NOTICE OF 2002 ANNUAL MEETING OF
STOCKHOLDERS AND PROXY STATEMENT
[COMPANY LOGO]
MIDWEST GRAIN PRODUCTS, INC.
1300 Main Street
Atchison, Kansas 66002
September 13, 2002
NOTICE OF ANNUAL MEETING
To the Stockholders:
The Annual Meeting of Stockholders of Midwest Grain Products, Inc. will be
held at the Atchison Heritage Conference Center, 710 South 9th Street, Atchison,
Kansas 66002, on Thursday, October 10, 2002, beginning at 10:00 a.m., local
time, for the following purposes:
o To elect three directors, each for a three-year term expiring in 2005;
and
o To transact such other business as may properly come before the
meeting.
Holders of Common and Preferred Stock of record on the books of the Company
at the close of business on August 16, 2002, will be entitled to vote at the
meeting or any adjournment thereof.
STOCKHOLDERS ARE REQUESTED TO COMPLETE, SIGN, DATE AND MAIL PROMPTLY IN THE
ENCLOSED ENVELOPE THE ACCOMPANYING PROXY SO THAT, IF YOU ARE UNABLE TO ATTEND
THE MEETING, YOUR SHARES MAY NEVERTHELESS BE VOTED.
By Order of the Board of Directors
/s/ Laidacker M. Seaberg
Laidacker M. Seaberg
President and Chief Executive Officer
PROXY STATEMENT
This Proxy Statement and the enclosed form of Proxy are being furnished in
connection with the solicitation of proxies for use at the Annual Meeting of
Stockholders of Midwest Grain Products, Inc. (the "Company") to be held on
Thursday, October 10, 2002, as set forth in the preceding Notice. It is expected
that this Proxy Statement and the enclosed form of Proxy will be mailed to
Stockholders commencing September 13, 2002.
GENERAL INFORMATION
The holders of outstanding shares of Common Stock and Preferred Stock of
the Company at the close of business on August 16, 2002 are entitled to notice
of and to vote at the Annual Meeting. The presence in person or by proxy of
persons entitled to vote a majority of the issued and outstanding stock of each
class of stock entitled to vote will constitute a quorum for the transaction of
business at the meeting. As of August 16, 2002, there were 8,090,894 shares of
Common Stock outstanding and 437 shares of Preferred Stock outstanding.
Generally, holders of Common and Preferred Stock each vote separately as a
class with respect to each matter that the class is authorized to vote on, with
each share of stock in each class being entitled to one vote. In connection with
the election of directors, the holders of Common Stock are entitled to vote on
the election of Group A directors and the holders of Preferred Stock are
entitled to vote on the election of Group B directors. The candidates for office
which receive the highest number of votes will be elected. Although no other
proposals are scheduled to come before the meeting, the affirmative vote of the
holders of a majority of the voting power represented at the meeting (or such
higher voting requirement as may be specified by law or the Company's Articles
of Incorporation) is required for approval of other proposals.
Abstentions and broker non-votes will be counted as present for purposes of
determining the existence of a quorum at the Annual Meeting. Abstentions will be
treated as shares present and entitled to vote for purposes of any matter
requiring the affirmative vote of a majority or other proportion of the shares
present and entitled to vote. With respect to shares relating to any proxy as to
which a broker non-vote is indicated on a proposal, those shares will not be
considered present and entitled to vote with respect to any such proposal. With
respect to any matter brought before the Annual Meeting requiring the
affirmative vote of a majority or other proportion of the outstanding shares of
a class, an abstention or non-vote will have the same effect as a vote against
the matter being voted upon.
Any stockholder giving a Proxy may revoke it at any time prior to its use
by executing a later dated Proxy or by filing a written revocation with the
Secretary of the Company. A stockholder may also revoke a Proxy by appearing at
the meeting and voting by written ballot. All shares represented by a Proxy in
the enclosed form that is properly executed and received in time for the meeting
and not revoked will be voted. If a choice is specified with respect to any
matter to be acted upon, the shares will be voted in accordance with the
specification so made. If no choice is specified, the Proxy will be voted FOR
each of the nominees named on the Proxy with respect to the election of
directors.
The principal executive offices of the Company are located at 1300 Main
Street, Atchison, Kansas 66002 and the Company's telephone number at that
address is (913) 367-1480.
ELECTION OF DIRECTORS
NOMINEES
One Group A Director and two Group B Directors are required to be elected
at the Annual Meeting. The holders of the Common Stock are entitled to vote for
the person nominated for the Group A position. The holders of Preferred Stock
are entitled to vote for the persons nominated for the Group B positions.
Michael R. Haverty has been nominated by the Board of Directors for election to
the Group A position for a term expiring at the Annual Meeting in 2005. Randall
M. Schrick and Laidacker M. Seaberg have been nominated by the Board of
Directors for election to the Group B positions for terms expiring at the Annual
Meeting in 2005. Messrs. Haverty, Schrick and Seaberg are now and have been
directors of the Company for more than the past two years. Each of the nominees
have consented to serve if elected. If for any reason any of the nominees should
not be available or able to serve, the Proxies will exercise discretionary
authority to vote for substitutes deemed by them to be in the best interests of
the Company.
GROUP A NOMINEE
(For a term expiring in 2005)
MICHAEL R. HAVERTY
Mr. Haverty, age 58, has been a director since October 1999. He is Chairman
of the Nominating Committee and a member of the Audit Review and Human
Resources Committees. Since January 1, 2001, he has been the Chairman,
President and CEO of Kansas City Southern. From 1995 until January 1, 2001,
he was Executive Vice President of Kansas City Southern. He also has served
as President and Chief Executive Officer of The Kansas City Southern
Railway Company since 1995. Mr. Haverty previously served as Chairman and
Chief Executive Officer of Haverty Corporation from 1993 to May, 1995,
acted as an independent executive transportation adviser from 1991 to 1993
and was President and Chief Operating Officer of The Atchison, Topeka and
Santa Fe Railway Company from 1989 to 1991. He is also a director of Kansas
City Southern Industries and Grupo Transportacion Ferroviaria Mexicana,
S.A. de C.V.
2
GROUP B NOMINEES
(For terms expiring in 2005)
RANDALL M. SCHRICK
Mr. Schrick, age 52, has been a director since 1987. He joined the Company
in 1973 and has been Vice President of Manufacturing and Engineering since
May 2002. From July, 1992 to May, 2002, he was Vice President of
Operations, and from 1984 to July, 1992, he was Vice President and General
Manager of the Pekin plant. From 1982 to 1984, he was the Plant Manager of
the Pekin plant. Prior to 1982, he was Production Manager at the Atchison
plant.
LAIDACKER M. SEABERG
Mr. Seaberg, age 56, has been a director since 1979. He joined the Company
in 1969 and has served as the President of the Company since 1980 and as
Chief Executive Officer since September, 1988. He is the son-in-law of Mr.
Cray, Jr.
OTHER
GROUP A DIRECTORS
LINDA E. MILLER
Ms. Miller, age 49, has been a director since June, 2000. Her present term
expires in 2003. She is a member of the Audit Review Committee and the
Human Resources Committee. She is an independent marketing consultant and
has been a Program Director of the University of Kansas School of
Journalism since 1996. She was Marketing Director of the American Business
Women's Association, Kansas City, Missouri from 1990 to 1996.
3
JAMES A. SCHLINDWEIN
Mr. Schlindwein, age 73, has been a director since June, 2001 when he was
appointed to fill the unexpired term of a member who previously resigned.
His present terms expires in 2004. He is a member of the Audit and Human
Resources Committees. He is a retired senior executive of SYSCO
Corporation. He also serves on the board of directors of Imperial Sugar
Company.
DARYL R. SCHALLER, Ph.D.
Dr. Schaller, age 58, has been a director since October, 1997. His present
term expires in 2003. He is Chairman of the Human Resources Committee and a
member of the Audit Review and Nominating Committees. He has been Vice
President of Research and Development of International Multifoods Corp., of
Minneapolis, Minnesota, since November 13, 2001. Prior thereto, he was
president of Schaller Consulting, a consulting firm, from 1996. He retired
from Kellogg Co. in 1996 after 25 years of service. He served Kellogg as
its Senior Vice President--Scientific Affairs from 1994 until 1996, and
previously was Senior Vice President--Research, Quality and Nutrition for
Kellogg.
OTHER
GROUP B DIRECTORS
MICHAEL BRAUDE
Mr. Braude, age 66, has been a director since 1991. His present term
expires in 2003. He is a member of the Audit, Human Resources and
Nominating Committees. Since November, 2000, he has been Executive Vice
President of Country Club Bank, Kansas City, Missouri. Previously, from
1984 until his retirement in November, 2000, he was the President and Chief
Executive Officer of the Kansas City Board of Trade, a commodity futures
exchange. Prior to 1984, he was Executive Vice President and a Director of
American Bank & Trust Company of Kansas City. Mr. Braude is a director of
NPC International, Inc., an operator of numerous Pizza Hut and other quick
service restaurants throughout the United States, Country Club Bank, Kansas
City, Missouri, a trustee of the University of Midwest
4
Research Institute and a trustee of the Kansas Public Employees Retirement
System.
CLOUD L. CRAY, JR.
Mr. Cray, age 79, has been a director since 1957, and has served as
Chairman of the Board since 1980. His present term expires in 2004. He
served as Chief Executive Officer from 1980 to September, 1988, and has
been an officer of the Company and its affiliates for more than 30 years.
ROBERT J. REINTJES
Mr. Reintjes, age 70, has been a director since 1986. He is Chairman of the
Audit Review Committee and a member of the Nominating and Human Resources
Committees. His present term expires in 2004. He has served as president of
Geo. P. Reintjes Co., Inc. of Kansas City, Missouri, for the past 24 years.
Geo. P. Reintjes Co., Inc. is engaged in the business of refractory
construction. He is a director of Commerce Bank of Kansas City.
CERTAIN INFORMATION CONCERNING THE BOARD AND ITS COMMITTEES
The Board has three standing committees: Audit, Nominating and Human
Resources.
Non-employee directors are paid a retainer at the rate of $2,500 quarterly,
$625 for attendance at each meeting of the Board, and $312.50 for attendance at
each meeting of a committee of the Board. Employee directors receive a fee of
$437.50 for attendance at each meeting of the Board of Directors. Pursuant to a
stockholder approved plan, each non-employee director also receives an automatic
grant of an option to purchase 1,000 shares of the Company's Common Stock on the
first business day following each annual meeting of stockholders at a price
equal to the fair market value of the Common Stock on that date. Options become
exercisable on the 184th day following the date of grant and expire on the
sooner of (a) ten years from the date of grant, (b) three years following
termination of the director's office due to retirement following age 70, (c) one
year following termination of the director's office due to death or (d) 90 days
following the date of the termination of the director's term of office for any
other reason.
During the fiscal year ended June 30, 2002, the Board met five times, the
Audit Review Committee met three times, the Human Resources Committee met three
times and the Nominating Committee met once. Each director attended at least 75%
of the meetings of the Board and the Committees of which the director was a
member.
5
The Audit Review Committee reviews the process involved in the preparation
of the Company's annual audited financial statements and recommends to the Board
of Directors an independent accountant to conduct that audit and to review the
Company's quarterly financial statements. It also reviews and makes
recommendations with regard to the process involved in the Company's
implementation of its conflict of interest and business conduct policy. In
connection with this work, the Committee annually reviews: (a) the adequacy of
the Audit Review Committee's written Charter, that has been adopted by the Board
of Directors; (b) the independence and financial literacy of each member of the
Audit Review Committee; (c) the plan for and scope of the annual audit; (d) fees
proposed by the Company's auditors; (e) certain matters relating to the
independence of the Auditor; (f) certain matters required to be discussed with
the Auditors relative to the quality of the Company's accounting principles; (f)
the audited financial statements and results of the annual audit; (g)
recommendations of the Auditors with respect to internal controls and other
financial matters; (h) significant changes in accounting principles that are
brought to the attention of the Committee; and (i) various other matters that
are brought to the attention of the Committee. The Board of Directors has
determined that each Audit Committee member is "independent", as that term is
defined in Rule 4200 (a) (15) of the National Association of Securities Dealers'
listing standards.
The Human Resources Committee recommends to the Board of Directors the
compensation of all officers and employees who report directly to the Chief
Executive Officer. The Committee approves a bonus system for various key
employees and reviews the scope and type of compensation plans for management
personnel. The Committee administers the Company's Executive Stock Bonus Plan,
the Salaried and Senior Stock Incentive Plans and the Directors' Stock Option
Plans, and also serves as an executive search committee.
The Nominating Committee recommends to the Board of Directors the
qualifications for new director nominees, candidates for nomination and policies
concerning compensation and length of service. The Committee considers written
recommendations from stockholders concerning these subjects and suggests that
they may be addressed to the Secretary of the Company. Recommendations for
director nominees should provide pertinent information concerning the
candidates' background and experience.
OTHER MATTERS
A Proxy confers discretionary authority with respect to the voting of
shares represented thereby on any other business that may properly come before
the meeting as to which the Company did not have prior notice to July 31, 2002.
The Board of Directors is not aware that any such other business is to be
presented for action at the meeting and does not itself intend to present any
such other business. However, if any such other business does come before the
meeting, shares represented by Proxies given pursuant to this solicitation will
be voted by the persons named in the Proxy in accordance with their best
judgment. A Proxy also confers discretionary authority on the persons named to
approve minutes of last year's Annual Meeting, to vote on matters incident to
the conduct of the meeting and to vote on the election of any person as a
director if a nominee herein named should decline or become unable to serve as a
director for any reason.
6
AUDIT COMMITTEE REPORT
The Audit Committee has reviewed and discussed with management the audited
financial statements for the fiscal year ended June 30, 2002; has discussed with
the independent auditors the matters required to be discussed by SAS 61
(Codification of Statements on Auditing Standards, AU ss. 380), as modified or
supplemented; has received the written disclosures and letter from the
independent auditors required by Independence Standards Board Standard No. 1, as
may be modified or supplemented; and has discussed with the independent auditors
the auditors' independence. Based on such review and discussions, the Audit
Committee recommended to the Board of Directors that the audited financial
statements for the fiscal year ended June 30, 2002 be included in the Company's
Annual Report on Form 10-K for filing with the Securities and Exchange
Commission.
This report is made over the name of each continuing member of the Audit
Committee at the time of such recommendation, namely Robert J. Reintjes
(Chairman), Michael Braude, Michael R. Haverty, Linda E. Miller, Daryl R.
Schaller, Ph. D. and James A. Schlindwein.
AUDIT AND CERTAIN OTHER FEES PAID ACCOUNTANTS
The aggregate fees billed the Company by its principal accountant, BKD,
LLP, for the fiscal year ended June 30, 2002 for (i) professional services
rendered for the audit of the Company's annual financial statements and the
reviews of the financial statements included in the Company's reports on Form
10-Q during such fiscal year, (ii) financial information systems design and
implementation as described in paragraph (c)(4)(ii)of Rule 2-01 of Regulation
S-X during such year and (iii) for all other services, were as set forth in the
following table. The Audit Committee has considered whether the provision of
such services is compatible with maintaining the independence of BKD, LLP.
Type of Fee Amount
----------- ------
Audit Fees $116,750
Financial Information Systems
Design and Implementation Fees 0
All Other Fees $ 81,615
7
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning compensation for each
of the years ending June 30, 2002, 2001, and 2000 awarded to, earned by, or paid
to the five most highly compensated executive officers of the Company for
services rendered in each of those years:
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
------------------------------------------ --------------
Securities
Other Annual Underlying All Other
Name and Year Salary Bonus Compensation Options Compensation
Principal Position ($) (1) ($) ($) (#) ($) (1)
- ------------------------------ -------- ----------- ----------- --------------- -------------- ---------------
Laidacker M. Seaberg 2002 $391,140 $22,647 --- 24,000 (2) $15,292
President and Chief 2001 369,000 37,740 --- 24,000 (3) 15,308
Executive Officer 2000 357,750 20,050 --- 24,000 14,402
Michael J. Trautschold 2002 196,350 11,369 --- 22,000 15,292
Executive Vice President 2001 148,402 14,960 --- 12,000 ---
Marketing and Sales 2000 --- --- --- --- ---
Robert G. Booe 2002 179,091 10,993 --- 12,000 (2) 15,292
Vice President- 2001 171,790 17,633 --- 12,000 (3) 15,308
Finance and 2000 166,757 9,346 --- 12,000 14,402
Administration and Chief
Financial Officer
Randy M. Schrick 2002 177,819 9,848 --- 12,000 (2) 15,292
Vice President of 2001 170,162 17,466 --- 12,000 (3) 15,308
Manufacture and 2000 165,966 --- 12,000 14,402
Engineering 9,032
Sukh Bassi, Ph.D. 2002 176,960 9,375 --- 7,000 (2) 15,292
Vice President- 2001 170,154 17,465 --- 7,000 (3) 15,308
New Products 2000 166,757 9,346 --- 12,000 14,402
Innovation/Technology
- -------------------
(1) Consists of the amount of the Company's contributions to the Company's
Employee Stock Ownership Plans and 401(k) plan allocated to the
accounts of each executive officer for the years indicated.
(2) These options replace options that were cancelled on December 10,
2001. For more information, refer to the Option Grants in Fiscal 2002
and 10-Year Option/SAR Repricing tables below.
(3) These options replace options that were cancelled on December 7, 2000.
For more information, refer to the Option Grants in Fiscal 2002 and
10-Year Option/SAR Repricing tables below.
8
STOCK OPTIONS
The following table contains information concerning the grant of stock
options under the Company's Stock Incentive Plan of 1996 to the Named Executive
Officers during the fiscal year ended June 30, 2002.
OPTION GRANTS IN FISCAL 2002
Potential
Realizable Value
at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term
----------------------------------------------------- ------------------
Number of % of Total
Securities Options
Underlying Granted to
Options Employees Exercise
Granted in Fiscal Price Expiration
Name (#) Year ($/Sh) Date 5%($) 10%(4)
---- --- ---- ------ ---- ----- ------
Laidacker M. Seaberg 24,000 21.8% $12.89 6/12/12 $137,280 $426,960
Michael J. Trautschold 22,000 20.0 12.89 6/12/12 125,840 391,380
Robert G. Booe 12,000 10.9 12.89 6/12/12 68,640 213,480
Randy M. Schrick 12,000 10.9 12.89 6/12/12 68,640 213,480
Sukh Bassi, Ph.D. 7,000 6.4 12.89 6/12/12 40,040 124,520
- --------------------
(1) These options were granted in connection with the cancellation on December
10, 2001 of options granted in December 1996. See "Report of Human
Resources Committee."
(2) Options granted have an exercise price equal to $12.89. This was fair
market value of the Common Stock on June 12, 2002. The options vest in one
year. Subject to provisions of the 1996 Stock Incentive Plan providing for
earlier termination upon the occurrence of certain events, the options
expire ten years after their respective dates of grant. Optionees may
provide for withholding taxes on those options that are not incentive
options under Section 422 of the Internal Revenue Code by delivering
previously issued shares of stock or directing the Company to withhold
shares otherwise issuable upon exercise of such options.
9
TEN-YEAR OPTION/SAR REPRICING
The following table sets forth for all executive officers of the Company
all option repricings during the period July 1, 1992 through June 30, 2002.
During such period, there were two repricings with respect to the options set
forth below. See "Report of the Human Resources Committee - Stock Incentive Plan
of 1996."
Length of
Number of Original
Securities Market Price Exercise Option Term
Underlying of Stock At Price At Time Remaining At
Options/SARs Time of of Repricing New Date of
Repriced or Repricing or or Amendment Exercise Repricing Or
Name (Title) Date Amended (#) Amendment ($) ($) Price ($) Amendment
------------ ---- ----------- ------------- -- --------- ---------
Ladd M. Seaberg (1) 12/7/00 24,000 $ 9.3125 $14.00 $ 9.3125 5.1 years
12/10/01 24,000 12.89 15.25 12.89 5.0 years
Robert G. Booe (1) 12/7/00 12,000 9.3125 14.00 9.3125 5.1 years
12/10/01 12,000 12.89 15.25 12.89 5.0 years
Randall M. Schrick (1) 12/7/00 12,000 9.3125 14.00 9.3125 5.1 years
12/10/01 12,000 12.89 15.25 12.89 5.0 years
Dr. Sukh Bassi (1) 12/7/00 7,000 9.3125 14.00 9.3125 5.1 years
12/10/01 7,000 12.89 15.25 12.89 5.0 years
Gerald Lasater (Vice 12/7/00 7,000 9.3125 14.00 9.3125 5.1 years
President) 12/10/01 7,000 12.89 15.25 12.89 5.0 years
(1) See Summary Compensation Table for titles of current Named Executive
Officers.
10
OPTION EXERCISES AND YEAR END HOLDINGS
The following table provides information, with respect to the Named
Executive Officers, concerning the exercise of options during the fiscal year
ended June 30, 2002, and unexercised options held as of the end of fiscal 2002.
AGGREGATED OPTION EXERCISES IN FISCAL 2001
AND FY-END OPTION VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Shares FY-End (#) FY-End ($)
Acquired on Value Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable
---- ------------ --- ------------- -------------
Laidacker M. Seaberg --- --- 60,000/60,000 $90,765/$131,415
Michael J. Trautschold --- --- 3,000/31,000 $11,032/$57,077
Robert G. Booe --- --- 30,000/30,000 $45,382/$65,707
Randall M. Schrick --- --- 30,000/30,000 $45,382/$65,707
Dr. Sukh Bassi --- --- 23,750/21,250 $45,785/$50,716
PERFORMANCE OF THE COMPANY'S COMMON STOCK
The following performance graph compares the performance of the Company's
Common Stock during the period beginning June 30, 1997 and ending June 30, 2002,
to the Center for Research in Security Prices of the University of Chicago
School of Business ("CRSP") index for the NASDAQ Stock Market (the "NASDAQ
COMPOSITE" index consisting of US companies) and a peer group CRSP index
consisting of active NASDAQ stocks of US processors of food and kindred products
having SIC codes between 2000 - 2099 (the "NASDAQ Food" index) for the same
period. The number of companies in the NASDAQ Food index varies from period to
period but consisted of 41 companies at the end of June 2002. The graph assumes
a $100 investment in the Company's Common Stock and in each of the indexes at
the beginning of the period and a reinvestment of dividends paid on such
investments throughout the period.
11
VALUE OF $100 INVESTMENTS
ASSUMING REINVESTMENT OF DIVIDENDS AT JUNE 30, 1997
AND AT EACH SUBSEQUENT JUNE 30
[GRAPH OMITTED]
1997 1998 1999 2000 2001 2002
----------- ----------- ----------- ----------- ------------ ----------
MWGP $100.0 $109.4 $ 84.0 $ 62.7 $ 85.4 $100.6
------------------------------------- ----------- ----------- ----------- ----------- ------------ ----------
NASDAQ FOOD $100.0 $131.6 $189.1 $279.6 $151.6 $103.3
------------------------------------- ----------- ----------- ----------- ----------- ------------ ----------
NASDAQ COMPOSITE $100.0 $122.6 $126.3 $122.0 $156.8 $204.6
------------------------------------- ----------- ----------- ----------- ----------- ------------ ----------
12
REPORT OF THE HUMAN RESOURCES COMMITTEE
HUMAN RESOURCES COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. Executive
compensation is based primarily upon recommendations made to the Board of
Directors by the Company's Human Resources Committee (the "Committee"). The
Committee for the year ended June 30, 2002, consisted of Daryl R. Schaller, Ph.
D. (Chairman), Michael R. Haverty, Robert J. Reintjes, Linda E. Miller, Michael
Braude and James A. Schlindwein. All of the members of the Committee are
non-employee directors of the Company. The Committee recommends to the Board of
Directors compensation and compensation plans for officers and employees who
report directly to the Chief Executive Officer. The recommendations are acted
upon by the full board which includes Messrs. Seaberg and Schrick, who are two
of the five highest paid officers of the Company.
This report is provided by the Committee to assist stockholders in
understanding the Committee's philosophy in establishing the compensation of the
Chief Executive Officer and all other Executive Officers of the Company for the
year ended June 30, 2002.
COMPENSATION PHILOSOPHY. Historically, executive compensation has been
designed to link rewards with business results and stockholder returns
consistent with (a) the executive's level of responsibility, (b) compensation
paid to the executive in the prior year, (c) the Company's performance for the
year and the prior year, (d) the executive's individual performance for the year
and the prior year, (e) salary levels for executives in comparable positions in
comparable enterprises, (f) inflation and (g) a variety of other factors. The
components of Executive Compensation which reflect this philosophy consist of
(i) annual base salary, (ii) annual cash bonuses, (iii) annual stock bonuses,
(iv) stock options and (v) equity based retirement compensation, which is
reflected in the Company's Employee Stock Ownership Plan and 401(k) Plan. In
formulating its compensation recommendations, the Committee considers
information and recommendations provided by management and by Hay Management
Consultants, a nationally known and recognized firm of management consultants.
BASE SALARY. The past practice of the Committee has been to establish base
salaries of all executives prior to the beginning of the year based on the
various factors described in the preceding paragraph. In 2002, the Committee
increased base salaries to the levels indicated in the Summary Compensation
Table to keep salary levels reasonably consistent with inflation and salary
levels for executives in comparable positions in comparable enterprises. These
increases were based in large part on studies conducted by Hay Management
Consultants.
ANNUAL CASH BONUSES. Annual cash bonuses are paid primarily pursuant to a
Cash Bonus Plan. Under that plan, each executive, along with all other nonunion
personnel, become entitled to cash bonuses, payable annually, of up to 25% of
each employee's base salary to the extent that certain Company performance
targets are met. In fiscal 2002, some of the targets were met, and this resulted
in average bonuses for all covered employees of between 1.37% and 7.89%.
The Committee has also authorized a $50,000 bonus pool that may be paid at
the discretion of the Chief Executive Officer to reward superior performance by
any employee of the Company other than the CEO.
13
STOCK INCENTIVE PLAN OF 1996. In January, 1996, the Board of Directors,
upon recommendation of the Committee, adopted the Stock Incentive Plan of 1996.
The Plan was approved by stockholders at the Annual Meeting in 1996. The Board
and the Committee took this action due to a recognized need to provide medium
term incentives for the retention and motivation of Senior Executives consistent
with current needs to conserve cash. Since that action, the Committee has
granted options to Senior Executives on an annual basis.
Since options were first granted in 1996 under the Stock Incentive Plan,
the market price of the Company's Common Stock has declined due in large part to
competitive market forces and government policies beyond management's control.
By fiscal 2001, all of the outstanding options held by senior management were
out of the money and provided little value as an incentive. Further,
substantially all of the shares available for issue under the Stock Incentive
Plan were subject to options issued prior to fiscal 2001. Out of concern about
market overhang, the Human Resources Committee and the Board of Directors
determined not to seek approval of a plan amendment or a new plan authorizing
issuance of additional shares. However, the Human Resources Committee and the
Board of Directors believe that stock options remain an important component of
the Company's compensation program and determined that it would be in the best
interests of the Company to restore incentive by granting options to certain
members of senior management who agreed to cancel certain options that had been
granted to them previously. In each of fiscal 2001 and 2002, the Company agreed
that such persons who cancelled their options would be granted a new option one
day and six months after cancellation for a like number of shares at a price
equal to the greater of fair market value on the date of cancellation or fair
market value on the new grant date. Other terms of the new options would be
substantially the same as the cancelled options except for the expiration date.
Because the old options were fully vested, the new options granted in fiscal
2001 were fully exercisable when granted. In fiscal 2002, the Committee
determined to impose a one year vesting period on options granted in fiscal
2002. On December 10, 2001, the Chief Executive Officer and each of the named
executive officers agreed to cancel options granted in December 1996 with an
exercise price of $15.25 per share; on June 12, 2002, the Company granted such
persons options for a like number of shares at an exercise price of $12.89 per
share, which was the closing market price of the Company's Common Stock on June
12, 2002. Additional information about these options may be found in tables set
forth at pages 8 and 9 herein.
EQUITY BASED RETIREMENT COMPENSATION. The final component of executive
compensation consists of equity based retirement compensation through
participation in the Company's employee stock ownership plans for salaried and
certain hourly employees ("Salaried ESOP") and 401(k) Plan. The amount of the
Company's contributions to the Salaried ESOP and the 401(k) Plan is determined
by the Board each year based upon the recommendation of the Committee. The
Committee bases its recommendation primarily upon Company performance for the
year.
Under the Salaried ESOP, amounts contributed by the Company are invested in
shares of the Company's Common Stock. Shares purchased are allocated to
participant accounts in proportion to the participant's eligible compensation
(as defined). Generally, accounts are distributed to participants who have
completed at least ten years of service upon death, permanent disability or
retirement. In fiscal 2002, the Company contributed an amount equal to
14
4-1/2% of eligible compensation for the Salaried ESOP. This is the same amount
as in the prior year.
The Company has maintained a 401(k) Plan for the benefit of employees for
several years but prior to fiscal 2001 had not heretofore made a contribution to
it. During fiscal 2001, the Board determined to reduce the Company's
contribution to the Salaried ESOP and to contribute an amount equal to the
reduction to the 401(k) Plan. Five years service is required for full vesting in
the amount of the Company contribution. In fiscal 2002, the Company contributed
an amount equal to 4-1/2% of eligible compensation to the 401(k) Plan.
Compensation of the Chief Executive Officer for fiscal 2002. All of the
components of fiscal 2002 compensation of the Chief Executive Officer were
determined in accordance with the criteria described above for other Senior
Executives.
This report is being made over the names of Daryl R. Schaller, Ph. D.
(Chairman), Michael R. Haverty, Robert J. Reintjes, Linda E. Miller, Michael
Braude and James A. Schlindwein, who are the continuing members of the Committee
which passed on Executive Compensation for fiscal 2002.
15
PRINCIPAL STOCKHOLDERS
The following table sets forth as of July 1, 2002, the number of shares
beneficially owned and the percentage of ownership of the Company's Preferred
Stock and Common Stock by (i) each person who is known by the Company to own
beneficially more than 5% of either class of the Company's capital stock
outstanding, (ii) each director of the Company, (iii) each of the executive
officers named in the Summary Compensation Table and (iv) all directors and
executive officers of the Company as a group.
Shares Beneficially Owned (a)
------------------------------------------------------------------
Common Stock Preferred Stock
Stockholder No. of Shares % No. of Shares %
----------- ------------- --- ------------- ---
Sukh Bassi, Ph. D.(b)(c).................. 39,444 *
Robert G. Booe (b)(d)(e).................. 93,955 1.15
Michael Braude (b)........................ 16,936 *
Brian Cahill (d).......................... 24,176 *
Cloud L. Cray, Jr.(b)(f)(g)............... 2,206,167 27.27 333 76.2
Richard B. Cray (f)(h).................... 32,675 * 334 76.4
Michael R. Haverty (b).................... 12,859 *
Linda E. Miller (b)....................... 5,194 *
Robert J. Reintjes (b)(i)................. 23,595 *
Dave Rindom (d)(j)........................ 9,655 *
Daryl Schaller (b)........................ 11,817 *
Randy M. Schrick (b)(d)(k)................ 48,989 *
James Schlindwein......................... 2,205
Laidacker M. Seaberg (b)(d)(f)(l)......... 565,445 6.99 404 92.4
Michael J. Trautschold (b)................ 3,197 *
Cray Family Trust (f)..................... --- --- 333 76.2
Trustees of the Company's ESOPs, (Robert G.
Booe, Brian Cahill, Dave Rindom, Randy
Schrick and
Ladd Seaberg)(d).......................... 765,097 9.5
All Executive Officers and Directors as a
Group of 18 (b)(m)........................ 3,947,568 48.8 405 92.6
- --------------
* less than 1%
(a) For the purposes of the table, a person is deemed to be a beneficial owner
of shares if the person has or shares the power to vote or to dispose of
them. Except as otherwise indicated in the table or the footnotes below,
each person had sole voting and investment power over the shares listed in
the beneficial ownership table and all stockholders shown in the table as
having beneficial ownership of 5% or more of either of the classes of stock
had business addresses at 1300 Main Street, Atchison, Kansas 66002, as of
July 1, 2002. Stockholders disclaim beneficial ownership in the shares
described in the footnotes as being "held by" or "held for the benefit of"
other persons.
16
(b) The table includes shares which may be acquired pursuant to stock options
granted under the Company's stock option plans that become exercisable on
or before September 1, 2002. These consist of options held by three
non-employee directors (Messrs. Braude, Cray and Reintjes) to purchase
6,000 shares each, one non-employee director (Mr. Schaller) to purchase
5,000 shares, one non-employee director (Mr. Haverty) to purchase 3,000
shares, one non-employee director (Ms. Miller) to purchase 2,000 shares,
and one non-employee director (Mr. Schlindwein) to purchase 1,000 shares,
options held by Messrs. Bassi, Booe, Schrick, Seaberg and Trautschold to
purchase 23,750, 30,000, 30,000, 60,000 and 3,000 shares, respectively, and
options held by all executive officers and directors as a group to purchase
250,910 shares.
(c) Includes 440 shares held by members of Dr. Bassi's family.
(d) The Company's Employee Stock Ownership Plans (ESOPs) hold for the benefit
of participants 765,097 shares of Common Stock, all of which are attributed
in the table to each of the five trustees, who are the same for each Plan.
The trustees are obligated to vote the shares which are allocated to
participants in accordance with instructions given by such participants,
all of which were allocated at July 1, 2002. Any unallocated shares are
voted by the trustees. The trustees, and the number of shares allocated to
their accounts are as follows: Mr. Seaberg (69,890 shares); Mr. Booe
(38,319 shares); Mr. Cahill (12,512 shares); Mr. Rindom (8,074 shares); and
Mr. Schrick (24,238 shares). A total of 139,933 shares are allocated to the
accounts of all other officers and directors. The number and percentage of
ownership shown after the names of each of the Trustees in the table above
do not include any of the 765,097 shares or any of the shares allocated to
their individual accounts. Accordingly, the aggregate beneficial ownership
for each of the Trustees may be deemed to be the individual amounts shown,
plus 765,097 shares and 9.5%.
(e) Includes 40,000 shares held by Mr. Booe's wife.
(f) The Cray Family Trust holds 333 shares of Preferred Stock which are
attributed in the table to the trustees, who share the power to vote and
dispose of such shares. The trustees are Mr. Cray, Jr., Mr. Seaberg and Mr.
Richard B. Cray.
(g) Includes 194,763 shares of Common Stock held by the Cray Medical Research
Foundation with respect to which Mr. Cray, Jr. is a director, 570,765
shares of Common Stock held by other family trusts with respect to which
Mr. Cray, Jr. or his spouse is a trustee and 32,000 shares held by the
Cloud L. Cray Foundation.
(h) Includes 333 shares of Preferred Stock held by the Cray Family Trust and
32,000 shares of Common Stock held by a foundation with respect to which
Mr. Richard B. Cray is a Trustee.
(i) Includes 6,590 shares held by Mr. Reintjes' wife.
(j) Includes 3,103 shares held by a trust for the benefit of Mr. Rindom's wife.
(k) Includes 2,084 shares held by members of Mr. Schrick's family.
17
(l) Includes 107,420 shares held by Mr. Seaberg's wife.
(m) Includes shares discussed under notes (a) through (l) as well as shares
held by members of the families of officers not listed in the table.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who own more than 10% of the
Company's Common Stock, to file reports of ownership and changes in ownership
with the SEC and NASDAQ. Executive officers, directors and greater-than-10%
beneficial owners are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file. Based solely on a review of the
copies of such forms furnished to the Company, the Company believes that during
fiscal 2002 all of its executive officers, directors and greater-than-10%
beneficial owners complied with the Section 16(a) filing requirements except
that Dr. Sukh Bassi failed to timely report on Form 4 two transactions which
occurred on May 21, 2002; these were reported on a Form 5 filed on August 14,
2002.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected the firm of BKD, LLP as independent
certified public accountants to audit the books, records and accounts of the
Company for 2002. The selection was made upon the recommendation of the Audit
Review Committee, which, at the time of such recommendation, consisted of Mr.
Reintjes, Chairman, Ms. Miller and Messrs. Braude, Haverty, Schaller and
Schlindwein. BKD, LLP has audited the Company's books annually since 1958.
Representatives of BKD, LLP will be present at the stockholders' meeting.
They will have the opportunity to make a statement and will be available to
respond to appropriate questions.
PROXY SOLICITATIONS
The cost of soliciting proxies will be borne by the Company. The Company
will reimburse brokers, banks or other persons for reasonable expenses in
sending proxy material to beneficial owners. Proxies may be solicited through
the mail and through telephonic or telegraphic communications to, or by meetings
with, stockholders or their representatives by directors, officers and other
employees of the Company who will receive no additional compensation therefor.
Stockholders who intend to present proposals for inclusion in the Company's
Proxy Statement for the next Annual Meeting of Stockholders on October 9, 2003
must forward them to the Company at 1300 Main Street, Box 130, Atchison, Kansas
66002, Attention: Marta L. Myers, Corporate Secretary, so that they are received
on or before May 17, 2003. In addition, proxies solicited by management may
confer discretionary authority to vote on matters which are not included in the
proxy statement but which are raised at the Annual Meeting by stockholders,
unless the Company receives written notice of the matter on or before July 30,
2003, at the above address.
18
HOUSEHOLDING
Only one copy of the Company's Annual Report and Proxy Statement has been
sent to multiple stockholders of the Company who share the same address and last
name, unless the Company has received contrary instructions from one or more of
those stockholders. This procedure is referred to as "householding." In
addition, the Company has been notified that certain intermediaries, i.e.,
brokers or banks, will household proxy materials. The Company will deliver
promptly, upon oral or written request, a separate copy of the Annual Report and
Proxy Statement to any stockholder at the same address. If you wish to receive a
separate copy of the Annual Report and Proxy Statement, you may write to the
Corporate Secretary of the Company at Midwest Grain Products, 1300 Main Street,
P.O . Box 130, Atchison, Kansas 66002. You can contact your broker or bank to
make a similar request. Stockholders sharing an address who now receive multiple
copies of the Company's Annual Report and Proxy Statement may request delivery
of a single copy by writing or calling the Company at the above address or by
contacting their broker or bank, provided they have determined to household
proxy materials.
By Order of the Board of Directors
/s/ Laidacker M. Seaberg
Laidacker M. Seaberg
President and Chief Executive Officer
September 13, 2002
19
MIDWEST GRAIN PRODUCTS, INC.
[Company Logo]
1300 Main street, P.O. Box 130
Atchison, Kansas 66002
Phone 913-367-1480
www.midwestgrain.com
[Logo] MIDWEST GRAIN PRODUCTS, INC. PROXY
1300 Main Street, Atchison, Kansas 66002 PREFERRED STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Cloud L. Cray, Jr., Laidacker M. Seaberg and
Robert G. Booe, or any of them, each with full power to appoint his substitute,
proxies to vote, in the manner specified on the reverse hereof, all of the
shares of Preferred Stock of Midwest Grain Products, Inc. held by the
undersigned at the Annual Meeting of stockholders to be held on October 10,
2002, or at any adjournment thereof.
The undersigned has received the Company's Annual Report for 2002, and its
Proxy Statement.
This Proxy is revocable and it shall not be voted if the undersigned is
present and voting in person.
__________________________________
Stockholder's Signature
__________________________________
Stockholder's Signature
Dated__________________________________
Please sign exactly as you name(s)
appear above. Joint owners should
each sign. Executors, trustees,
custodian, etc., should indicate
the capacity in which they are
signing.
PLEASE RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE.
(Continued from other side)
The Board of Directors Recommends a vote FOR the following proposals:
1. Election of two Group B Directors for terms expiring in 2005. The Board of
Directors has nominated:
Randall M. Schrick and Laidacker M. Seaberg
[] FOR both Nominees [] AUTHORITY WITHHELD from both Nominees
[] AUTHORITY WITHHELD from the following Nominee:____________________
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED PROXY IS RETURNED, THE SHARES
WILL BE VOTED "FOR" BOTH NOMINEES UNDER PROPOSAL 1.
BE SURE TO SIGN AND DATE THE REVERSE SIDE OF THIS CARD.
[Logo] MIDWEST GRAIN PRODUCTS, INC. PROXY
1300 Main Street, Atchison, Kansas 66002 COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Cloud L. Cray, Jr., Laidacker M. Seaberg and
Robert G. Booe, or any of them, each with full power to appoint his substitute,
proxies to vote, in the manner specified on the reverse hereof, all of the
shares of Preferred Stock of Midwest Grain Products, Inc. held by the
undersigned at the Annual Meeting of stockholders to be held on October 10,
2002, or at any adjournment thereof.
The undersigned has received the Company's Annual Report for 2002, and its
Proxy Statement.
This Proxy is revocable and it shall not be voted if the undersigned is
present and voting in person.
__________________________________
Stockholder's Signature
__________________________________
Stockholder's Signature
Dated__________________________________
Please sign exactly as you name(s)
appear above. Joint owners should
each sign. Executors, trustees,
custodian, etc., should indicate
the capacity in which they are
signing.
PLEASE RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE.
(Continued from other side)
The Proxies are hereby given the following authority:
1. Election of one Group A Directors for term expiring in 2005. The Board of
Directors has nominated: Michael R. Haverty
[] FOR Nominee [] AUTHORITY WITHHELD from Nominee
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED PROXY IS RETURNED, THE
SHARES WILL BE VOTED "FOR" THE NOMINEE UNDER PROPOSAL 1.
BE SURE TO SIGN AND DATE THE REVERSE SIDE OF THIS CARD.
September 13, 2002
TO: Participants in the Midwest Grain Products, Inc.
Employee Stock Purchase Plan
Provisions of the Midwest Grain Products, Inc. Employee Stock Purchase Plan
(the "Plan") entitle participants to instruct the Trustee of the Plan as to the
voting of Midwest Grain Products, Inc. Common Stock allocated to the accounts of
participants. Accordingly, please find enclosed a form of instruction card that
will permit you to direct the Trustee as to the voting of Common Stock allocated
to your accounts in the Plan with respect to proposals to be acted upon at the
Annual Meeting of Stockholders of the Company to be held on October 10, 2002.
We are also enclosing a copy of the Company's Annual Report for 2002 and
its Proxy Statement, unless you are being mailed one as a record holder of
Common Stock.
Please promptly complete and sign the instruction card and return it in the
enclosed envelope.
Thank you.
Very truly yours,
s/Laidacker M. Seaberg
Laidacker M. Seaberg
President and
Chief Executive Officer
MIDWEST GRAIN PRODUCTS, INC. EMPLOYEE STOCK PURCHASE PLAN
C/O Midwest Grain Products, Inc.
1300 Main Street, Atchison, Kansas 66002
INSTRUCTIONS FOR THE VOTING OF MIDWEST GRAIN PRODUCTS, INC. COMMON STOCK
The undersigned hereby instructs United Missouri Bank of Kansas City, N.A.
as Trustee of the Midwest Grain Products, Inc. Employee Stock Purchase Plan (the
"ESPP"), to vote, in the manner specified on the reverse hereof, all of the
shares of Common Stock of Midwest Grain Products, Inc. held by the ESPP and
allocated to the account of the undersigned at the Annual Meeting of
Stockholders to be held on October 10, 2002, or at any adjournment thereof.
The undersigned has received the Company's Annual Report for 2002 and its
Proxy Statement.
___________________________
Accountholder's Signature
Accountholder Dated:_____________________
Number of Shares Allocated to Account:_____________________
PLEASE RETURN THIS INSTRUCTION CARD PROMPTLY IN THE ACCOMPANYING ENVELOPE.
(Continued from other side)
The Board of Director Recommends a vote FOR the following proposals:
1. Election of one Group A Director for term expiring in 2005. The Board of
Directors has nominated: Michael R. Haverty
[] FOR Nominee [] AUTHORITY WITHHELD from Nominee
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED INSTRUCTION CARD IS RETURNED,
THE SHARES WILL BE VOTED "FOR" THE NOMINEE UNDER PROPOSAL 1.
BE SURE TO SIGN AND DATE THE REVERSE SIDE OF THIS CARD.
September 13, 2002
TO: Participants in the
Employee Stock Ownership Plan
Provisions of the Employee Stock Ownership Plan (the "Plan") entitle
participants to instruct the Trustees of the Plan as to the voting of Midwest
Grain Products, Inc. Common Stock allocated to the accounts of participants.
Accordingly, please find enclosed a form of instruction card that will permit
you to direct the Trustee as to the voting of Common Stock allocated to your
accounts in the Plan with respect to proposals to be acted upon at the Annual
Meeting of Stockholders of the Company to be held on October 10, 2002.
We are also enclosing a copy of the Company's Annual Report for 2002 and
its Proxy Statement, unless you are being mailed one as a record holder of
Common Stock.
Please promptly complete and sign the instruction card and return it in the
enclosed envelope.
Thank you.
Very truly yours,
s/Laidacker M. Seaberg
Laidacker M. Seaberg
President and
Chief Executive Officer
MIDWEST GRAIN PRODUCTS, INC. EMPLOYEE STOCK OWNERSHIP PLAN
C/O Midwest Grain Products, Inc.
1300 Main Street, Atchison, Kansas 66002
INSTRUCTIONS FOR THE VOTING OF MIDWEST GRAIN PRODUCTS, INC. COMMON STOCK
The undersigned hereby instructs Laidacker M. Seaberg, Robert G. Booe,
Brian Cahill, Dave Rindom and Randy Schrick, as Trustees of the Employee Stock
Ownership Plan indicated below (the "ESOP"), or any of them, to vote, in the
manner specified on the reverse hereof, all of the shares of Common Stock of
Midwest Grain Products, Inc. held by the ESOP and allocated to the account of
the undersigned at the Annual Meeting of stockholders to be held on October 10,
2002, or at any adjournment thereof.
The undersigned has received the Company's Annual Report for 2002 and its
Proxy Statement.
Name of ESOP:______________________
___________________________
Accountholder's Signature
Accountholder Dated:_____________________
Number of Shares Allocated to Account:_____________________
PLEASE RETURN THIS INSTRUCTION CARD PROMPTLY IN THE ACCOMPANYING ENVELOPE.
(Continued from other side)
The Board of Director Recommends a vote FOR the following proposals:
1. Election of one Group A Director for term expiring in 2005. The Board of
Directors has nominated: Michael R. Haverty
[] FOR Nominee [] AUTHORITY WITHHELD from Nominee
2. In their discretion, the Trustees are authorized to vote upon such other
business as may properly come before the meeting.
IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED INSTRUCTION CARD IS RETURNED,
THE SHARES WILL BE VOTED "FOR" THE NOMINEE UNDER PROPOSAL 1.
BE SURE TO SIGN AND DATE THE REVERSE SIDE OF THIS CARD.