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
None.
Item 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information relating to this item is hereby incorporated by reference from
the Financial Statements and Notes thereto in the 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 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, 1998, 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 for
the year ended June 30, 1998 which is anticipated to be filled with
the Securities and Exchange Commission within 120 days after the
end of the Company's fiscal year ended June 30, 1998.
(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 Bylaws of the Company, as amended, of the Company (incorporated
herein by reference to Exhibits 3.5 and 3.6 to the Company's
Registration Statement on Form S-1, dated April 18, 1988).
3-3 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).
3-4 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).
3-5 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).
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
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
<RECEIVABLES> 5,436,735
<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
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,592,930)
<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
