<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended December 31, 1995 - Commission File No. 0-17196
MIDWEST GRAIN PRODUCTS, INC.
(Exact Name of Registrant as Specified in Its Charter)
KANSAS 48-0531200
(State or Other Jurisdiction of IRS Employer
Incorporation or Organization) Identification No.
1300 Main Street, Atchison, Kansas 66002
(Address of Principal Executive Offices and Zip Code)
(913) 367-1480
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to the filing
requirements for at least the past 90 days.
[X] YES [ ] NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock, no par value
9,765,172 shares outstanding
as of February 1, 1996.
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Independent Accountants' Review Report............ 2
Condensed Consolidated Balance Sheets as of
December 31, 1995 and June 30, 1995............. 3
Condensed Consolidated Statements of Income for
the Three Months and Six Months Ended December 31, 1995
and 1994........................................ 5
Condensed Consolidated Statements of Cash Flows for
the Six Months Ended December 31, 1995 and 1994.. 6
Notes to Condensed Consolidated Financial Statements 7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations............... 8
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K.................. 13
<PAGE>
{LOGO}
Independent Accountants' Review Report
Baird, Kurtz &
Dobson
Board of Directors and Stockholders
Midwest Grain Products, Inc.
Atchison, Kansas 66002
We have reviewed the condensed consolidated balance sheet of
MIDWEST GRAIN PRODUCTS, INC. and subsidiaries as of December 31,
Certified 1995, and the related condensed consolidated statements
Public of income for the three month and six month periods ended
Accountants December 31, 1995 and 1994, and the related condensed consolidated
statements of cash flows for the six month periods ended December
31, 1995 and 1994. These financial statements are the
responsibility of the Company's management.
We conducted our reviews in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our reviews, we are not aware of any material
modifications that should be made to the condensed consolidated
financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet as of June 30,
1995, and the related consolidated statements of income,
stockholders' equity, and cash flows for the year then ended (not
presented herein); and, in our report dated August 4, 1995, we
expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of June 30,
1995, is fairly stated in all material respects in relation to
the consolidated balance sheet from which it has been derived.
/s/Baird, Kurtz & Dobson
BAIRD, KURTZ & DOBSON
Kansas City, Missouri
January 25, 1996
City Center Square, Suite 2700, 1100 Main, 816 221-6300
Kansas City, Missouri 64105 FAX 816 221-6380
With Offices in: Arkansas, Colorado, Kansas, Kentucky, Missouri,
Nebraska, Oklahoma
Member of Moores Rowland International
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<PAGE>
MIDWEST GRAIN PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
ASSETS
December 31 June 30,
1995 1995
----------- --------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 3,011 $ 460
Receivables 23,680 21,550
Notes receivable 919
Inventories 15,737 14,690
Prepaid expenses 871 560
Deferred income taxes 875 875
Income taxes receivable 1,808 2,338
------ ------
Total Current Assets 45,982 41,392
------ ------
PROPERTY AND EQUIPMENT, At cost 208,894 206,336
Less accumulated depreciation 78,000 71,424
------ ------
130,894 134,912
------- -------
OTHER ASSETS 433 445
------- -------
$177,309 $176,749
======== ========
See Accompanying Note to Condensed Consolidated
Financial Statements
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<PAGE>
MIDWEST GRAIN PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(In Thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, June 30,
1995 1995
------------ --------
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 10,465 $ 7,807
Accrued expenses 4,398 6,630
---------- ---------
Total Current Liabilities 14,863 14,437
---------- ---------
LONG-TERM DEBT 40,933 38,908
---------- ---------
POST-RETIREMENT BENEFITS 5,740 5,449
---------- ---------
DEFERRED INCOME TAXES 5,327 5,327
---------- ---------
STOCKHOLDERS' EQUITY
Capital stock
Preferred, 5% noncumulative,
$10 par value; authorized 1,000
shares; issued and outstanding
437 shares 4 4
Common, no par; authorized
20,000,000 shares; issued 6,715 6,715
9,765,172 shares
Additional paid-in capital 2,485 2,485
Retained earnings 101,242 103,424
-------- --------
110,446 112,628
-------- --------
$177,309 $176,749
======== ========
See Accompanying Note to Condensed Consolidated
Financial Statements
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<PAGE>
MIDWEST GRAIN PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS AND SIX MONTHS ENDED DECEMBER 31, 1995 AND 1994
(Unaudited)
Three Months Six Months
--------------- --------------
1995 1994 1995 1994
------ ------ ------ ------
(in thousands, except per share amounts)
NET SALES $55,751 $44,488 $102,911 $90,472
COST OF SALES 52,132 37,754 100,229 76,088
-------- -------- --------- --------
GROSS PROFIT 3,619 6,734 2,682 14,384
SELLING, GENERAL AND ADMINIS-
TRATIVE EXPENSES 2,377 2,897 4,840 6,326
--------- --------- --------- --------
1,242 3,837 (2,158) 8,058
OTHER OPERATING INCOME 54 9 53 13
-------- --------- --------- --------
INCOME (LOSS) FROM OPERATIONS 1,296 3,846 (2,105) 8,071
OTHER INCOME (LOSS)
Interest (797) (15) (1,492) (15)
Other (180) (72) (9) 335
--------- --------- --------- --------
INCOME (LOSS) BEFORE INCOME TAXES 319 3,759 (3,606) 8,391
PROVISION (CREDIT) FOR INCOME TAXES 124 1,522 (1,424) 3,398
--------- -------- --------- -------
NET INCOME (LOSS) $ 195 $ 2,237 $ (2,182) $ 4,993
========= ======== ========= ========
EARNINGS (LOSS) PER COMMON SHARE $.02 $.23 $(.22) $.51
==== ==== ====== ====
See Accompanying Note to Condensed Consolidated
Financial Statements
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<PAGE>
MIDWEST GRAIN PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED DECEMBER 31, 1995 AND 1994
(Unaudited)
1995 1994
-------- ---------
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (2,182) $ 4,993
Items not requiring (providing) cash:
Depreciation 6,677 3,527
Gain on sale of assets (30) (248)
Changes in:
Accounts receivable (2,130) (1,999)
Inventories (1,047) (390)
Prepaid expenses and other assets (299) (167)
Disbursements in excess of demand
deposit cash 3,553
Accounts payable 4,054 (163)
Accrued expenses (720) (1,809)
Income taxes payable 530 (2,001)
-------- --------
Net cash provided by operating
activities 4,853 5,296
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (4,093) (21,824)
Purchase of short-term investments 14,531
Proceeds from sale of equipment 68 264
Payment received on note for sale of plant 919 343
-------- ---------
Net cash used in investing activities (3,106) (6,686)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of long-term debt 6,000
Principal payments on long-term debt (3,975)
Dividends paid (1,221) (2,442)
-------- --------
Net cash provided by (used in) financing
activities 804 (2,442)
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,551 (3,832)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 460 3,832
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,011 $ 0
======== ==========
See Accompanying Note to Condensed Consolidated
Financial Statements
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<PAGE>
MIDWEST GRAIN PRODUCTS, INC.
NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1995
(Unaudited)
NOTE 1: GENERAL
In the opinion of management, the accompanying unaudited condensed
financial statements contain all adjustments necessary to present fairly the
Company's condensed consolidated financial position as of December 31, 1995, and
the condensed consolidated results of its operations and its cash flows for the
periods ended December 31, 1995 and 1994, and are of a normal recurring nature.
- 7 -
<PAGE>
MIDWEST GRAIN PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS AND SIX MONTHS ENDED DECEMBER 31, 1995
RESULTS OF OPERATIONS
General
While the Company's earnings in the second quarter of fiscal 1996 decreased
compared to the same period a year ago, they represent a substantial improvement
over the current year's first quarter loss. The improvement was largely the
result of an intense cash management program to reduce costs and improve cash
flow, including reductions in management and administrative compensation and
benefits; strategies to maximize operating results; and increased sales of
premium wheat starch, alcohol products and alcohol by-products.
The decline in earnings compared to the prior year's second quarter was due
primarily to unusually high raw material costs for grain in the face of lower
selling prices for wheat gluten and low prices for fuel alcohol. Fuel alcohol
prices remained flat due to increased capacities throughout the industry and
lower gasoline prices. Wheat gluten prices not only failed to adjust to the
rising grain costs, as is normally the case, but actually declined compared to a
year ago due to significantly increased gluten imports from the European Union.
Profits from their highly subsidized and protected wheat starch business have
allowed European producers to dump their surpluses of gluten, a co-product, in
the United States at prices below U.S. production costs. Low U.S. tariff rates
on wheat gluten provide little deterrence to this practice, while high tariffs
in Europe effectively prohibit non-European Union member countries from
competing in the wheat gluten and wheat starch markets there. A measure that
should help rectify this problem has been included in a grains agreement being
negotiated between the U.S. and E.U. The agreement is expected to be fully
ratified during the third quarter of fiscal 1996. It states that "If the market
share of European Community origin wheat gluten exports into the Untied States
increases in comparison to their average 1990-1992 market share, the European
Commission and the United States government shall consult with a view to finding
a mutually acceptable solution." Until the intensity of competitive conditions
subside, pursuant to the grains agreement or otherwise, and wheat costs
substantially decrease, the Company does not anticipate utilizing the 40%
increase in gluten production capacity that was completed at its Pekin, Illinois
plant in the latter part of the first quarter.
As a result of the Company's recent distillery expansion in Pekin, its unit
sales of alcohol products in the second quarter rose significantly above the
prior year's second quarter amount. Increases occurred in unit sales of both
food grade alcohol, which is sold for beverage, industrial and commercial
applications, and fuel grade alcohol, which is sold as an octane additive and
oxygenate commonly known as ethanol. Demand in the food grade markets remains
strong. Therefore, the Company plans to continue to maximize production in this
category, as market prices for fuel grade alcohol remain depressed in spite of
higher grain costs.
The Company's unit sales of wheat starch in the second quarter increased
substantially above the prior year's second quarter. The increase resulted from
- 8 -
<PAGE>
MIDWEST GRAIN PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
THREE MONTHS AND SIX MONTHS ENDED DECEMBER 31, 1995
higher volumes of unmodified, modified and specialty wheat starches, which was
made possible by a 70% increase in the Company's total starch production
capacity. Completion of the additional capacity occurred this past July in Pekin
and greatly improves the Company's ability to meet current and future increases
in demand for wheat starch.
While the Company expects higher raw material costs for grain and intense
foreign competition to continue having a negative impact on results during much
of fiscal 1996, it believes it is in an excellent position to realize
significant growth with a return to more favorable market conditions and lower
grain prices.
Sales
Net sales for the second quarter of fiscal 1996 increased by approximately $11.3
million above sales in the second quarter of fiscal 1995. The increase was
principally due to a higher sales of premium wheat starch, and significant
increases in sales of alcohol products and alcohol by-products, the latter
consisting mainly of distillers feeds. The rise in wheat starch sales resulted
from strengthened market demand and the Company's ability to meet this demand
with its increased production capacity. A 56% increase in total alcohol sales
resulted from strengthened demand for food grade beverage and industrial alcohol
and higher sales of fuel grade alcohol. Sales of distillers feed climbed 54%
compared to a year ago. These increases were partially offset by a 23% decrease
in sales of wheat gluten due to intense competitive pressures from European
gluten producers. Net sales for the first six months of fiscal 1996 increased by
approximately $12.4 million. The vast majority of this increase occurred in the
second quarter for the reasons cited above.
Changes in selling prices of the Company's vital wheat gluten normally are due
to fluctuations in grain costs and competition. Wheat starch prices
traditionally track corn starch prices, with the exception of the Company's
specialty modified starches. Fuel alcohol prices traditionally follow the
movement of gasoline prices. Prices for food grade alcohol for beverage
applications normally follow the movement of corn prices, while prices for food
grade alcohol for industrial and commercial applications are normally consistent
with prices for industrial alcohol derived from synthetic products such as
petroleum. In the first and second quarters of fiscal 1996, grain costs
increased to exceptionally high levels in the face of competition from foreign
exporters of vital wheat gluten and a relatively flat market for fuel grade
alcohol. The combination of these factors significantly restricted the ability
of the Company to adjust the price of its gluten and fuel grade alcohol to
compensate for the high grain costs in the first six months of fiscal 1996.
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<PAGE>
MIDWEST GRAIN PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
THREE MONTHS AND SIX MONTHS ENDED DECEMBER 31, 1995
Cost of Sales
The cost of sales in the second quarter of fiscal 1996 increased by
approximately $14.4 million above the costs of sales in the second quarter of
fiscal 1995. The principal cause was a $10.2 million increase in raw material
costs for grain. Other manufacturing cost increases principally included higher
operating costs associated with increased energy requirements and depreciation
resulting from the Company's expanded production facilities at its Pekin,
Illinois plant. These increases were partially offset by lower maintenance and
repair costs, which returned to more normal levels following the completion of
the expansion project in this year's first quarter.
The cost of sales for the first six months of fiscal 1996 increased by
approximately $24 million over cost of sales for the first six months of fiscal
1995. This was due largely to an increase of approximately $20.8 million in raw
material costs. Other factors included the increased operating costs as
experienced in the second quarter partially offset by decreased repair and
maintenance costs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses in the second quarter of fiscal
1996 were down approximately $520,000 compared to the same period the prior
year. This principally was due to a decrease of almost $457,000 resulting from
reductions in compensation, and accruals for the Company's management and
employee incentive programs. These and other reductions helped to more than
offset increases which were incurred in a minor segment of the expense
categories. Selling, general and administrative expenses for the first six
months of fiscal 1996 decreased by approximately $1.5 million, largely as the
result of compensation and benefit reductions.
Other Expense
Interest expense increased substantially as the capital expansion at the Pekin
plant came on line during the second half of fiscal 1995. Prior to that time,
the interest incurred was primarily capitalized as a part of that expansion.
The consolidated effective income tax rate is consistent for all periods.
The general effects of inflation were minimal.
Net Income
As the result of the foregoing factors, the Company experienced net income of
$195,000 in the second quarter of fiscal 1996 compared to net income of
$2,237,000 in the second quarter of fiscal 1995. A first quarter net loss of
$2,377,000 more than offset the first quarter income, resulting in a net loss of
$2,182,000 for the first six months of fiscal 1996. For the first six months of
fiscal 1995, the Company had net income of $4,993,000.
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<PAGE>
MIDWEST GRAIN PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
THREE MONTHS AND SIX MONTHS ENDED DECEMBER 31, 1995
LIQUIDITY AND CAPITAL RESOURCES
The following table is presented as a measure of the Company's liquidity and
financial condition:
December 31, June 30,
1995 1995
----------- --------
(in thousands)
Cash and cash equivalents $ 3,011 $ 460
Note payable and long-term debt 40,933 38,908
Working capital 31,119 26,955
The cost management program implemented by the Company at the end of the first
quarter bore fruit during the second quarter, resulting in a positive cash flow.
Cash provided by operations and increased borrowings on long-term debt improved
working capital. Increased inventory requirements caused by a high level of fuel
grade alcohol to be sold over the remaining winter months and the escalation of
grain costs continued to impact cash flow. Due to the current downturn in
operations and cash flow needs, dividends for the first and second quarters were
suspended.
At December 31, 1995, the Company has only $1.2 million to spend on capital
improvement projects, primarily relating to improvements and replacements of
existing equipment.
The Company had approximately $18.6 million available under existing lines of
credit at December 31, 1995.
Management believes the available lines of credit, combined with existing
working capital and working capital to be generated from future operations, will
allow the Company to complete its capital improvement projects and meet its
expanded working capital needs.
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<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4(a) Copy of Consent and Waiver Agreement between Principal
Mutual Life Insurance Company and the Company dated as
of January 20, 1996.
4(b) Copy of Consent and Waiver Agreement between Commerce
Bank of Kansas City, N.A., and the company dated as of
February 2, 1996.
11(a) Copy of Midwest Grain Products, Inc. Stock Incentive
Plan of 1996.
11(b) Copy of Midwest Grain Products, Inc. 1996 Stock Option
Plan for Outside Directors.
(15) Letter from independent public accountants pursuant to
paragraph (d) of Rule 10-01 of Regulation S-X
(incorporated by reference to Independent Accountants'
Review Report at page 2 hereof).
(20) Report to Stockholders for the six months ended December
31, 1995 (without financial statements).
(27) Financial Data Schedule for the six months ended
December 31, 1995.
(b) Reports on Form 8-K
The Company has filed no reports on Form 8-K during the quarter
ended December 31, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MIDWEST GRAIN PRODUCTS, INC.
February 14, 1996 S/Ladd M. Seaberg
_______________________________________ By____________________________
Date Ladd M. Seaberg
President and Chief Executive Officer
February 14, 1996 s/Robert G. Booe
_______________________________________ By_____________________________
Date Robert G. Booe, Vice
President and Chief Financial Officer
- 12 -
<PAGE>
<PAGE>
EXHIBIT 99
EXHIBIT INDEX
Exhibit
Number Description
4(a) Copy of Consent and Waiver Agreement between
Principal Mutual Life Insurance Company and
the Company dated as of January 20, 1996.
4(b) Copy of Consent and Waiver Agreement between
Commerce Bank of Kansas City, N.A., and the
company dated as of February 2, 1996.
11(a) Copy of Midwest Grain Products, Inc. Stock
Incentive Plan of 1996.
11(b) Copy of Midwest Grain Products, Inc. 1996 Stock
Option Plan for Outside Directors.
15 Letter from independent public accountants
pursuant to paragraph (d) of Rule 10-01 of
Regulation S-X (incorporated by reference to
Independent Accountants' Review Report at
page 2 hereof).
20 Report to Stockholders for the six months ended
December 31, 1995 (without financial statements).
27 Financial Data Schedule for the six months ended
December 31, 1995.
<PAGE>
<PAGE>
CONSENT AND WAIVER AGREEMENT Exhibit 4(a)
Dated as of January 23, 1996
Reference is made to the Note Agreement, dated as of August 1, 1993 (the "Note
Agreement"), by and among Midwest Grain Products, Inc. (the "Company") and
Principal Mutual Life Insurance Company ("Principal Mutual"). Pursuant to the
Note Agreement, the Company issued, and Principal Mutual purchased, senior notes
of the Company (collectively, the "Notes") in the aggregate original principal
amount of $25,000,000 due 2008. Capitalized terms used but not defined herein
shall have the meanings ascribed to them in the Note Agreement. By their
execution of this Consent and Waiver Agreement (the "Agreement") below, the
Company and Principal Mutual agree and consent to the following.
1. CONSENT. Principal Mutual consents to the inclusion of depreciation net
of major capital maintenance in the calculation of Net Income Available for
Fixed Charges for (and only for) the purpose of computation of the fixed charges
coverage ratio of Section 5.10 of the Note Agreement for each fiscal quarter of
the Company during the period beginning January 1, 1996 and ending December 31,
1996.
2. WAIVER. Principal Mutual agrees to waive compliance with Section 5.10
of the Note Agreement for the fiscal quarter of the Company ended December
31, 1995.
3. CONDITIONS PRECEDENT. The consent in paragraph 1 above and the waiver
in paragraph 2 above are expressly subject to and shall be effective only
upon the satisfaction of the following conditions.
3.1 The Company and Principal Mutual shall have executed this
Agreement.
3.2 As of the date of execution hereof by the Company, no Default or
Event of Default under the Note Agreement (except for any Default or Event of
Default which has been either waived by Principal Mutual or the subject of a
previous amendment to the Note Agreement) shall exist or be continuing, after
giving effect to the waiver and consent set forth herein.
3.3 The representations and warranties of the Company referred to in
Section 3.1 of the Note Agreement, shall be true and complete in all material
respects, as if made on and as of the date hereof (except as to those
representations and warranties which are made as of a specific date, which shall
be true and complete in all material respects as of such specific date, and
except as previously disclosed to Principal Mutual in writing).
<PAGE>
3.4 The representations of the Company referred to in Section 4 hereof
shall be true and complete in all material respects.
4. REPRESENTATIONS OF THE COMPANY. The Company, by its execution
and delivery of this Agreement, hereby represents and warrants to Principal
Mutual as follows:
4.1 As of the date of this Agreement, no Default or Event of Default
under the Note Agreement, or under any other agreement to which the Company is
subject, exists or is continuing, after giving effect to the amendments and
waiver set forth herein.
4.2 The representations and warranties of the Company referred to in
Section 3.1 of the Purchase Agreement are true and correct and complete in all
material respects as if made on the date hereof, except as to those
representations and warranties made as of a specific date, which are true and
correct and materially complete as of such date.
4.3 No dissolution proceedings with respect to the Company have been
commenced or are contemplated, and there had been no material adverse change in
the business, conditions or operations (financial or otherwise) of the Company
and its Restricted Subsidiaries, taken as a whole since August 1, 1993, except
as previously disclosed to Principal Mutual.
4.4 This Agreement has been duly authorized, executed and delivered by
the Company and constitutes a legal, valid and binding obligation of the
Company.
5. MISCELLANEOUS.
5.1 It is expressly understood and agreed that this Agreement shall not
constitute either (a) a modification, alteration or amendment of the terms,
conditions, and covenants of the Note Agreement or the Notes, all of which shall
remain unchanged and in full force and effect, except as otherwise specifically
set forth herein, or (b) a waiver, release or limitation upon the exercise by
Principal Mutual of any of the rights, legal or equitable, present or future,
thereunder or with respect thereto, except as to matters as to which Principal
Mutual herein expressly consents or waives compliance and only for the relevant
time period set forth herein. Nothing herein is intended or shall be construed
to release or relieve the Company in any way or to any extent from any of the
obligations, covenants or agreements imposed upon the Company by the Note
Agreement or the Notes or otherwise, or from the consequences of any breach
thereof or default or event of default thereunder, except as to matters as to
which the undersigned expressly agree herein.
2
<PAGE>
5.2 This Agreement may be executed in as many counterparts as may be
deemed necessary or convenient and by the different parties hereto on separate
counterparts (provided that the Company will execute each counterpart), and each
of which, when so executed, shall be deemed to be an original, but all such
counterparts shall constitute but one and the same agreement.
5.3 This Agreement shall be deemed effective as of the date hereof,
provided that the provisions and the conditions precedent set forth in Section 3
hereof have been completely satisfied.
5.4 This Agreement (a) shall be binding on the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and their respective successors and assigns, (b) constitutes the entire
agreement among the parties hereto with respect to the matters addressed herein,
and (c) shall be governed by and construed and enforced in accordance with the
laws of the State of Kansas.
Agreed and Acknowledged:
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
S/Clint Woods
By: ________________________
Clint Woods, Counsel
s/C Henderson
By: ________________________
C Henderson
MIDWEST GRAIN PRODUCTS, INC.
/s/ Robert g. Booe
By: ________________________
VP-CFO, 1-25-96
cjh\mwgrain.amd
3
<PAGE>
<PAGE>
WAIVER AND CONSENT Exhibit 4(b)
THIS WAIVER AND CONSENT ("Waiver") is granted as of February 2, 1996, by
COMMERCE BANK, N.A. located in Kansas city, Missouri ("Bank") for the benefit of
MIDWEST GRAIN PRODUCTS, INC. ("Company").
WHEREAS, pursuant to the Second Amended Line of Credit Loan Agreement
dated as of September 18, 1995 by and between Bank and Company ("Loan
Agreement"), Bank agreed to make advances to Company, subject to certain terms,
conditions and limitations contained therein; and
WHEREAS, Company is in violation of certain covenant under the Loan
Agreement, and Company has requested that Bank acknowledge its waiver of such
covenant; and
WHEREAS, pursuant to the terms for Section 5.1 of the Loan Agreement
for Fixed waive compliance with covenants by a writing executed by an officer of
the Bank and the parties may consent in writing to a modification of the Loan
Agreement.
NOW, THEREFORE, for valuable consideration, the Bank hereby agrees as
follows;
1. Capitalized terms used herein and not defined herein, shall have the
meanings ascribed to them in the Loan Agreement.
2. Bank hereby waives compliance with Section 3.1(e) of the Loan
Agreement for the fiscal quarter of Company ended December 31, 1995.
3. Bank consents to the inclusion of depreciation net of major capital
maintenance in the calculation of New Income Available for Fixed Charges for
(and only for) for the propose of computation of the fixed charges coverage
ratio of section 3.1(e) of the Loan Agreement for each fiscal quarter of the
Company during the period beginning January 1, 1996 and ending December 31,
1996.
4. This Waiver shall be strictly limited to the covenant set forth
herein and shall not obligate Bank to grant any further waivers in the future
unless otherwise specifically agreed to by the Bank.
5. This Waiver shall be governed by, and construed in accordance with,
the laws of the State of Missouri.
IN WITNESS WHEREOF, Bank has executed this Waiver, and Company has
executed its acknowledgment and agreement herewith, as of the date first above
written.
COMMERCE BANK, N.A.
s/Frederick Marsten
By:________________________
Title: V.P.
Acknowledged and Accepted:
MIDWEST GRAIN PRODUCTS, INC.
s/Robert G. Booe
By:________________________
Title: V.P. - CFO
<PAGE>
<PAGE>
Exhibit 11(a)
MIDWEST GRAIN PRODUCTS, INC.
STOCK INCENTIVE PLAN OF 1996
<PAGE>
TABLE OF CONTENTS
Section Page
1. Purposes 1
2. Definitions 1
3. Grants of Stock Incentives 3
4. Stock Subject to the Plan 4
5. Stock Awards 5
6. Stock Options 5
7. Stock Appreciation Rights 8
8. Adjustment Provisions 9
9. Term 9
10. Administration 10
11. General Provisions 11
12. Amendment or Discontinuance of Plan 12
13. Change In Control 13
14. Effective Date 13
Approved by Board of Directors, subject to
Stockholder Approval: January 5, 1996.
Approved by Stockholders: October _, 1996.
Effective Date: January 5, 1996.
<PAGE>
MIDWEST GRAIN PRODUCTS, INC.
STOCK INCENTIVE PLAN OF 1996
1. PURPOSES
The purposes of the Plan are (a) to provide additional incentive
for Key Employees of the Company and its Subsidiaries by authorizing a
Committee of the Board of Directors to grant stock incentives to such Key
Employees, thereby furthering their identity of interest with the interests
of the Company's shareholders, and increasing their interest in and
commitment to the future growth and prosperity of the Company; and (b) to
enable the Company to induce the employment and continued employment of Key
Employees and to compete with other organizations in attracting and
retaining the services of highly-qualified personnel.
2. DEFINITIONS
Unless otherwise required by the context, the following terms,
when used in the Plan, shall have the meanings set forth in this Section 2.
Board of Directors or Board: The Board of Directors of the
Company.
Change in Control: A Change in Control shall be deemed to have
occurred upon
(i) the acquisition (other than from the Company) by any
person, entity or "group," within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act, (excluding, for this purpose, the Company or
its subsidiaries, any employee benefit plan of the Company or its
subsidiaries, trustees of the Cray Family Trust, or any person who acquires
Common or Preferred Stock from Cloud L. Cray, Jr. or from any trust
controlled by or for the benefit of Cloud L. Cray, Jr. prior to or as a
result of his death) of beneficial ownership, (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of at least 30% of the then
outstanding shares of Common Stock and 50% of the then outstanding shares
of Preferred Stock or 30% of the combined voting power of the Company's
then outstanding voting securities entitled to vote generally in the
election of directors; or
(ii) approval by the stockholders of the Company of a
reorganization, merger, consolidation, in each case, with respect to which
persons who were the stockholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own
collectively as a group more than 50% of the combined voting power entitled
to vote generally in the election of directors of the reorganized, merged
or consolidated company's then outstanding voting securities, or a
liquidation or dissolution of the Company or of the sale of all or
substantially all of the assets of the Company.
If any of the events enumerated in clauses (i) or (ii) occur, the
Board shall determine the effective date of the Change in Control resulting
therefrom, for purposes of the Plan.
The Code: The Internal Revenue Code of 1986 as now or hereafter
amended.
<PAGE>
Committee: A committee of the Board of Directors of the Company
consisting of not less than three disinterested directors as provided in
Section 10(a) of the Plan.
Common Stock: The Common Stock of the Company, no par value, or
such other class of shares or other securities as may be subject to the
Plan as the result of an adjustment made pursuant to the provisions of
Section 8.
Company: Midwest Grain Products, Inc., a Kansas corporation.
Fair Market Value of a Share of Common Stock: The fair market
value of a share of Common Stock on the date as of which fair market value
is to be determined shall be: (a) if the Common Stock is reported on the
NASDAQ National Market System of the National Association of Securities
Dealers, Inc., the last reported sales price of a share of Common Stock as
reported by NASDAQ; or (b) if the Common Stock is listed on an established
securities exchange or exchanges, the highest reported closing price of a
share of Common Stock on such exchange or exchanges. The fair market value
of the Common Stock if not so reported or listed and the fair market value
of any other property on the date as of which fair market value is to be
determined shall mean the fair market value as determined by the Committee
in its sole discretion.
Incentive Compensation: Bonuses, extra and other compensation
payable in addition to a salary or other base amount, whether contingent or
not, whether discretionary or required to be paid pursuant to an agreement,
resolution, arrangement, plan or practice, and whether payable currently or
on a deferred basis, in cash, Common Stock or other property.
Incentive Stock Option: A stock option granted hereunder which
satisfies the conditions of Section 6 of the Plan, and the requirements of
Section 422 of the Code.
Key Employee: A salaried, full-time employee of the Company or of
a Subsidiary, including an officer or director who is an employee, who in
the opinion of the Committee can contribute significantly to the growth and
successful operations of the Company or a Subsidiary. The determination by
the Committee that a Stock Incentive be granted to an employee shall be
deemed a determination by the Committee that such employee is a Key
Employee.
Mature Stock: shall mean shares of Common Stock which have been
obtained through the exercise of an option under this Plan or any other
plan of the Company, which are delivered to the Company in order to
exercise an Option and which have been held continuously by an Optionee for
six months or more.
Option: An option to purchase shares of Common Stock or, where
the context so requires, the instrument which evidences such an option as
provided in paragraph (c) of Section 3 of the Plan.
Plan: The Stock Incentive Plan of 1996 herein set forth as the
same may from time to time be amended.
Restricted Shares: Shares of Common Stock issued or transferred
subject to terms and conditions with respect to payment or forfeiture as
authorized by Section 5.
<PAGE>
Stock Appreciation Right: A right to receive a number of shares
of Common Stock, cash, or a combination of the two based on the increase in
the Fair Market Value of shares of Common Stock subject to an Option, as
set forth in Section 7 of the Plan.
Stock Award: An issuance or transfer of shares of Common Stock at
the time a Stock Incentive is granted or as soon thereafter as practicable,
or an undertaking to issue or transfer such shares in the future,
including, without limitation, such an issuance, transfer or undertaking
with respect to a Stock Incentive that is contingent, in whole or in part,
upon the attainment of a specified objective or objectives.
Stock Incentive: A stock incentive granted under the Plan in one
of the forms authorized in Section 3.
Subsidiary: A corporation or other form of business association
of which shares (or other ownership interests) having 50% or more of the
voting power are owned or controlled, directly or indirectly, by the
Company.
3. GRANTS OF STOCK INCENTIVES.
(a) Eligibility. Subject to the provisions of the Plan, the
Committee may at any time grant Stock Incentives under the Plan to, and
only to, Key Employees who are not members of the Committee; provided that
Incentive Stock Options may only be granted to a key employee who is an
employee of the Company or of a subsidiary which is a corporation.
(b) Types of Stock Incentives. Stock Incentives may be granted
in the following forms:
(i) a Stock Award, in accordance with Section 5, or
(ii) a Stock Option, in accordance with Section 6, or
(iii) a Stock Appreciation Right, in accordance with
Section 7, or
(iv) a combination of any of the foregoing.
(c) Evidence of Grant. Each Stock Incentive shall be evidenced
by a written instrument in a form prescribed by the Committee, which
instrument shall be consistent with the Plan, shall incorporate the Plan by
reference, and shall be signed on behalf of the Company by a person
authorized by the Committee. Any such instrument may contain such
additional provisions consistent with the Plan as the Committee may deem
advisable.
(d) Amendments. The Committee may from time to time authorize
the amendment of outstanding stock incentives so long as such amendments
are consistent with the Plan, as amended. Without limiting the foregoing
such amendments may, in the case of any outstanding stock option not
immediately exercisable in full, accelerate the time in which the option
may be exercised by the removal or modification of installments imposed in
the initial grant of such option pursuant to Section 6(d). Any amendment
shall be evidenced by a written instrument in a form prescribed by the
Committee, which instrument shall be consistent with the Plan, and shall be
signed on behalf of the Company by a person authorized by the Committee.
<PAGE>
Any such amendment may contain such additional provisions consistent with
the Plan, as amended, as the Committee may deem advisable.
4. STOCK SUBJECT TO THE PLAN.
(a) Number of Shares. Subject to the provisions of paragraph (c)
of this Section 4 and of Section 8, the aggregate number of shares of
Common Stock which may be issued or transferred pursuant to Stock
Incentives granted under the Plan shall not exceed four hundred and fifty
thousand (450,000) shares of Common Stock.
(b) Source of Shares. Subject to the requirements of applicable
Kansas law, authorized but unissued shares of Common Stock and shares of
Common Stock held in the treasury, whether acquired by the Company
specifically for use under the Plan or otherwise, may be used, as the Board
of Directors may from time to time determine, for purposes of the Plan;
provided, however, that any shares acquired or held by the Company for the
purposes of the Plan shall, unless and until transferred to a Key Employee
in accordance with the terms and conditions of a Stock Incentive, be and at
all times remain treasury shares of the Company, available for any
corporate purpose, irrespective of whether such shares are entered in a
special account for purposes of the Plan.
(c) Charges Against Plan Limit. If any shares of Common Stock
subject to a Stock Incentive shall not be issued or transferred or shall
cease to be issuable or transferable under such Stock Incentive, or if any
such shares shall, after issuance or transfer, be reacquired by the Company
or Subsidiary because of an employee's failure to comply with or meet the
terms and conditions of a Stock Incentive, such shares shall no longer be
charged against the limitation provided for in paragraph (a) of this
Section 4 and may again be made subject to Stock Incentives; and, only the
net additional shares issued upon the exercise of a stock incentive through
the delivery or withholding of shares of Common Stock in payment of the
exercise price or withholding taxes shall be counted against the number of
shares which are authorized for issuance under Section 3(a). The
limitation provided for in paragraph (a) of this Section 4, shall also be
increased by the number of shares subject to any Substitute Stock Options
granted under Section 6(j). Notwithstanding the foregoing, shares shall be
deemed to have been issued pursuant to an Option or Stock Award and shall
be charged against the limitation provided for in paragraph (a) of this
Section 4, whether actually delivered, to the extent of the number of
shares covered by that portion of the related option or award granted under
the Plan which is settled by the exercise of a Stock Appreciation Right or
by a cash payment under a Stock Award.
(d) Certain Limitations on Grants. Notwithstanding any provision
herein to the contrary, and subject to adjustment as provided in Section 8,
no Executive Officer of the Company may receive Stock Incentives under the
Plan in any calendar year that relate to more than fifty thousand (50,000)
shares of Common Stock. In addition, and subject to other provisions of the
plan permitting the expiration of restrictions under certain circumstances,
no Stock Award shall be granted under Section 5 unless the shares subject
to the Award (other than shares purchased for cash at fair market value on
date of purchase under a related Stock Purchase Right) are subject to
restrictions on transfer and/or ownership specified by the Committee and
the restrictions continue for a period of one year from the date of grant
in the case of Awards that are performance based and continue for a period
of three years from the date of grant in the case of Awards that are not
<PAGE>
performance based.
5. STOCK AWARDS
Stock Incentives in the form of Stock Awards shall be subject to
the following provisions:
(a) Consideration. A Stock Award shall be granted only in
payment of (i) Incentive Compensation that has been earned, (ii) as
Incentive Compensation to be earned, or (iii) a combination of (i) and
(ii).
(b) General. Shares of Common Stock subject to a Stock Award may
be issued or transferred to a Key Employee at the time the Stock Award is
granted, or at any time subsequent thereto, or in installments from time to
time, as the Committee shall determine. With respect to a Stock Award
providing for issuance or transfer of shares subsequent to the time it is
granted, the Committee may provide for payment to the grantee of amounts
not exceeding the cash dividends which would have been payable in respect
of such shares (as adjusted under Section 8 of the Plan) if they had been
issued or transferred at the time the Stock Award was granted. Such
payments may be made in cash, shares of Common Stock or a combination of
cash and shares. Such payments may be made at the time the shares are
issued or transferred, or at the time or times the cash dividends would
have been payable if the shares had been issued or transferred at the time
the Stock Award was granted. Any amount payable in shares of Common Stock
under the terms of the Stock Award may be paid in cash on each date on
which delivery of shares would otherwise have been made, in an amount equal
to the Fair Market Value on such date of the shares which would otherwise
have been delivered.
(c) Restrictions on Transfer, Forfeiture. A Stock Award may
contain such terms and conditions as the Committee may determine with
respect to transfer, payment or forfeiture of all or any part of the Stock
Award.
(d) Other Terms. A Stock Award may be subject to such other
terms and conditions, including, without limitation, restrictions on sale
or other disposition of the Stock Award or of the shares issued or
transferred pursuant to the Stock Award, as the Committee may determine;
provided, however, that upon the issuance or transfer of shares pursuant to
a Stock Award, the recipient shall, with respect to such shares, be and
become a shareholder of the Company fully entitled to receive dividends, to
vote and to exercise all other rights of a shareholder except to the extent
otherwise provided in the Stock Award.
6. STOCK OPTIONS
Stock Incentives granted under the Plan in the form of Stock
Options shall be subject to the following provisions:
(a) Date of Grant. The "Date of Grant" of an Option shall be the
date the action of the Committee providing for the grant of the Option is
taken, or such later date as the Committee may provide.
(b) Option Price. The price at which shares of Common Stock may
be purchased under an Option (the "Option Price") shall be specified in the
Option and shall be not less than 100% of the Fair Market Value of such
<PAGE>
stock on the Date of Grant of the Option. In the case of options other
than incentive stock options, the Committee may grant options at a price
equal to such percentage of the Fair Market Value of the stock on the date
of grant as the Committee may specify, provided that in no case shall the
price be less than 100% of such Fair Market Value.
(c) Term of Option. An Option shall be exercisable only during a
term (the "Term of the Option" or "Term") commencing not sooner than six
months and one day after the Date of Grant of the Option and ending (unless
the Option shall have terminated earlier under other provisions of the
Plan) on a date fixed by the Committee and stated in the Option, which date
shall be an anniversary of the Date of Grant of the Option and shall not be
later than the tenth anniversary. If an Option is granted for an original
Term of less than ten years, the Committee may, at any time prior to the
expiration of the Option, extend its Term for a period ending not later
than the tenth anniversary of the Date of Grant of the Option.
(d) Installments. An Option may provide that it shall be
exercisable in full or in part at any time during the Term of the Option,
or that it shall be exercisable in a specified series of installments.
Unless otherwise provided in the Option, installments or portions thereof
not exercised in earlier periods shall be cumulative and shall be available
for exercise in later periods. The Committee may, by so providing in an
Option, require any partial exercise thereof to be with respect to a
specified minimum number of shares.
(e) Termination of Employment other than by Death or Retirement.
If an optionee shall cease, for a reason other than his death or
retirement, to be employed by the Company or Subsidiary, the Option shall
terminate ninety (90) days after the cessation of employment if the option
is an Incentive Stock Option and not later than one year after the
cessation of employment with respect to other options, unless the Incentive
or other option terminates earlier by its terms or under other provisions
of the Plan. Until the Option terminates it may be exercised by the
optionee, his estate or legal representatives for all or a portion of the
shares as to which the right of purchase had accrued under the Plan at the
time of cessation of employment, subject to all applicable conditions and
restrictions provided in the Plan and the Option. In no event shall an
Option be exercisable later than the date of expiration of the Term of the
Option, and in no event shall an Option be exercisable for any shares as to
which the right of purchase had not accrued at the time of cessation of
employment. Employment for the purposes of this paragraph shall mean
continuous full-time salaried employment. Vacations, sick leaves and any
approved absence on leave shall not constitute a termination of employment
or an interruption of continuous full-time salaried employment.
(f) Retirement. If an optionee shall retire, the Option shall
terminate on the third anniversary of such retirement, unless it terminates
earlier by its terms or under other provisions of the Plan. Until the
Option terminates it may be exercised by the optionee, his estate or legal
representatives for all or a portion of the shares as to which the right of
purchase had accrued as of the date of such exercise, subject to all
applicable conditions and restrictions provided in the Plan and the Option.
In no event shall an Option be exercisable later than the date of
expiration of the Term of the Option, and in no event shall an Option be
exercisable for any shares as to which the right of purchase had not
accrued at the time of exercise. "Retirement" for purposes of
paragraph 6(e) and (f) shall be defined by the Committee with respect to
<PAGE>
age, service, and other requirements. Notwithstanding the foregoing, if
the option is an Incentive Stock Option, it may be exercised as an
incentive stock option by the retired optionee or his estate not later than
the day three months after the date of termination of his employment and by
his estate not later than the first anniversary of such termination of
employment if the optionee's death occurred prior to the day three months
after the termination of employment.
(g) Death. If an optionee shall die while in the employ of the
Company or a Subsidiary and if the Option was in effect at the time of his
death (whether or not its terms had then commenced), the Option may, until
the expiration of one year from the date of death of the optionee or until
the earlier expiration of the Term of the Option, be exercised as and to
the extent it could have been exercised by the optionee had he been living
at the time, by the legal representatives of the optionee or by any person,
persons or entity to whom his rights under the Option shall have been
transferred pursuant to the provisions of paragraph (g) of Section 11 of
the Plan. Such exercise shall not be limited to the shares as to which the
right of purchase had accrued at the date of death of the optionee, but
shall be subject to all applicable conditions and restrictions prescribed
in the Plan and the Option, including any installment provision.
(h) Exercise. To the extent that the right to purchase shares
has accrued under an Option, the Option may be exercised from time to time
by the optionee or by a person or persons entitled to exercise the Option,
by delivery to the Company of a written notice, in the manner and in such
form as may be prescribed by the Committee, stating the number of shares
with respect to which the Option is being exercised, and by making
provision satisfactory to the Company for the payment in full of the Option
price of the shares prior to or in connection with the delivery of
certificates evidencing the shares. The Committee may, in its discretion
and upon request of the Participant, issue shares of Common Stock upon the
exercise of an Option directly to a brokerage firm or firms to be approved
by the Company, without payment of the purchase price by the optionee but
upon delivery of an irrevocable guarantee by such brokerage firm or firms
of the payment of such purchase price or upon the participant's issuance to
the brokerage firm of irrevocable instructions to sell or margin a
sufficient portion of the shares and deliver the sale or margin loan
proceeds directly to the Company to pay the exercise price and any
withholding taxes. Upon receipt of such notice and payment arrangement in
form satisfactory to the Company, the Company shall deliver to or upon the
order of the optionee, or such other person entitled to exercise the
Option, at the General Office of the Company, or at such place as shall be
mutually acceptable, a certificate of certificates evidencing such shares.
An Option may not be exercised for fractional shares of Common Stock.
Payment in form satisfactory to the Company may, at the option of the
Company, include payment by transfer to the Company of other shares of
Mature Stock or other Common Stock which was not obtained through the
exercise of a stock option owned by the Optionee or by the withholding of
shares to be distributed in connection with the exercise of a Stock
Incentive. Common Stock transferred to the Company or withheld from shares
to be distributed in payment of the option price or withholding taxes shall
be valued at the Fair Market Value of the Common Stock on the date of the
exercise.
(i) No Rights Before Exercise. No person shall have any rights
of a stockholder by virtue of an Option except with respect to shares
actually issued to him, and issuance of shares shall not confer retroactive
<PAGE>
rights to dividends.
(j) Substitute Options. Options may be granted under the Plan
from time to time in substitution for stock options held by employees of
other corporations who are about to become employees of the Company or a
Subsidiary as the result of a merger or consolidation of the employing
corporation with the Company or a Subsidiary, or the acquisition by the
Company or a Subsidiary of the assets of the employing corporation, or the
acquisition by the Company or a Subsidiary of stock of the employing
corporation as the result of which it becomes a Subsidiary. The terms and
conditions of the substitute options so granted may vary from the terms and
conditions set forth in this Section 6 to such extent as the Committee at
the time of grant may deem appropriate to conform, in whole or in part, to
the provisions of the options in substitution for which they are granted.
(k) Certain Limits on Incentive Stock Options. In the case of
Incentive Stock Options, the amounts, terms and conditions of such grants
shall be subject to and comply with the requirements for Incentive Stock
Options as set forth in Section 422 of the Code, as from time to time
amended, and any regulations implementing such statute.
7. STOCK APPRECIATION RIGHTS.
(a) Grant. Stock Appreciation Rights may be granted in
connection with any Option granted under the Plan, either at the time of
the grant of such Option or at any time thereafter during the term of the
Option. A grant of Stock Appreciation Rights shall either be included in
the instrument evidencing the Option to which they relate or evidenced by a
separate instrument meeting the requirements of Section 3 of the Plan.
(b) Settlement. A person entitled to exercise an Option in
connection with which Stock Appreciation Rights shall have been granted
shall be entitled, at such time or times and subject to such terms and
conditions as may be stated in the granting instrument, to settle all or
part of the Option by requesting the Company to pay, in cancellation of the
part of the Option to be settled, consideration in an amount equal to the
number of shares of Common Stock subject to the canceled part of the Option
times the amount by which the fair market value of one share on the
exercise date exceeds the Option Price (the "Appreciation"). The election
shall be made in a written instrument, in form satisfactory to the
Committee, delivered in the manner prescribed in Section 6(h) for the
exercise of options.
(c) Form of Consideration. The form of the consideration to be
paid for the Appreciation shall either be cash, shares of Common Stock
having an aggregate market value on the exercise date equal to the
Appreciation, or a combination of cash and shares. Such form of
consideration shall be specified either by the Committee or, subject to the
approval of the Committee, by the person exercising the Stock Appreciation
Right, provided that such form of consideration shall in no event include
fractional shares of Common Stock.
(d) Provisions in a Related Option. An Option in connection with
which Stock Appreciation Rights are granted may prescribe or limit the
period or periods of time during which the Stock Appreciation Rights may be
exercised as provided in paragraph (b) of this Section 7, and may prescribe
such additional terms and conditions applicable to the exercise of the
Stock Appreciation Rights as may be determined by the Committee and as are
consistent with the Plan. In no event may Stock Appreciation rights be
<PAGE>
exercised at a time when the Option in connection with which they were
granted is not exercisable.
8. ADJUSTMENT PROVISIONS
In the event of a reorganization of the Company, an equitable
adjustment shall be made in: (a) the number and class of shares or other
securities that may be issued or transferred pursuant to Stock Incentives
in the aggregate or to any individual, (b) the number and class of shares
or other securities which have not been issued or transferred under
outstanding Stock Incentives, (c) the purchase price to be paid per share
under outstanding Options, and (d) the price to be paid per share by the
Company or a subsidiary for shares or other securities issued or
transferred pursuant to Stock Incentives which are subject to a right of
the Company or a Subsidiary to reacquire such shares or other securities.
For this purpose, a "reorganization" shall be deemed to have occurred in
the event:
(i) any recapitalization, reclassification, split-up or
consolidation of shares of Common Stock shall be effected;
(ii) the outstanding shares of Common Stock are, in
connection with a merger or consolidation of the Company or the acquisition
by another corporation of Common Stock or of all or part of the assets of
the Company, exchanged for a different number or class of shares of stock
or other securities of the Company or for shares of the stock or other
securities of another corporation;
(iii) New, different or additional shares or other
securities of the Company or of another corporation are received by the
holders of Common Stock with respect to such stock; or
(iv) any distribution other than a cash dividend is made to
the holders of Common Stock.
The Committee may also unilaterally amend outstanding stock
incentives to remove restrictions or otherwise change the terms of
outstanding stock incentives to permit such incentives to be substituted
for comparable incentives to be provided by any entity which assumes the
Company's obligations with respect to such outstanding stock incentives
upon terms and conditions approved by the Board of Directors or
Stockholders.
In the event of any other change in the capital structure or in
the capital stock of the Company, the Committee shall be authorized to make
such appropriate adjustments in the maximum number of shares of Common
Stock available for issuance under the Plan in the aggregate or to any
individual and any adjustments and/or modifications to outstanding Stock
Incentives as it deems appropriate.
The action of the Committee in approving any adjustment or change
contemplated by this Section 8 shall be conclusively deemed to be
equitable, appropriate, fair and/or comparable and shall be binding on all
persons holding rights under the Plan.
9. TERM
(a) Effective Date. The Plan shall be effective as of January 5,
<PAGE>
1996, subject to approval by the affirmative vote of the holders of a
majority of the shares of the Company's Common Stock present or
represented, and entitled to vote at a meeting duly held in accordance with
applicable law within one year after such effective date.
(b) Expiration Date. No Stock Incentives shall be granted under
the Plan after January 4, 2006. Unless otherwise expressly provided in the
Plan or in an applicable award agreement, any Stock Incentive granted
hereunder may, and the authority of the Board or the Committee to amend,
alter, adjust, suspend, discontinue, or terminate any such Award or to
waive any conditions or rights under any such Stock Incentive shall,
continue after the authority for grant of new Stock Incentives hereunder
has been exhausted.
10. ADMINISTRATION.
(a) Composition of Committee. The Plan shall be administered by
the Committee which shall consist of not less than three directors of the
Company designated by the Board of Directors; provided, however, that no
director shall be designated as or continue to be a member of the Committee
unless he shall at the time of designation and throughout his service be a
"disinterested person" within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934 (or any successor rule or statute at the
time in effect).
(b) Delegation of Board Authority. The Board of Directors may
delegate to the Committee any or all its authority under the Plan,
including the authority to award Stock Incentives, but excluding the
authority to amend or discontinue the Plan.
(c) Rules, etc. The Committee may establish such rules and
regulations and may construe, interpret and further define terms used in
the Plan so long as such rules, regulations and other actions are not
inconsistent with the provisions of the Plan and are otherwise believed to
be necessary or appropriate to promote the purposes of the Plan, and may
amend or revoke the same. All such rules, regulations, determinations,
definitions and interpretations shall be binding and conclusive upon all
persons granted stock incentives under the Plan, the Company, its
Subsidiaries, its stockholders and all employees; upon their respective
legal representatives, beneficiaries, successors and assigns, and upon all
other persons claiming under or through any of them.
(d) Limited Liability. No member of the Board or of the
Committee shall be liable for any action or determination made in good
faith with respect to the Plan or any Stock Incentive granted under the
Plan, and shall incur no liability except for willful misconduct in the
performance of their duties.
11. GENERAL PROVISIONS
(a) No right to Continued Employment. Nothing in the Plan nor in
any instrument executed pursuant thereto shall confer upon any employee any
right to continue in the employ of the Company or a Subsidiary or shall
affect the right of the Company or of a Subsidiary to terminate the
employment of any employee with or without cause.
(b) Legal Requirements for Transfers. No shares of Common Stock
shall be issued or transferred pursuant to a Stock Incentive unless the
<PAGE>
Company is satisfied that there has been compliance with all legal
requirements applicable to the issuance or transfer of such shares. In
connection with any such issuance or transfer, the person acquiring the
shares shall, if requested by the Company, give assurances satisfactory to
the Company that the shares are being acquired for investment and not with
a view to resale or distribution thereof and assurances in respect of such
other matters as the Company may deem desirable to assure compliance with
all applicable legal requirements.
(c) No Rights in shares Before Issue or Transfer. No employee
(individually or as a member of a group), and no beneficiary or other
person claiming under or through him, shall have any right, title or
interest in or to any shares of Common Stock allocated or reserved for the
purposes of the Plan or subject to any Stock Incentive, except as to such
shares of Common Stock, if any, as shall have been issued or transferred to
him.
(d) Grants to Prospective Key Employees. The Company or
Subsidiary may, with the approval of the Committee, enter into an agreement
or other commitment to grant a Stock Incentive in the future to a person
who is or will be at the time of grant a Key Employee, and, notwithstanding
any other provision of the Plan, any such agreement or commitment shall not
be deemed the grant of a Stock Incentive until the date on which the
Committee takes action to implement such agreement or commitment, which
date shall for the purpose of the Plan be the date of grant.
(e) Implementation by subsidiary. In the case of a grant of a
Stock Incentive to any employee of a Subsidiary, such grant may, if the
Committee so directs, be implemented by the Company issuing or transferring
the shares, if any, covered by the Stock Incentive to the Subsidiary, for
such lawful consideration as the Committee may specify, upon the condition
or understanding that the Subsidiary will transfer the shares to the
employee in accordance with the terms of the Stock Incentive.
Notwithstanding any other provision hereof, such Stock Incentive may be
issued by and in the name of the Subsidiary and shall be deemed granted on
the date it is approved by the Committee or on such later date as the
Committee shall specify.
(f) Taxes. The Company or a Subsidiary may make such provisions
as it may deemappropriate for the withholding and payment of any taxes
which the Company or Subsidiary determines it is required to withhold or
which the employee deems to be payable in connection with any Stock
Incentive. Such provisions may include a requirement that all or part of
the amount of such taxes be paid to the Company or Subsidiary, in cash or
by transfer to the Company of shares of Mature Stock or other Stock which
was not obtained through the exercise of a stock option owned by the
employee, or by the withholding of cash or shares of Common Stock payable
to the employee under the stock incentive, or by any combination of the
foregoing. To the extent that tax provisions are satisfied with shares of
the Company's Common Stock, such stock shall be valued at Fair Market Value
on the appropriate transaction date.
(g) No Assignments. No Stock Incentive and no rights under a
Stock Incentive or under the Plan, contingent or otherwise, shall, by
operation of law or otherwise, be transferable or assignable or subject to
any encumbrance, pledge, hypothecation or charge of any nature, or to
execution, attachment or other legal process, except that, in the event of
the death of the holder of a Stock Incentive, the holder's rights under the
<PAGE>
Stock Incentive may pass, as provided by law, to the legal representatives
of the holder, and such legal representatives may transfer any rights in
respect of such Stock Incentive to the person or persons or entity
(including a trust) entitled thereto under the will of the holder of such
Stock Incentive, or in the case of intestacy, under the applicable laws
relating to intestacy. During the life of a holder of a Stock Incentive,
the Stock Incentive shall be exercisable only by such holder.
Notwithstanding the foregoing, a Stock Incentive may be transferable, to
the extent set forth in the applicable award agreement, (i) if such Award
Agreement provisions do not disqualify such Award for exemption under Rule
16b-3 or (ii) if such Stock Incentive is not intended to qualify for
exemption under such rule.
(h) No Restriction on Other Plans. Nothing in the Plan is
intended to be a substitute for, or shall preclude or limit the
establishment or continuation of, any other plan, practice or arrangement
for the payment of compensation or fringe benefits to employees generally,
or to any class or group of employees, which the Company or any Subsidiary
now has or may hereafter lawfully put into effect, including, without
limitation, any retirement, pension, profit-sharing, insurance, stock
purchase, incentive compensation or bonus plan.
(i) Applicable Law. The place of administration of the
Plan shall conclusively be deemed to be within the State of Kansas
and the validity, construction, interpretation and administration
of the Plan and of any rules and regulations or determinations or
decisions made thereunder, and the rights of any and all persons
having or claiming to have any interest therein or thereunder,
shall be governed by and be determined exclusively and solely in
accordance with, the laws of the State of Kansas. Without limiting
the generality of the foregoing, the period within which any action
arising under or in connection with the Plan, or any payment or
award made or purportedly made under or in connection therewith,
must be commenced, shall be governed by the laws of the State of
Kansas, irrespective of the place where the act or omission
complained of took place and of the residence of any party to such
action and irrespective of the place where the action may be
brought.
12. AMENDMENT OR DISCONTINUANCE OF PLAN
(a) Amendments. The Plan may be amended by the Board of
Directors at any time, provided that without the affirmative vote of the
holders of a majority of the shares of the Company's Common Stock and a
vote of the holders of a majority of the Company's Preferred Stock present
or represented, and entitled to vote at a meeting duly held in accordance
with applicable law, no amendment shall be made which (i) increases the
aggregate number of shares of Common Stock that may be issued or
transferred pursuant to Stock Incentives as provided in paragraph (a) of
Section 4, (ii) amends the provisions of paragraph (a) of Section 10 with
respect to eligibility and disinterest of members of the Committee, (iii)
permits any person who is not determined to be a Key Employee to be granted
a Stock Incentive, (iv) amends the provisions of paragraph (b) of
Section 6, (v) amends Section 9 to extend the term of the Plan, or (vi)
amends this Section 12.
(b) Plan Termination. The Board of Directors may by resolution
adopted by a majority of the entire Board of Directors discontinue the
Plan.
<PAGE>
(c) Effect of Amendment or Termination. No amendment or
discontinuance of the Plan by the Board of Directors or the shareholders of
the Company shall adversely affect, without the consent of the holder
thereof, any Stock Incentive theretofore granted.
13. CHANGE IN CONTROL.
Unless the Committee shall otherwise provide in the award
agreement relating to a Stock Incentive granted under the Plan, upon the
occurrence of a Change in Control:
(a) In the case of Stock Options and Stock Appreciation Rights
granted under the Plan (i) each outstanding option or right that is not
then fully exercisable shall automatically become fully exercisable until
the termination of the option exercise period of the option or right [as
modified by subsection (ii) that follows], and (ii) in the event the
Participant's employment is terminated within two years after a Change in
Control, his or her outstanding options or rights at that date of
termination shall be immediately exercisable for a period of three months
following such termination, provided, however, that, to the extent the
option or right by its terms otherwise permits a longer option exercise
period after such termination, such longer period shall govern, and
provided further that in no event shall such option or right be exercisable
more than ten years after the date of grant; and
(b) Any restrictions and provisions for forfeiture on all
outstanding Stock Awards shall automatically expire and immediately lapse
and all such awards shall be immediately and fully vested.
14. EFFECTIVE DATE OF PLAN.
The Plan shall become effective on its adoption by the Board,
provided, however, the Plan shall be submitted for approval by the holders
of a majority of the shares of the Company's Common Stock and by the
holders of a majority of the shares of the Company's Preferred Stock,
present or represented and entitled to vote at a meeting duly held in
accordance with applicable law prior to the first anniversary of such
adoption by the Board. Any Stock Incentive granted prior to stockholder
approval of the Plan shall become null and void if such approval is not
obtained before the first anniversary of the effective date. Such grants
shall also contain provisions for the return or cancellation of benefits if
such stockholder approval is not obtained.
<PAGE>
CERTIFICATIONS
The undersigned Secretary of Midwest Grain Products, Inc., hereby
certifies that the foregoing Plan was duly adopted by the Board of
Directors at a regular meeting of the Board duly called, noticed, convened
and held on January 5, 1996, in accordance with the Certificate of
Incorporation, Bylaws and applicable laws of the State of Kansas.
Dated January 5, 1996.
s/Norma C. Ewbank
___________________________
Norma C. Ewbank, Secretary
The undersigned Secretary of Midwest Grain Products, Inc., hereby
certifies that the foregoing Plan was duly approved by the holders of a
majority of the Common and Preferred Stock present or represented and
entitled to vote at the Annual Meeting of Stockholders duly called,
noticed, convened and held on October __, 1996, in accordance with the
Certificate of Incorporation, Bylaws and applicable laws of the State of
Kansas.
Dated October __, 1996.
________________________________
Norma C. Ewbank, Secretary
<PAGE>
<PAGE>
Exhibit 11(b)
MIDWEST GRAIN PRODUCTS, INC.
1996 STOCK OPTION PLAN
FOR OUTSIDE DIRECTORS
<PAGE>
MIDWEST GRAIN PRODUCTS, INC.
1996 STOCK OPTION PLAN
FOR OUTSIDE DIRECTORS
Section 1. Name; Purposes; Definitions.
The name of this plan is the Midwest Grain Products, Inc. 1996 Stock
Option Plan for Outside Directors (the "Plan").
The purposes of the Plan are to promote the long-term success of the
Company by enhancing the long-term mutuality of interests between the
non-employee directors of the Company and the stockholders of the Company and by
providing incentives that will enhance the Company's ability to attract highly
qualified persons to serve as directors of the Company.
For purposes of this Plan, the following terms shall be defined as set
forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor thereto.
(c) "Committee" means the Human Resources Committee of the Board, or
any other committee the Board may subsequently appoint to administer
the Plan pursuant to Section 2.
(d) "Company" shall mean Midwest Grain Products, Inc., a corporation
organized under the laws of the State of Kansas (or any successor
corporation).
(e) "Effective Date" shall mean the date the plan is approved by
the stockholders of the Company.
(f) "Fair Market Value" of a share of Common Stock on the date as of
which fair market value is to be determined shall be: (a) if the Common
Stock is reported on the NASDAQ National Market System of the National
Association of Securities Dealers, Inc., the last reported sales price
of a share of Common Stock as reported by NASDAQ; or (b) if the Common
Stock is listed on an established securities exchange or exchanges, the
highest reported closing price of a share of Common Stock on such
exchange or exchanges.
(g) "Mature Stock" shall mean Stock which was obtained through the
exercise of an option under this Plan or any other plan of the Company,
which is delivered to the Company in order to exercise an Option and
which has been held continuously by an Optionee for six months or more.
(h) "Nonqualified Stock Option" means any Stock Option that by its
terms is designated as not being an "incentive stock option" within the
meaning Section 422 of the Code.
(i) "Optionee" means the recipient of a Stock Option.
<PAGE>
(j) "Stock" means the Company's presently authorized Common Stock, par
value $1.00 per share, except as this definition may be modified
pursuant to Section 3 hereunder.
(k) "Stock Option" means any nonqualified option to purchase
shares of Stock granted pursuant to Section 5.
Section 2. Administration.
The Plan shall be administered by a Committee of not less than two
Directors, who shall be appointed by the Board and who shall serve at the
pleasure of the Board. Until otherwise specified by the Board, the Plan shall be
administered by the Human Resources Committee of the Board. If at any time no
Committee shall be in office, then the functions of the Committee shall be
exercised by the Board.
Section 3. Stock Subject to Plan.
(a) The total number of shares of Stock reserved and available for
issuance under the Plan shall be 90,000. Such shares may consist, in whole or in
part, of authorized and unissued shares or treasury shares.
(b) In the event of any merger, reorganization, consolidation,
recapitalization, Stock dividend, or other change in corporate structure
affecting the Stock, a substitution or adjustment shall be made in (i) the
aggregate number of shares reserved for issuance under the Plan, (ii) the number
of options to be granted automatically each year to non-employee directors of
the Company, (iii) the limits on the number of options that may be granted to
each non-employee director under the plan and (iv) the number and option price
of shares subject to outstanding Stock Options granted under the Plan as may be
determined by the Board, provided that the number of shares subject to any award
shall always be a whole number.
(c) If any shares of Common Stock subject to a Stock Option shall not
be issued or transferred or shall cease to be issuable or transferable under
such Stock Option, such shares shall no longer be charged against the limitation
provided for in paragraph (a) of this Section 3 and may again be made subject to
Stock Options; and, only the net additional shares issued upon the exercise of a
stock option through the delivery or withholding of shares of Common Stock in
payment of the exercise price or withholding taxes shall be counted against the
number of shares which are be authorized for issuance under Section 3(a).
Section 4. Eligibility.
Each non-employee member of the Board shall receive Nonqualified Stock
Options in accordance with the provisions of Section 5.
Section 5. Stock Options.
(a) On the first business day after the 1996 Annual Meeting of
Stockholders of the Company, and on the first business day after each annual
stockholders' meeting of the Company thereafter during the term of the Plan,
2
<PAGE>
each non-employee member of the Board shall be granted a Nonqualified Stock
Option to purchase 1,000 shares of Stock.
(b) Stock Options granted under the Plan shall be subject to the
following terms and conditions:
(1) The exercise price per share of Stock purchasable under
such Stock Options shall be 100% of the Fair Market Value of the Stock on the
date of grant.
(2) Each Stock Option shall be exercisable on the 184th day
following the date of grant by written notice to the Company of the election to
exercise and of the number of shares elected to be purchased in such form as the
Committee has prescribed or approved, together with payment in full of the
purchase price in cash, personal check, wire transfer, certified or cashier's
check, or delivery of Stock certificates for Mature Stock or other Stock which
was not obtained through the exercise of a stock option, endorsed in blank or
accompanied by executed stock powers with signatures guaranteed by a national
bank or trust company or a member of a national securities exchange.
(3) If an Optionee resigns or does not stand for election
(prior to retirement from the Board of Directors upon reaching age 70) or is
removed from his or her position as a Director or is not re-elected to his or
her position as a Director, any unexercised portion of any Stock Option granted
to him or her under the terms of the Plan shall terminate ninety (90) days
following the date of such resignation, removal or end of the term of such
position. If an Optionee dies while a Director, any unexercised portion of any
Stock Option granted to him or her under the terms of the Plan shall terminate
one year from the date of death. If an Optionee does not stand for re-election
due to retirement from the Board of Directors upon reaching age 70, any
unexercised portion of any Stock Option granted to him or her under the terms of
the Plan shall terminate three years from the date of the end of his or her
term. It is understood, however, that such right to exercise any outstanding
Options during any period following a terminating event shall only exist to the
extent such Options were exercisable immediately preceding the terminating
event.
(4) Each Stock Option shall cease to be exercisable on the
date that is five years following the date of grant.
(5) The aggregate number of shares of Stock that may be
granted to any non-employee member of the Board pursuant to the Plan may not
exceed 10,000 shares.
(6) No Stock Options shall be transferable by the Optionee
otherwise than by will or by the laws of decent and distribution, and as may
otherwise be permitted by Rule 16b-3 promulgated under the Securities Exchange
Act of 1934, as amended (the "Act"), and all Stock Options shall be exercisable,
during the Optionee's lifetime, only by the Optionee or in accordance with the
terms of such transfer.
(7) Any withholding taxes required to be paid to the Company
in connection with the exercise of any option shall be paid, at the election of
the director, in cash or by the Company's withholding of shares of Common Stock
issuable to the director under the stock option, or by any combination of the
foregoing. To the extent that tax provisions are satisfied with shares of the
3
<PAGE>
Company's Common Stock, such stock shall be valued at Fair Market Value on the
appropriate transaction date.
(c) Each Optionee shall enter into a stock option agreement with the
Company, which agreement shall set forth, among other things, the exercise price
of the option, the term of the option and provisions regarding exercisability of
the option granted thereunder, which provisions shall not be inconsistent with
the terms set forth herein.
Section 6. Amendment and Termination.
The Board may amend, alter, modify or discontinue the Plan at any time,
provided that the Board may not amend or alter the provisions of the Plan
relating to the amount, price and timing of awards more than once every six
months, other than to comply with changes in the Code, the Employee Retirement
Income Security Act of 1974, as amended, or the rules thereunder; and provided,
further that the Board may not amend the Plan without the approval of the
stockholders if the amendment would: (A) materially increase the benefits
accruing to Optionees; (B) materially increase the number of securities that may
be issued under the Plan; or (C) materially modify the requirements as to
eligibility for participation in the Plan. Notwithstanding the foregoing,
stockholder approval shall be required only at such times and under such
circumstances as would be required under Rule 16b-3 of the Act with respect to
any material amendment to any employee benefit plan of the Company.
Section 7. Unfunded Status of Plan.
The Plan is intended to constitute an "unfunded" plan for incentive
compensation. With respect to any payments not yet made to a recipient by the
Company, nothing contained herein shall give any such recipient any rights that
are greater than those of a general creditor of the Company.
Section 8. General Provisions.
(a) If necessary to effect compliance with applicable securities laws,
each person purchasing shares pursuant to a Stock Option must represent to and
agree with the Company in writing that such person is acquiring the shares
without a view to the distribution thereof.
(b) All certificates for shares of Stock delivered under the Plan shall
be subject to such stock transfer orders and other restrictions under the rules,
regulations, and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Stock is then listed, and any applicable
federal or state securities law, and a legend or legends may be put on any such
certificates to make appropriate reference to any required restriction on
transfer.
(c) Nothing contained in the Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to stockholder approval
if such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases. The adoption of the Plan shall
not confer upon any member of the Board any right to continued membership on
such Board.
(d) No member of the Board or the Committee, nor any officer or
employee of the Company acting on behalf of the Board or the Committee, shall
4
<PAGE>
be personally liable for any action, determination, or interpretation taken or
made in good faith with respect to the Plan, and all members of the Board and
the Committee and any officer or employee of the Company acting on their behalf
shall, to the extent permitted by law, be fully indemnified and protected by the
Company in respect to any such action, determination or interpretation.
Section 9. Term of Plan.
No stock Option shall be granted pursuant to the Plan on or after the
tenth anniversary of the Effective Date, but awards theretofore granted may
extend beyond that date.
CERTIFICATIONS
The undersigned Secretary of Midwest Grain Products, Inc.,
hereby certifies that the foregoing Plan was duly adopted by the Board of
Directors at a regular meeting of the Board duly called, noticed, convened and
held on January 5, 1996, in accordance with the Certificate of Incorporation,
Bylaws and applicable laws of the State of Kansas.
Dated January 5, 1996.
s/Norma C. Ewbank
--------------------------------
Norma C. Ewbank, Secretary
The undersigned Secretary of Midwest Grain Products, Inc.,
hereby certifies that the foregoing Plan was duly approved by the holders of a
majority of the Common and Preferred Stock present or represented and entitled
to vote at the Annual Meeting of Stockholders duly called, noticed, convened and
held on October __, 1996, in accordance with the Certificate of Incorporation,
Bylaws and applicable laws of the State of Kansas.
Dated October , 1996.
--------------------------------
Norma C. Ewbank, Secretary
5
<PAGE>
<PAGE>
Letter to Stockholders Exhibit 20
February 9, 1996
Dear Stockholder:
I am pleased to report that while our earnings for the second quarter of fiscal
1996 were down from the same period a year ago, they represent a sizeable
improvement compared to this year's first quarter loss.
Our net income for the second quarter was $195,000, or $0.02 per share on sales
of $55,751,000 versus net income of $2,237,000, or $0.23 per share on sales of
$44,488,000 for the prior year's second quarter.
For the first six months of fiscal 1996, we experienced a net loss of
$2,182,000, or $0.22 per share on sales of $102,911,000. For the first half of
fiscal 1995, we had net income of $4,993,000, or $0.51 per share on sales of
$90,472,000.
The improvements we experienced since the first quarter were largely the result
of an intense cash management program, and increased sales of premium wheat
starch, alcohol products and alcohol by-products, which consist mainly of
distillers feeds. I am encouraged by the direction we are taking. I am also
encouraged by a proposed agreement between our government and the European Union
(E.U.), which includes a measure to curb excess shipments of wheat gluten to the
United States.
Final ratification of the agreement is expected to occur during the current
quarter. It states that "If the market share of European Commission origin wheat
gluten exports into the United States increases in comparison to their average
1990-92 market share, the European Commission and the United States government
shall consult with a view to finding a mutually acceptable solution."
The continuing flood of gluten imports from Europe in the second quarter,
however, together with exorbitantly high raw material costs for wheat, had a
severe negative impact on our results compared to the same period a year ago.
Our average per bushel cost for wheat in the quarter was approximately 26%
higher than the prior year's second quarter average. Wheat prices continue to
hover well above levels that were in place a year ago due to a worldwide wheat
shortage.
Prices for corn and milo also remain exceptionally high due to global shortages
of these grains as well. Our costs in the second quarter averaged 54% more per
bushel compared to the second quarter of fiscal 1995. This adversely affected
alcohol production costs, especially in the fuel grade category.
While conditions in the fuel grade alcohol market remain flat, demand for our
food grade alcohol for beverage and industrial applications continues to be
strong. Demand for our premium wheat starches, both modified and unmodified,
also remains strong due to their effectiveness in satisfying functional
requirements in a growing variety of food products.
<PAGE>
As we go forward, we will continue to focus on increasing the effectiveness of
our cash management measures and on improving cost efficiencies in all
marketing, production and administrative processes. As I stated in my last
report to you on November 9, we are prepared to increase production and sales in
all three of our principal product areas and to realize significant long-term
growth when grain costs and selling prices return to more normal levels.
Sincerely,
s/Ladd M. Seaberg
Ladd M. Seaberg
President and CEO
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MIDWEST
GRAIN PRODUCTS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE SIX
MONTHS ENDED DECEMBER 31, 1996, AND CONDENSED CONSOLIDATED BALANCE SHEET AS AT
DECEMBER 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000835011
<NAME> MIDWEST GRAIN PRODUCTS, INC.
<MULTIPLIER> 1,000
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 3,011
<SECURITIES> 0
<RECEIVABLES> 23,680<F1>
<ALLOWANCES> 0<F2>
<INVENTORY> 15,737
<CURRENT-ASSETS> 45,982
<PP&E> 208,894
<DEPRECIATION> 78,000
<TOTAL-ASSETS> 177,309
<CURRENT-LIABILITIES> 14,863
<BONDS> 40,933
<COMMON> 6,715
0
4
<OTHER-SE> 103,727<F3>
<TOTAL-LIABILITY-AND-EQUITY> 177,309
<SALES> 102,911
<TOTAL-REVENUES> 102,964<F4>
<CGS> 100,229
<TOTAL-COSTS> 100,229
<OTHER-EXPENSES> 4,840<F5>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,492<F6>
<INCOME-PRETAX> (3,606)
<INCOME-TAX> (1,424)
<INCOME-CONTINUING> (2,182)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,182)
<EPS-PRIMARY> (.22)
<EPS-DILUTED> (.22)
<FN>
<F1>After deduction of allowances and addition of Notes Receivable.
<F2>See Note F1.
<F3>Reflects Retained Earnings and Additional Paid In Capital.
<F4>Reflects net sales plus Other Operating Income.
<F5>Consists of Selling, General and Administrative Expenses.
<F6>Total revenues includes "Other Income." Other Income reflects excess Other
Income after deducting interest expense.
</FN>
<PAGE>
</TABLE>
