HIGH PLAINS CORPORATION
200 W. Douglas, Suite #820
Wichita, Kansas 67202
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 17, 1998
The Annual Meeting of Stockholders of High Plains Corporation (the
"Company") will be held at the Wichita Airport Hilton, 2098 Airport Rd.,
Wichita, Kansas, on the 17th day of November, 1998 at 10:00 o'clock a.m.
Central Time for the purpose of considering and voting upon the following
matters:
1. To elect three directors to the class whose term expires in 2001.
2. To ratify the appointment of Allen, Gibbs & Houlik, L.C. as the
independent public accountants for the Company.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The stock transfer books of the Company will not be closed, but only
stockholders of record at the close of business on September 30, 1998 will be
entitled to notice of and to vote at the meeting.
By order of the Board of Directors
Gary R. Smith
President and Chief Executive Officer
Wichita, Kansas
September 30, 1998
You are cordially invited to come to the Annual Meeting early so that you
may meet informally with management and with Board nominees. The meeting room
will be open from 9:00 a.m. until the meeting at 10:00 a.m. Refreshments will
be served before the meeting.
IMPORTANT
IF YOU DO NOT EXPECT TO ATTEND THE MEETING, PLEASE SIGN, DATE, AND MAIL THE
ENCLOSED PROXY IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED
IN THE UNITED STATES. IT IS IMPORTANT THAT THE PROXY BE RETURNED REGARDLESS
OF THE NUMBER OF SHARES OWNED.
<PAGE>
HIGH PLAINS CORPORATION
200 W. Douglas, Suite 820
Wichita, Kansas 67202
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 17, 1998
GENERAL INFORMATION
The accompanying proxy is furnished by High Plains Corporation (the
"Company") in connection with the solicitation of proxies by the Board of
Directors of the Company to be voted at the Annual Meeting of Stockholders to
be held at the Wichita Airport Hilton, 2098 Airport Rd., Wichita Kansas on
November 17, 1998 at 10:00 a.m. (CST), or any adjournment thereof, and may be
revoked by the stockholder at any time before it is voted by giving a written
notice to the Secretary of the Company, by executing and delivering a proxy
with a later date, or by personal withdrawal of the proxy prior to or at the
meeting. The expense of this solicitation is to be borne by the Company and
the Company will reimburse persons holding stock in their name or in the names
of their nominees, for their expenses in sending proxies and proxy materials
to their principals. The approximate mailing date of this proxy statement is
October 19, 1998.
The Company had outstanding 15,999,444 shares of Common Stock, par value
$.10 per share as of September 30, 1998, the date the security holders of
record entitled to vote at the meeting will be determined (the "Record Date").
Each share of Common Stock entitles the holder thereof to one vote. There is
cumulative voting in the election of directors, and each stockholder is
entitled to cast a number of votes equal to the number of voting shares held
by the stockholder at the Record Date multiplied by the number of directors to
be elected and may cast all such votes for a single nominee or may distribute
them between the nominees as the stockholder chooses. This Proxy Statement
solicits discretionary authority to vote cumulatively, and the accompanying
form of proxy grants such authority.
ITEM 1 ELECTION OF DIRECTORS
The Board recommends that the stockholders vote FOR, and unless otherwise
instructed, the persons named in the Proxy have indicated that they intend to
vote FOR the election of H.T. Ritchie, Daniel O. Skolness and Arthur
Greenberg, comprising the class of directors whose current terms expire at the
1998 Annual Meeting, to serve as directors for a term of three years, until
the 2001 Annual Meeting of Stockholders and until their successors are duly
elected and qualified. In the event of the death or disability of any of the
candidates for director, the Proxy will be voted for such other person or
persons as the Board of Directors may recommend. No stockholder may vote in
person or by proxy for more than three nominees at the Annual Meeting.
<PAGE>
Certain information about the (i) nominees, (ii) the other current directors
of the Company who will continue in office after the Annual Meeting and (iii)
the executive officers of the Company is set forth below:
<TABLE>
<CAPTION>
Nominees For Reelection.
Nominated
For term
Name Age Position Expiring
<S> <C> <C> <C>
H.T. Ritchie 54 Secretary and Director 2001
Daniel O. Skolness 49 Chairman and Director 2001
Arthur Greenberg 63 Director 2001
</TABLE>
<TABLE>
<CAPTION>
Directors Who Will Continue in Office and Executive Officers.
Expiration
for Term as
Name Age Position Director
<S> <C> <C> <C>
Jack F. Chivers 57 Director 1999
Ronald D. Offutt 55 Director 1999
Donald M. Wright 74 Director 1999
Raymond G. Friend 46 Director 2000
Donald D. Schroeder 57 Treasurer and Director 2000
Gary R. Smith 55 President and Chief Executive Officer
Christopher G. Standlee 44 Vice President and Chief Operating Officer
Dianne S. Rice 43 Vice President and Chief Financial Officer
</TABLE>
The directors of the Company are divided into three classes, each holding
office for a term of three years. One class of directors is elected each year
at the Annual Meeting of Stockholders. Officers of the Company serve at the
discretion of the Board of Directors.
Set forth below are biographical summaries of the incumbent directors,
including the nominees, and the executive officers of the Company.
Jack F. Chivers has been a director of the Company since April 1993 and
his current term as director expires at the Annual Meeting of Stockholders in
1999. Mr. Chivers is a realtor and developer from Detroit Lakes, Minnesota.
For more than 5 years he has owned and operated a travel business under the
name of Travel Travel, and a Caribbean resort under the name of Magnum Belize.
He is a member of the "Nominating" and "Mergers and Acquisitions" Committees
of the Board of Directors.
H.T. Ritchie has been a director and the Secretary of the Company since
October 1987 and his current term as director expires at the Annual Meeting of
Stockholders in 1998. For over nineteen years, Mr. Ritchie has served as
President of the Ritchie Corporation, a paving, sand and concrete production
business located in Wichita, Kansas. He is a member of the "Policy and
Compensation" and "Finance and Capital Expenditures" Committees of the Board
of Directors.
Daniel O. Skolness has been a director of the Company since December 1993,
serving as Chairman of the Board since April 1997 and his current term as
director expires at the Annual Meeting of the Stockholders in 1998. Mr.
Skolness has been chief financial officer of Skolness, Inc., a sugarbeet and
grain business of Glyndon, Minnesota, for over ten years. He also serves as
Chief Executive Officer of Raddco, Inc., a convenience store and fast food
business. He is a member of the "Policy and Compensation" and "Budget and
Audit" Committees of the Board of Directors.
<PAGE>
Donald M. Wright has been a director of the Company since October 1987 and
his current term as director expires at the Annual Meeting of Stockholders in
1999. For over seven years he has managed his personal investments. He is a
member of the "Nominating" and "Budget and Audit" Committees of the Board of
Directors.
Raymond G. Friend joined the Company in 1985 as controller. He
subsequently served as Chief Financial Officer, then Vice President, and
ultimately was elected as President of the Company and as a member of the
Board of Directors in May of 1997. In June of 1998, he resigned from the
position of President of the Company. His current term as a director of the
Company expires at the Annual Meeting of Stockholders in 2000. Mr. Friend has
served as a Director of the Clean Fuels Development Coalition (CDFC), a
national organization formed to promote the commercial development and use of
clean alternative fuel sources from 1985 through 1998. From 1985 through
1998, he also served as President of the Kansas Ethanol Association, an
organization of ethanol producers which operate within the state of Kansas.
He is a member of the "Finance and Capital Expenditures" and the "Mergers and
Acquisitions" Committees of the Board of Directors. Mr. Friend is now the
President and Chief Executive Officer of Wichita, Kansas based The L.A.W.
Group, Inc., a company that provides environmental and bioremediation
technology and equipment under the tradename "CryoKinetics." Mr. Friend also
remains active in the development of technology and new markets for the
increased use of ethanol.
Arthur Greenberg has been a director of the Company since April 1997, and
his current term as director expires at the Annual Meeting of Stockholders in
1998. For more than 5 years Mr. Greenberg has been a commercial and
residential land developer from Grand Forks, North Dakota. Mr. Greenberg has
extensive experience in the transportation industry, having previously owned
and operated an ICC regulated transportation company and a truck brokerage
company. In the farming industry, he was formerly president of World Seeds,
Inc., a group of farmers and agronomists committed to the development of
varieties of disease resistant wheat seed. He is a member of the "Finance and
Capital Expenditures" and Mergers and Acquisitions" Committees of the Board of
Directors.
Ronald D. Offutt has been a director of the Company since April 1997, and
his current term as director expires at the Annual Meeting of Stockholders in
2000. Mr. Offutt is the founder and Chief Executive Officer of RDO Equipment
Company (NYSE: RDO), a public company which operates the largest network of
John Deere industrial and agricultural dealerships in the United States. He
has overseen the operations of RDO for more than 5 years, during which time he
also maintained extensive farming and food processing and packaging interests.
He is a resident of Fargo, North Dakota and a member of the "Policy and
Compensation" and "Mergers and Acquisitions" Committees of the Board of
Directors.
Donald D. Schroeder has been a director of the Company since September
1997, and his current term as director expires at the Annual Meeting of
Stockholders in 2000. Mr. Schroeder is a food processing and packaging
executive from Minneapolis, Minnesota. He is a former officer of Hoerner
Waldorf Corporation (a New York Stock Exchange Company), and served as Vice
President of Marketing and Strategic Planning for the $1.2 billion Brown
Kraft division of Champion International Corporation. Since 1985, he has been
a co-owner of The Schroeder Group, which is a group of companies with
diversified interests in packaging, transportation and food processing.
Mr. Schroeder is a member of the "Nominations" and "Budget and Audit"
Committees of the Board of Directors.
Gary R. Smith has been Chief Executive Officer of the Company since April
1998, and in July 1998 was elected President. From 1996 until coming to High
Plains, Mr. Smith was President of Signa Stortech Systems, Inc., an Ohio-based
metal fabrication and powder-coating company. For more than 5 years
previously, he served in executive capacities with Hercules Engine Company,
White Engines, Inc., Cummins Engine Company and Hoerner-Waldorf Paper. While
serving as the President of Hercules Engine Company, Mr. Smith served on the
Board of Directors of the Natural Gas Vehicle Coalition, a national clean-
fuels advocacy organization.
Christopher G. Standlee has been General Counsel of the Company since his
employment in March 1995. In November 1996 he was also elected Vice President
of the Company, and in July 1998 was appointed Chief Operating Officer. From
May 1978 until March 1995 he maintained a private law practice in Wichita,
Kansas, during which time he represented the Company as outside counsel for
approximately ten years.
<PAGE>
Dianne S. Rice joined the Company in February 1994 as Controller. In May
1998, she was promoted to Chief Financial Officer of the Company and in July
1998 was elected Vice President of the Company. Ms. Rice is a certified
public accountant with over eighteen years experience in both the public and
private accounting sectors.
No family relationships exist between or among the directors or executive
officers of the Company.
Committees
The Company has standing Budget and Auditing, Policy and Compensation,
Mergers and Acquisitions, Finance and Capital Expenditures and Nominating
Committees. Each Committee has met at least twice in the past fiscal year. All
Committee members were present at each Committee meeting.
The Budget and Audit Committee, consisting of Messrs. Schroeder, Wright,
and Skolness, reviews the financial statements and budgets of the Company and
reviews the performance of and recommends selection of the Company's
independent auditors.
The Policy and Compensation Committee, consisting of Messrs. Offutt,
Ritchie, and Skolness, reviews overall policies including compensation
policies of the Company, recommends modifications to general policies and to
compensation levels, and awards and grants stock options.
The Nominating Committee, consisting of Messrs. Wright, Schroeder and
Chivers, recommends the nomination of prospective directors and officers. The
Nominating Committee will consider persons brought to its attention by
stockholders. Stockholders wishing to recommend persons for consideration by
the Nominating Committee as nominees to the Company's Board of Directors can
do so by writing to the Secretary of the Company at 200 W. Douglas, Suite
#820, Wichita, Kansas 67202, giving such person's name, biographical data and
qualifications. Any such recommendation should be accompanied by a written
statement from the person recommended giving consent to be named as a nominee
and, if nominated and elected, to serve as a director.
The Finance and Capital Expenditures Committee, consisting of Messrs.
Friend, Greenberg and Ritchie, reviews and recommends action on major projects
for expansion or improvement of the Company's production facilities. The
Committee also oversees and recommends action in financing arrangements for
the Company.
The Mergers and Acquisitions Committee was formed in April of 1997. It
consists of Messrs. Chivers, Greenberg, Friend and Offutt, and was formed to
seek out and evaluate possible expansion or diversification options for the
Company in the form of mergers, acquisitions, or synergistic joint ventures.
Attendance At Board Meetings
During the fiscal year ended June 30, 1998, five meetings were held by the
Board of Directors including one meeting held by conference call. All
incumbent directors have attended all of the Board of Directors meetings held
this fiscal year.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
Common Stock as of September 30, 1998 by (i) each beneficial owner of more
than 5%, (ii) each director of the Company, (iii) each Named Officer, as
defined in "Executive Compensation", and (iv) all directors and executive
officers of the Company as a group. Unless otherwise noted, each person has
sole voting and investment power with respect to the shares of voting
securities beneficially owned by such person.
<TABLE>
<CAPTION>
Number Ownership
Name of Beneficial Owner of Shares Percentage (1)
<S> <C> <C>
Heartland Advisors 2,333,000 13.1%
790 N. Milwaukee St.
Milwaukee, WI 53202
Dimensional Fund Advisors, Inc. 922,986 5.2%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Raymond G. Friend (2) 377,325 2.1%
John F. Chivers (3) 195,000 1.1%
Arthur Greenberg (4) 15,000 *
Gary R. Smith (5) 26,000 *
Ronald D. Offutt (6) 15,000 *
H.T. Ritchie (7) 403,953 2.3%
Donald D. Schroeder (8) 25,000 *
Daniel O. Skolness (9) 180,751 1.0%
Donald M. Wright (10) 281,859 1.6%
All directors and executive officers as a group
(9 persons) 1,519,888 8.5%
* Less than 1%
</TABLE>
(1) Assumes exercise of options which were exercisable at September 30, 1998
to purchase Common Stock granted to present and former officers, directors,
and employees representing 1,866,240 shares of Common Stock for total
outstanding shares of Common Stock of 17,865,684.
(2) Includes options to purchase 307,325 shares of Common Stock acquired
under the Company's 1990 and 1992 Stock Option Plans, which are currently
exercisable. Also included are 25,704 options which are currently
exercisable and 8,304 shares acquired under the Company's Employee Stock
Purchase Plan.
(3) Consists of options to purchase 195,000 shares of Common Stock which are
currently exercisable.
(4) Consists of options to purchase 15,000 shares of Common Stock which are
exercisable currently or within 180 days.
(5) Includes options to purchase 25,000 shares of Common Stock which are
exercisable currently or within 180 days.
(6) Consists of options to purchase 15,000 shares of Common Stock which are
exercisable currently or within 180 days.
<PAGE>
(7) Includes options to purchase 231,000 shares of Common Stock which are
currently exercisable; 8,689 shares of Common Stock as to which Mr.
Ritchie shares investment and voting power; and 2,152 shares which are
held as custodian for a minor child.
(8) Includes options to purchase 15,000 shares of Common Stock which are
exercisable currently or within 180 days.
(9) Includes options to purchase 159,000 shares of Common Stock which are
currently exercisable and 4,988 shares held as custodian for a minor
child.
(10) Includes options to purchase 231,000 shares of Common Stock which are
currently exercisable.
EXECUTIVE COMPENSATION
The following table sets forth certain individual compensation information
for the Company's Chief Executive Officer and for the Company's executive
officers whose total salary and bonus for fiscal 1998 exceeded $100,000 (the
"Named Officers"). The Company granted no restricted stock awards or stock
appreciation rights and did not make any long-term incentive plan payouts
during the fiscal years indicated.
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Compensation
Name and Awards All Other
Principal Fiscal Annual Compensation Securities Underlying Compensation
Position Year Salary($) Bonus ($) Options(#)(1) (2)(3)($)
<S> <C> <C> <C> <C> <C>
Gary R. Smith 1998 $ 41,563 $ -- 25,000 $ --
(CEO since
April 6, 1998)
Raymond G. 1998 $183,087 $314,822(4) 320,325(5) $ 4,597.00
Friend 1997 136,960 63,013 84,000(6) 4,645.68
(Former 1996 128,689 277,757 150,600(7) 4,510.00
Executive
Vice President
and Chief
Financial
Officer -
President from
April 1997 until
resignation on
June 30, 1998)
</TABLE>
(1) Numbers of options have been adjusted for the dilutive effect of the
February 22, 1995 stock split.
(2) All amounts represent employer matching contributions to the Company's
401(k) Retirement Plan on behalf of the named individuals.
(3) Does not include the value of perquisites and other personal benefits
because the aggregate amount of such compensation does not exceed the
lesser of $50,000 or 10% of the total amount of annual salary and bonus for
any Named Officer.
(4) $300,000 of this amount was the result of the Amended Employee Agreement
between the Company and Mr. Friend dated June 30, 1998, and more specifically
discussed below.
<PAGE>
(5) 13,000 of these options were issued as part of the Company's Employee
Stock Purchase Plan. 271,325 of these options were issued as non-qualified
options to replace incentive stock options surrendered (see "Employment
Contracts" below). These options were issued at the same exercise price as
those surrendered with a shorter term. 36,000 of these options were issued
in replacement of 72,000 options surrendered as detailed in "Report on
Repricing of Options" below.
(6) 72,000 of these options were issued as "re-load" options for options
currently exercised, as provided for under the 1995 stockholder approved
amendments to the "1992 Stock Option Plan". These options do not have
additional "re-load" rights.
(7) 129,600 of these options were issued either to replace options previously
exercised or were issued as "re-load" options for currently exercised, as
provided for under the 1995 stockholder approved amendments to the "1992
Stock Option Plan." These options issued do not have additional "re-load"
rights.
Option Grants in Fiscal Year Ended June 30, 1998
The following table sets forth information concerning stock options granted
to the Named Executive Officers during fiscal 1998 under the Company's 1992
Stock Option Plan and the Employees Stock Purchase Plan. The Company granted
no stock appreciation rights during fiscal 1998.
<TABLE>
<CAPTION>
% of Total Market Potential Realizable Value
Options Price on at Assumed Annual Rates
Granted to Exercise or Date of of Stock Price Appreciation
Options Employees in Base Price Grant Expiration for Option Term
Name Granted (#)(1) Fiscal Year ($/Sh) ($/Sh)(2) Date 5% ($) 10%($) 0%($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gary R. Smith 25,000(3) 5.4% $2.50 $2.50 04/05/08 $ 40,438 $106,690 $ 0
Raymond G. Friend 13,000(4) 2.8% $1.59 $1.8125 06/30/00 $ 5,149 $ 7,612 $ 2,893
72,000(5) 15.7% $8.344 $2.625 09/30/00 0 0 0
117,325(5) 25.5% $5.25 $2.625 09/30/00 0 0 0
10,000(5) 2.2% $3.50 $2.625 09/30/00 0 0 0
72,000(5) 15.7% $3.75 $2.625 09/30/00 0 0 0
36,000(6) 7.8% $2.625 $2.625 12/10/01 $ 9,686 $ 19,845 0
</TABLE>
(1) All options are exercisable currently or within 180 days.
(2) Based upon the last reported sales price on the NASDAQ National Market
System on the date of grant.
(3) These options were granted pursuant to the Company's "1992 Stock Option
Plan", as original option awards.
(4) These options were granted pursuant to the Company's Employee Stock
Purchase Plan.
(5) These options were granted as non-qualified options in replacement of
incentive stock options with the same exercise price surrendered by Mr.
Friend (see "Employment Contracts" below).
(6) These options were granted in replacement of 36,000 options surrendered
as detailed in "Report on Repricing of Options" below.
<PAGE>
Aggregated Option Exercises in Fiscal Year Ended June 30, 1998
and Fiscal Year-End Option Values
The following table sets forth information concerning stock options
exercised during, or held at the close of, fiscal 1998 by the Named Employee
Officers. The Named Officers did not exercise during, or hold at the close of,
such fiscal year any stock appreciation rights.
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised in-the-Money
Shares Options at Fiscal Options at
Acquired on Value Year-End(#) Fiscal Year-
Name Exercise(#) Realized($) Exercisable/Unexercisable End($)
<S> <C> <C> <C> <C>
Gary R. Smith 0 0 0 / 25,000 $ 3,125
Raymond G. Friend 4,601(1) 2,975 327,297/ 0 $11,857
</TABLE>
(1) These shares were acquired as a result of scheduled purchase/exercises
pursuant to the Company's Employee Stock Purchase Plan.
Report on Repricing of Options
The following table sets forth information concerning Stock Options granted
to the named executive officers during fiscal 1998 which were granted in
return for the surrender or cancellation of existing Stock Options.
<TABLE>
<CAPTION>
Length of original
Number of Market price of Exercise Price option term
Options/SARs stock at time at time of New remaining at date
Repriced or of repricing or repricing or exercise of repricing
Name Date amended (#) amendment ($) amendment price ($) or amendment
<S> <C> <C> <C> <C> <C> <C>
Raymond G. Friend 06/30/98 36,000(1) $2.625 $5.382 $2.625 54 months
(President from 06/30/98 72,000(2) $2.625 $8.34 $8.34 78 months
April 1997 until 06/30/98 30,925(2) $2.625 $5.25 $5.25 86 months
Resignation on 06/30/98 86,400(2) $2.625 $5.25 $5.25 54 months
June 30, 1998) 06/30/98 10,000(2) $2.625 $3.50 $3.50 95 months
06/30/98 72,000(2) $2.625 $3.75 $3.75 66 months
</TABLE>
(1) These options were granted in replacement of 72,000 options surrendered,
and will expire on December 10, 2001.
(2) These options, as amended or replaced, now expire on September 30, 2000.
Policy and Compensation Committee
H.T. Ritchie
Daniel O. Skolness
Ronald D. Offutt
Director Compensation
Until July 1, 1993 the Company traditionally did not pay cash compensation
for serving on the Board of Directors or on a committee of the Board of
Directors. As compensation for serving as a director and serving on committees
of the Board of Directors for fiscal years 1994, 1995 and 1996, on December
10, 1993, the Company adopted a shareholder approved three year plan to grant
to each of the six incumbent directors options to purchase
<PAGE>
25,000 shares of Common Stock at an exercise price equal to $9.63 per share,
the market closing price of the Company's Common Stock on such date. Such
options expire 10 years from the date of grant if not previously exercised.
Due to antidilutive features of the Company's stock options, the quantity of
options granted to each optionee, for each of those three years, has increased
to 72,000. As a result of stock splits which have occurred through 1997, the
exercise price of all options which were issued prior to any stock splits has
been reduced proportionately by the dilutive effect of the splits. Two of the
Company's directors have retired and four new directors have been elected
during or subsequent to the 1997 fiscal year. Stanley E. Larson retired as
President, Chairman of the Board, and as a director on April 11, 1997, and
Roger D. Skaer retired as a director on September 26, 1997. On September 25,
1997 the Board approved and Mr. Skaer was granted an option to purchase an
additional 25,000 shares of the Company's Common Stock at an exercise price of
$3.8125 per share. Three of the four newly elected directors (excluding only
Raymond Friend, the only employee director) were granted options to purchase
15,000 shares of the Company's Common Stock on the date of their election to
the Board, at an exercise price equal to the market closing price on the date
of such grant. Mr. Greenberg and Mr. Offutt were each granted their options on
May 6, 1997 at an exercise price of $3.19 per share. Mr. Schroeder's options
were granted on September 26, 1997 at an exercise price of $3.875 per share.
On December 16, 1997, the Company adopted a shareholder approved three-year
plan to grant to each non-employee director options to purchase 15,000 shares
of Common Stock at an exercise price equal to the closing market price of the
Company's Common Stock on that date. The plan also included an additional
15,000 options for each incumbent, non-employee director to be granted on
December 16, 1998 and 1999, respectively, at an exercise price equal to the
closing market price on the dates of such grants, Mr. Greenberg, Mr. Offutt
and Mr. Schroeder were excluded for the option grants in the first year of the
plan due to the options separately issued to them as described above.
Since July 1, 1993 the Company has paid directors who are not employees of
the Company (i) $1,000 for each meeting of the Board of Directors attended in
person and (ii) $500 for each meeting of a committee of the Board of Directors
attended, provided that such meeting is not held coincidentally with a full
board meeting. Mr. Friend, the only current employee director, is not eligible
to receive cash compensation for serving as a director or for serving on any
committees of the Board of Directors.
The Company also reimburses directors for reasonable expenses incurred in
connection with their attendance at meetings, including committee meetings, of
the Board of Directors.
Employment Contracts, Termination of Employment and Change-in-Control
Agreements
On April 1, 1993, the Company entered into employment agreements (the
"Employment Agreements") with Messrs. Stanley E. Larson, the then President of
the Company and Raymond G. Friend then a Vice President of the Company (the
"Employees"). Each of the Employment Agreements was for a four-year term. On
April 1, 1995, these employment agreements were extended for a period of five
years from that date, to coincide with the terms of additional employment
agreements entered into by the Company with other key management employees.
On June 30, 1998, the Company entered into an Amended Employment Agreement
with Raymond G. Friend, the then President of the Company. Pursuant to this
agreement Mr. Friend resigned as President, but remains a non-exclusive
employee through June 30, 2000. During this period Mr. Friend may obtain
other employment, but may not compete with the Company, and agrees to advise,
consult and cooperate with the Company on an as needed basis. In
consideration of the execution of the Amended Employment Agreement Mr. Friend
waived all rights and benefits of his prior Employment Agreement, and agreed
to accept as compensation and settlement the sum of $600,000, with $300,000
paid on June 30, 1998, and the remaining $300,000 payable ratably over the
next 24 months of continued employment. During this period of continued
employment, Mr. Friend will continue to receive the standard employee benefits
offered by the Company for health, life, and disability insurance, and for
401K and Employee Stock Purchase Plan participation. The Amended Employment
Agreement also provides for Mr. Friend to surrender all outstanding stock
options previously issued to him by the Company. Replacement options were re-
issued to Mr. Friend on the same terms and conditions as the surrendered
options, except for the options described in the following sentence, but were
re-issued as non-qualified options with an expiration date of September 30,
2000. However, the 72,000 options which had an exercise price of $5.382 and
an expiration date of December 10, 2002, were replaced with 36,000 non-
qualified options with an exercise price of $2.625 (closing market price on
June 30, 1998), and an expiration date of December 10, 2001. The options held
by Mr. Friend prior to this surrender and re-issuance were primarily incentive
stock options, with expiration dates ranging from December 9, 2002 to May 7,
2006.
<PAGE>
On March 31, 1998, the Company entered into an employment agreement with Gary
R. Smith providing for him to serve as Chief Executive Officer of the Company.
This agreement has a term of three years, expiring March 30, 2001, and
provides for a base salary of $180,000 for the first year, and $200,000 for
the second year, and $225,000 for the third year respectively. The agreement
also provides for bonus payments at the discretion of the Board of Directors,
and for a grant of stock options according to the following schedule: (a)
25,000 options granted on April 6, 1998 at $2.50; (b) 15,000 options to be
granted on December 31, 1998 at the closing market price on that date; and (c)
15,000 options to be granted on December 31, 1999 at the closing market price
on that date. The agreement further provides for standard employee benefits,
a travel and moving allowance, a Company provided vehicle, and an agreement
that the employee will not compete with the Company for a period of two years
after termination of his employment.
Report of the Compensation Committee with Respect to Executive Compensation
The Company applies a consistent philosophy to compensation for all
employees, including senior management. This philosophy is based on the
premise that the achievements of the Company result from the coordinated
efforts of individuals working toward common objectives. The Company strives
to achieve those objectives through teamwork that is focused on meeting the
expectations of customers, stockholders and employees. Prior to and including
fiscal 1998, the ultimate responsibility for administering the Company's
compensation philosophy and overseeing the evaluation process as it relates to
salary and bonus determinations has been the responsibility of the Board of
Directors as a group, with the responsibility of the Policy and Compensation
Committee ( the "Committee") being to study compensation issues and make
recommendations to the Board of Directors.
Executive Compensation Philosophy. The goals of the Company's executive
compensation program are to align compensation with business objectives and
performance, and to enable the Company to attract, retain and reward executive
officers who contribute to the long-term success of the Company. The Company's
compensation program for executives is based on the following principles:
* The Company attempts to compensate competitively.
The Company is committed to providing a compensation program aimed at
attracting and retaining the best people in the industry. To ensure
that compensation is competitive, the Company periodically compares
its compensation practices with those of comparable companies and sets
its compensation parameters based on this review.
* The Company compensates sustained performance.
Executive officers are rewarded based upon corporate performance and
individual performance. Corporate performance is evaluated by
reviewing the extent to which strategic and business plan goals are
met, including such factors as operating profit and performance
relative to competitors. Individual performance is evaluated by
reviewing organizational and management development progress against
set objectives.
* The Company strives for fairness in the administration of compensation.
The Company attempts to apply its compensation philosophy uniformly.
The Company strives to achieve a balance of the compensation paid to a
particular individual and the compensation paid to other executives
both inside the Company and at comparable companies.
The Board of Directors, partially on the basis of information obtained
from the underwriter of the Company's 1993 stock offering, as updated
since that time, determined the compensation levels and contract terms
for the prior and current employment agreements with management
employees.
Commencing with fiscal 1994, the Company's process of assessing executive
performance has been as follows:
<PAGE>
1. At the beginning of the annual performance cycle, the Chief Executive
Officer and the Committee set objectives and key goals for the
Company's officers, and officers and other key employees are
provided written work plans.
2. Throughout the annual performance cycle, the Chief Executive
Officer and the Committee give each officer ongoing feedback on
performance.
3. At the end of the annual performance cycle, the Chief Executive
Officer and the Committee evaluate the officer's accomplishment of
objectives and attainment of key goals.
4. The accomplishment of objectives and attainment of key goals affect
the Chief Executive Officer's and the Committee's recommendations to
the Board of Directors on salary increases, bonuses and, if
applicable, stock options.
Executive Compensation Vehicles. The Company utilizes a compensation program
to attract and retain key executives, enabling it to improve products,
motivate technological innovation, foster teamwork and adequately reward
executives, all with the goal of enhancing stockholder values. The annual
cash-based compensation for executives consists of a base salary subject to
increases at the discretion of the Company. Salaries are reviewed on an annual
basis and may be changed at that time based on (i) information derived from
the evaluation procedures described above, (ii) a determination that an
individual's contributions to the Company have increased (or decreased), and
(iii) changes in competitive compensation levels. The Company also makes
available to executives incentive bonuses based on individual work plan
performance, and based on overall Company performance.
The Company also has a Long-Term Savings and Deferred Profit Sharing Plan
(the "401(k) Plan"), adopted in 1991 to allow participants to defer
compensation pursuant to 401(k) of the Internal Revenue Code. All employees of
the Company, including executives, are eligible to participate in the 401(k)
Plan provided certain qualifications are met. In addition to amounts which
participants may elect to contribute to the 401(k) Plan, the Company makes
"matching" contributions to the 401(k) Plan allocated to all participants.
Payments of benefits accrued for 401(k) Plan participants will be made upon
retirement or upon termination of employment prior to retirement provided
certain conditions have been met by the employee prior to termination.
Long-term incentives are intended to be provided through stock options
specified in employment agreements and through the possible grant of
additional stock options under the 1992 Stock Option Plan or future stock
option plans. The objective of aligning executives' long range interests with
those of the stockholders may be met by providing the executives with the
opportunity to build meaningful stake in the Company.
Chief Executive Officer and Other Officer Compensation. The compensation
levels paid to Raymond G. Friend as President until his resignation on June
30, 1998, and to Gary R. Smith as the current President and Chief Executive
Officer, were established pursuant to the employment agreements described
above (see "Employment Contracts, Termination of Employment and Change-in-
Control Agreements" above). These Agreements were approved by the entire
Board of Directors after careful consideration. Compensation to executive
officers is provided by base salary, incentive bonuses, and stock option
awards.
Base Salary. An executive's base salary is determined by an assessment of
his or her sustained performance, advancement potential, experience,
responsibility, scope and complexity of the position, current salary in
relation to the range designated for the job and salary levels for comparable
positions at peer companies.
Bonuses. Payments under the Company's bonus incentive plan are tied to both
individual performance and the Company's level of achievement of annual
earnings. This creates a direct link between the Company's profitability and
executive officer pay.
Long-Term Incentives. The Company's overall long-term compensation
philosophy is that long-term incentives should be directly related to the
creation of stockholder value, thus providing a strong link between management
and stockholders. In support of this philosophy, the Company has awarded to
its executive officers stock options.
<PAGE>
Stock Option Awards. Stock options encourage and reward executive officers
for creating stockholder value as measured by stock price appreciation. Stock
options under the 1992 Stock Option Plan are typically awarded at an exercise
price equal to the fair market value of the stock on the date of grant, and,
therefore, only have value for the executive officers if the price of the
Company's stock appreciates in value from the date the stock options are
granted. The Company has also adopted an Employee Stock Purchase Plan for key
management employees. This 3-year plan was approved by majority vote of
stockholders at the Company's Annual Meeting of Stockholders on November 17,
1995. The last option to purchase shares of stock under this plan was granted
in fiscal year 1998. Mr. Friend was eligible and participated in this plan;
Mr. Smith was not eligible to participate in the plan. Under the plan,
employees of the Company are entitled to purchase a certain number of shares
of stock (based primarily on years of service to the Company) at a discounted
value. Stockholders also benefit from such stock price appreciation.
Stock options are awarded periodically with the Company's objective to
provide (i) a long-term equity interest in the Company, and (ii) an
opportunity for a greater financial reward if long-term performance is
sustained. The base number of options granted to each executive officer falls
within a pre-determined range, set and approved by the Board of Directors when
implementing the Company's Stock Option Plans. Individual grants which are
awarded in addition to the base options are dependent upon the Company's
future business plans and the executive officer's ability to positively impact
those plans, the executive officer's position and level of responsibility
within the Company, and an evaluation of the executive officer's performance.
Policy and Compensation Committee
H.T. Ritchie, Chairman
Daniel O. Skolness
Ronald D. Offutt
Section 16(a) Beneficial Ownership Reporting Compliance.
Under the securities laws of the United States, the Company's directors,
executive officers, and any persons holding more than ten percent of the
Company's securities are required to report to the Securities and Exchange
Commission and to the NASDAQ National Market System by a specified date his or
her ownership of or transactions in the Company's securities. To the Company's
knowledge, based solely on information filed with the Company, all of these
requirements have been satisfied, except that Gary R. Smith failed to timely
file one Form 3 and one Form 4 reflecting a total of two transactions both in
the month of April 1998. These transactions were the initial options granted
upon his employment as Chief Executive Officer, and a purchase of the
Company's stock in an over-the-counter transaction. The appropriate
Securities and Exchange Commission Forms reflecting these transactions were
filed in October 1998.
Compensation Committee Interlocks and Insider Participation.
For fiscal 1998, Messrs. H.T. Ritchie (Committee Chairman), Ronald D. Offutt
and Daniel O. Skolness comprised the Policy and Compensation Committee of the
Board of Directors. Mr. Ritchie is currently the Secretary of the Company.
As members of the Policy and Compensation Committee of the Board of
Directors of the Company, Messrs. Ritchie, Offutt and Skolness make
recommendations to the entire Board of Directors regarding the compensation
for the executive officers and directors of the Company, including those
compensation arrangements described in the "Executive Compensation" portion of
this proxy.
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The Stock Price Performance Graph below compares the yearly percentage
change in the cumulative total stockholder return on the Company's Common
Stock against the total cumulative return of the S&P 500 Stock Index and the
Peer Group for the Company (Midwest Grain Products, Archer-Daniels and
Methenex Corp.) for the fiscal years 1993, 1994, 1995, 1996, 1997 and 1998
ending June 30. All calculations assume reinvestment of dividends.
(graph of Total Return to Stockholders)
(Assumes $100 investment on 06/30/93)
<TABLE>
<CAPTION>
TOTAL RETURN TO STOCKHOLDERS
(assumes $100 invested on June 30, 1993)
Total Return Analysis
6/30/93 6/30/94 6/30/95 6/28/96 6/30/97 6/30/98
<S> <C> <C> <C> <C> <C> <C>
High Plains Corp. $100.00 $118.59 $129.88 $ 87.53 $ 93.18 $ 59.29
Peer Group $100.00 $113.21 $123.58 $133.02 $173.58 $153.25
S&P 500 $100.00 $101.38 $127.77 $160.97 $216.80 $282.16
Source: Carl Thompson Associates www.ctaonline.com (800) 959-9677. Data from
Bloomberg Financial Markets
</TABLE>
<PAGE>
ITEM 2 SELECTION OF AUDITORS
Proxies solicited by the Board of Directors will be voted for ratification
of the appointment of Allen, Gibbs & Houlik, L.C. as the Company's independent
auditors for the 1999 fiscal year in the absence of instructions to the
contrary.
The audit of the Company for the year ended June 30, 1998, was conducted by
Allen, Gibbs & Houlik, L.C. Representatives of such firm are expected to be
present at the Annual Meeting of Stockholders to make a statement if they
desire to do so and to answer appropriate questions. The Board of Directors
recommends that the stockholders vote FOR ratification of its appointment of
Allen, Gibbs & Houlik, L.C.
OTHER INFORMATION
Neither the Board of Directors nor management knows of any other matters to
be presented at the Annual Meeting of Stockholders. However, if any other
matter properly comes before the meeting, the persons named in the enclosed
Proxy will vote in accordance with their judgement upon such matters.
Stockholders who do not expect to attend in person are urged to execute and
promptly return the enclosed form of Proxy.
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders to be presented at the Company's 1999 Annual
Meeting of Stockholders must be received at the Company's executive offices no
later than June 22, 1999 for inclusion in the 1999 Proxy Statement. Proposals
of stockholders to be presented at the Company's 1999 Annual Meeting of
Stockholders without inclusion of such proposal in the 1999 Proxy Statement
should be received at the Company's executive offices no later than September
4, 1999. If the Company does not receive a proposal by September 4, 1999,
proxies given to the Company may grant the Company discretionary authority to
vote on such proposal.
By Order of the Board of Directors
Gary R. Smith
President and Chief Executive Officer
Wichita, Kansas
October 19, 1998
