarily suspended operations at both
its York and Colwich facilities in May 1996. The Company had forward
contracted grain purchases to insure the availability of grain needed
for its production process at a fixed price. These contracts would
have allowed continued operations through approximately August 1997.
Due to grain prices rising to record levels in excess of the forward
contracted levels, the Company sold all of its forward grain contracts
for approximately $14 million after commissions. Expenses incurred
prior to the year ending June 30, 1996 to fill these contracts were
estimated to be approximately $2.5 million. The Colwich facility
reopened in September 1996, and the York facility reopened in October
1996.
Business Acquisition - In December 1997, the Company acquired an idle
ethanol production facility in Portales, New Mexico. The purchase,
which had a total acquisition cost of $4,000,000, was funded from
additional borrowings on the Company's reducing revolving line-of-
credit (see Note 5). The purchase was accounted for under the purchase
method of accounting. Accordingly, the purchase price was allocated to
the net assets acquired based upon their estimated fair values as shown
below. The results of operations of the acquired facility are included
in the financial statements beginning from the acquisition date.
<TABLE>
<S> <C>
Land $ 110,000
Building 890,000
Equipment 3,000,000
$4,000,000
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
2. DESCRIPTION OF BUSINESS (CONTINUED)
Year 2000 Issue - The Company is currently working to resolve any
potential impact of the Year 2000 on the processing of date-sensitive
information by the Company's computerized information systems. Based
on preliminary information, costs of addressing potential corrections
are not currently expected to have material adverse impact on the
Company's financial position, results of operations or cash flows in
future periods. However, if the Company, its customers or vendors are
unable to resolve such processing issues in a timely manner, it could
result in material financial risk. Accordingly, the Company plans to
devote the necessary resources to resolve all significant Year 2000
issues in a timely manner.
3. NOTES RECEIVABLE
In January 1995, the Company disposed of its engineering division, and
certain property assets associated with the division were transferred
to the former officer who took over the operations under a separate,
unrelated company. This company and former officer agreed to pay
$300,000 and $100,000, respectively, in notes, plus interest at 9.75%
over 45 months. The remaining balances on these notes receivable were
$31,307 and $-0- at June 30, 1998 and $119,370 and $39,789 at June 30,
1997, respectively. These notes are secured by the property
transferred and the former officer's personal guarantee.
4. INVENTORIES
Inventories consisted of:
</TABLE>
<TABLE>
<CAPTION>
June 30,
1998 1997
<S> <C> <C>
Raw materials $ 1,463,536 $ 957,894
Work-in-process 529,246 396,747
Finished goods 3,437,794 2,149,904
Spare parts 897,656 664,530
Adjustment to cost for
hedged grain inventory -- 77,708
$ 6,328,232 $ 4,246,783
</TABLE>
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
5. REVOLVING LINES-OF-CREDIT
On December 11, 1997, the Company amended its existing loan agreement
with the bank. This amendment increased the credit available on its
two lines-of-credit for the purpose of providing additional working
capital and to fund the Company's acquisition of an ethanol production
facility in New Mexico. The lines-of-credit have an interest rate
option equal to the bank's prime rate or a rate based on the LIBOR
rate, whichever the Company elects.
Revolving lines-of-credit consisted of:
<TABLE>
<CAPTION>
1998 1997
Interest Interest
Outstanding Rate Expiration Outstanding Rate Expiration
<S> <C> <C> <C> <C> <C> <C>
Revolving line- $ 2,000,000 7.94% 09/30/98 $ 2,300,000 8.14% 01/08/98
of-credit has a 2,000,000 7.97% 12/31/98 1,700,000 8.50% N/A
maturity of 2,000,000 8.00% 01/08/99 --
January 8, 1999
$ 6,000,000 $ 4,000,000
Reducing $ 6,000,000 7.94% 09/30/98 $ 9,350,000 8.14% 01/08/98
revolving line- 850,000 7.94% 09/30/98 550,000 8.02% 09/30/97
of-credit has a 850,000 8.00% 12/31/98 --
maturity of 5,000,000 8.00% 01/08/99 --
January 10, 2002
$12,700,000 $ 9,900,000
</TABLE>
At June 30, 1998, all interest rates are LIBOR-based rates with their
respective maturity dates as disclosed above. For the year ended June 30,
1997, all interest rates are LIBOR-based rates except the
outstanding balance of $1,700,000 which bears interest at a prime rate
of 8.5%.
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
5. REVOLVING LINES-OF-CREDIT (CONTINUED)
The maximum availability under the lines-of-credit as set forth above
is limited so that the amount of collateral securing the lines at all
times exceeds the outstanding balances by a ratio of at least 2 to 1.
The maximum availabilities under the revolving and reducing lines-of-
credit at June 30, 1998 were $6,500,000 and $13,100,000, respectively.
Therefore, at June 30, 1998, the available, unused amount in the
combined lines-of-credit was $900,000. The maximum availability under
the reducing revolving line-of-credit decreases each calendar quarter
by $850,000. Therefore, the Company can expect to pay at least
$3,000,000 on this line-of-credit in the next fiscal year. This amount
is included in the current maturities of the lines-of-credit on the
balance sheet.
Collateral on the lines as amended under the new agreement includes all
eligible receivables, inventory, general intangibles, property and
equipment located at the Company's three ethanol facilities, and the
Company's rights to payments under present or future production
incentive contracts from the Ethanol Plant Production Credit Agreement
with the State of Nebraska.
The financing agreement contains various restrictions, including the
maintenance of certain financial ratios, fulfilling certain net worth
and indebtedness tests, and capital expenditure limitations. At June 30,
1998, the Company was in violation of certain covenants; however,
on September 24, 1998, the bank has waived its rights to declare the
debt due and payable based on these covenant violations through June 30,
1999.
6. LEASES
Sale - Leaseback Transaction - On December 12, 1996, the Company sold
certain processing equipment for the production of industrial grade
ethanol for $3,128,676 and concurrently entered into an agreement to
lease the property back at $54,191 per month through December 12, 2002.
The sale of equipment was recorded resulting in a gain of $87,447 which
was deferred and will be recognized over a period not to exceed the
six-year term of the lease agreement. The lease has been classified as
a capital lease. The equipment under lease is included in ethanol
plants totaling $3,128,676, less accumulated depreciation of $195,944,
for a net book value of $2,932,732 at June 30, 1998.
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
6. LEASES (CONTINUED)
Other Capital Leases - The Company also leases various processing and
office equipment under long-term agreements which have been classified
as capital leases. The leases have terms of three years or less, and
expire through 2001. As of June 30, 1998, cost and accumulated
depreciation on equipment under capital leases amounted to $116,585 and
$26,934, for a net book value of $89,651. At June 30, 1997, cost and
accumulated depreciation on equipment under capital leases amounted to
$284,068 and $29,568, for a net book value of $254,500.
Operating Leases - The Company leases 100 railroad cars under an
operating lease expiring in fiscal year ending June 30, 1999. Annual
rentals are $618,000 for all 100 cars. The Company also leases 32 cars
under an operating lease expiring in June 30, 2002. Annual rentals are
$213,120 for all 32 cars. The Company leases an additional 57 railroad
cars under various operating leases expiring through fiscal year ending
June 30, 2003. These rail car leases require the Company to pay
certain executory costs. Corporate offices are also under a 5-year
lease expiring in 2003 that requires annual rentals of $31,000. Rent
paid during the years ended June 30, 1998, 1997 and 1996 was
$1,213,699, $977,449 and $865,941, respectively.
Future Minimum Lease Payments - The following is a schedule of future
minimum lease payments for capital leases and operating leases as of
June 30, 1998.
<TABLE>
<CAPTION>
Capital Operating
Year Ending June 30 Leases Leases
<S> <C> <C>
1999 $ 672,749 $ 1,060,799
2000 658,644 350,959
2001 650,819 326,239
2002 650,290 313,879
2003 325,145 86,562
Total minimum lease payments 2,957,647 $ 2,138,438
Less amount representing interest 454,172
Present value of net minimum
lease payments 2,503,475
Less current maturities 500,852
$ 2,002,623
</TABLE>
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
7. COMMITMENTS
Forward Contracts - The Company periodically enters into forward
contracts with suppliers and customers on both the purchase of grain
and the sale of ethanol and DDG. At June 30, 1998, the Company had
forward contracts to purchase approximately 2,890,643 bushels of milo
and corn at fixed prices totaling $7,142,661 with delivery dates of
July 1998 through March 1999. An additional 641,185 bushels were held
under contracts for delivery, however, at June 30, 1998, no prices had
been set. The unpriced contracts are for deliveries from July through
December 1998. The Company had forward contracts to sell 60,395 tons of
DDG at fixed prices totaling approximately $4,769,785. No losses were
expected on these contracts.
During 1998, the Company also entered into a contract to sell carbon
dioxide, a production by-product, to another company. The contract
requires the Company to supply at least 200 tons of carbon dioxide gas
per day from its York, Nebraska plant through 2008.
Retirement and Consulting Agreement - On April 11, 1997, the Company
entered into an agreement with the former President and Chairman of the
Board to provide a retirement benefit package and consulting agreement
for future services. As part of the retirement package, the Company
agreed to grant (on August 1, 1997) 14,000 non-qualified options at an
exercise price equal to one-half of the lowest closing price achieved
by the Company's stock between May 1, 1997 and August 1, 1997.
In consideration for future consulting services to be provided by the
former President, the Company agreed to make payments equal to the amounts
required under his former employment contract, which would have expire
July 1, 2000. At June 30, 1998, this totaled $265,983 plus annual bonuses
of 2% of net income before taxes. The Company also agreed to grant the
former President 50,000 non-qualified stock options on each April 11, 1997,
1998 and 1999 at the then closing stock price.
For compensation expenses recorded on the 64,000 and 50,000 shares
issued in 1998 and 1997, respectively, see Note 9.
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
8. INCOME TAXES
For Federal income tax purposes at June 30, 1998, the Company had a net
operating loss carryforward of approximately $21,422,000 and
approximately $5,856,000 of federal general business tax credit
carryforwards, which, if not used, will expire as follows:
<TABLE>
<CAPTION>
Expires in Operating Net General
Fiscal Year Loss Amount Business Credit
Ending Carryforward Carryforward
<S> <C> <C>
1999 $ -- $ 1,263,000
2000 -- 7,000
2001 -- 86,000
2002 -- --
2003 5,409,000 --
2004 1,553,000 --
2005 992,000 4,500,000
2008 3,000 --
2009 3,000 --
2010 481,000 --
2012 4,893,000 --
2013 8,088,000 --
$21,422,000 $ 5,856,000
</TABLE>
The general business credits expiring in fiscal 1999-2002 are
investment tax credits and the credits expiring in fiscal 2005 are
small ethanol producer tax credits. In the event these credits would
expire, the Company would receive a deduction of 50% of the investment
tax credit and 100% deduction of the small ethanol producer credit in
the year of expiration.
The Company also has a Nebraska investment credit carryforward of
$4,894,000, expiring in fiscal 2009, which may be used to offset taxes
in the State of Nebraska.
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
8. INCOME TAXES (CONTINUED)
The tax net operating loss carryforward and federal tax credit
carryforwards discussed above and other matters result in deferred tax
assets under FAS 109 totaling $20,126,000 at June 30, 1998 (see below).
The book basis of property, plant and equipment in excess of its tax
basis results in an offsetting deferred tax liability of $15,069,000,
and the valuation allowance offsets an additional $5,057,000, leaving
no net deferred tax assets at June 30, 1998. Future tax expenses, if
any, may be offset, at least in part, by net increases in future tax
assets (including changes in the valuation allowance) to the extent
that such assets exceed the amounts of future deferred tax liabilities.
The Company expects to continue annually to provide for a reasonable
valuation allowance, to reduce deferred tax assets as needed until such
time as future taxable income is generated or assured (if ever).
Income taxes consisted of:
<TABLE>
<CAPTION>
June 30,
1998 1997 1996
<S> <C> <C> <C>
Current tax (benefit) expense $ (94,340) $ (18,895) $ 355,256
Tax effect of changes in
deferred tax assets
and liabilities:
Book basis of plant and
equipment in excess of
tax basis 1,751,000 3,354,000 2,652,000
Nondeductible accrued expenses (97,000) 239,000 (303,000)
(Increase) decrease in net
operating loss carryforward (3,163,000) (2,979,000) 1,588,000
(Increase) decrease in tax
credits carryforward 1,000 (80,000) 80,000
Increase in Nebraska investment
credit carryforward (366,000) (931,000) (170,000)
AMT credit carryforward
and other (122,000) 258,000 (230,000)
Change in asset valuation
allowance 1,996,000 139,000 (3,617,000)
Deferred tax expense -- -- --
Income tax (benefit) expense $ (94,340) $ (18,895) $ 355,256
</TABLE>
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
8. INCOME TAXES (CONTINUED)
A reconciliation between the actual income tax expense and income taxes
computed by applying the statutory Federal income tax rate to earnings
before income taxes is as follows:
<TABLE>
<CAPTION>
June 30,
1998 1997 1996
<S> <C> <C> <C>
Computed income tax (benefit)
expense, at 34% $(1,253,672) $ 582,894 $ 4,139,953
Utilization of net operating
loss carryforwards -- (582,894) (4,139,953)
Increase in valuation allowance 1,253,672 -- --
Alternative minimum tax -- -- 239,256
Other, net (94,340) (18,895) 116,000
Total income tax (benefit)
expense $ (94,340) $ (18,895) $ 355,256
</TABLE>
The Company has deferred income tax liabilities and assets arising from
the following temporary differences and carryforwards:
<TABLE>
<CAPTION>
June 30,
1998 1997
<S> <C> <C>
Deferred tax liabilities:
Book basis of property,
plant and equipment in
excess of tax basis $15,069,000 $13,318,000
Deferred tax assets:
Net federal and state operating
loss carryforwards $ 8,673,000 $ 5,510,000
Nebraska investment credit
carryforward 4,894,000 4,528,000
General business credit carryforward 5,856,000 5,857,000
AMT credit carryforward and other 542,000 420,000
Nondeductible accrued expenses 161,000 64,000
20,126,000 16,379,000
Less: Valuation allowance 5,057,000 3,061,000
$15,069,000 $13,318,000
Net deferred income taxes $ -- $ --
</TABLE>
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
9. STOCK-BASED COMPENSATION
The Company has three stock-based compensation plans which are
described below. Grants to employees under those plans are accounted
for following APB Opinion No. 25. Accordingly, no compensation cost
has been recognized for options granted to employees in the financial
statements, except under the employee stock purchase plan where
compensation expense equals the excess of the fair market value of the
shares over the exercise price on the grant date. Grants to non-
employees under the plans are accounted for under FAS 123. For the
64,000 and 50,000 options granted to a non-employee in the years ended
June 30, 1998 and 1997, $89,495 and $78,868, respectively, were
recognized as compensation expense. Had compensation cost for all the
stock-based compensation plans been determined based on the fair value
grant date, consistent with the provisions of FAS 123, the Company's
net earnings and earnings per share would have been reduced to the
proforma amounts below:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Net (loss) earnings:
As reported $(3,592,930) $ 1,733,290 $11,821,077
Pro forma (3,866,883) 1,381,750 10,302,658
(Loss) earnings
per share:
As reported $ (.22) $ .11 $ .74
Pro forma (.24) .09 .65
</TABLE>
Fixed Stock Option Plans - The Company has two fixed option plans under
which it may grant options to key employees, officers and directors to
purchase common stock, with a maximum term of 10 years, at the market
price on the date of grant. Options up to 1,200,000 shares may be
granted under the 1990 plan and options up to 3,000,000 shares may be
granted under the 1992 plan. All options are 100% vested at the date
of grant. The fair value under FAS 123 of each option granted is
estimated on the date of grant using the Black-Scholes option pricing
model with the following weighted average assumptions for 1998, 1997
and 1996: dividend rate of 0% for all years; price volatility of
40.91%, 51.47% and 51.49%; risk-free interest rates of 5.7%, 6.6% and
6.26%; and expected lives of 3 years, 5 years and 4 years.
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
9. STOCK-BASED COMPENSATION (CONTINUED)
A summary of the status of the two fixed plans at June 30, 1998, 1997
and 1996 and changes during the years then ended is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
Weighted- Weighted- Weighted-
Number Average Number Average Number Average
of Exercise of Exercise of Exercise
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding and
exercisable at
beginning of year 1,818,193 $ 5.6612 2,175,154 $ 5.7334 1,964,675 $ 4.7652
Granted 496,325 4.5781 204,333 3.9377 986,821 5.1525
Exercised 14,000 1.50 124,333 3.3689 776,342 2.5447
Expired or
surrendered 504,600 5.4832 436,961 5.8665 --
Outstanding and
exercisable at
end of year 1,795,918 5.4443 1,818,193 5.6612 2,175,154 5.7334
Weighted average
fair value per
option of options
granted during
the year $ .71 $ 2.04 $ 2.38
</TABLE>
The following table summarizes information about the outstanding
options at June 30, 1998:
<TABLE>
<CAPTION>
Weighted- Weighted-
Average Average
Number Remaining Exercise
Range of Exercise Prices Outstanding Life Life
<S> <C> <C> <C>
$2.37 to $2.63 111,000 7.7 $ 2.484
$3.19 to $4.81 442,200 6.2 3.556
$5.12 to $5.63 810,718 4.2 5.334
$8.34 432,000 5.7 8.344
1,795,918
</TABLE>
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
9. STOCK-BASED COMPENSATION (CONTINUED)
The Company's 1990 and 1992 Stock Option Plans were approved for
modification at the Company's November 1994 annual meeting of
stockholders. The approved amendments provide that when optionees
exercise their options and remit the exercise payment to the Company,
they may be granted a one-time option to purchase a like quantity of
Common Shares as those options exercised (Reload Options). The Reload
Options shall have an exercise price equal to the closing sales price
of the Company's Common Stock on the day in which the original options
were exercised, and shall have an exercise period that extends to the
later of one year from the date of grant of the Reload Option or the
expiration date of the originally exercised option. Options subject to
reload included in total outstanding options at June 30, 1998 totaled
1,142,000 shares. These have a weighted average exercise price of
$5.97.
Employee Stock Purchase Plan - In August, 1995 the Company adopted a
compensatory Employee Stock Purchase Plan, effective for a 3-year
period, to provide employees of the Company with an incentive to remain
with the Company and an opportunity to participate in the growth of the
Company. The plan is administered by the Company's Board of Directors.
Employees with one year of service are able to elect annually to
purchase shares of the Company's common stock at a price equal to 50%
of its lowest market value recorded between May 1 and August 1 of each
calendar year. The aggregate number of shares which may be purchased
under the plan shall not exceed 80,000 as adjusted for stock splits or
stock dividends.
Employees must elect to purchase a designated number of shares on or
before May 15 of each calendar year, except that the election for the
first year may be made on or before January 31, 1996. The number of
shares that may be purchased by each employee is limited to 100 shares
per year of service. The shares are paid for by the participating
employees through payroll deductions ratably over a five-year period
and prepayment is not permitted. The employee vests in the shares over
the same five-year period based on the amounts paid. Shares are
transferred to the employee only at the end of the five-year period.
Compensation cost is measured on August 1 of each year, which is the
first date that both the purchase price and the number of shares are
known. The amount of compensation measured on the measurement date is
recorded as deferred compensation and charged to expense over the
periods in which the employee performs the related services, which is
the same as the vesting period.
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
9. STOCK-BASED COMPENSATION (CONTINUED)
The Company also adopted a stock purchase plan for certain key
management personnel, which is similar to the above plan, except that
the aggregate number of shares available shall not exceed 250,000 and
the employee is limited to 1,000 shares plus an additional 1,000 shares
for each year of service. Vesting is the same as above except that any
employee who is also an officer of the Company and who has achieved at
least ten continuous years of employment shall have the option to
prepay any balance due for shares purchased under the plan. At that
time, the Company will immediately transfer said shares to the
employee. The amount of compensation measured for this key management
employee plan is on the same measurement date as set forth above for
the employee plan. Deferred compensation is recorded and charged to
expense over the five-year vesting period except for those officers
eligible to prepay. For those officers, the expense is recognized
immediately upon the measurement date.
Employees and key management personnel elected to purchase 87,600 and
75,700 shares with an exercise price per share of $1.50 and $2.50
through the stock purchase plan in 1997 and 1996, respectively. The
related deferred compensation recorded at June 30, 1997 and 1996
totaled $273,750 and $141,937, respectively.
Amortization of the deferred compensation recognized in the income
statement was $46,204, $107,923 and $53,230 for the periods ending
June 30, 1998, 1997 and 1996, respectively. Forfeitures of shares in
1998 from employee terminations totaled 20,562 shares under the 1996 and
1995 purchase years. The fair value under FAS 123 of each purchased share
is estimated on the date of grant using the Black-Scholes option pricing
model with the following assumptions: expected life of 5 years for all
years; dividend rate of 0% for all years; risk-free interest rates of 6.8%
and 5.6% in 1997 and 1996, and price volatility of 53% in 1997 and 1996.
The weighted average fair value per share granted would be $3.09 in 1997
and $2.91 in 1996.
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
10. MAJOR CUSTOMERS
Sales to individual customers of 10% or more of net sales and revenues
are as follows:
<TABLE>
<CAPTION>
Trade Accounts
Receivable Balance at
Sales During the Year Ended June 30, June 30,
Customer 1998 1997 1996 1998 1997
<S> <C> <C> <C> <C> <C>
A $17,956,247 $12,532,761 $ -- $ 453,866 $ 421,759
B 15,255,183 -- -- 559,299 --
C 8,666,195 6,460,989 8,553,353 635,603 425,999
D -- 8,653,840 11,356,458 -- 594,879
E -- -- 13,917,311 -- --
$41,877,625 $27,647,590 $33,827,122 $ 1,648,768 $ 1,442,637
</TABLE>
11. EARNINGS PER SHARE
Basic earnings per share is computed by deducting from net earnings or
adding to net losses the income not available to common stockholders
and dividing the result by the weighted average number of shares
outstanding during the period.
Diluted earnings per share is computed by increasing the weighted
average shares outstanding by the number of additional shares that
would have been outstanding if all dilutive potential common shares had
been issued, unless the effect is to reduce the loss or increase the
income per common share outstanding.
<TABLE>
<CAPTION>
For the Year Ended 1998
Loss Shares Per Share
(numerator) (denominator) Amount
<S> <C> <C> <C>
Basic EPS:
(Loss) income available to
common stockholders $(3,592,930) 16,095,443 $ (.22)
Diluted EPS:
(Loss) income available to
common stockholders plus
assumed conversions $(3,592,930) 16,095,433 $ (.22)
</TABLE>
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
11. EARNINGS PER SHARE (CONTINUED)
Options outstanding at June 30, 1998 to purchase 1,795,918 shares of
common stock with a range of exercise prices from $2.37 to $8.34, were
not included in the computation of diluted EPS because the options'
exercise prices were greater than the average market price of the
common shares. The options expire over a ten-year period.
<TABLE>
<CAPTION>
For the Year Ended 1997
Income Shares Per Share
(numerator) (denominator) Amount
<S> <C> <C> <C>
Basic EPS:
Income available to
common stockholders $1,733,290 15,933,157 $ .11
Effect of Dilutive Securities
Stock options 90,323
Diluted EPS:
Income available to common
stockholders plus assumed
conversions $1,733,290 16,023,480 $ .11
</TABLE>
Options outstanding at June 30, 1997 to purchase 1,395,193 shares of
common stock with a range of exercise prices from $5.63 to $8.34 were
outstanding during fiscal 1997 but were not included in the computation
of diluted EPS because the options' exercise prices were greater than
the average market price of the common shares.
<TABLE>
<CAPTION>
For the Year Ended 1996
Income Shares Per Share
(numerator) (denominator) Amount
<S> <C> <C> <C>
Basic EPS:
Income available to
common stockholders $11,821,077 15,736,310 $ .75
Effect of Dilutive Securities
Stock options 192,095
Diluted EPS:
Income available to common
stockholders plus assumed
conversions $11,821,077 15,928,405 $ .74
</TABLE>
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
11. EARNINGS PER SHARE (CONTINUED)
Options outstanding at June 30, 1996 to purchase 1,779,821 shares of
common stock with a range of exercise prices from $5.25 to $8.34 were
outstanding during fiscal 1996 but were not included in the computation
of diluted EPS because the options' exercise prices were greater than
the average market price of the common shares.
12. ADDITIONAL INFORMATION FOR STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Interest paid $1,656,796 $1,328,310 $2,249,297
Income taxes paid -- -- 645,000
The Company had the following non-cash transactions:
1998 1997 1996
Purchase of plant and equipment
in exchange for debt $ 5,000 $3,271,074 $ 66,286
Increase in accrued compensation
costs at implementation of
employee stock purchase plan -- 273,750 141,937
Surrender of common stock in
lieu of employee payroll
tax obligations -- 126,251 493,283
Increase in additional paid-
in-capital from tax benefit
of exercise of stock options -- -- 116,000
Decrease in deferred compensation
from employee terminations 51,202 23,260 --
Acceptance of receivable in
exchange for sale of property,
plant and equipment 28,275 -- --
</TABLE>
(Continued)
<PAGE>
HIGH PLAINS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
13. 401(k) PLAN
The Company adopted a 401(k) Plan on June 1, 1991. All employees who
are over the age of 19 and have one year (1,000 hours) of service are
eligible to participate. Employees may contribute from 1% to 12% of
their pay. The Company matches 100% of the first 1% of employee salary
deferrals and 50% of the next 5% of employee salary deferrals. The
Company contributions to the Plan for the years ended June 30, 1998,
1997 and 1996 were $37,697, $27,822 and $27,100, respectively.
14. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
Year Ended June 30, 1998
First Second Third Fourth Fiscal
Quarter Quarter Quarter Quarter 1998
<S> <C> <C> <C> <C> <C>
Net sales
and revenues $22,570,837 $21,660,983 $19,123,056 $21,508,906 $84,863,782
Gross profit 2,064,738 1,171,191 437,837 (3,544,804) 128,962
Net (loss)
earnings 1,370,881 405,408 (299,425) (5,069,794) (3,592,930)
Net (loss)
earnings per
common share:
Basic $ 0.09 $ 0.03 $ (0.02) $ (0.32) $ (0.22)
Assuming
dilution 0.09 0.03 (0.02) (0.32) (0.22)
</TABLE>
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, 1998 of our
report dated August 28, 1998 which appears in the annual report to stockholders
for the year ended June 30, 1998.
ALLEN, GIBBS & HOULIK, L.C.
Wichita, Kansas
October 9, 1998
