UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 2054
-------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) of THE
SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For Fiscal Year Ended December 31, 1995
[ ] 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. 0-11431
NEW ENERGY COMPANY OF INDIANA LIMITED PARTNERSHIP
(formerly, New Energy Company of Indiana)
(Exact Name of Registrant as Specified in its Charter)
INDIANA 52-1195762
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3201 WEST CALVERT STREET, SOUTH BEND, INDIANA 46680
(Address of principal executive office) (zip code)
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:) (219) 233-3116
------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT
LIMITED PARTNERSHIP INTERESTS
(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 preceding twelve 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 90 days.
YES X NO
------ ------
State the aggregate market value of the voting stock held by non-affiliates
of the registrant.
Not Applicable.
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TABLE OF CONTENTS
PART I Page
----
Item 1. Business................................................... 1
Item 2. Properties................................................. 11
Item 3. Legal Proceedings.......................................... 11
Item 4. Submission of Matters to a Vote of Security Holders........ 11
PART II
Item 5. Market for Registrant's Limited Partner Units
and Related Security Holder Matters....................... 11
Item 6. Selected Financial Data.................................... 12
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 14
Item 8. Financial Statements and Supplementary Data................ 19
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure....................... 34
PART III
Item 10. Directors and Executive Officers of the Registrant........ 34
Item 11. Executive Compensation..................................... 35
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 36
Item 13. Certain Relationships and Related Transactions............. 36
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K....................................... 40
Index to Exhibits.................................................... 40
Signatures............................................................ 45
<PAGE>
PART 1
ITEM 1. BUSINESS
General Development of Business
New Energy Company of Indiana Limited Partnership, an Indiana limited
partnership (the "Company"), the general partner of which is New Energy
Corporation of Indiana, an Indiana corporation (the "General Partner"), was
formed on April 15, 1980 under the Indiana Uniform Limited Partnership Act to
construct and operate an ethanol production facility (the "Plant") located in
South Bend, Indiana.
On April 28, 1982, the Company commenced an offering, on a best efforts basis,
of $37,000,000 in limited partnership interests in $5,000 increments with a
minimum required investment of $5,000. In addition to subscribing for interests
at a minimum price of $5,000, each limited partner executed an assumption
agreement pursuant to which they assumed $2,500 of the principal amount of a
loan obtained by the Company to be used in connection with the construction of
the Plant. On August 27, 1982, the Partnership terminated the offering having
raised the minimum amount of $32,000,000 through the sale of 6,400 limited
partner interests.
Construction of the Plant commenced in 1982 using the proceeds of the offering,
a private offering of $5,000,000 of special limited partner interests, the
General Partner's contribution of $3,000,000, long-term financing from a
syndicate of eight banks in the amount of $140,914,000, 90% of which was
guaranteed by the United States of America, acting by and through the Secretary
of Energy and long-term financing in the amount of $2,432,264 from the South
Bend Development Corporation ("SBDC").
The Plant was designed and constructed to produce approximately 52,500,000
gallons annually of fuel grade ethanol from corn. The Plant was also designed to
produce, as by-products of the ethanol production process, approximately 186,000
tons annually of distilled dried grains and solubles ("DDGS") and approximately
145,000 tons annually of gaseous carbon dioxide ("Co2").
Financial Information about Industry Segments
The Company operates in one business segment, the production of ethanol and its
by-products: DDGS and Co2. The Company does not operate in any other business
segment. The following chart lists sales for each of ethanol and its by-products
(DDGS and Co2) for 1995, 1994 and 1993:
1995 1994 1993
---- ---- ----
Ethanol Sales $103,227,074 $96,111,285 $86,994,722
By-Product Sales $ 30,859,962 $31,818,002 $28,543,669
1
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Narrative Description of Business
Since it commenced operations in 1985, the Plant has been producing ethanol on a
regular basis. During 1995, the Plant produced approximately 88 million gallons
of ethanol as compared to approximately 83.5 million gallons produced in 1994.
The approximate 5.4% increase in ethanol production is primarily the result of
increased efficiencies in the operation of the Plant.
At its current rate of production the Plant, in 1996, is projected to produce
approximately 90 million gallons of denatured ethanol. In addition, the Plant is
projected to produce annually, as by-products, approximately 290,000 tons of
DDGS, and approximately 168,000 tons of Co2.
The Company's revenues during its last three fiscal years were derived from
sales of ethanol, DDGS and Co2. The statements of operations set forth in the
financial statements contained in this Report indicate the amounts of revenue
and operating income or loss derived from the Company's sale of ethanol and its
by-products for the fiscal years ended December 31, 1995, 1994 and 1993. The
following table indicates the percentage of revenue from the Company's sales of
ethanol and its by-products for the fiscal years ended December 31, 1995, 1994
and 1993:
1995 1994 1993
---- ---- ----
Ethanol 77.0% 75.2% 75.3%
DDGS 21.7% 23.5% 23.3%
Carbon Dioxide 1.3% 1.3% 1.4%
PRODUCTS
Ethanol. Known chemically as ethyl alcohol, and commonly as grain alcohol,
ethanol is used primarily as an octane enhancer and as an oxygen source to
produce cleaner burning gasoline. To produce ethanol, corn is dry-milled through
grinding and then converted to a fermentable sugar stream through a process of
enzyme hydrolysis. The resulting mash is fermented in batch fermenters and then
transferred to a continuous distillation column which yields 95%-pure ethanol.
The ethanol is then further refined by a separate distillation column into
anhydrous (water-free) ethanol. The anhydrous ethanol is denatured to produce
fuel ethanol. The ethanol produced by the Plant may only be used as a fuel or a
substitute for petroleum or petrochemical feedstock.
Distilled Dried Grains and Solubles. DDGS is a by-product of the Plant's ethanol
production process. Approximately 90% of the protein content of the corn used by
the Plant is recovered in the DDGS and is marketed as a protein supplement in
livestock feed.
2
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Carbon Dioxide. The fermentation process used by the Plant yields Co2 as a
by-product. The Co2 produced at the Plant is used primarily in the preparation
of carbonated beverages and frozen foods.
RESEARCH AND DEVELOPMENT
In April 1991, the Company entered into a cooperative research and development
agreement ("CRADA") with the National Renewable Energy Laboratory ("NREL"), a
research laboratory operated by the U.S. Department of Energy (the "DOE"). The
goal of the Company's work with NREL is to develop an economical process for the
conversion of cellulose and hemi-cellulose materials to ethanol. If successful,
this project would allow the Company to produce ethanol from alternative, less
expensive feedstocks and could hold an important key to the future of the
ethanol industry. Management of the NREL research is coordinated by the
Company's Project Development Team ("PDT").
In addition to its work with NREL, PDT is engaged in projects to identify new
products which would allow the Company to diversify its product line and to
develop manufacturing processes for those products. PDT is also engaged in
projects to increase the efficiency of the current ethanol production process
through the identification and elimination of production bottlenecks.
The Company has also engaged a research consultant to assist it in developing
new production processes and alternative products. This consultant works with
the Company in connection with the CRADA with NREL as well as assisting the PDT.
As of the date of this Report the Company's research and development efforts
have achieved limited success in eliminating bottlenecks and no commercially
feasible new products or processes have been identified.
THE PLANT
The Company owns a single plant located on approximately 60 acres in South Bend,
Indiana. The Plant is an open air facility that consists of various physical
equipment used in the ethanol production process and a two story office building
used for the Company's administrative offices. The Plant is located in the heart
of the "corn belt" and in close proximity to the Company's major customers. The
Plant and all equipment is encumbered under a first mortgage lien held by the
DOE as security for its loan to the Company.
Under normal conditions, the Plant is expected to operate at full capacity from
340 to 350 days per year. During the remainder of each year, the Plant is
expected to be shut down for regularly scheduled repair and maintenance
operations. During the year ended December 31, 1995, the Plant operated for
approximately 352 days.
3
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RAW MATERIALS
Corn. At its current production rate the Plant consumes approximately 32 million
bushels of corn annually. The Company purchases 100% of its expected corn
requirements from a large regional supplier at a price which may fluctuate with
corn futures prices or which may be fixed at the Company's election (a copy of
this agreement has been filed as Exhibit 10.25 to the Company's Form 10-K for
the year ended December 31, 1995). Approximately 90% of the Company's corn
requirements are purchased within a 75 mile radius of the Plant.
The price of corn is posted daily on national commodities exchanges for both
immediate delivery (spot price) and future delivery. Prices for corn in the area
surrounding the Plant are influenced by local, national and international supply
and demand conditions, weather conditions, transportation rates and
transportation system constraints such as the freezing of waterways in winter
and the adequacy and cost of storage. Price differentials within the area are
influenced by the location and number of grain processors and feed
manufacturers. The price of corn is also significantly affected by federal
governmental policies with respect to price supports and exports. During fiscal
year 1995, the price of corn paid by the Company varied by approximately $.43
per bushel. Based on its current annual requirements of approximately 32 million
bushels, the Company experiences a $3.2 million change in operating costs for
every 10 cents per bushel change in the price it pays for corn.
During the first nine months of 1996, the Company anticipates a significant
increase in corn prices due primarily to a significantly smaller corn crop in
1995 than in 1994 and an increase in worldwide demand for corn. During the first
two months of 1996, corn prices, as reflected by the Chicago Board of Trade
Commodities Futures Market, have increased on average approximately 50% over the
same period in 1995. This increase is anticipated to have a material adverse
impact on the Company's 1996 net income and cashflow.
The Plant has an aggregate storage capacity for approximately 320,000 bushels of
corn, which is adequate for approximately 3.5 days of normal operation. Supplies
of corn in the eight Indiana and five Michigan counties surrounding South Bend
are considered to be adequate to meet the Plant's 1996 operating requirements.
Coal. The Plant uses coal as its principal fuel source. During 1995, the Company
entered into fixed price contracts with suppliers to purchase a one year supply
of coal. The Company purchased approximately 109,000 tons of coal in fiscal year
1995. During 1996, the Company expects to continue to purchase coal under
long-term fixed price contracts.
Enzymes. Enzymes constitute the principal chemicals used in the Plant's
production process. The Company maintains enzyme supply contracts with major
enzyme suppliers which are renewable on an annual basis.
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<PAGE>
Denaturants. The Company purchases denaturants for use in converting the grain
alcohol into fuel grade ethanol. There are a number of denaturing agents that
the Plant may use. Currently, the Company purchases unleaded hydrocarbons on the
open market for use as a denaturant. During 1995 the Company purchased
approximately 3,708,000 gallons of unleaded hydrocarbons, including gasoline,
for use as a denaturant.
MARKETING OF ETHANOL
The Company sells the ethanol it produces to refiners, blenders and distributors
of motor fuels for blending with gasoline at up to a 90:10 ratio as an octane
enhancer and as an oxygenate source to comply with certain state and federal
carbon-monoxide reduction programs. Beginning in the mid-1970's, increasingly
stringent air quality standards, especially the requirement to phase out the use
of lead additives as octane boosters, had the effect of creating a demand for
ethanol-enhanced motor fuels. Regular unleaded gasoline has lower octane levels
than gasoline with lead additives, and the engines of some fuel-efficient
automobiles "knock and ping" when using regular unleaded gasoline because of the
lower octane level. Several major oil companies, in order to boost gasoline
octane ratings without employing lead additives, began utilizing octane boosting
additives such as ethanol and methyl tertiary butyl ether, more commonly known
as MTBE.
A critical factor in the development of the alcohol motor fuels market was the
enactment in 1978 of a federal excise tax exemption or alternative income tax
credit on alcohol/gasoline fuel mixtures containing at least 10% alcohol.
Similar state tax exemptions or production grants ranging from 1 to 8 cents were
also enacted in a variety of states. However, beginning in 1986 the amount of
such state tax exemptions and other production grants has been significantly
reduced, and a number of states, including Indiana, have eliminated these
benefits altogether.
The current, as well as the future, market for ethanol, is significantly
impacted by congressional action. The Clean Air Act of 1990 ("CAA") requires
that cleaner burning, reformulated gasoline ("RFG") be sold in certain
designated cities. The CAA requires Chicago, Milwaukee, Houston, Hartford, New
York City, Philadelphia, Baltimore, Los Angeles and San Diego to utilize RFG.
Additionally, the governors of a number of other states have "opted" into the
RFG program to help their states achieve air quality improvements. Subsequently,
the governors of New York, Pennsylvania and Maine have elected to opt out of the
CAA in certain specific areas within each state.
Among the many changes in the composition of RFG, as compared to conventional
gasoline, is the addition of an oxygenate, such as ethanol or MTBE. The addition
of oxygen allows the gasoline to burn cleaner. As a result of the RFG program,
demand for ethanol increased.
5
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In June 1994, the United States Environmental Protection Agency ("EPA") issued
the "Renewable Oxygen Standard" ("ROS") which required refiners manufacturing
RFG to utilize 15% of their oxygenate requirements in 1995, from a renewable
source -- like ethanol. The percentage was scheduled to increase from 15% to 30%
in 1996. The enactment of the ROS program encountered strong resistance from,
among others, the National Petroleum Refiners Association, The American
Petroleum Institute and The American Methanol Institute. In September 1994, the
United States Court of Appeals for the Fourth Circuit issued a restraining order
staying enforcement of the ROS. The case was argued in February 1995 and in July
1995, the Court of Appeals ruled that EPA did not have the authority to issue
the ROS. As a result, the ROS was not implemented. Management believes that
implementation of the ROS would have increased the demand for ethanol and
allowed the Company to penetrate new, higher value markets.
On March 18, 1996, the EPA finalized a rule lifting the cap on oxygen content in
summertime RFG, thereby allowing ethanol to be blended at 10 percent volume. A
cap on oxygen content, limiting fuels to 2.7 percent oxygen (7.7 percent volume
ethanol) had originally been adopted by EPA in the belief that higher levels of
oxygen increased nitrous oxide ("NOx") emissions. Data generated subsequently
proved that higher levels of oxygen did not increase NOx emissions and EPA
promulgated a rule that the cap be lifted in October 1995. The new rule allows
up to 4 percent oxygen or 10 percent volume ethanol.
In addition to the availability and amount of exemptions from federal and state
excise and sales taxes as previously discussed, the ethanol industry is affected
by numerous other factors, including (1) gasoline prices generally and the
comparative prices of regular unleaded gasoline versus alcohol/gasoline
mixtures; (2) market prices of corn, the principal raw material used in the
production of ethanol; (3) the level of refiners' crude oil and gasoline
inventories; (4) competition among domestic ethanol producers; (5) availability
of low-cost foreign ethanol; (6) the familiarity of jobbers and retailers with
tax and octane benefits of ethanol blends; (7) marketing support of retailers by
major refinery/blenders, and (8) competition with other oxygenates, such as
MTBE.
Customers, each accounting for 10% or more ethanol sales, accounted for 59%, 24%
and 66% of total ethanol sales in 1995, 1994 and 1993, respectively. The Company
does not believe that the loss of any ethanol customer which accounts for 10% or
more of ethanol sales would have a material adverse impact on the operation of
the business.
MARKETING OF BY-PRODUCTS
DDGS. DDGS is sold by the Company as a high-protein livestock feed supplement.
DDGS competes with soybean meal and, to a lesser extent, urea and cottonseed
meal. Among the principal domestic markets for the DDGS produced by the Plant
are feed-lot operators and animal feed compounders in Indiana, Ohio, Michigan
and, generally,
6
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the eastern and western United States. DDGS is marketed domestically or
exported, depending upon prevailing market conditions. During 1995, 1994 and
1993, the Company sold approximately 9%, 17% and 20% of its DDGS, respectively,
for export. In 1995, 1994 and 1993, one customer accounted for 22%, 27% and 32%
respectively, of its DDGS sales. The Company does not believe that the loss of
any DDGS customer which represents 10% or more of DDGS sales would have a
material adverse impact on the operation of the business. During 1995, the
Company sold approximately 283,000 tons of DDGS, as compared to approximately
263,000 tons of DDGS sold in 1994.
Carbon Dioxide. The Company first began sales of carbon dioxide in June 1985,
following completion of a carbon dioxide recovery facility adjacent to the
Plant. BOC, Inc. ("BOC") (formerly Airco, Inc.) is currently operating the
facility. The General Partner and BOC are parties to a contract providing for
the sale of all of the Plant's carbon dioxide production. The agreement extends
until the year 1999 and can be automatically extended for an additional
five-year term. The Company sold approximately 167,000 tons of carbon dioxide to
BOC in 1995, as compared to approximately 162,000 tons of carbon dioxide sold to
BOC in 1994.
WORKING CAPITAL REQUIREMENTS
The Company maintains raw material and finished goods inventory to the extent
required for the continued normal operation of the Plant. Raw material inventory
consists primarily of corn, coal and enzymes used in the production process.
Finished goods inventory consists of both ethanol and DDGS.
Corn. At its current rate of production the Company has the ability to store
approximately 3.5 days inventory of corn. The value of this inventory fluctuates
daily based upon changes in the cash and futures market prices for corn.
Coal. The Company's coal inventory is seasonally affected by weather conditions
which affect both the amount of coal used in the operation of the Plant and the
ability of the Plant to take delivery. Due to these seasonal fluctuations the
Company maintains between 3 weeks and 4 months inventory of coal.
Enzymes. The Company uses two primary enzymes in its production process. On
average the Company maintains approximately 7 days of enzyme inventory.
Ethanol. Ethanol inventory consists of intransit inventory and inventory
maintained at the Plant in its primary storage facility. During 1995, the
average finished goods inventory at the Plant represented approximately 3 days
of production. In addition, inventory in transit to customers, which fluctuates
seasonally, averages between 2 and 3 days of production.
7
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COMPETITION
The most important competitive factor of the Company is the price of ethanol
relative to the price of gasoline and MTBE. Other competitive factors include
the value of state and federal incentives, the cost of corn and the other costs
associated with the Plant's operations. The Company is also vulnerable to
adverse effects which would emanate from a reduction or elimination of federal
or state excise taxes on gasoline containing up to 10% ethanol as well as the
loss of alternative federal income tax credits. The price of ethanol varies at
times with the price of gasoline and MTBE and the value of state and federal tax
exemptions. The price of DDGS fluctuates with the price of corn and the
agricultural by-product market as well as the market for competing products such
as soybean meal. Because the Company is unable to directly control the
relationship of the corn, gasoline and agricultural by-product markets, and is
unable to assure the continuation of state and federal tax exemptions, changes
in market conditions could adversely affect the future operations of the
Company.
The Company has two programs which, management believes, serve to lessen these
risks. First, the Company enters into long-term contracts with major gasoline
refiners to sell a significant portion of its ethanol production. Second, the
Company has executed a contract which allows it to flat price a significant
portion of its 1996 corn requirements on a rolling basis at a price which is
fixed based upon the futures market price for corn. This strategy may allow the
Company to reduce the risk associated with the purchase of corn and the sale of
ethanol and its by-products.
The production of ethanol for motor fuels is a highly competitive industry. The
Company competes principally with larger producers, other energy companies and
major corn processors, which are well-established and have substantially greater
financial resources than the Company.
Other ethanol producers include: Archer Daniels Midland Company, with production
capacity of approximately 750 million gallons per year, Minnesota Corn
Processors, with production capacity of approximately 115 million gallons per
year, Cargill, with production capacity of approximately 110 million gallons per
year, Pekin Energy, Inc. with production capacity of approximately 125 million
gallons per year, and Midwest Grain, with production capacity of approximately
78 million gallons per year.
The Company's principal methods of competing for market share are the price it
charges for its products, the quality of its products, the level of service that
it provides to its customers, and the Company's geographic location and its
ability to deliver adequate supplies of its products in a reliable manner. The
Company competes for customers with ethanol producers located throughout the
United States.
Ethanol primarily competes with MTBE, which is a hydrocarbon derivative. Because
of changing technology, it is possible that other alternative fuels or octane
enhancers may be developed which would also compete with ethanol for market
share.
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The marketing of DDGS is also highly competitive. As with ethanol, the principal
methods of competition in this market are price, quality, service, geographic
location of the Plant and the ability to deliver adequate product supplies in a
reliable manner.
GOVERNMENTAL REGULATION
The Company has obtained an Alcohol Fuel Producers Permit from the Department of
the Treasury, Bureau of Alcohol, Tobacco and Firearms and all other necessary
federal and state licensing permits needed to produce and sell ethanol. The
Company's activities are also affected by federal and state regulations
governing the sale and distribution of gasoline.
As of December 31, 1995, the federal excise tax on the sale of gasoline was
$.184 per gallon. Congress has also provided for an excise tax exemption for
qualifying fuel/ethanol blends which is currently set at $.054 per 10% blended
gallon through the year 2000. As an alternative to the excise tax exemption,
effective through September 30, 2000, fuel blenders who blend gasoline with
ethanol at up to a 90:10 ratio (gasoline/ethanol) are entitled to the
corresponding alternative income tax credit of $.54 per gallon of ethanol. If
the federal excise tax exemption or alternative income tax credit are eliminated
or phased out, it will have a significant adverse effect on the Company.
Currently 9 states, including 3 states within the Company's marketing area,
Ohio, Minnesota and Illinois, have exempted, in varying amounts, from excise
and/or sales taxes, the sale of motor fuel blends containing ethanol. Most state
tax exemptions vary in proportion to the amount of ethanol blended into gasoline
up to a maximum of 10% ethanol.
Environmental Matters. The Company is subject to federal, state and local laws
and regulations designed to protect the environment. The Company does not
believe or expect that compliance with such laws and regulations regarding the
discharge of materials into the environment, or otherwise relating to the
protection of the environment, has had or will have a material adverse effect
upon the Company.
On September 30, 1991, the EPA issued to the Company Finding of Violation
("FOV") No. EPA-5-91-R-17 and Notice of Violation ("NOV") No. EPA-5-91-R-18.
Both the FOV and NOV are based on alleged violations of the Clean Air Act as it
relates to sulfur dioxide emissions. At limited times during the second, third
and fourth quarters of 1990, the Company's sulfur dioxide emissions exceeded the
limitations specified in the Approval to Construct which was issued by EPA on
December 3, 1981. EPA also contended that the Company was not maintaining and
operating a continuous monitoring system for measuring sulfur dioxide emissions
in compliance with applicable law.
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In August 1992, after negotiations with the Company's attorneys, EPA issued a
Consent Order to resolve the FOV and NOV. The Company was required to install a
continuous monitoring system for measuring sulfur dioxide emissions. The
deadline for installation and certification of the new monitoring equipment was
February 15, 1993. The Company met that deadline. The Consent Order reserves
EPA's right to assess a fine against the Company in connection with the alleged
violations as reflected in the FOV and NOV. Under the applicable federal
statutes, the Company could potentially be fined a maximum of $25,000 per day
beginning from the date that the FOV and NOV were issued (9/30/91) through the
date that the alleged violation was corrected. However, no specific fine has
been proposed by EPA to date. Although there is no statute of limitations
applicable to fine assessments, the risk of a fine will continue to decrease as
time passes. The cost of installing the monitoring system was approximately
$154,000. Management estimates that any fines levied in this matter will not be
significant.
On April 12, 1995, the Company received a FOV from the EPA as a result of the
Company's alleged failure to submit a report summarizing the regulatory status
of each benzene containing wastestream as required by federal regulations. The
Company responded to the FOV on June 8, 1995 and provided EPA with all requested
documentation. The matter is still pending and the Company has not received any
further response from EPA.
In February, 1996, the Company received a FOV from the Indiana Department of
Environmental Management ("IDEM") regarding alleged exceedences of sulphur
dioxide and nitrous oxide emissions in August and September 1995. The matter is
currently under review by IDEM. Management believes that if a fine is levied in
this matter it will not be significant.
Additional Legislation. No prediction can be made as to what additional state or
federal legislation or regulations may be enacted, if any, affecting the
production, sale or distribution of ethanol for use in alcohol fuels. Any
regulations, orders, directives or legislation which may be promulgated in the
future may require expenditures by the Company which could be substantial or
otherwise adversely affect the Company.
Safety Standards. The Company is subject to various federal and state laws
relating to worker health and safety requirements, including the federal
Occupational Safety and Health Act.
EMPLOYEES
At December 31, 1995, the Company had 158 employees. Most of the Company's
employees are drawn from the South Bend, Indiana area. None of the Company's
employees are unionized. The Company considers its labor relations to be
excellent.
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ITEM 2. PROPERTIES
The Plant and administrative offices are located on approximately 60 acres in
South Bend, Indiana. The land for the Plant site, administrative offices and all
equipment is subject to liens to secure the Company's debt with the DOE. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
ITEM 3. LEGAL PROCEEDINGS
The Company is not party to any material legal proceedings other than routine
litigation incidental to its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S LIMITED PARTNERSHIP UNITS & RELATED SECURITY
HOLDER MATTERS
A regulated public market for trading Limited Partnership Units does not exist
and is not likely to develop. Non-regulated auction markets have developed for
limited partnership interests, however, no assurances can be made that a market
exists for New Energy Units. Consequently, limited partners (the "Limited
Partners") of the Company may not be able to liquidate their investment. As of
December 31, 1995, there were 3,310 record holders owning an aggregate of 6,400
Limited Partnership Units and one record holder owning a Special Limited
Partnership Interest.
As of the date of this report no cash distributions have been made to the
holders of the Limited Partnership Units. Restrictions contained in the
Restructuring Agreement, as hereinafter defined, significantly limit the amount
of cash which the Company can distribute to its Limited Partners. The terms of
the loan with the SBDC and the Special Limited Partner Agreement also require
that the Company give priority to debt payments and distributions before paying
distributions to Limited Partners.
Beginning in October 1989, the Special Limited Partner was eligible to receive
appropriate allocations of income, losses or distributions from the Company. See
Note 5 of Notes to Financial Statements. No cash distributions have been made
with respect to the Special Limited Partnership Interest.
11
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ITEM 6. SELECTED FINANCIAL DATA
The table on the following page sets forth selected financial data of the
Company for the years ended December 31, 1991, 1992, 1993, 1994 and 1995:
12
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<TABLE>
NEW ENERGY COMPANY OF INDIANA LIMITED PARTNERSHIP
SELECTED FINANCIAL DATA
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------------------
1991 1992 1993 1994 1995
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues .......................... $ 107,041,807 $ 121,003,872 $ 115,538,391 $ 127,929,287 $ 134,087,036
Net Income / (Loss) ............... (9,552,119) 2,401,385 629,052 (2,549,586) 11,653,870
Total Assets at
End of Year .................... 81,106,791 75,715,837 61,659,770 52,082,532 51,662,253
Total Long-Term Debt .............. 110,372,675 102,663,981 89,661,930 81,791,708 69,842,321
Partners' Capital at
End of Year (1):
General Partner ........... (5,321,331) (5,081,192) (5,018,287) (5,273,246) (4,107,859)
Limited Partners .......... (32,563,597) (30,402,351) (29,813,739) (32,107,672) (21,619,189)
Special Ltd. Partner ...... 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000
</TABLE>
- -------------
(1) Before syndication costs of $4,523,047.
See financial statements and related notes elsewhere in this Report.
13
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company originally financed the construction and start up of the Plant with
financing guaranteed by the DOE. On December 31, 1986, the Company defaulted on
its construction loan and the consortium of banks that provided the original
financing called the DOE guarantee. Since 1987, the DOE has held a promissory
note secured by essentially all of the Partnership's assets.
On December 23, 1991, the Company restructured its loan with the DOE by the
execution of an Amended and Restated Loan Restructuring Agreement (the
"Restructuring Agreement") and two new promissory notes, Note A and Note B. Note
A, in the amount of $55,000,000, provides for 119 consecutive monthly
installments of interest and principal of $631,533 commencing April 30, 1992 and
maturing on March 31, 2002. Note A provides for a fixed rate of interest of
6.75% per annum. Note B, in the amount of $40,622,523, provides for a fixed rate
of interest of 4.00% per annum. Payments of Note B are based upon monthly cash
flow as defined by the Restructuring Agreement. Note B matures on March 31,
2002. Accordingly, the fixed monthly payment required by the Restructuring
Agreement is $631,533. Principal payments of $4,687,856 and $6,687,434 were made
during 1995 under the terms of Note A and Note B, respectively.
On March 25, 1996, the Company and DOE entered into an agreement ("DOE Letter
Agreement") which allows the Company to suspend payment of all Note A principal
and interest payments during the period January 1, 1996, through September 30,
1996. As described above, Note A requires monthly principal and interest
payments totaling $631,533. Under the terms of the DOE Letter Agreement, nine
principal and interest payments totaling $5,683,797 will be suspended on Note A.
Suspended payments will be added monthly to the outstanding principal balance of
Note B and will accrue interest at the Note B interest rate of 4% per annum.
Note B payments will continue to be calculated and paid on a cash flow basis as
defined in the DOE Letter Agreement.
The DOE has certain rights should there be a default under the DOE Letter
Agreement or the Restructuring Agreement, including the acceleration of the debt
and enforcement of its liens securing the debt which cover substantially all of
the Company's assets.
On October 14, 1982, the Company entered into an agreement with the SBDC, a
not-for-profit corporation organized and existing under the laws of the State of
Indiana, which provided for the financing, through the U.S. Department of
Housing and Urban Development, of a loan to the Company, in the aggregate amount
of $2,432,264, for the construction of certain ethanol plant facilities within
the City of South Bend, Indiana. As of December 31, 1995, the principal amount
of debt owed to SBDC was $948,768.
14
<PAGE>
On March 27, 1996, the Company and SBDC entered into an agreement ("SBDC Letter
Agreement") which allows the Company to suspend payment of all principal and
interest payments due to SBDC during the period January 1, 1996, through
September 30, 1996. Principal and interest payments totaling $69,877 are due
SBDC on each of February 1, 1996, May 1, 1996, August 1, 1996 and November 1,
1996. Under the terms of the SBDC Letter Agreement, three payments due in
February, May and August 1996, totaling $209,631 will be suspended. Suspended
payments will be evidenced by the execution of a new note that will accrue
interest at a rate of 6% per annum and be payable in 38 equal monthly payments
of $6,194 beginning October 1, 1996.
On July 20, 1987, the Company entered into an agreement with the Indiana
Recycling and Energy Development Board, formerly the Indiana Energy Development
Board, pursuant to which the Company received a loan of $8,500,000 (the "Loan").
The Loan required quarterly payments of $288,462 with the balance due in April
1994. On December 20, 1989 the Company restructured the Loan and cured a default
which occurred as a result of its failure to make timely quarterly payments.
Under a restructured loan agreement the Company agreed to extend the due dates
on the four quarterly payments in arrears and to pay $286,559 in accrued
interest. On April 7, 1994 the Company made its final payment on the Loan.
In 1982, as part of the original financing package for the construction of the
Plant, the General Partner was required to pledge a certificate of deposit in
the amount of $4 million as partial security for the Partnership's loan. On
December 30, 1986, as a result of the Partnership's failure to pay interest due
under the terms of the loan, a default was declared and the certificate of
deposit, which had grown to $5,780,583, was immediately paid to the syndicate of
banks that provided the financing. This amount has been classified as a loan by
the General Partner to the Partnership. The General Partner did not charge
interest on the loan to the Partnership through July 31, 1987. Effective August
1, 1987, interest began accruing at an annual rate of 8.5%. In December 1991, as
a condition precedent to the DOE consenting to the Partnership's Amended and
Restated Loan Restructuring Agreement, the General Partner was required to
contribute $578,831.60 to the Partnership's working capital reserves. This
amount has also been classified as a loan by the General Partner to the
Partnership. As of December 31, 1995, the General Partner loan consisted of cash
advances totaling $6,359,415 and accrued interest of $3,416,775. During 1995,
the Company paid the General Partner $918,000 of accrued interest on the loan.
During 1995, the Company had sufficient liquidity to meet its debt and other
obligations. On a long-term basis, the Company's ability to maintain sufficient
liquidity to meet its debt service and other obligations will depend to a large
extent upon favorable market price levels for corn and ethanol, factors over
which the Company has little control. However, through its corn purchasing
agreement and its strategy to execute long-term ethanol sales contracts, the
Company is attempting to minimize its exposure to fluctuations in the corn and
gasoline markets.
During the first nine months of 1996, the Company anticipates that it will
experience a significant increase in the price it pays for corn due primarily to
a significantly smaller 1995 corn crop than in 1994 and an increase in worldwide
demand for corn. During the first two months of 1996, the Company's average cost
per bushel of corn was approximately 50% higher than the same period in 1995.
The increase in corn prices is anticipated to have a material adverse impact on
the Company's 1996 net income and cashflow.
15
<PAGE>
Notwithstanding the current increase in corn prices the Company anticipates that
the combination of its cash reserves and the cashflow benefits of the DOE and
SBDC Letter Agreements will allow it to maintain sufficient liquidity to meet
demands in fiscal 1996.
16
<PAGE>
RESULTS OF OPERATIONS - FISCAL YEAR ENDED DECEMBER 31, 1995 AS COMPARED TO
FISCAL YEAR ENDED DECEMBER 31, 1994.
For the year ended December 31, 1995, the Company reported net income of
$11,653,870 compared to a net loss of $2,549,586 for the year ended December 31,
1994. The increase in income during 1995, when compared to 1994, was primarily
the result of higher ethanol selling prices and lower corn costs. Revenues from
the sale of ethanol increased to $103,227,074 during 1995, from $96,111,285 in
1994. The increase in revenue during 1995, was primarily due to an increase in
ethanol selling prices and to a lesser degree in the volume of ethanol produced
and sold. Revenue from the sale of by-products decreased to $30,859,962 during
1995, from $31,818,002 in 1994, primarily due to lower DDGS selling prices
offset partially by an increase in the volume of DDGS produced and sold.
Interest expense decreased by $438,660 in fiscal year 1995, primarily due to a
reduction in the principal amount of debt outstanding.
As discussed in the "Liquidity and Capital Resources" section of this report,
during the first nine months of 1996, the Company anticipates that it will
experience a significant increase in the price it pays for corn. The Company
further anticipates that the increase in corn prices will have a material
adverse impact on 1996 net income and cashflow. Because of this fact, the
Company does not believe that 1995 operating results are an accurate indicator
of the Company's financial performance in 1996. The Company's performance in
1996 will be dependent upon several important factors including the size of the
1996 corn crop and price levels for ethanol and DDGS.
IMPACT OF INFLATION
Inflation continued to be moderate during the year ended December 31, 1995.
Management of the Company believes that inflation has a relatively minor direct
impact on its results of operations. While certain types of costs (such as
salaries) are affected by inflation, the items which most affect the Company's
operations are ethanol prices and the cost of raw materials which are influenced
by a variety of factors. The impact of inflation on these items is not readily
determinable.
17
<PAGE>
RESULTS OF OPERATIONS - FISCAL YEAR ENDED DECEMBER 31, 1994 AS COMPARED TO
FISCAL YEAR ENDED DECEMBER 31, 1993.
For the year ended December 31, 1994, the Company reported a net loss of
$2,549,586 compared to net income of $629,052 for the year ended December 31,
1993. The loss incurred during 1994, when compared to 1993, was primarily the
result of higher corn costs and, to a lesser degree, lower ethanol selling
prices. Revenues from the sale of ethanol increased to $96,111,285 during 1994,
from $86,994,722 in 1993. The increase in revenue during 1994 was primarily due
to an increase in the volume of ethanol produced and sold. Revenue from the sale
of by-products increased to $31,818,002 during 1994, from $28,543,669 during
1993, primarily due to higher DDGS selling prices and a slight increase in the
volume of DDGS produced and sold. Interest expense decreased by $693,069 in
fiscal year 1994 primarily due to a reduction in the principal amount of debt
outstanding.
18
<PAGE>
NEW ENERGY COMPANY OF INDIANA
LIMITED PARTNERSHIP
FORM 10-K
ITEMS 8 AND 14(a)
Page
----
Report of Independent Auditors....................................... 20
Financial Statements:
Balance Sheets as of December 31, 1995 and 1994................. 21
Statements of Operations for the years
ended December 31, 1995, 1994 and 1993....................... 23
Statements of Partners' Capital Deficit for the
years ended December 31, 1995, 1994 and 1993................ 24
Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993............................. 25
Notes to Financial Statements........................................ 26
Financial Statement Schedules:
None
* * *
All financial statement schedules are omitted because they are either not
applicable or the required information is included in the financial statements
or notes thereto.
19
<PAGE>
Report of Independent Auditors
Partners
New Energy Company of Indiana Limited Partnership
We have audited the accompanying balance sheets of New Energy Company of Indiana
Limited Partnership as of December 31, 1995 and 1994, and the related statements
of operations, partners' capital deficit and cash flows for each of the three
years in the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of New Energy Company of Indiana
Limited Partnership at December 31, 1995 and 1994, and the results of its
operations, partners' capital deficit and its cash flows for each of the three
years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
Ernst & Young LLP
February 13, 1996,
except for Note 3, as to which the
date is March 27, 1996
20
<PAGE>
New Energy Company of Indiana Limited Partnership
Balance Sheets
<TABLE>
<CAPTION>
December 31
-----------------------------------
1995 1994
------------- --------------
<S> <C> <C>
Assets (Note 3)
Current assets:
Cash and cash equivalents (Note 2) $ 11,460,672 $ 8,879,804
Accounts receivable 7,353,405 8,025,818
Other receivables 178,685 77,952
Inventories (Note 2) 4,235,685 4,453,276
Spare parts 2,604,433 2,611,001
Prepaid expenses and other 317,815 346,247
------------- ------------
Total current assets 26,150,695 24,394,098
Property and equipment:
Land 2,047,477 2,047,477
Land improvements 2,316,203 2,316,203
Buildings 3,744,805 3,738,729
Machinery and equipment 151,262,507 150,999,887
Construction in progress 141,312 57,040
Allowances for depreciation (134,000,746) (131,470,902)
------------- ------------
25,511,558 27,688,434
============= ============
Total assets $ 51,662,253 $ 52,082,532
============= ============
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
December 31
---------------------------------
1995 1994
------------ -------------
<S> <C> <C>
LIABILITIES AND PARTNERS' CAPITAL DEFICIT
Current liabilities:
Accounts payable $ 3,832,976 $ 3,204,488
Interest payable (Note 3) 290,740 342,522
Taxes payable 1,704,799 1,642,124
Other accrued liabilities 1,241,512 905,467
Current portion of long-term debt (Note 3) 3,268,249 12,795,098
------------ ------------
Total current liabilities 10,338,276 18,889,699
Deferred management fees payable to general
partner (Note 6) -- 1,100,188
Long-term debt, less current portion (Note 3) 66,574,072 68,996,610
Partners' capital (deficit) (Note 5):
General partner (4,107,859) (5,273,246)
Limited partners (21,619,189) (32,107,672)
Special limited partner 5,000,000 5,000,000
Syndication costs (4,523,047) (4,523,047)
------------ ------------
Total partners' capital deficit (25,250,095) (36,903,965)
============ ============
Total liabilities and partners' capital deficit $ 51,662,253 $ 52,082,532
============ ============
</TABLE>
See accompanying notes.
22
<PAGE>
New Energy Company of Indiana Limited Partnership
Statements of Operations
<TABLE>
<CAPTION>
Years ended December 31
--------------------------------------------------
1995 1994 1993
------------ ------------ -------------
<S> <C> <C> <C>
Net sales, ethanol $103,227,074 $ 96,111,285 $ 86,994,722
By-product revenue 30,859,962 31,818,002 28,543,669
------------ ------------ ------------
134,087,036 127,929,287 115,538,391
Cost of goods sold 111,006,086 118,291,931 102,057,738
------------ ------------ ------------
23,080,950 9,637,356 13,480,653
Selling, general and administrative
expenses 7,703,227 7,736,138 7,724,135
------------ ------------ ------------
15,377,723 1,901,218 5,756,518
Other income (expense):
Interest income 591,931 313,159 328,423
Interest expense (4,318,679) (4,757,339) (5,450,408)
Other income (expense) 2,895 (6,624) (5,481)
------------ ------------ ------------
Net income (loss) $ 11,653,870 $ (2,549,586) $ 629,052
============ ============ ============
Net income (loss) allocable to limited
partners $ 10,488,483 $ (2,294,627) $ 566,147
============ ============ ============
Limited partner units outstanding 6,400 6,400 6,400
============ ============ ============
Net income (loss) per unit $ 1,639 $ (359) $ 88
============ ============ ============
</TABLE>
See accompanying notes.
23
<PAGE>
New Energy Company of Indiana Limited Partnership
Statements of Partners' Capital Deficit
<TABLE>
<CAPTION>
Special
General Limited Limited
Partner Partners Partner
----------- ------------ -----------
<S> <C> <C> <C>
Capital (deficit) at January 1, 1993 $(5,081,192) $(30,402,351) $5,000,000
Net income - 1993 62,905 566,147 --
Contributions -- 22,465 --
----------- ------------ -----------
Capital (deficit) at December 31, 1993 (5,018,287) (29,813,739) 5,000,000
Net loss - 1994 (254,959) (2,294,627) --
Contributions -- 694 --
----------- ------------ -----------
Capital (deficit) at December 31, 1994 (5,273,246) (32,107,672) 5,000,000
Net income - 1995 1,165,387 10,488,483 --
----------- ------------ -----------
Capital (deficit) at December 31, 1995 $(4,107,859) $(21,619,189) $5,000,000
=========== ============ ===========
</TABLE>
See accompanying notes.
24
<PAGE>
New Energy Company of Indiana Limited Partnership
Statements of Cash Flows
<TABLE>
<CAPTION>
Years ended December 31
-----------------------------------------------
1995 1994 1993
----------- ----------- ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $11,653,870 $(2,549,586) $ 629,052
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 2,550,148 10,733,075 13,623,045
Decrease in deferred management fees
payable to general partner (1,100,188) (119,172) (1,381,224)
Increase (decrease) in accrued interest on general
partner loan (380,277) 540,550 540,550
Net loss (gain) on disposition of property and
equipment (2,895) 6,624 5,481
Increase (decrease) due to changes in operating
assets and liabilities:
Accounts and other receivables 571,680 (3,639,768) 2,371,137
Inventories 217,591 1,291,221 227,995
Spare parts 6,568 26,483 (67,030)
Prepaid expenses and other 28,432 76,000 616,667
Accounts payable 628,488 619,010 71,314
Management fees payable to general partner -- -- (251,830)
Interest payable (51,782) 74,046 (14,431)
Taxes payable 62,675 17,907 (3,170)
Other accrued liabilities 336,045 250,085 (126,192)
----------- ----------- ------------
Net cash provided by operating activities 14,520,355 7,326,475 16,241,364
INVESTING ACTIVITIES
Purchase of property and equipment (373,272) (173,629) (312,210)
Proceeds from sale of property and equipment 2,895 -- --
----------- ----------- ------------
Net cash used in investing activities (370,377) (173,629) (312,210)
FINANCING ACTIVITIES
Payments on long-term debt (11,569,110) (8,410,772) (13,542,601)
Capital contributions from limited partners -- 694 22,465
----------- ----------- ------------
Net cash used in financing activities (11,569,110) (8,410,078) (13,520,136)
----------- ----------- ------------
Increase (decrease) in cash and cash equivalents 2,580,868 (1,257,232) 2,409,018
Cash and cash equivalents, beginning of year 8,879,804 10,137,036 7,728,018
----------- ----------- ------------
Cash and cash equivalents, end of year $11,460,672 $ 8,879,804 $10,137,036
=========== =========== ============
</TABLE>
See accompanying notes.
25
<PAGE>
New Energy Company of Indiana Limited Partnership
Notes to Financial Statements
December 31, 1995
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND OPERATIONS
New Energy Company of Indiana Limited Partnership (the "Company"), the General
Partner of which is New Energy Corporation of Indiana (the "General Partner"),
operates an ethanol production facility in South Bend, Indiana. The Company
sells ethanol to petroleum refiners, blenders and retailers on unsecured terms.
Customers, each accounting for 10% or more of sales, totaled 59%, 24% and 66% of
total ethanol sales in 1995, 1994 and 1993, respectively. The Company also sells
distillers' dried grains and solubles ("DDGS") and carbon dioxide, both
by-products, on unsecured terms. The Company sold approximately 9%, 17% and 20%
of its DDGS to a worldwide exporter for sales overseas in 1995, 1994 and 1993,
respectively. In 1995, 1994 and 1993 another customer also accounted for 22%,
27% and 32%, respectively, of its DDGS sales. Carbon dioxide sales are made to
one customer on contract which extends to the year 1999.
To a large extent, the Company's operations are dependent upon market factors
which are outside the Company's control. The Company's cost of production is
largely dependent upon the cost of corn, its principal raw material. In
addition, the Company's revenues are principally generated from the sale of
ethanol, the price of which can vary at times with the price of gasoline and the
value of state and federal tax exemptions and credits; and from the sale of
DDGS, the price of which fluctuates with the agricultural by-product market.
Because the Company is unable to directly control the relationship of the corn,
gasoline and agricultural by-product markets, and is unable to assure the
continuation of state and federal tax exemptions and credits, changes in market
conditions could adversely affect the future operations of the Company.
The Company has two programs which, management believes, serve to reduce the
risk associated with the purchase of corn and sale of ethanol and its
by-products. First, the company enters into long-term contracts with major
gasoline refiners to sell a significant portion of its ethanol production.
Second, the Company has executed a contract which allows it to flat price a
significant portion of its 1996 corn requirements on a rolling basis at a price
which is fixed based upon the futures market price for corn. During the first
nine months of 1996, the Company anticipates a significant increase in corn
prices due primarily to a significantly smaller corn crop in 1995 than in 1994
and an increase in worldwide demand for corn. Through February 13, 1996, corn
prices, as reflected by the Chicago Board of Trade Commodities Futures Market,
have increased on average approximately 50% over the same period in 1995.
26
<PAGE>
New Energy Company of Indiana Limited Partnership
Notes to Financial Statements (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STATEMENTS OF CASH FLOWS
For purposes of the statement of cash flows, the Company considers all highly
liquid investments with a maturity of one year or less when purchased to be cash
equivalents.
FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheet for financial instrument
assets approximate those assets' fair value. Payment of long-term liabilities
are generally dependent upon the Company's ability to achieve cash flow.
Management believes that estimating the fair value of these long-term
liabilities is either not appropriate or, because of excess costs, considers
estimation of fair value to otherwise be impracticable.
INVENTORIES
Inventories consist of raw materials (corn, coal and chemicals), work in process
and finished goods (ethanol and DDGS). Coal and chemical inventories are stated
at the lower of average cost or market. Corn and ethanol inventories are stated
at the lower of cost (FIFO) or market. DDGS, a by-product, is stated at net
realizable value.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is provided over the
estimated useful lives of the assets using the straight-line method.
PENSION PLANS
The Company has a defined benefit pension plan covering substantially all
full-time employees. The Company's policy is to fund amounts as are necessary on
an actuarial basis to provide sufficient funds to meet benefits to be paid to
plan members.
FEDERAL INCOME TAXES
No provision is made for federal income taxes or related credits since the
results of operations are included in the tax returns of the partners.
27
<PAGE>
New Energy Company of Indiana Limited Partnership
Notes to Financial Statements (continued)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the FASB issued Statement No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount.
Statement 121 also addresses the accounting for long-lived assets that are
expected to be disposed of. The Company will adopt Statement 121 in the first
quarter of 1996 and, based on current circumstances, does not believe the effect
of adoption will be material.
2. INVENTORIES
The major components of inventories at December 31 are as follows:
1995 1994
---------- ----------
Raw materials $2,162,478 $2,251,812
Work in process 559,451 434,505
Finished goods 1,513,756 1,766,959
---------- ----------
$4,235,685 $4,453,276
========== ==========
The Company has executed a contract with a grain supplier to provide its
expected corn requirements at a price which may fluctuate with the commodity
prices or be fixed at the Company's election. In connection with the contract,
the Company has purchased an irrevocable standby letter of credit for
$2,000,000, secured by cash and cash equivalents, which expires December 26,
1996, for the benefit of the grain supplier. As of February 13, 1996, the
Company has fixed the price for all corn purchases through approximately March
1996.
28
<PAGE>
New Energy Company of Indiana Limited Partnership
Notes to Financial Statements (continued)
3. LONG-TERM DEBT
Long-term debt consists of the following as of December 31:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Department of Energy note payable ("Note A"),
$631,533 including interest at 6.75%, due
monthly with remaining balance due
March 31, 2002 $40,251,665 $44,939,521
Department of Energy note payable ("Note B"),
monthly payments based on cash flow with
remaining balance due March 31, 2002;
interest at 4% 18,865,699 25,553,133
South Bend Development Corporation notes payable,
$69,877 including interest at 8%, due quarterly
through October, 1999 948,768 1,142,587
New Energy Corporation of Indiana loan, no stated
payment terms, interest at 8.5% 9,776,189 10,156,467
----------- -----------
69,842,321 81,791,708
Less current portion 3,268,249 12,795,098
----------- -----------
$66,574,072 $68,996,610
=========== ===========
</TABLE>
Substantially all the assets of the Company are collateralized.
On December 23, 1991, the Department of Energy ("DOE") promissory note was
restructured by the execution of an Amended and Restated Loan Restructuring
Agreement ("Restructuring Agreement") and two new promissory notes, Note A and
Note B. Payments of Note B are based upon monthly cash flow as defined by the
Restructuring Agreement. On March 25, 1996, the Company and DOE entered into an
agreement ("DOE Letter Agreement") which allows the Company to suspend payment
of all Note A principal and interest payments during the period January 1, 1996,
through September 30, 1996. Under the terms of the DOE Letter Agreement nine
principal and interest payments totaling $5,683,797 will be suspended on Note A.
Suspended payments will be added monthly to the outstanding principal balance of
Note B and will accrue interest at the Note B interest rate of 4% per annum.
Note B payments will continue to be calculated and paid on a cash flow basis as
defined in the DOE Letter Agreement.
29
<PAGE>
New Energy Company of Indiana Limited Partnership
Notes to Financial Statements (continued)
3. LONG-TERM DEBT (CONTINUED)
Based upon present facts and circumstances it has been estimated that the
Company may make principal payments of approximately $1,538,507 during 1996,
under the terms of Note B, which has been included in the current portion of
long-term debt. However, as discussed in Note 1, the Company is subject to
various market factors which are outside of its control. The ultimate amount
paid during 1996, will depend upon the status of market conditions on a monthly
basis. In addition, the Restructuring Agreement requires the Company to maintain
cash balances of $3,300,000 for working capital and capital expenditures.
On March 27, 1996, the Company and the South Bend Development Corporation
("SBDC") entered into an agreement ("SBDC Letter Agreement") which allows the
Company to suspend payment of all principal and interest payments due to SBDC
during the period January 1, 1996, through September 30, 1996. Payments are due
SBDC on each of February 1, 1996, May 1, 1996, August 1, 1996 and November 1,
1996. Under the terms of the SBDC Letter Agreement three payments totaling
$209,631 will be suspended. Suspended payments will be evidenced by the
execution of a new note that will accrue interest at a rate of 6% per annum and
be payable in 38 equal monthly payments of $6,194 beginning October 1, 1996.
The New Energy Corporation of Indiana Loan represents certain cash payments made
by the General Partner on behalf of the Company in fulfillment of its
obligations under various financing agreements. This amount includes the balance
of cash payments totaling $6,359,415 plus accrued interest of $3,416,775. The
New Energy Corporation of Indiana Loan is subordinated to the DOE notes and, as
required by the Restructuring Agreement, payment of this loan and the related
accrued interest are restricted to cash flow, as defined, until all DOE notes
are paid. Under the terms of the DOE Letter Agreement, the General
Partner has agreed to further limit permitted distributions to $50,000 per month
during the term of the agreement. In 1995, the Company paid $918,000 from cash
flow.
Scheduled maturities of long-term debt for the next five years (including the
effects of the DOE and SBDC Letter Agreements above), excluding Note B and the
New Energy Corporation of Indiana Loan and related accrued interest, are:
1996--$1,729,742; 1997--$5,621,469, 1998--$5,988,453; 1999--$6,562,427,
2000--$6,566,082.
Interest of $4,750,394, $4,142,262 and $4,820,634, was paid in 1995, 1994 and
1993, respectively.
30
<PAGE>
New Energy Company of Indiana Limited Partnership
Notes to Financial Statements (continued)
4. EMPLOYEE BENEFIT PLANS
Under the terms of the defined benefit pension plan, benefits are based upon
years of service and the highest five years of compensation during the
participants' last ten years of employment. The Company also maintains a savings
plan for which matching contributions are provided. A summary of the components
of net pension cost for the pension plan and contributions charged to pension
expense for the savings plan for the years ended December 31 follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Pension Plan:
Service cost-benefits earned during
the year $260,187 $246,673 $185,278
Interest cost on projected benefit
obligation 166,816 143,385 107,879
Actual return on plan assets (214,834) (19,920) (73,539)
Net amortization and deferral 113,588 (62,907) 11,039
-------- -------- --------
Net pension cost 325,757 307,231 230,657
Savings plan 86,821 86,467 88,375
-------- -------- --------
$412,578 $393,698 $319,032
======== ======== ========
</TABLE>
31
<PAGE>
New Energy Company of Indiana Limited Partnership
Notes to Financial Statements (continued)
4. EMPLOYEE BENEFIT PLANS (CONTINUED)
The following table sets forth the funded status and amounts recognized in
the balance sheets at December 31 for the defined benefit plan:
1995 1994
----- ----
Actuarial present value of accumulated
benefit obligation, including vested
benefits of $1,266,457 and $1,033,606,
respectively $(1,343,800) $(1,109,008)
=========== ===========
Actuarial present value of projected
benefit obligation for services
rendered to date $(2,648,014) $(2,298,658)
Plan assets at fair value 1,761,461 1,348,075
----------- -----------
Projected benefit obligation in
excess of plan assets (886,553) (950,583)
Unrecognized net gain from past
experience and effects of changes
in assumptions 207,651 369,758
Unrecognized transition obligation 94,393 107,877
Unrecognized prior service cost 64,234 68,822
----------- -----------
Accrued pension costs $ (520,275) $ (404,126)
=========== ===========
The weighted average discount rate used in determining the actuarial present
value of the projected benefit obligations was 7.5%. The rate of increase in
future compensation levels used was 5.5%. The expected long-term rate of return
on plan assets was 8.5%. Plan assets are invested primarily in listed debt and
equity securities.
5. PARTNERSHIP INTERESTS
The Amended and Restated Limited Partnership Agreement dated October 26, 1982,
provides that allocations of income, gains, losses, deductions and credits, and
distributions to the partners shall be based on the following percentages:
32
<PAGE>
New Energy Company of Indiana Limited Partnership
Notes to Financial Statements (continued)
5. PARTNERSHIP INTERESTS (CONTINUED)
Limited General
Partners Partner
-------- --------
For all periods prior to the Conversion Date 90% 10%
For all periods after the Conversion Date 60% 40%
The "Conversion Date" will take place after the distribution of tax credits,
income, gains, losses, deductions, and distributions to the Limited Partners
reach certain levels as defined in the Amended and Restated Limited Partnership
Agreement.
Commencing October, 1989, the Special Limited Partner was eligible to receive
allocations of income, losses or distributions from the Company. The Special
Limited Partner is entitled to receive over a period of the next ten years out
of distributions made by the Partnership, equal annual installments, in
preference to distributions to other partners, a return of its capital plus a
rate of return thereon equal to 8% per year compounded annually. With the
exception of certain permitted distributions from cash flow, as defined, no
distributions can be made until the DOE notes payable are repaid and,
accordingly, no amounts have been distributed to date.
6. RELATED PARTY TRANSACTIONS
In accordance with the terms of the Amended and Restated Limited Partnership
Agreement dated October 26, 1982, the General Partner is entitled to an annual
management fee of $850,000 plus annual increases based on the Consumer Price
Index. Total management fees accrued were $1,296,531, $1,261,656 and $1,227,552
for 1995, 1994 and 1993, respectively. In connection with the Restructuring
Agreement, the General Partner has agreed to defer payment of 50% of the
management fee, except for certain permitted distributions from cash flow, as
defined, until such time as the DOE notes are paid in full. Under the terms of
the DOE Letter Agreement, the General Partner has agreed to further limit
permitted distributions to $50,000 per month during the term of the agreement.
33
<PAGE>
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
The Company has no officers or directors. The General Partner of the Company,
New Energy Corporation of Indiana, is the founder of the Company, and as General
Partner, manages and controls the Company's affairs and has general
responsibility in all matters affecting its business.
The Bylaws of the General Partner presently provide for the election by the
shareholders of the General Partner of up to four directors, each to serve an
approximate one-year term from the time of election at the annual meeting of
shareholders until the next annual meeting. The Board presently consists of four
members. The executive officers of the General Partner are elected approximately
annually by the Board of Directors of the General Partner. The current directors
and executive officers of the General Partner are as follows:
Name Age Title Principal Occupation
- ---- --- ----- --------------------
Anthony R. Corso 34 Director Executive Vice President,
Chief Operating Officer &
Chief Financial Officer
General Partner
John H. Parker 48 Director Chief Executive Officer &
President
General Partner
Alberto Shaio 46 Director Senior Vice President
Farrel Corporation
Victor Shaio 78 Chairman Chairman
General Partner
Anthony R. Corso is Executive Vice President, Chief Operating Officer & Chief
Financial Officer of the General Partner. Prior to his employment with the
General Partner in April 1994, Mr. Corso was a Vice President of Lehman
Brothers, an investment banking firm located in New York. Before joining Lehman
Brothers Mr. Corso held positions in the Corporate Audit Departments of Shearson
Lehman Brothers
34
<PAGE>
and E.F. Hutton & Co. Inc. Mr. Corso holds a Masters Degree in Business
Administration from New York University's Stern School of Business and a
Bachelor of Science Degree in Business Administration from Mercy College.
John H. Parker is the Chief Executive Officer and President of the General
Partner. Mr. Parker has been a director of the General Partner since 1989 and
was a vice-president of the General Partner from 1991 to 199_. Prior to his
employment with the General Partner in April 1994, Mr. Parker was a Managing
Director of Lehman Brothers an investment banking firm located in New York.
Prior to July 1993, he served as Executive Vice President of Shearson Lehman
Brothers ("SLB"). From November 1987 to November 1990, he was a Senior Vice
President of SLB and he has been a Vice President of Shearson Leasing
Corporation and other leasing affiliates since July 1984. From 1978 through
1984, Mr. Parker served as Vice President and General Counsel of CTI - Container
Transport International, Inc. ("CTI"), which at the time was a wholly-owned
subsidiary of Gelco Corporation. Prior to his employment with CTI, Mr. Parker
was an Associate Attorney with the firm of Bigham, Englar, Jones & Houston, New
York, N.Y. Mr. Parker is admitted to practice law before the courts of the State
of New York, the United States District Court for the Southern District of New
York, the United States Court of Appeals for the Second Circuit and the United
States Supreme Court.
Alberto Shaio has been a director of the General Partner since June 1985. Since
July 1986, he has served as Senior Vice President of Sales and Marketing for
Farrel Corporation. Prior to that time he served as President and Vice President
of Interamerican Investment Group, Inc. Alberto Shaio is the son of Victor
Shaio.
Victor Shaio, Chairman of the Board of Directors, has been a director of the
General Partner since its formation and has served in various capacities for the
General Partner including President and Chief Executive Officer. Mr. Shaio has,
during the past 30 years, been engaged in the design, engineering, construction,
start-up, operation and ownership of industrial facilities, including facilities
for the manufacture of chemicals, textiles, polyvinyl chloride and products
related thereto and floor tile. Mr. Shaio also serves as the Chairman of the
Board of Directors of Interamerican Investment Group, Inc., an investment
company wholly-owned by Mr. Shaio and his family. Victor Shaio is the father of
Alberto Shaio.
ITEM 11. EXECUTIVE COMPENSATION
No compensation was paid by the Company to the officers and directors of the
General Partner. See Item 13 below "Certain Relationships and Related
Transactions" for a description of remuneration paid to the General Partner and
its affiliates.
35
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
OWNERSHIP OF COMMON STOCK IN GENERAL PARTNER
As of March 26, 1996, the following table sets forth information concerning the
beneficial ownership of the 41,351 outstanding shares of the General Partner's
common stock, no par value (the "Common Stock"), by (i) all persons who own more
than 5% of the Common Stock, (ii) each director of the General Partner who owns
any such shares, and (iii) all officers and directors of the General Partner as
a group:
Shares Beneficially Percent of Class
Name and Address Owned Beneficially Owned
---------------- ------------------- ------------------
Chiquita Brand International 11,745 28.4%
250 East 5th Street
Cincinnati, Ohio 45202
Interamerican Investment Group, Inc. 16,549 40.0%
20 Cedar Street, Suite 304
New Rochelle, N.Y. 10801
Ethanol Services, Inc. 10,338 25.0%
c/o Lehman Brothers, Inc.
3 World Financial Center
New York, N.Y. 10285
All executive Officers and directors 16,549 40.0%
as a group
OWNERSHIP OF LIMITED PARTNERSHIP INTERESTS
Special Limited Partnership Interest. As of March 26, 1996, South Bend
Development Corporation, an Indiana non-profit local development corporation,
owned 100% of the Special Limited Partnership Interest.
Limited Partnership Units. As of March 26, 1996, no person (including any
"group" as that term is defined in Section 13(d)(3) of the Securities Exchange
Act of 1934) is known to the Company to be the beneficial owner of more than
five percent of the outstanding Limited Partnership Units.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to a management agreement between the Company and the General Partner,
the General Partner is entitled to receive an annual operating management fee of
$850,000, payable on a monthly basis and subject to annual adjustments based on
36
<PAGE>
changes in the Consumer Price Index. In 1987, under the terms of the Company's
Restructuring Agreement, the General Partner agreed to defer 50% of its
management fee, except for certain permitted distributions from Cash Flow, as
defined therein, until such time as the DOE notes are paid in full. For the year
ended December 31, 1995, the Company paid management fees to the General Partner
totaling $2,396,719, which amount was comprised of $648,266 in current
management fees and $1,748,453 of deferred management fees. As of December 31,
1995, no deferred management fees were owed to the General Partner. Under the
terms of the March 28, 1996 debt service assistance agreement with DOE (see item
7 "Management's Discussion and Analysis of Financial Condition" on page 14 of
this Report for a description of the agreement), the General Partner has agreed
to further limit permitted distributions to $50,000 per month during the term of
the agreement.
In 1995, the Company paid the General Partner $918,000 of accrued interest on
the New Energy Corporation of Indiana Loan. The New Energy Corporation of
Indiana Loan represents certain cash payments made by the General Partner on
behalf of the Company in fulfillment of its obligations under various financing
agreements. As of December 31, 1995, $9,776,190 was owed by the Company to the
General Partner. This amount includes principal of $6,359,415 plus accrued
interest of $3,416,775. The New Energy Corporation of Indiana Loan is
subordinated to the DOE notes and, as required by the Restructuring Agreement,
payment of this loan and the related accrued interest are restricted to cash
flow, as defined, until all DOE notes are paid. Under the terms of the debt
service assistance agreement with DOE, the General Partner has agreed to further
limit permitted distributions to $50,000 per month during the term of the
agreement.
Article 7 of the amended and restated limited partnership agreement provides, in
general, for the following allocations of income, gains, losses, deductions and
credits among the Limited Partners and the General Partner (collectively, the
"Partners").
Limited General
Partners Partner
-------- -------
90% 10% ........ For all periods prior to the Conversion Date
60% 40% ........ For all periods after the Conversion Date
The "Conversion Date" is the last day of that calendar month on which the sum of
(i) the federal income tax credits allocated or allocable to the Limited
Partners with respect to the property placed in service by the Company on or
prior to that date, (ii) the cash distributions by the Company to the Limited
Partners on or prior to that date, and (iii) 50% of the taxable losses of the
Company allocated to the Limited Partners with respect to calendar months of the
Company ending on or prior to that date (excluding any losses which may not be
deducted by Limited Partners by reason of
37
<PAGE>
their having insufficient basis in their Limited Partnership Units within the
meaning of Section 704(d) of the Internal Revenue Code of 1986, as amended (the
"Code") or an insufficient amount "at risk" within the meaning of Section 465 of
the Code), first equals or is greater than the sum of (x) 150% of the aggregate
capital contributions to the Company of the Limited Partners, (y) 50% of the
taxable income and gains of the Company allocated to the Limited Partners with
respect to calendar months of the Company ending on or prior to that date (net
of any losses not included in clause (iii) above by reason of the parenthetical
phrase therein), and (z) any payments made by Limited Partners pursuant to
Assumption Agreements by which each Limited Partner agreed to assume $2,500 of
the principal amount of the loan to be incurred by the Company for each Limited
Partnership Unit purchased by such Limited Partner; provided, however, that the
Conversion Date shall not occur prior to the day after the Plant is placed in
service or, if later, the date when at least $1,000,000 in cash distributions
resulting from operations of the Company have been made to the Partners or,
under certain circumstances, have been placed in a segregated reserve for the
distribution after the Recapture Period, as such term is defined in the
Partnership Agreement of the Company (generally comprising the period ending on
the fifth anniversary of the date on which the Plant was placed in service). For
purposes of determining the Conversion Date, income, gain, losses and deductions
shall be computed as provided in Article 7 of the Amended and Restated Limited
Partnership Agreement of the Company and shall also include income, gain, losses
and deductions recognized for federal income tax purposes by Limited Partners by
reason of Section 465(e) or Section 731 of the Code.
Any gain realized by the Company from a taxable disposition of the Plant or any
other asset of the Company will be allocated generally so as to restore any
negative capital account balances of any Partners to zero and then in the
following manner:
(a) if such disposition occurs prior to the Conversion Date, to the
Partners in the proportions applicable prior to the Conversion Date in the
amount that will increase the capital account balances of the Limited
Partners to 90% of an amount (the "Conversion Amount") which, if
distributed on the date of disposition, would cause Conversion to occur;
(b) next, to the General Partner in an amount that will cause the capital
account of the General Partner (after reduction by 10% of the Conversion
Amount) to be increased to an amount equal to 40% of the difference between
(i) the then sum of the balances of the capital accounts of all Partners
and (ii) the Conversion Amount; and
(c) finally, to the Partners in proportion to their interests in profits
and losses after the Conversion Date.
38
<PAGE>
Losses realized by the Company from the taxable disposition of the Plant or any
other asset of the Company will be allocated in the same manner as losses from
operations of the Company.
The General Partner will determine periodically, in its discretion, and subject
to restrictions contained in loan agreements and restrictions imposed by the
federal income tax laws and regulations relating to the recapture of income tax
credits, the amount of cash, if any, that may be distributed to Partners, as
well as the timing of any such distributions. Distributions made before the
Conversion Date will be allocated 90% to the Limited Partners and 10% to the
General Partner. Distributions made after the Conversion Date will be allocated
60% to the Limited Partners and 40% to the General Partner. Each Limited
Partner's share of distributions will be in the ratio that his capital
contribution bears to the aggregate contributions of all Limited Partners.
In the event of liquidation of the Company, cash distributions (after repayment
of any loans to the Company) will be made in proportion to the capital accounts
of all Partners, after such capital accounts have been adjusted for allocations
of profit and loss. Any gain from the sale of the Plant will generally be
allocated initially to the General Partners, after such capital accounts have
been adjusted for allocations of profit and loss. Any gain from the sale of the
Plant will generally be allocated initially to the General Partner to the extent
necessary to increase the capital account of the General Partner to 40% of the
total capital accounts. Thus, if such gain is adequate, the General Partner will
be assured of receiving 40% of the assets in liquidation. The General Partner is
obligated to make additional contributions to the Partnership during winding up
in the amount equal to the lesser of (i) the amount necessary to permit
distributions to be made to Limited Partners that will reduce their capital
account balances to zero or (ii) the amount necessary to raise the General
Partner's capital account balance to zero.
39
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements and Financial Statement Schedules - See Index to
Financial Statements on page 18.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during
fiscal 1995.
(c) Exhibits
4.1 Restated and Amended Limited Partnership Agreement of the Company dated
October 26, 1982 (filed as Exhibit 12 to the Form 8-K amending the
Company's quarterly report on Form 10-Q for the nine months ended
September 30, 1982, and incorporated herein by reference).
4.2 Form of Assumption Agreement (filed as Exhibit B-3 to the Prospectus
dated April 28, 1982, contained in the Company's Registration
Statement on Form S-1, No. 2-74254, and incorporated herein by
reference).
9.1 Voting Trust Agreement, dated September 14, 1981, between United
Brands Company and Interamerican Investment Group, Inc. (filed as
Exhibit 10(o) to the Company's Registration Statement on Form S-1,
No. 2-74525, and incorporated herein by reference).
10.1 Credit Agreement, dated as of October 26, 1982, among the Company, the
First National Bank of Chicago, in its individual capacity and as agent
(the "Agent"), 1st Source Bank, in its individual capacity and as
collateral trustee (the "Collateral Trustee"), and the banks listed on
the signature pages thereof (the "Banks) (filed as Exhibit 2 to the
Company's quarterly report on Form 10-Q for the nine months ended
September 30, 1982, and incorporated herein by reference).
10.2 Guarantee Agreement, dated as of October 26, 1982, among the Company,
the United States of America, acting by and through the Secretary of
Energy (the "Secretary"), the Agent, and 1st Source Bank, as Collateral
Trustee and Servicer for the Secretary (filed as Exhibit 17 to Form 8-K
amending the Company's quarterly report on Form 10-Q for the nine
months ended September 30, 1982, and incorporated herein by reference).
40
<PAGE>
10.3 Security and Collateral Application Agreement, dated as of October 26,
1982, among the Company, the General Partner, the Agent, the Collateral
Trustee and the Secretary (filed as Exhibit 4 to the Company's
quarterly report on Form 10-Q for the nine months ended September 30,
1982, and incorporated herein by reference).
10.4 General Partner Agreement, dated as of October 26, 1982, among the
General Partner, the Agent, the Collateral Trustee and the Secretary
(filed as Exhibit 5 to the Company's quarterly report on Form 10-Q for
the nine months ended September 30, 1982, and incorporated herein by
reference).
10.5 Cash Pledge Escrow Agreement dated as of October 26, 1982, among the
Company, the General Partner, the Collateral Trustee and the Agent
(filed as Exhibit 6 to the Company's Quarterly report on Form 10-Q for
the nine months ended September 30, 1982, and incorporated herein by
reference).
10.6 Loan Agreement, dated October 14, 1982, between the Company and South
Bend Development Corporation (filed as Exhibit 8-K to the Company's
quarterly report on Form 10-Q for the nine months ended September 30,
1982, and incorporated herein by reference).
10.7 Subordinated Security Agreement, dated as of October 26, 1982,
between the Company and South Bend Development Corporation (filed as
Exhibit 10 to the Company's quarterly report on Form 10-Q for the nine
months ended September 30, 1982, and incorporated herein by reference).
10.8 Subordinated Real Estate Mortgage, dated as of October 26, 1982,
between the Company and South Bend Development Corporation (filed as
Exhibit 11 to the Company's quarterly report on Form 10-Q for the nine
months ended September 30, 1982, and incorporated herein by reference).
10.9 Mortgage, dated as of October 26, 1982, between the Company and 1st
Source Bank (filed as Exhibit 13 to Form 8-K amending the Company's
quarterly report on Form 10-Q for the nine months ended September 30,
1982, and incorporated herein by reference).
10.10 Promissory Note, dated October 26, 1982, in the principal amount of
$1,769,057 executed by the Company and payable to the United States
Department of Energy (filed as Exhibit 14 to Form 8-K amending the
Company's quarterly report on Form 10-Q for the nine months ended
September 30, 1982, and incorporated herein by reference).
41
<PAGE>
10.11 First Amended Agreement for Engineering, Procurement and Construction
Services, dated June 11, 1982, between the General Partner and Davy
McKee Corporation, as amended by letter agreements dated September 21,
1982 and October 26, 1982 (filed as Exhibit 16 to Form 8-K amending the
Company's quarterly report on Form 10-Q for the nine months ended
September 30, 1982, and incorporated herein by reference).
10.12 Agreement for Sale of Carbon Dioxide, dated February 4, 1983,
between the General Partner and Airco Industrial Gases, a Division
of Airco, Inc. (filed under Confidential Treatment as Exhibit
10.16 to the Company's annual report on Form 10-K for the year ended
December 31, 1982, and incorporated herein by reference).
10.13 Letter agreement dated August 17, 1982, between the General
Partner and Ethanol Services, Inc. (filed as Exhibit 10(cc) to
the Company's Registration Statement on Form S-1, No. 2-74254, and
incorporated herein by reference).
10.14 Promissory Note, dated October 24, 1984, in the principal amount of
$2,272,903.31, executed by the Company and payable to Business
Development Corporation of South Bend (filed as Exhibit 10.17 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1985, and incorporated herein by reference).
10.15 Promissory Note, dated October 24, 1985, in the principal amount of
$159,360.95, executed by the Company and payable to Business
Development Corporation of South Bend (filed as Exhibit 10.18 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1985, and incorporated herein by reference).
10.16 Principal Assistance Agreement dated as of November 25, 1986, by and
among the United States of America, acting by and through the Secretary
of Energy, the Company and the General Partner (filed as Exhibit 10.20
to the Company's Annual Report on Form 10-K for the year ended December
31, 1985, and incorporated herein by reference).
10.17 Loan Restructuring Agreement dated July 31, 1987, by and among the
United States of America, acting by and through the Secretary of
Energy, the Company and the General Partner (filed as Exhibit 19.1 to
the Company's Form 10-Q for the quarter ended September 30, 1987, and
incorporated herein by reference).
10.18 Loan Agreement dated July 20, 1987, by and between the Indiana Energy
Development Board and the Company (filed as Exhibit 19.2 to the
Company's Form 10-Q for the quarter ended September 30, 1987, and
incorporated herein by reference).
42
<PAGE>
10.19 Receivables and Inventory Loan and Security Agreement dated January 29,
1988, by and between First Interstate Commercial Corporation and the
Company (filed as Exhibit 10.19 to the Company's Form 10-K for the year
ended December 31, 1989, and incorporated herein by reference).
10.20 Agreement dated December 20, 1989, by and between the Indiana Energy
Development Board and the Company (filed as Exhibit 10.20 to the
Company's Form 10-K for the year ended December 31, 1989, and
incorporated herein by reference).
10.21 Amendment to Loan and Security Agreement dated January 29, 1990, by and
between First Interstate Commercial Corporation and the Company (filed
as Exhibit 10.21 to the Company's Form 10-K for the year ended December
31, 1989, and incorporated herein by reference).
10.22 Amended and Restated Loan Restructuring Agreement dated December 23,
1991, by and among the Company, the General Partner and the United
States of America, acting by and through the Secretary of Energy (filed
as Exhibit 10.22 to the Company's Form 10-K for the year ended December
31, 1991, and incorporated herein by reference).
10.23 Letter Agreement dated January 14, 1994, by and between Interamerican
Investments, Inc. and Ethanol Services, Inc.(filed as Exhibit
10.23 to the Company's Form 10-K for the year ended December 31, 1994,
and incorporated herein by reference).
10.24 Agreement dated December 17, 1993, by and between the Company and
Countrymark Cooperative, Inc.(filed as Exhibit 10.24 to the Company's
Form 10-K for the year ended December 31, 1993, and incorporated herein
by reference).
10.25 Agreement dated January 16, 1996, by and between the Company and Frick
Services, Inc. referenced in Part I, Item I, "Raw Materials",
page 4 of the Company's Form 10-K for the year ended December 31, 1995.
10.26 DOE Letter Agreement dated March 25, 1996, by and among the Company,
the General Partner and the United States of America, acting by and
through the Secretary of Energy, referenced in Part II, Item 7
"Liquidity and Capital Resources", page 14 of the Company's Form
10-K for the year ended December 31, 1995.
43
<PAGE>
10.27 SBDC Letter Agreement dated March 27, 1996, by and among the
Company, the General Partner and the South Bend Development
Corporation, referenced in Part II, Item 7 "Liquidity and Capital
Resources", page 15 of the Company's Form 10-K for the year ended
December 31, 1995.
10.28 Letter Agreement dated August 23, 1995, by and between Interamerican
Investments, Inc. and Ethanol Services, Inc.
27.1 Financial Data Schedule
44
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
NEW ENERGY COMPANY OF INDIANA
By: New Energy Corporation of Indiana,
General Partner
Dated: March 29, 1996 By: /s/ JOHN H. PARKER
------------------------------------
John H. Parker, Director,
Chief Executive Officer & President
Dated: March 29, 1996 By: /s/ ANTHONY R. CORSO
------------------------------------
Anthony R. Corso, Director, Executive
Vice President, Chief Operating Officer
& Chief Financial Officer
45
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the undersigned on behalf of the Company and in the
capacities and on the date indicated.
March 29, 1996 /s/ VICTOR SHAIO
--------------------------------------
Victor Shaio, Chairman of the Board
of the General Partner
March 29, 1996 /s/ JOHN H. PARKER
--------------------------------------
John H. Parker, Director, Chief
Executive Officer and President
of the General Partner
March 29, 1996 /s/ ANTHONY R. CORSO
--------------------------------------
Anthony R. Corso, Director, Executive
Vice President Chief Operating Officer
and Chief Financial Officer of
the General Partner
April 1, 1996 /s/ ALBERTO SHAIO
--------------------------------------
Alberto Shaio, Director
of the General Partner
46
<PAGE>
EXHIBIT INDEX
Exhibit
- -------
4.1 Restated and Amended Limited Partnership Agreement of the Company dated
October 26, 1982 (filed as Exhibit 12 to the Form 8-K amending the
Company's quarterly report on Form 10-Q for the nine months ended
September 30, 1982, and incorporated herein by reference).
4.2 Form of Assumption Agreement (filed as Exhibit B-3 to the Prospectus
dated April 28, 1982, contained in the Company's Registration
Statement on Form S-1, No. 2-74254, and incorporated herein by
reference).
9.1 Voting Trust Agreement, dated September 14, 1981, between United
Brands Company and Interamerican Investment Group, Inc. (filed as
Exhibit 10(o) to the Company's Registration Statement on Form S-1,
No. 2-74525, and incorporated herein by reference).
10.1 Credit Agreement, dated as of October 26, 1982, among the Company, the
First National Bank of Chicago, in its individual capacity and as agent
(the "Agent"), 1st Source Bank, in its individual capacity and as
collateral trustee (the "Collateral Trustee"), and the banks listed on
the signature pages thereof (the "Banks) (filed as Exhibit 2 to the
Company's quarterly report on Form 10-Q for the nine months ended
September 30, 1982, and incorporated herein by reference).
10.2 Guarantee Agreement, dated as of October 26, 1982, among the Company,
the United States of America, acting by and through the Secretary of
Energy (the "Secretary"), the Agent, and 1st Source Bank, as Collateral
Trustee and Servicer for the Secretary (filed as Exhibit 17 to Form 8-K
amending the Company's quarterly report on Form 10-Q for the nine
months ended September 30, 1982, and incorporated herein by reference).
<PAGE>
10.3 Security and Collateral Application Agreement, dated as of October 26,
1982, among the Company, the General Partner, the Agent, the Collateral
Trustee and the Secretary (filed as Exhibit 4 to the Company's
quarterly report on Form 10-Q for the nine months ended September 30,
1982, and incorporated herein by reference).
10.4 General Partner Agreement, dated as of October 26, 1982, among the
General Partner, the Agent, the Collateral Trustee and the Secretary
(filed as Exhibit 5 to the Company's quarterly report on Form 10-Q for
the nine months ended September 30, 1982, and incorporated herein by
reference).
10.5 Cash Pledge Escrow Agreement dated as of October 26, 1982, among the
Company, the General Partner, the Collateral Trustee and the Agent
(filed as Exhibit 6 to the Company's Quarterly report on Form 10-Q for
the nine months ended September 30, 1982, and incorporated herein by
reference).
10.6 Loan Agreement, dated October 14, 1982, between the Company and South
Bend Development Corporation (filed as Exhibit 8 to the Company's
quarterly report on Form 10-Q for the nine months ended September 30,
1982, and incorporated herein by reference).
10.7 Subordinated Security Agreement, dated as of October 26, 1982,
between the Company and South Bend Development Corporation (filed as
Exhibit 10 to the Company's quarterly report on Form 10-Q for the nine
months ended September 30, 1982, and incorporated herein by reference).
10.8 Subordinated Real Estate Mortgage, dated as of October 26, 1982,
between the Company and South Bend Development Corporation (filed as
Exhibit 11 to the Company's quarterly report on Form 10-Q for the nine
months ended September 30, 1982, and incorporated herein by reference).
10.9 Mortgage, dated as of October 26, 1982, between the Company and 1st
Source Bank (filed as Exhibit 13 to Form 8 amending the Company's
quarterly report on Form 10-Q for the nine months ended September 30,
1982, and incorporated herein by reference).
10.10 Promissory Note, dated October 26, 1982, in the principal amount of
$1,769,057 executed by the Company and payable to the United States
Department of Energy (filed as Exhibit 14 to Form 8-K amending the
Company's quarterly report on Form 10-Q for the nine months ended
September 30, 1982, and incorporated herein by reference).
<PAGE>
10.11 First Amended Agreement for Engineering, Procurement and Construction
Services, dated June 11, 1982, between the General Partner and Davy
McKee Corporation, as amended by letter agreements dated September 21,
1982 and October 26, 1982 (filed as Exhibit 16 to Form 8-K amending the
Company's quarterly report on Form 10-Q for the nine months ended
September 30, 1982, and incorporated herein by reference).
10.12 Agreement for Sale of Carbon Dioxide, dated February 4, 1983,
between the General Partner and Airco Industrial Gases, a Division
of Airco, Inc. (filed under Confidential Treatment as Exhibit
10.16 to the Company's annual report on Form 10-K for the year ended
December 31, 1982, and incorporated herein by reference).
10.13 Letter agreement dated August 17, 1982, between the General
Partner and Ethanol Services, Inc. (filed as Exhibit 10(cc) to
the Company's Registration Statement on Form S-1, No. 2-74254, and
incorporated herein by reference).
10.14 Promissory Note, dated October 24, 1984, in the principal amount of
$2,272,903.31, executed by the Company and payable to Business
Development Corporation of South Bend (filed as Exhibit 10.17 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1985, and incorporated herein by reference).
10.15 Promissory Note, dated October 24, 1985, in the principal amount of
$159,360.95, executed by the Company and payable to Business
Development Corporation of South Bend (filed as Exhibit 10.18 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1985, and incorporated herein by reference).
10.16 Principal Assistance Agreement dated as of November 25, 1986, by and
among the United States of America, acting by and through the Secretary
of Energy, the Company and the General Partner (filed as Exhibit 10.20
to the Company's Annual Report on Form 10-K for the year ended December
31, 1985, and incorporated herein by reference).
10.17 Loan Restructuring Agreement dated July 31, 1987, by and among the
United States of America, acting by and through the Secretary of
Energy, the Company and the General Partner (filed as Exhibit 19.1 to
the Company's Form 10-Q for the quarter ended September 30, 1987, and
incorporated herein by reference).
10.18 Loan Agreement dated July 20, 1987, by and between the Indiana Energy
Development Board and the Company (filed as Exhibit 19.2 to the
Company's Form 10-Q for the quarter ended September 30, 1987, and
incorporated herein by reference).
<PAGE>
10.19 Receivables and Inventory Loan and Security Agreement dated January 29,
1988, by and between First Interstate Commercial Corporation and the
Company (filed as Exhibit 10.19 to the Company's Form 10-K for the year
ended December 31, 1989, and incorporated herein by reference).
10.20 Agreement dated December 20, 1989, by and between the Indiana Energy
Development Board and the Company (filed as Exhibit 10.20 to the
Company's Form 10-K for the year ended December 31, 1989, and
incorporated herein by reference).
10.21 Amendment to Loan and Security Agreement dated January 29, 1990, by and
between First Interstate Commercial Corporation and the Company (filed
as Exhibit 10.21 to the Company's Form 10-K for the year ended December
31, 1989, and incorporated herein by reference).
10.22 Amended and Restated Loan Restructuring Agreement dated December 23,
1991, by and among the Company, the General Partner and the United
States of America, acting by and through the Secretary of Energy (filed
as Exhibit 10.22 to the Company's Form 10-K for the year ended December
31, 1991, and incorporated herein by reference).
10.23 Letter Agreement dated January 14, 1994, by and between Interamerican
Investments, Inc. and Ethanol Services, Inc.(filed as Exhibit
10.23 to the Company's Form 10-K for the year ended December 31, 1994,
and incorporated herein by reference).
10.24 Agreement dated December 17, 1993, by and between the Company and
Countrymark Cooperative, Inc.(filed as Exhibit 10.24 to the Company's
Form 10-K for the year ended December 31, 1993, and incorporated herein
by reference).
10.25 Agreement dated January 16, 1996, by and between the Company and Frick
Services, Inc. referenced in Part I, Item I, "Raw Materials",
page 4 of the Company's Form 10-K for the year ended December 31, 1995.
10.26 DOE Letter Agreement dated March 25, 1996, by and among the
Company, the General Partner and the United States of America,
acting by and through the Secretary of Energy, referenced in Part II,
Item 7 "Liquidity and Capital Resources", page 14 of the Company's Form
10-K for the year ended December 31, 1995.
<PAGE>
10.27 SBDC Letter Agreement dated March 27, 1996, by and among
the Company, the General Partner and the South Bend Development
Corporation, referenced in Part II, Item 7 "Liquidity and Capital
Resources", page 15 of the Company's Form 10-K for the year ended
December 31, 1995.
10.28 Letter Agreement dated August 23, 1995, by and between Interamerican
Investments, Inc. and Ethanol Services, Inc.
27.1 Financial Data Schedule
NEW ENERGY
This Agreement dated effective as of the 16th day of January, 1996, is
between New Energy Company of Indiana Limited Partnership ("Buyer") and Frick
Services, Inc. ("Seller"). Seller is in the business of selling corn
("Product"). Seller desires to sell to Buyer and Buyer desires to purchase from
Seller all of the Product required by Buyer in order to operate its ethanol
production facility located in South Bend, Indiana ("Plant") during the Term of
this Agreement.
In consideration of the mutual covenants herein contained and other good
and Valuable consideration, the receipt, adequacy and sufficiency of which are
acknowledged, Seller and Buyer agree as follows:
1. Term. The term of this Agreement shall commence on the effective date of
this Agreement and end on December 31, 1997 (the "Term") except as provided in
Section 2.B.
2. Price. The price for Product purchased shall be determined pursuant to
the terms of this section. Without the express written consent of Seller, Buyer
will not flat price more than _______ bushels of Product.
A. 1996 Calendar Year. Buyer, in accordance with the terms of this
agreement, shall purchase Product pursuant to Option A or Option B for the 1996
calendar year. Buyer shall select Option A or Option B at the time this
Agreement is executed by initialling next to the option selected.
<PAGE>
Price Option A:
BASIS PRICE DELIVERY PERIOD
----------- ---------------
January 1996
February 1996
March 1996
April 1996
May 1996
June 1996
July 1996
August 1996
September 1996
October 1996
November 1996
December 1996
The final price per bushel of Product purchased will be determined through
the following procedure the ("Pricing Procedure"):
A.1. From time to time, Buyer will provide Seller with telephonic
instructions to place an order for the purchase of a specified quantity or
quantities of Product at a specified price or prices at the Chicago Board of
Trade. Seller will immediately confirm the instruction in writing via facsimile.
A.2. Seller will place, at the Chicago Board of Trade, an order in Seller's
name in accordance with the instructions provided by Buyer.
A.3. If the order placed by Seller is filled, the final price or prices for
the quantity or quantities for which the order is filled will be equal to the
price at which the order is filled plus the applicable Basis Price additament
set forth above for the month of delivery.
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A.4. If the order is not filled, Seller will so notify Buyer as promptly as
possible. If delivery is required for a day and no Product has previously been
priced pursuant to the foregoing procedure, the price will be the closing
futures price for the month for which the Basis Price is quoted at the close of
the Chicago Board of Trade on the day of delivery, plus the applicable Basis
Price.
The price per bushel must be established for all Product or the Basis Price
spread to another option month on or before the first delivery day of the option
month the Basis Price is quoted against. Buyer may spread any of the Basis
Priced corn, prior to final pricing, to another option month in which corn is
traded. Buyer will notify Seller by phone and confirm in writing the spread
order to be placed on Buyer's behalf. Seller will notify Buyer in writing if the
spread order is filled and the Basis Price will be adjusted accordingly. If the
spread order can not be filled, the Basis Price quoted in Option A will remain
in effect. Buyer will pay an additional ____ per bushel for all spread
transactions which are filled.
Option B. Buyer may purchase from Seller its Product requirements for
calendar year 1996 at a fixed Basis Price equal to __________ for the period of
_____________________________ and _____________ for the period ________________.
The final price for Product delivered will be established through the Pricing
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Procedure except the Basis Price will be ____________ as applicable.
The price per bushel must be established for all Product or the Basis Price
spread to another option month on or before the first delivery day of the option
month the Basis Price is quoted against. Buyer may spread any of the Basis
Priced corn, prior to final pricing, to another option month in which corn is
traded. Buyer will notify Seller by phone and confirm in writing the spread
order to be placed on Buyer's behalf. Seller will notify Buyer in writing if the
spread order is filled and the Basis Price will be adjusted accordingly. If the
spread order can not be filled, the Basis Price quoted in Option B will remain
in effect. Buyer will pay an additional ________________ bushel for all spread
transactions which are filled.
B. 1997 Calendar Year. Buyer and Seller agree that Buyer has the option to
purchase Product for calendar year 1997 pursuant to the terms of this subsection
"B". Between October 1, 1996 and December 1, 1996, Buyer and Seller will attempt
to agree on a Basis Price or Basis Prices to be applied to futures to establish
final pricing for Buyer's Product requirements during the calendar year 1997.
The final price for Product delivered by Seller to Buyer will then be
established pursuant to the procedures set forth in Price Option A beginning
with subsection A.1. Buyer and Seller will memorialize the agreed to Basis Price
or Basis Prices and applicable futures contracts at the time the agreement is
reached. No orders may be placed under subsection A.1. for
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<PAGE>
calendar year 1997 until Buyer and Seller agree on a Basis Price or Basis
Prices. This Agreement will terminate on December 31, 1996 if Buyer and Seller
are unable to reach an agreement on the relevant Basis Price or Basis Prices to
be applied to futures to establish final pricing for Buyer's 1997 Product
requirements.
3. Quality. Product shall be 2YC with a test weight of 54 lbs. per
bushel, with no more than 15% moisture content, 5% damaged, no more than 3%
foreign material, and no more than 2/10ths of a percent heat damage. If all or
any part of the Product fails to meet these specifications, Buyer shall be
entitled to a discount on the price per bushel as set forth in Appendix A. Buyer
shall provide Seller with grade certificates for any product upon which Buyer
claims entitlement to a discount.
4. Quantity and Delivery. Buyer shall purchase and receive from Seller,
and Seller shall deliver to Buyer, all of Buyer's requirements for Product
during the Term, except as provided in Paragraph 7 hereof. Buyer shall purchase
from Seller a minimum quantity of ___________________ during each year of the
Term (the "Yearly Minimum Requirements"). Buyer projects Buyer will require
the monthly amounts designated in Appendix B during calendar years 1996 and 1997
(the "Monthly Projections").
The quantity of Product delivered to Buyer in a given month which is more
than the Monthly Projections shall hereafter be referred to as the "Overfill
Amount." The quantity of Product delivered to Buyer for a given month which is
less than the Monthly Projections shall hereafter be referred to as the
"Underfill
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<PAGE>
Amount." The Underfill Amount may accumulate from month to month, and such
accumulated Underfill Amount shall hereafter be referred to as the "Cumulative
Underfill Amount." The Overfill Amount may accumulate from month to month, and
such accumulated Overfill Amount shall hereafter be referred to as the
"Cumulative Overfill Amount." The amount by which the Cumulative Underfill
Amount exceeds any Cumulative Overfill Amount will hereafter be referred to as
the "Net Cumulative Underfill Amount." The amount by which the Cumulative
Overfill Amount exceeds any Cumulative Underfill Amount will hereafter be
referred to as the "Net Cumulative Overfill Amount." Underfill amounts for which
final prices have been established pursuant to the Pricing Procedure shall
hereafter be referred to as "Final Priced Underfill Amounts." Underfill Amounts
for which final prices have not been established pursuant to the Pricing
Procedure shall hereafter be referred to as "Unpriced Underfill Amounts."
If the Net Cumulative Underfill Amount exceeds _________bushels at the end
of any month, all bushels in excess of ___________ bushels ("Excess Bushels")
will be cancelled from this Agreement. If some of the Excess Bushels to be
cancelled are Final Priced Underfill Amounts and some of the Excess Bushels are
Unpriced Underfill Amounts, the Final Priced Underfill Amounts will be cancelled
prior to cancelling Unpriced Underfill Amounts.
If, based on the Cancellation Calculations, the disposition of Excess
Bushels cancelled from this Agreement results in a net gain to Seller, Seller
shall pay Buyer an amount equal to such net gain.
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<PAGE>
If, based on the Cancellation Calculations, the disposition of Excess
Bushels cancelled from this Agreement results in a net loss to Seller, Buyer
shall pay Seller an amount equal to such net loss.
The "Cancellation Calculations" shall be the sum of factors "a", "b" and
"c" below, any of which may be a negative number:
a. If the Excess Bushels to be cancelled from this Agreement are part of
Final Priced Underfill Amounts (and Buyer does not elect to utilize the
underlying futures contracts acquired by Seller as provided below),
factor "a" shall be an amount equal to the number of Excess Bushels
cancelled from this Agreement multiplied by the difference between:
1. The Futures Price for the month used to establish the final price in
accordance with the Pricing Procedure, and
2. The Futures Price quoted at the Chicago Board of Trade for the
futures month used in the Pricing Procedure as of the date the Excess
Bushels are cancelled from this Agreement.
b. Factor "b" will be an amount equal to the number of Excess Bushels
cancelled from this Agreement multiplied by the difference between:
1. Seller's cash basis purchase price per bushel for Product delivered
to Buyer, and
2. The cash basis purchase price per bushel for product to be delivered
F.O.B. to Bremen, Indiana, calculated based on F.O.B. origin
Columbus, Ohio for CSX 65 car trains less the freight adjustment for
Bremen, and less an elevation charge of ______ per bushel.
c. Factor "c" will be an amount equal to the number of Excess Bushels
cancelled from this Agreement multiplied by the difference between:
1. The freight cost per bushel for product delivered to Buyer, and
2. The actual freight cost per bushel for product delivered to Bremen,
Indiana.
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<PAGE>
With respect to Final Priced Underfill Amounts to be cancelled, Buyer may,
at its option, utilize the futures contracts acquired by Seller pursuant to
Paragraph 2.A.2. for delivery of Product in a later month. The final price of
any such Product delivered in the later month or months will be the utilized
futures contract price plus the basis price additament applicable for the month
in which the Product is actually delivered plus, if applicable, any
spread charges. Subsection "a" of the Cancellation Calculations will not be
utilized as part of the Cancellation Calculations if Buyer utilizes the futures
acquired by Seller. However, Subsection "b" and "c" of the Cancellation
Calculations will still be utilized when Final Priced Underfill Amounts are
cancelled from this Agreement, and Buyer utilizes the underlying futures
contracts.
On or before August 31 of each year of the Term, Buyer will deliver to
Seller a written statement projecting Buyer's requirements for Product for each
month from the date of the statement to the end of the calendar year ("Revised
Monthly Projections"). The parties will then project the Net Cumulative Overfill
Amount or Net Cumulative Underfill Amount as of September 30 and December 31 of
the year. The Net Cumulative Overfill Amount and Net Cumulative Underfill Amount
projections will be determined by comparing the Revised Monthly Projections with
the Monthly Projections for the same periods. If the analysis results in a Net
Cumulative Underfill Amount for September 30 and/or December 31, Buyer shall
have the option of selling, or deferring delivery until
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<PAGE>
the next delivery period, up to _______ bushels of the Net Cumulative
Underfill Amount. All of the Net Cumulative Underfill Amount in excess of
________ bushels shall be cancelled from this Agreement with compensation to be
determined through the Cancellation Calculations. If the analysis results in a
Net Cumulative Overfill Amount for September 30 and/or December 31, Buyer and
Seller will agree upon a new Basis Price additament for the September 30 and/or
December 31 Net Cumulative Overfill Amount. The final price of Overfill Amounts
delivered in September and December shall be determined by utilizing the new
Basis Price additament as part of the Pricing Procedure. Bushels of Product
delivered in September and December up to the Monthly Projections shall be
priced according to the Pricing Procedure.
Seller shall deliver Product:
a. In quantities required to maintain an adequate supply of Product in
order to support the efficient operation of the Plant 24 hours a day, 365
days per year, and
b. At times so that Product can be unloaded as provided in this
Agreement. In order to maintain an adequate supply of Product, Seller shall
deliver Product to Buyer on each Monday through Friday. (except for
holidays observed by Buyer's administrative personnel which are recognized
as national holidays) (a "Business Day") and on Saturday. Buyer and Seller
agree that either party has the right to request delivery of Product
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<PAGE>
on Sundays if the same is necessary to ensure an adequate supply of Product
at the Plant.
Deliveries will be made in such a manner that as of 6:00 p.m., South Bend
time, the following minimum number of bushels of Product will be in the storage
bin at Buyer's Plant (hereinafter referred to as the "Minimum Quantity,):
Monday ______ bushels
Tuesday ______ bushels
Wednesday______ bushels
Thursday ______ bushels
Friday ______ bushels
Saturday ______ bushels
If sufficient quantities of the Product is not delivered on any Monday,
Tuesday or Wednesday so that the Minimum Quantity on a given Monday, Tuesday or
Wednesday is less than the relevant amount set forth above, Seller shall not be
in default of this Agreement provided Seller delivers sufficient Product to
Buyer to meet not less than ________________ of the Minimum Quantity required on
the day following the day of the insufficiency. If the insufficiency takes place
on a Thursday, Seller agrees that it shall deliver to Buyer on Friday sufficient
Product in order that the quantity of Product in Buyer's storage bins shall be
_______ bushels. Buyer agrees that in the event delivery must take place on
Friday due to an insufficiency on a Thursday, Buyer shall accept delivery of
Product until ________ bushels are in its storage bin at the Plant.
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<PAGE>
Not later than 3:00 p.m. South Bend time on every Business Day, Buyer shall
inform Seller by facsimile of the minimum number of bushels required by Buyer
and the maximum number of bushels which Buyer can accept on the next Business
Day.
Buyer represents and warrants that it has the ability to receive and unload
Product at the rate of ___________ rail cars per hour or ___________ trucks per
hour ("Delivery Rate"). If Buyer is unable to take delivery at the Delivery
Rate, Buyer will reimburse Seller for the costs incurred by Seller, if any, due
to Buyer's inability to receive Product at the Delivery Rate. Seller shall not
cause to be delivered to Buyer more than __________ rail cars per hour or
____________ trucks per hour of Product during each Business Day, and shall
deliver Product so that it can be received, tested and unloaded in accordance
with the provisions of Paragraph 9 of this Agreement. On any day in which
Product is delivered, Seller shall not deliver to Buyer more Product than Buyer
has the capacity to store on-site unless the amount delivered does not exceed
the maximum amount which Buyer notified Seller that Buyer could accept. Seller
will use its best efforts to meet Buyer's reasonable requests with respect to
increasing or decreasing the amount of Product to be delivered on any given day.
5. Testing. The quantity and quality of Product delivered by truck shall be
inspected by Buyer. _________________________________________________________
_______________________________________________________________________________
____________________________________________________________________________
_______________________________________________________. Payment will be
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<PAGE>
made by Seller to Buyer in the form of a credit to be applied by Buyer against
amounts due Seller from Buyer. Buyer will deliver to Seller invoices marked
"Paid In Full" for the inspection and testing charges. First official grades and
first certified weights will govern on all in-bound rail receipts.
6. Payment. Buyer will wire transfer to a bank account designated by Seller
payment for all Product unloaded by Buyer which meets contract specifications.
______________________________________________________________________________
_________________________________________________________________________
____________________________________________________. Buyer will provide Seller,
in a timely fashion, with copies of truck scale tickets during the day of
unload. For rail deliveries, Seller will provide Buyer with copies of proper
bills of lading for any Product which is delivered but not yet unloaded or
tested for which Seller is seeking _____________ prior to testing. Prior to
receiving _______________ Seller will also provide Buyer with origin certified
grade certificates and the original bills of lading. Weights will be verified
either by Buyer upon unloading or through certified origin weight certificates.
All payments under this Agreement will be wired by noon on the Business Day
following the day Product is delivered or the amount owed is established,
provided, however, that if: (i) Product first arrives at Buyer's Plant after
4:00 p.m., South Bend time and/or (ii) Product is delivered to Buyer on a
non-Business Day other than Saturday; then such Product will be deemed to have
been delivered on the Business Day following the day the Product is actually
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<PAGE>
delivered and payment will be made by wire transfer by noon on the Business Day
following the deemed Business Day.
If payment for Product is due on a non-Business Day or a bank holiday,
payment for such Product shall be made by Buyer to Seller by noon on the next
Business Day or day federal wire transfers can be made, which ever day is
earlier.
7. Suspension of Deliveries and Force Majeure. Seller shall not suspend
delivery of Product to Buyer for any reason except for Buyer's failure to make
payment for Product as provided in this Agreement, Buyer's failure to provide
adequate assurance of payment for future deliveries, or the occurrence of an
Extraordinary Event. Also, Seller shall not suspend delivery of Product for
Buyer's failure to make payment for Product unless Seller first notifies Buyer
that payment has not been received and Buyer fails to remit such missed payment
or payments by noon on the day following the day Seller provided the notice of
nonpayment. Should Buyer fail to make payment as provided above, Seller may
exercise its rights to assure payment (as provided in paragraph 10 hereof) and
may suspend delivery of Product until it receives adequate assurance of payment
for future deliveries. In the event Buyer fails to provide such adequate
assurance to Seller within two (2) Business Days, then Seller may avail itself
of any remedies provided by law. For purposes of this Agreement, "adequate
assurance,, shall be defined as obtaining one or more letters of credit in the
same amounts as the letters of credit existing at the time delivery was
suspended, minus any amounts which may still be drawn under the letters of
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<PAGE>
credit existing at the time delivery was suspended. If Seller wrongfully
suspends delivery of Product, Buyer's remedy shall be to obtain replacement
product from a source Buyer deems appropriate, in quantities which Buyer deems
appropriate, and at a price Buyer deems appropriate and recover from Seller the
difference between:
a. The price Buyer paid for Product plus any other incidental costs
incurred in obtaining Product, and
b. The price which Buyer would have paid Seller had Seller delivered
Product as required under this Agreement.
Deliveries may be suspended temporarily due to acts of God, insurrections,
strikes, lock outs, or other extraordinary events beyond Buyer's and Seller's
control (such events, whether applicable to Seller and/or Buyer are hereinafter
referred to as "Extraordinary Events"). However, should an Extraordinary Event
arise, Buyer and Seller will use their best efforts to maintain deliveries of
Product to Buyer. Seller or Buyer shall immediately notify the other by
telephone, to be confirmed in writing, as soon as either learns of the
possibility that an Extraordinary Event may arise or has arisen.
If deliveries are suspended due to the occurrence of an Extraordinary
Event, Excess Bushels shall be cancelled from the contract with compensation
calculated pursuant to the Cancellation Calculations. However, if Seller is
unable to deliver Product but Buyer is able to obtain deliveries from another
source, Seller shall pay compensation to Buyer in an amount equal to the
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<PAGE>
difference between the price of Product as determined through the Pricing
Procedure and the amount paid by Buyer for the replacement Product.
8. Title and Risk of Loss. Title to and risk of loss or damage to, any
Product shall pass from Seller to Buyer upon unloading of Product at Buyer's
Plant if delivery is by truck or upon constructive or actual placement at
Buyer's Plant if delivery is by rail. Seller shall be deemed to be in exclusive
control and possession of Product, responsible for any loss thereof, damage to
property or injury to persons caused thereby, until title to Product passes to
Buyer, and Buyer shall be deemed to be in exclusive control and possession,
responsible for such Product and any loss thereof, damage to property or injury
to person caused thereby, after title has passed to Buyer.
9. Receiving of Product by Truck and by Rail. The normal receiving testing
and unloading hours for the delivery of Product by truck and/or rail shall be
from 7:00 a.m. to 4:00 p.m. Monday through Friday, and 7:00 a.m. to 3:00 p.m.
Saturday, South Bend time. At Seller's option, Seller may request that Buyer
extend normal hours for truck unloading to 6:00 p.m. South Bend time. In
addition, Seller may, if requested under paragraph 4 hereof, schedule Sunday
delivery from 12:00 p.m. to 4:00 p.m. Buyer shall unload __________ rail cars of
corn per hour if the cars have been actually placed at the plant by 8:00 a.m.
This unload rate will be prorated if placement is commenced after 8:00 a.m.
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10. Letter of Credit. Buyer will, at its expense, purchase an irrevocable
standby letter of credit in the form of Appendix C attached hereto ("Letter of
Credit"), for the benefit of Seller from a financial institution acceptable to
Seller. The amount of the Letter of Credit will be _______________ for the 1996
calendar year until the parties agree to the contrary. Buyer and Seller will
negotiate the need for and amount of a letter of credit for 1997 at the time
Buyer and Seller are negotiating 1997 Basis pricing.
Seller may draw on the letter of credit for any of the following reasons:
a. Buyer does not remit payment for Product that is delivered and the
events in Paragraph 7 which would give cause for Seller to suspend
delivery occur.
b. Buyer does not remit any other payment due pursuant to this Agreement.
c. Buyer's default or breach under this Agreement.
11. Office. Buyer shall, at its own cost, provide Seller with an office,
telephone, and communication hook-ups at Buyer's office for Seller's use. Seller
shall use the office and telephone only for business relating to this Agreement.
12. Taxes. Seller shall pay all taxes, fees, and other charges imposed or
assessed by any governmental authority with respect to Product delivered
hereunder the taxable incidence of which occurs prior to the transfer of title
of Product to Buyer. Buyer shall pay all taxes, fees or other charges imposed or
assessed by any governmental authority with respect to Product delivered
hereunder, the taxable incidence of which occurs after the transfer of title of
Product to Buyer.
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13. Warranty of Title. Seller hereby warrants title to Product sold and
delivered by it hereunder and the right of Seller to sell same, and Seller
warrants that all Product sold by it is owned by Seller and upon delivery to
Buyer shall be free from all liens and adverse claims of any kind. Seller agrees
to indemnify Buyer and save it harmless from all suits, actions, damages, costs,
expenses and attorney fees arising from or out of all liens and/or adverse
claims which are in existence before the title thereto passes to Buyer.
14. Amendments. This Agreement may be amended, modified, waived, discharged
or terminated only by an instrument in writing signed by the party against which
enforcement of the amendment, modification, waiver, discharge or termination is
sought.
15. Assiqnment. Seller hereby consents to Buyer's assignment of this
Agreement to the United States Department of Energy to secure certain
obligations of Buyer to the United States Department of Energy. Seller agrees
that the Department of Energy or its designee, without penalty, cost or further
consent of Seller shall be entitled to exercise all rights of Buyer subject to
all rights of Seller, under this contract. If the Department of Energy or its
designee should exercise any such rights, no payments shall be required
hereunder to Seller except as required for the continuation of deliveries, for
past deliveries for which payment has not yet been remitted, and for damages
covered by the letter of credit, and no penalty or additional fee shall be
levied upon the Department of Energy or its designee, for the continuation of
this
-17-
<PAGE>
contract except for the payments and other obligations of Buyer required by this
contract. Other than as set forth above, this Agreement may not be assigned by
any party except if Buyer assigns its rights and obligations hereunder to any
other entity which in the future may own or operate the Plant.
16. Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
17. Entire Agreement. This Agreement (including the schedules, Appendices
and Exhibits hereto and the lists, schedules and documents, delivered pursuant
hereto, which are a part hereof) is intended by the parties to and does
constitute the entire agreement of the parties with respect to the transactions
contemplated by this Agreement. This Agreement supersedes any and all prior
understandings, written or oral, between the parties hereto.
18. Governing Law. This Agreement shall be construed in accordance with and
governed under the National Grain and Feed Association Trade Rules. To the
extent that those rules do not apply, the Agreement will be construed in
accordance with and governed by the laws of the State of Indiana.
19. Headings. The paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
-18-
<PAGE>
20. Notices. Notice from one party to another relating to this Agreement
shall be deemed effective if made in writing (including telecommunications) and
delivered to the recipient's address, telex number or facsimile number set forth
under its name by any of the following means: (a) hand delivery, (b) Federal
Express, Purolator, Courier or like overnight courier service; or (c) facsimile,
telex or other wire transmission with request for assurance of receipt in a
manner typical with respect to communications of that type. Notice made in
accordance with this section shall be deemed delivered on receipt if delivered
by hand or wire transmission, or on the next Business Day after deposit with an
overnight courier service if delivered by overnight courier.
Buyer Seller
----- ------
New Energy Company of Indiana Frick Services, Inc.
Limited Partnership 123 Depot Street
3201 West Calvert Wawaka, Indiana 46794
Post Office Box 2289
South Bend, IN 46601-2289
Attn: Nathan P. Kimpel Attn: Daniel R. Frick
Fax: (219) 232-1876 Fax: (219) 761-3112
cc: John H. Parker
Fax: (914) 633-5695
21. Successors. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns,
but nothing herein, express or implied, is intended to or shall confer any
rights, remedies or benefits upon any person other than the parties hereto and
their successors and permitted assigns.
-19-
<PAGE>
NEW ENERGY COMPANY OF INDIAN
LIMITED PARTNERSHIP
By: JOHN H. PARKER
----------------------------------
New Energy Corporation of Indiana
Its: General Partner
By: John H. Parker
Its: President and Chief
Operating Officer
FRICK SERVICES, INC.
By: DANIEL R. FRICK
----------------------------------
Daniel R. Frick
Its Executive Vice President
-20-
<PAGE>
APPENDIX A
1. Quality Specification on Sale: Following discounts apply. Discounts are
cumulative unless Specified "each".
#2YC 54.0#T.W. 15.0 MSTR 5.0% DMG 3.0% F.M. 0.2% HT DMG
DISCOUNT
TEST WEI(GIHT DISCOUNT MOISTURE SHRINK BUSHEL
- ------------- -------- -------- ------ ------
54.0 AND ABOVE 15.0%- 0
53.9-53.0 15.1%- 15.5 .7
52.9-52.0 16.1 - 16.5 1.4
51.9-51.0 15.6 - 16.0 2.i
50.9-50.0 16.1 - 16.5 2.8
49.9-49.0 16.6 - 17.0 3.5
48.9-48.0 MIN 17.1 - 17.5
FOREIGN ABOVE 17.5 WILL BE REJECTED.
MATERIAL DISCOUNT MOISTURE DISCOUNTS ARE FIGURED
- -------- ------- ON WET BUSHELS.
3.0% AND BELOW
3.1-4.0
4.1-5.0
5.1-25.0
MAX-25%
DAMAGE DISCOUNT
- ------ --------
5.0 AND BELOW
5.1-10.0
10.1-15.0
25.1-25.0
MAX- 25.0
HEAT DAMAGE DISCOUNT
- ----------- --------
2/10% AND BELOW
3/10%-2% MAX ON
ORIGINAL INSPECTION
STONES DISCOUNT
- ------ --------
2/10% MAX ON
ORIGINAL INSPECTION
MUSTY
SOUR
COFO
<PAGE>
APPENDIX A
(Page 2)
Discount Schedule
- -------------------------------------------------------------------------------
Corn with any of the quality factors listed below will not be acceptable
for delivery or application on contract:
Moisture in excess of 17.5%
Weevil -- no reinspection. If weevil or infested corn
is accidentally unloaded, the charge is ___
cents/bushel.
Heating
Stones in excess of 2/10% on original inspection
Distinctly low quality -- no reinspection
Hot
Grain suspected of containing seed corn or seeds
treated with an unknown chemical
Aflatoxin -- no reinspection
**TREATED GRAIN**
New Energy does not and will not purchase or accept delivery of any grain
suspected of containing seed corn or gain treated with unknown chemical
substances.
Anyone who delivers any seed corn, corn containing any toxin greater than
allowable F.D.A. limits for intra or inter state commerce, corn containing more
than 10 ppb aflatoxin as confirmed by a "Quick Test" screening method such as
the Neogen Agri Screen test and/or grain treated with any unknown substance,
will assume the full responsibility for any losses, costs, expenses, and/or
liabilities including both real and consequential damages from loss of
production that New Energy views as a direct or indirect result of the above
mentioned items.
<PAGE>
APPENDIX B
January ______________ bushels
February ______________ bushels
March ______________ bushels
April ______________ bushels
May ______________ bushels
June ______________ bushels
July ______________ bushels
August ______________ bushels
September ______________ bushels
October ______________ bushels
November ______________ bushels
December ______________ bushels
TOTAL _______________bushels
<PAGE>
INTERNATIONAL BANKING Norwest Bank Indiana, N.A.
Norwest Phone No. (219) 461-6440 Fort Wayne Downtownn Office
Bank Fax No. (219) 461-6495 111 East Wayne Street
[Logo} Telex 232427 Post Office Box 960
Fort Wayne, Indiana 46801-6600
219/461-6000
NORWEST BANK INDIANA, NATIONAL ASSOCIATION
INTERNATIONAL BANKING
111 EAST WAYNE STREET
FORT WAYNE, INDIANA 46802-6626
TELEPHONE NO. (219) 461-6440
TELEX NO. 232427
DECEMBER 26, 1995
TO:
FRICK SERVICES, INC.
123 DEPOT
WAWAKA, IN 46794
WE HEREBY OPEN OUR IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER 2144 IN YOUR
FAVOR AT THE REQUEST OF AND FOR THE ACCOUNT OF NEW ENERGY COMPANY OF INDIANA
LIMITED PARTNERSHIP IN AN AMOUNT OF _______ AVAILABLE FOR PAYMENT AT SITE BY
YOUR DRAFT ON OR REQUEST FOR PAYMENT FROM NORWEST BANK INDIANA, NATIONAL
ASSOCIATION.
EXPIRES DECEMBER 26, 1996 AT OUR COUNTERS
ALL BANKING CHARGES ARE FOR THE ACCOUNT OF NEW ENERGY COMPANY OF INDIANA
LIMITED PARTNERSHIP.
PARTIAL DRAWINGS ARE PERMITTED.
WE HEREBY ENGAGE WITH YOU THAT DRAFTS UNDER THIS CREDIT WILL BE DULY HONORED
UPON PRESENTATION. THIS LETTER OF CREDIT SETS FORTH IN FULL THE TERMS OF OUR
UNDERTAKING, AND SUCH UNDERTAKING SHALL NOT IN ANY WAY BE MODIFIED, AMENDED, OR
AMPLIFIED BY REFERENCE TO ANY INSTRUMENT OF AGREEMENT REFERRED IN WHICH THIS
LETTER OF CREDIT IS REFERRED TO OR TO WHICH THIS LETTER OF CREDIT RELATES, AND
ANY SUCH REFERENCE SHALL NOT BE DEEMED TO INCORPORATE HEREIN BY REFERENCE ANY
INSTRUMENT OR AGREEMENT.
<PAGE>
INTERNATIONAL BANKING Norwest Bank Indiana, N.A.
Norwest Phone No. (219) 461-6440 Fort Wayne Downtownn Office
Bank Fax No. (219) 461-6495 111 East Wyne Street
[Logo} Telex 232427 Post Office Box 960
Fort Wayne, Indiana 46801-6600
219/461-6000
OUR LETTER OF CREDIT NO. 2126 PAGE TWO
THIS CREDIT IS SUBJECT TO THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY
CREDITS (1993 REVISION) INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO. 500.
DOCUMENTS TO BE DIRECTED TO:
NORWEST BANK INDIANA, NATIONAL ASSOCIATION
INTERNATIONAL BANKING
111 EAST WAYNE STREET
FORT WAYNE, IN 46802-6626
NORWEST BANK INDIANA, NATIONAL ASSOCIATION
KURT E. MATTOX JEFFERY B. CLARK
- ------------------------- -----------------------------
Kurt E. Mattox Jeffery B. Clark
Vice President Assistant Vice President
NEW ENERGY CORPORATION OF INDIANA
March 25, 1996
Mr. Douglas Baptist
U.S. Department of Energy
Office of Procurement, Assistance
and Program Management
1615 M Street, N.W.
Washington, D.C. 20036
Re: New Energy Company of Indiana Limited Partnership
Dear Doug:
This Letter Agreement is in furtherance of the discussions held between New
Energy Company of Indiana Limited Partnership (the "Partnership") by myself, an
officer of New Energy Corporation of Indiana, the General Partner of the
Partnership (the "General Partner") and you, as representative of the United
States of America, represented by the Secretary of Energy (the "Secretary")
following the correspondence to you dated January 31, 1996, in which the
Partnership advised the Secretary that the Partnership expected to experience a
severe reduction in its cash reserves during the first nine months of 1996 due
to the precipitous increase in the price of corn.
As a result of this increase in corn prices, the Partnership requested that
the Secretary agree to a nine month suspension of principal and interest
payments on the promissory note in the principal amount of $55,000,000 (the
"Note A") given by the Partnership to the Secretary pursuant to the Amended and
Restated Loan Restructuring Agreement dated as of December 23, 1991, by and
among the Partnership, the General Partner and the Secretary (the "Agreement").
Terms used herein without definition shall have the same meaning as defined in
the Agreement.
If the Secretary agrees, the Partnership and General Partner propose that
notwithstanding any provision to the contrary in the Agreement and without
further documentation except as provided in this letter (which agreement by the
Secretary shall constitute this letter as a "Letter Agreement"):
1. The obligation of the Partnership to make monthly payments of
principal and interest from January 1, 1996 through September 30, 1996
(the "Suspension Period") on Note A pursuant to Section 2.3(a) of the
Agreement shall be suspended; provided that the aggregate amount of
such Note A principal and
20 Cedar Street, Suite 304, New Rochelle, New York 10801
914-633-5454 / 800-526-8947 Fax 914-633-5695
<PAGE>
Mr. Douglas Baptist
March 25, 1996
Page 2
interest payments is added to the outstanding principal amount of Note
B by an endorsement which will be appended to Note B, an executed copy
of which is attached to this Letter Agreement. Note B, as so endorsed,
remains a legal and valid obligation of the Partnership, with the
security for Note B, as so endorsed, unimpaired.
2. Effective as of October 1, 1996, the Partnership's obligation under
Section 2.3(a) of the Agreement shall recommence.
3. Notwithstanding the provisions of Section 2.3(b) of the Agreement,
during the Suspension Period, Note B payments will calculated in
accordance with the form of Cash Flow Report attached to this Letter
Agreement. Commencing November 1, 1996, payments of principal and
interest on Note B, as amended, will be calculated in accordance with
the form of Cash Flow Report attached to the Agreement.
4. During the Suspension Period, the Partnership shall not expend in
excess of Fifty Thousand Dollars ($50,000) per month of its
accumulated Borrower's Cash Flow without the prior written consent of
the Secretary.
5. The agreement by the Secretary is contingent upon the Partnership
obtaining a deferral of the quarterly payments from BDC on the BDC
loan to the Partnership for the Suspension Period.
6. The Partnership and General Partner each hereby confirm that the
representations and warranties made by the respective parties in the
Agreement remain true and correct as of the date hereof.
7. The Letter Agreement shall be deemed to be an amendment to the
Agreement and, except as other wise proved herein, the Agreement shall
continue in full force and effect.
<PAGE>
Mr. Douglas Baptist
March 25, 1996
Page 3
If the Secretary is in agreement with these proposals, please sign below,
by original or facsimile signature, to indicate the Secretary's agreement to the
foregoing.
NEW ENERGY COMPANY OF INDIANA
LIMITED PARTNERSHIP, an Indiana
Limited Partnership
By its General Partner
NEW ENERGY CORPORATION OF
INDIANA, an Indiana
Corporation
By: /s/ ANTHONY R. CORSO
Its: Executive Vice President
NEW ENERGY CORPORATION OF INDIANA,
an Indiana Corporation
By: /s/ ANTHONY R. CORSO
Its: Executive Vice President
ACKNOWLEDGED AND AGREED TO:
THE UNITED STATES OF AMERICA, acting
by and through the Secretary of Energy
By: /s/ DOUGLAS L. BAPTIST
Its: Contracting Officer
<PAGE>
ENDORSEMENT TO NOTE B
DATED
AS OF MARCH 25, 1996
Pursuant to that certain Letter Agreement dated as of the date hereof, by
and among New Energy Company of Indiana Limited Partnership, an Indiana limited
partnership (the "Partnership"), New Energy Corporation of Indiana, an Indiana
corporation (the "General Partner"), and the United States of America, acting by
and through the Secretary of Energy (the "Secretary"), the Secretary has agreed,
commencing January 31, 1996, to a nine month suspension of payments of principal
and interest on Note A which was given by the Partnership to the Secretary
pursuant to the Amended and Restated Loan Restructuring Agreement dated as of
December 23, 1991, by and among the Partnership, the General Partner and the
Secretary (the "Agreement") on the condition that, inter alia, the aggregate
amount of the suspended Note A principal and interest payments be added to the
outstanding principal amount of Note B by way of this endorsement. By its
execution and delivery hereof, the Partnership agrees that commencing January
31, 1996 and on the last day of each month thereafter, to and including
September 30, 1996, the principal amount of Note B shall be increased by
$631,533 and that such additional amounts will be due and payable in accordance
with the terms of Note B, as if they were originally provided for therein.
Terms used herein but not otherwise defined herein shall have the same
meaning ascribed to them in the Agreement.
This Endorsement to Note B shall be deemed to be a contract made under the
federal laws of the United States and for all purposes shall be governed by and
construed in accordance with the federal laws of the United States.
IN WITNESS WHEREOF, the Partnership has caused this Endorsement to Note B
to be duly executed and delivered by a Responsible Officer of its General
Partner thereunto duly authorized as of the 25th day of March, 1996.
NEW ENERGY COMPANY OF INDIANA
LIMITED PARTNERSHIP, an Indiana
limited partnership
By its General Partner,
NEW ENERGY CORPORATION OF
INDIANA, an Indiana
corporation
By: /s/ ANTHONY R. CORSO
Its: Executive Vice President
<PAGE>
Attachment to
Letter Agreement
Dated _________, 1996
NEW ENERGY COMPANY OF INDIANA LIMITED PARTNERSHIP
CASH FLOW REPORT DURING THE
SUSPENSION PERIOD OF JANUARY 1, 1996
THROUGH SEPTEMBER 30, 1996
AMENDED AND RESTATED
LOAN RESTRUCTURING AGREEMENT
Dated December 23, 1991
Report #___________ Period Covered: Month Ended _______________ __, _____
(the "Subject Month")
Part A. Computation of Cash Flow
Net Income (Loss)
1. Borrower's net income (net loss) from $___________
operations (including any extraordinary
income) for the Subject Month (From
Monthly Income Statement (Unaudited)
for Month Ended __________, ______,
Line _____ (Income (loss) from operation))
Additions
2. Depreciation and amortization expense $___________(+)
for the Subject Month (From Monthly
Income Statement (Unaudited) for
Month Ended __________, ______, Line
_____ (Depreciation))
3. Other cash receipts received (if any) to $___________(+)
the extent not taken into account in
computing Line A.1 above for the
Subject Month (From Monthly Income
Statement (Unaudited) for Month Ended
__________, ______, Line _____
(Other income))
4. Portion (if any) of Administration Fee $___________(+)
that is accrued but unpaid to the extent
taken into account in computing Line
A.1 above for the Subject Month (From
Monthly Income Statement (Unaudited)
for Month Ended __________, ____,
Line ____ (Other administration expense
_____ Deferred management fees payable to
general partner))
<PAGE>
5. Total Additions (Line A.2 + Line A.3 + $___________
Line A.4)
Cash Flow
6. Cash Flow for the Subject Month (Line $___________
A.1 + Line A.5) ============
Part B. Computation of Note B Payment Amount and Borrower's
Cash Flow
Cash Flow
1. Cash Flow for the Subject Month (Line $___________
A.6)
Deductions
2. Amount of obligation to fund Working $___________(-)
Capital Account ($2,000,000 minus
balance in Working Capital Account as
of the last day of the Subject Month)
3. Amount of obligation to fund Capital $___________(-)
Expenditure Account ($1,300,000 minus
balance in Capital Expenditure Account
as of the last day of the Subject Month)
4. Total Deductions (Line B.2 + Line B.3) $___________
Excess Cash Flow
5. Excess Cash Flow for the Subject Month $___________
(Line B.1 - Line B.4)
Note B Payment Amount
6. Payment on Note B of Excess Cash $___________
Flow up to $631,533
7. Excess Cash Flow for the Subject $___________
Month after initial payment on
Note B (Line B.6 - Line B.5)
8. Components of Additional Note B Payment
Amount for the Subject Month
(a) Lesser of (i) Excess Cash Flow $___________
(but not less than $0), or (ii)
$100,000
- 2 -
<PAGE>
(b) Lesser of (i) Excess Cash Flow - $___________
$100,000 (but not less than $0), or
(ii) $100,000
(c) Lesser of (i) Excess Cash Flow - $___________
$200,000 (but not less than $0), or
(ii) $100,000
(d) Excess Cash Flow - $300,000 (but $___________
not less than $0)
9. Note B Payment Amount for the Subject $___________
Month (sum of .90 x Line B.6 (a) + .80 x ============
Line B.6(b) + .70 x Line B.6(c) + .60 x
Line B. 6 (d))
Borrower's Cash Flow
10. Borrower's Cash Flow for the Subject $___________
Month (Line B.5 - Line B.7) (but not ============
less than $0)
Part C. Computation of Amount of Note B Payment Amount to be
Deposited in the Special Capital Expenditure Account and
Amount to be Applied to Note B or Note A for the Subject Month
Based on the Special Capital Expenditure Amount for the
Calendar Year in Which the Subject Month
Occurs (the "Subject Year")(1)
1. Special Capital Expenditure Amount for $___________
the Subject Year
2. Aggregate amount deposited by $___________
Borrower in Special Capital Expenditure
Account from Borrower's Cash Flow for
all months in the Subject Year prior to
the Subject Month
3. Amount to be deposited in the Special $___________
Capital Expenditure Account from
Borrower's Cash Flow for the Subject
Month (lesser of (i) Borrower's Cash
Flow for the Subject Month (Line B.8),
(ii) the difference (if positive) of the
aggregate amount of Borrower's Cash
Flow for all months in the Subject Year
- ----------------
(1) If there is no Special Capital Expenditure Amount for the Subject Year,
skip lines C.1 through C.6 and insert the Note B Payment Amount from Line B.7 in
Line C.7.
- 3 -
<PAGE>
including the Subject Month - $200,000,
or (iii) the amount remaining to be
deposited in the Special Capital
Expenditure Account in the Subject Year
prior to Borrower's Cash Flow deposit
(Line C.1 - Line C.2 - Line C.4)
4. Aggregate amount deposited by $___________
Borrower in Special Capital Expenditure
Account from Note B Payment Amounts
for all months in the Subject Year
prior to the Subject Month
5. Amount remaining to be deposited in $___________
the Special Capital Expenditure Account
in the Subject Year (Line C.1 - Line
C.2 - Line C.3 - Line C.4)
6. Amount of Note B Payment Amount to $___________
be deposited in the Special Capital ============
Expenditure Account for the Subject
Month (lesser of (i) Note B Payment
Amount for the Subject Month (Line
B.7), or (ii) amount remaining to be
deposited in the Special Capital
Expenditure Account in the Subject
Year (Line C.5))
7. Amount of Note B Payment Amount to $___________
be applied to Note B (or, if Note B has ============
been paid in full, to Note A) (Line B.7 -
Line C.6)
- 4 -
NEW ENERGY CORPORATION OF INDIANA
March 27, 1996
Mr. Donald Inks
Business And Development Corporation
1200 County-City Building
South Bend, Indiana 46601
Re: New Energy Company of Indiana Limited Partnership
Dear Don:
On January 30, 1996, New Energy Company of Indiana Limited Partnership (the
"Company") informed the Business Development Corporation ("BDC") that it
expected to experience a significant drain on its cash reserves during 1996, as
the result of a 50% increase in the price the Company pays for corn. Since the
date of that letter New Energy has been involved in discussions with the
Department of Energy ("DOE") and BDC over a temporary deferral of debt service
payments to help the Company withstand this critical period. On March 25, 1996,
New Energy met with representatives of DOE to finalize the terms of a debt
service assistance agreement which would allow the Company to defer principal
and interest payments on Note A during the period January 1, 1996, through
September 30, 1996. Under the terms of the agreement with DOE, deferred payments
will be added to the outstanding balance of Note B and repaid on a cashflow
basis.
As you are aware from our prior discussions, the agreement with DOE is
contingent upon an agreement being reached with BDC that is on substantially the
same terms. With this goal in mind the Company and BDC propose the following
terms for a deferral of principal and interest payments during the period
January 1, 1996 through September 30, 1996.
Notwithstanding any provision to the contrary in the Loan Agreement between
South Bend Development Corporation and the Company dated October 14, 1982 as
amended by an Amendment to Loan Agreement dated February, 1990 ("Loan
Agreement") and in any of the Promissory Notes and Amendments to Promissory
notes issued thereunder ("Notes"), the Company and the BDC agree as follows:
20 Cedar Street, Suite 304, New Rochelle, New York 10801
914-633-5454 / 800-526-8947 Fax: 914-633-5695
<PAGE>
Page 2
March 27, 1996
1. The obligation of the Company to make principal and interest payments in
the amount of $65,135.40 each and $4,741.49 each due on February 1, 1996;
May 1, 1996 and August 1, 1996, on the Notes (collectively the "Deferred
Payments") shall be deemed satisfied upon the execution of Note 3 as
hereinafter defined.
2. On each of February 1, 1996; May 1, 1996 and August 1, 1996, the Deferred
Payments shall be added to a new note ("Note 3") to be entered into by the
Company and BDC. Note 3 shall be in the same form as Notes 1 and 2.
3. Note 3 shall accrue interest at a rate of 6 percent per annum.
4. During the period January 1, 1996 through September 30, 1996 interest on
Note 3 shall be compounded monthly.
5. Commencing on October 1, 1996 and continuing through November 1, 1999,
monthly payments of $6,193.79 will be paid on Note 3.
6. Effective as of October 1, 1996, the Company's obligation to make quarterly
payments as set forth in the Loan Agreement and the Notes shall recommence.
7. The provisions contained in this letter agreement are contingent upon the
Company obtaining a deferral from the DOE of its monthly loan repayment
obligations until September 30, 1996.
8. This letter agreement shall be deemed to be an amendment of the Loan
Agreement. Except as otherwise provided herein, all the terms and
provisions of the Loan Agreement shall remain in full force and effect.
NEW ENERGY COMPANY OF INDIANA
LIMITED PARTNERSHIP BY ITS
GENERAL PARTNER NEW ENERGY
CORPORATION OF INDIANA
By: /s/ ANTHONY R. CORSO
Its: Executive Vice President
Acknowledged and agreed to:
THE BUSINESS DEVELOPMENT CORPORATION
By: /s/ ROBERT A. HENRY
Its: Secretary
ETHANOL SERVICES, INC.
c/o Lehman Brothers Inc.
World Financial Center, 29th Floor
New York, NY 10285
August 23, 1995
BY FAX & FIRST CLASS MAll.
Inter-American Investments, Inc.
999 Summer Street
Stamford, CT 06905
Attn.: Victor Shaio
Re: Stock Purchase Agreement dated as of January 14, 1994, between Ethanol
Services, Inc. and Inter-American Investments, Inc. (the "Purchase
Agreement")
Dear Sirs:
At the annual shareholders' meeting of New Energy Corporation of Indiana
held on August 14, 1995, Inter-American Investments, Inc. ("IAI") and Ethanol
Services, Inc. ("ESI") agreed to immediately terminate the Purchase Agreement.
Pursuant to Section 7.l(a) of the Purchase Agreement, by signing below, IAI and
ESI are hereby confirming in writing our previous termination of the Purchase
Agreement effective as of August 14, 1995.
Please fax an executed version of this letter to ESI at (212) 528-9696
(attention: Rocco F. Andriola) and return an original to ESI at the address
indicated above.
Sincerely,
ETHANOL SERVICES, INC.
By: ROCCO F. ANDRIOLA
---------------------
Rocco F. Andriola
President
ACCEPTED AND AGREED:
INTER-AMERICAN INVESTMENTS, INC.
By: VICTOR SHAIO
------------
Victor Shaio
cc: Mr. John Parker - New Energy Corporation of Indiana
Barnes & Thornburg
1313 Merchants Bank Building
11 South Meridian Street
Indianapolis, IN 46204
Attn.: James A. Strain, Esq.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 11,460,672
<SECURITIES> 0
<RECEIVABLES> 7,532,090
<ALLOWANCES> 0
<INVENTORY> 6,840,118
<CURRENT-ASSETS> 26,150,695
<PP&E> 159,512,304
<DEPRECIATION> 134,000,746
<TOTAL-ASSETS> 51,662,253
<CURRENT-LIABILITIES> 10,338,276
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 51,662,253
<SALES> 134,087,036
<TOTAL-REVENUES> 134,087,036
<CGS> 111,006,086
<TOTAL-COSTS> 111,006,086
<OTHER-EXPENSES> 7,703,227
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,318,679
<INCOME-PRETAX> 11,653,870
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,653,870
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
