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COMPENSATION DISCUSSION AND ANALYSIS
Compensation Overview
This discussion provides an overview and analysis of our compensation programs and policies, the compensation decisions we made under those programs and policies, and the factors we considered in making those decisions. We also provide a series of tables that present information about the compensation earned or paid in each of 2014, 2015,2017, 2018, and 20162019 to our named executive officers, including:
•Augustus C. Griffin – Mr. Griffin, our President and Chief Executive Officer, joined the Company in July 2014.
Thomas K. Pigott – Mr. Pigott hasGriffin also served as President until March 2020 and will retire from the Company in May 2020.
•Brandon M. Gall - Mr. Gall was appointed the Vice President of Finance and Chief Financial Officer since September 2015.of the Company in April 2019.
•David E. Rindom – Mr. Rindom served as Vice President, Human Resources from June 2000 until December 2015, when he was appointed Vice President and Chief Administrative Officer.
•David E. Dykstra – Mr. Dykstra has served as Vice President, Alcohol and Marketing since 2009.
Michael Buttshaw•Stephen J. Glaser – Mr. ButtshawGlaser has served as Vice President of Ingredient SalesProduction and MarketingEngineering since December 2014.October 2015.
•Thomas K. Pigott – Mr. Pigott served as Vice President of Finance and Chief Financial Officer from September 2015 through his resignation in March 2019.
The discussion below is intended to help you understand the information provided in the tables and put that information into context within our overall compensation program.
Objectives of our Compensation Program
Our compensation program objectives are to align compensation programs with our business objectives and stockholders’ interests, to reward performance, to be externally competitive and internally equitable, and to retain talent on a long-term basis. In particular, our philosophy is to balance salary and benefits with incentive and equity compensation so that the interests of the executive officers will be aligned with those of stockholders.
Components of Our Compensation Program
The principal components of our compensation program are base salary, annual cash incentive awards, long-term equity incentives, and equityequity- and non-equity-based retirement compensation.
•Base salary is designed to attract and retain executives over time. In setting base salaries, our objectives are to assure internal fairness of pay in terms of job size, external competitiveness so that we can attract and retain needed talent, and a consistent, motivating system for administering compensation. Base salaries of named executive officers are reflected in the Salary column of the Summary Compensation Table.
Short term•Short-term incentive awards are intended to focus executives on factors deemed critical to our profitability. By rewarding named executive officers for good performance, we believe we help align their interests with those of our stockholders. Such awards, when paid to named executive officers, are reflected in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table.
•Long-Term Incentives, which have in recent years been in the form of restricted stock or restricted stock units, are intended to motivate the achievement of key long-term financial performance goals and thereby generate stockholder value, provide management an opportunity to increase ownership of our stock, help attract and retain key employees, and be cost efficient. The Human Resources and Compensation Committee’s typical practice is to grant awards made with respect to a year as soon as practicable following the close of the year based on the performance during that year. In accordance with the rules of the Securities and Exchange Commission relating to the reporting of stock awards, such awards are included in the Summary Compensation Table for the year in which they were made, rather than in the year to which they relate. The grant date fair values of awards, computed in accordance with FASB ASC Topic 718, made during 2016, 20152019, 2018, and 20142017 to the named executive officers are shown in the Stock Awards column of the Summary Compensation Table. Awards made with respect to 20162019 performance were made in early 2017,2020, and are, therefore, not included in the Summary Compensation Table. Awards made with respect to 20152018 were made on February 17, 2016in early 2019 and are included in the Summary Compensation Table. Any dividends paid on restricted stock or restricted stock units during a period are included in the All Other Compensation column of the Summary Compensation Table for the period in which they are paid.
•Non-Equity-Based Retirement Compensation, provided through our 401(k) plan and our non-qualified deferred compensation plan, permits employees to, among other things, reduce their current income taxes by making limited pre-tax contributions to increase, enhance and diversify their retirement savings. Named executive officers participate in the 401(k) plan on the same basis as other eligible employees. Amounts, if any, contributed by the Company under the 401(k) plan are included in the All Other Compensation column of the Summary Compensation Table. In 2018 the Company adopted a non-qualified deferred compensation plan for its executive officers. The deferred compensation plan permits participants to defer salary or short-term incentive payments. Amounts deferred are deemed invested in investments selected by the participant from a limited number of choices available in the Company's 401(k) plan. Mr. Gall, Mr. Glaser, Mr. Griffin, and Mr. Rindom participated in the deferred compensation plan in 2019, and each deferred a portion of their short-term incentive paid in 2020.
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Consideration of Say-On-Pay Results
At the 20162019 Annual Meeting of Stockholders, all of the shares of Preferred Stock and 99.1%more than 99% of the shares of Common Stock present in person or by proxy and entitled to vote atvoting on the meeting,matter voted for the approval of compensation of the Company’s named executive officers. We believe this indicates stockholder confidence in our pay for performance philosophy.
How We Determine Compensation
As noted elsewhere in this Proxy Statement, our Human Resources and Compensation Committee recommends to the Board of Directors the salary and incentive compensation of the Chief Executive Officer and other executive officers of the Company. The Committee reviews the scope and type of compensation plans for other management personnel and makes recommendations to the Board with respect to equity-based plans that are subject to Board approval. The Chief Executive Officer provides the Committee with performance reviews and salary recommendations for other officers.
The Committee has unrestricted access to management. It may also request the participation of management or the Committee’s independent consultant at any meeting or executive session. Committee meetings are regularly attended by the Chief Executive Officer, except for executive sessions and discussions of his own compensation and the Committee’s independent consultant. The Committee regularly reports to the Board on compensation matters and annually reviews the Chief Executive Officer’s compensation with the Board in an executive session of non-management directors only.
The Committee has sole discretion, at Company expense, to retain and terminate independent advisors, including sole authority to approve the fees and retention terms for such advisors, if it shall determinedetermines the services of such advisors to be necessary or appropriate.
Base Salary. Our Vice President – Chief Administrative Officer develops a summary of the titles and job descriptions of senior officers and other employees and submits them to a retained compensation consultant, which maintains survey data for similar-sized manufacturing firms. A retained compensation consultant prepares a report identifying the ranges of compensation at these companies for persons with similar responsibilities to those employees described in the company-prepared summary. In addition, annually we obtain from a retained compensation consultant updated information regarding average pay increases at the companies for which a retained compensation consultant maintains survey data. This survey information, or summaries thereof, is provided to the Human Resources and Compensation Committee. The Committee reviews this information, considers any recommendation made by the Chief Executive Officer with respect to other named executive officers and tries to assure that each officer’s base compensation falls within a range that is within 80% to 120% of a specified percentile of salaries paid to executives holding comparable positions at the surveyed companies. Although the ultimate goal is to compensate executive officers at the midpoint of this targeted range for comparable positions at companies within the survey, a particular individual’s salary may fall above or below the targeted level because of his or her tenure, experience level, or performance. The Human Resources and Compensation Committee has approved the 50th percentile of the market as the target for base salaries.
When made, annual adjustments usually take place after the start of the next year, but are retroactive to the start of such year. When making annual adjustments, the Human Resources and Compensation Committee generally uses a matrix format that takes into account each executive’s performance review and the extent to which his or her salary is above or below the midpoint for comparable positions. Adjustments sometimes occur at other times of the year as a result of a promotion or other change in duties.
Annual Cash Incentive. We believe a significant portion of the compensation of senior managers should be incentive based, and that by rewarding good performance, such arrangements help align the interests of our named executive officers with those of our stockholders. The goal of our annual program is to align more closely how we compensate employees with our business strategy. Specifically, we want to encourage employees to think about how they can contribute to driving Company profitability, reduce costs for goods and equipment, and create efficiencies to improve our ongoing operations. We reward them for success by basing annual cash bonuses on the attainment of performance metrics that correspond with the creation of shareholder value.
Short-Term Incentive Plan
Plan. The Company's Short-Term Incentive Plan (the “STI Plan”) is designed to motivate and retain Company officers and employees and to tie their short-term incentive compensation to achievement of certain profitability goals of the Company.
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Pursuant to the STI Plan, short-term incentive compensation is dependent on the achievement of certain performance metrics by the Company established by the Board of Directors and certain individual qualitative objectives. Each performance metric is calculated in accordance with the rules approved by the Human Resources and Compensation Committee. For 2016,2019, such performance metrics were operating income, EBITDA, and earnings per share (EPS), each calculated as presented in the table below. Operating income was the core measure of performance under the STI Plan, reflecting the belief that this measure of performance is the most sensitive to management's performance. EBITDA is a common metric used by shareholders to measure performance and EPS both reflectreflects the Company's full financial performance, including the performance of its ICP investment.performance. These quantitative goals represent 90% of the total short termshort-term incentive. In addition, 10% of the total incentive was based on qualitative goals. Payments at any of these levels of performance were conditioned upon there being no uncured default in compliance with the Company’s debt covenants under its Credit Agreement and on minimum put-away of 20,00025,000 barrels of premium whiskey, reflecting investment for the future. Levels in the table below for operating income (before STI and LTI Plan payouts) and EBITDA are shown in thousands.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Weighting
| | Minimum Payout 50% | | Plan Payout 100% | | Maximum Payout 200% |
Operating Income | | 70% | | $ | 50,148 | | | $ | 57,670 | | | $ | 69,204 | |
EBITDA | | 20 | | 61,509 | | | 69,403 | | | 83,284 | |
Earnings per share | | 10 | | 2.17 | | | 2.56 | | | 3.07 | |
|
| | | | | | | | | | | | |
| | Weighting
| | Minimum Payout 90% | | Plan Payout 100% | | Maximum Payout 150% |
Operating Income* | | 70 | % | | $ | 32,849 | | $ | 39,037 | | $ | 58,556 |
EBITDA | | 20 | % | | $ | 51,339 | | $ | 55,498 | | $ | 83,246 |
Earnings per share | | 10 | % | | $ | 1.48 | | $ | 1.51 | | $ | 2.27 |
*Calculated before STI and LTI Plan payouts.
The Human Resources and Compensation Committee determines the officers and employees eligible to participate under the STI Program for the plan year as well as the target annual incentive compensation for each participant for each plan year.
For 2016,2019, the Human Resources and Compensation Committee adjusted the Company's actual results to reflect the impact of the resolution of a legal matter arising out of the chemical release incident in Atchison, KS in 2016. The Committee excluded costs of $1,848,000 related to this matter, which was not anticipated when the performance targets were determined. The Human Resources and Compensation Committee determined that after reflecting this adjustment for purposes of the STI Plan the Company achieved Operating Income of $47,169,000 (before STI$49,090,000 and LTI Plan payouts), or 109% of target, EBITDA of $57,272,000, or 103% of target,$60,662,000; these amounts did not result in award payout. The Human Resources and Compensation Committee also determined after reflecting this adjustment that the Company achieved earnings per share of $1.82, or 121%$2.38. The Committee determined the earnings per share performance as adjusted was 53% of target. As a result of this performance, and after giving effect to the qualitative portion of the STI Plan, Mr. Griffin received a payment of $411,525,$96,785, Mr. PigottGall received a payment of $185,466,$20,280, Mr. Rindom received a payment of $164,174,$39,294, Mr. Dykstra received a payment of $145,903$19,374, and Mr. ButtshawGlaser received a payment of $137,992.$20,364.
Long-Term Incentives
The 2014 Equity Incentive Plan. On May 22, 2014, stockholders approved the 2014 Equity Incentive Plan. The Board reserved 1,500,000 shares of Common Stock for issuance under the plan. The 2014 Equity Incentive Plan authorizes awards in the form of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, other stock-based awards and cash performance awards. The mix of long-term incentives going forward is expected to continue to be 100% in three-year cliff vestingcliff-vesting restricted stock unit awards. Each named executive officer’s participation level is subject to Human Resources and Compensation Committee discretion. The long-term incentive awards made in any given year under the 2014 Equity Incentive Plan relate to performance for the prior year.
In February 2017,early 2020, each of the named executive officers received an award of restricted stock units under the 2014 Equity Incentive Plan, related to their performance in 2016.2019 in the amounts presented below. At the same time, Mr. Gall received a 5-year retention restricted stock unit grant related to his service, which award is not reflected in the below chart.
| | | | | | | | | | | | | | |
| | 2/12/2020 | | |
| | | | Grant |
| | # of | | date fair |
Participant | | RSUs | | value($) |
Mr. Griffin | | 3,533 | | | $ | 120,970 | |
Mr. Gall | | 720 | | | 24,653 | |
Mr. Rindom | | 1,226 | | | 41,978 | |
Mr. Dykstra | | 884 | | | 30,268 | |
Mr. Glaser | | 827 | | | 28,316 | |
|
| | | | | |
| | 2/15/2017 |
| | | | | Grant |
| | # of | | | date fair |
Participant | | RSUs | | | value($) |
Mr. Griffin | | 9,586 | | $ | 411,525 |
Mr. Pigott | | 3,424 | | | 146,990 |
Mr. Rindom | | 3,031 | | | 130,115 |
Mr. Dykstra | | 2,716 | | | 116,584 |
Mr. Buttshaw | | 2,584 | | | 110,920 |
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Retirement Compensation. We provide non-equity-based compensation through our 401(k) plan, a tax-qualified defined contribution plan. The amount of our contributions to the 401(k) plan is determined by the Board each year based on the Human Resources and Compensation Committee’s recommendation. The Committee bases its recommendation primarily upon the recommendations of management as well as Company performance for the year. Our 401(k) plan allows a Company match of 1% for each 1% of employee deferral to a maximum of 6%. Named executive officers participate in the 401(k) plan on the same basis as other employees. Amounts contributed under the 401(k) plan have been allocated to participant accounts in proportion to each participant’s eligible compensation, as defined in the plan. In 2018 the Company adopted a non-qualified deferred compensation plan for its executive officers. The deferred compensation plan permits participants to defer salary or short-term incentive payments. Amounts deferred are deemed invested in investments selected by the participant from a limited number of choices available in the Company's 401(k) plan. Mr. Gall, Mr. Glaser, Mr. Griffin, and Mr. Rindom participated in the deferred compensation plan in 2019, and deferred a portion of their short-term incentive paid in 2020.
Executive Severance Plan. On February 12, 2020, the Company established the MGP Ingredients, Inc. Executive Severance Plan. The plan was amendedprovides the Company’s executive officers the opportunity to receive severance benefits in 2016the event of certain terminations of employment, with the purpose to allowattract and retain qualified executives. Pursuant to the plan, upon a qualifying termination (generally, a termination by the Company without cause or a termination by the participant for immediate vesting.good reason (each as defined in the plan)) then the participant would receive severance in an amount equal to an applicable severance multiplier (one for any participant who is not the chief executive officer and two for any participant who is the chief executive officer) times the participant’s base salary in effect immediately prior to the date of the termination. In addition, participants would receive a prorated annual bonus based on the Company’s actual performance in the year in which termination occurs. Participants are eligible for reimbursement for certain COBRA premiums for a limited period of time. The plan does not affect the terms of any outstanding equity awards. Any severance benefits payable to a participant under the plan would be reduced by any severance benefits to which the participant would otherwise be entitled under any other severance policy or plan, including any agreement between a participant and the Company (unless the plan or agreement expressly provides for severance benefits to be in addition to those provided under the plan).
Other Compensation Programs. We do not provide executive perquisites of any significance. We also do not have significant executive benefits, such as supplemental executive retirement plans or deferred compensation arrangements.plans. Mr. Griffin receives an automobile allowance of $500 per month pursuant to the terms of his employment agreement.
Except for provisions in long-term incentive plans applicable to all participants and provisions in employment agreements or offer letters with identified officers, as described below, we generally do not have formal arrangements for paying severance to our executive officers upon their termination of employment or a change in control, but may negotiate severance arrangements on a case-by-case basis.
Employment Agreements and Other Arrangements
Griffin Employment Agreement
In connection with the retention of Mr. Griffin as the Company’s President and Chief Executive Officer, the Human Resources and Compensation Committee negotiated and recommended to the Board of Directors for approval the Company’s entrance into an employment agreement with Mr. Griffin. TheIn 2017, the Committee negotiated and approved the Company’s entrance into a new employment agreement with Mr. Griffin provides him an initialto replace the original agreement. Pursuant to the new employment agreement, Mr. Griffin was entitled to a base salary of $375,000$565,000 for 2017, and his base salary was reviewed by the Human Resources and Compensation Committee annually thereafter during the term, which expires on May 31, 2020. Unless Mr. Griffin is terminated for cause by the Company or terminates his employment for good reason (each as defined in the employment agreement), the Company will purchase his Atchison, Kansas residence from him following the term for his original purchase price of $325,000. Except in the event of a voluntary termination by Mr. Griffin without good reason or by the Company with cause, upon a termination other than at the expiration of the term or upon a termination at death or for disability, Mr. Griffin will receive severance of two times his base salary. Except in the event of a voluntary termination by Mr. Griffin without good reason or by the Company for cause, Mr Griffin will receive a pro-rata long-term incentive award for the year in which termination occurs or the full-year award for any completed year unpaid as of the date of termination, and an amount equal to $2,000 times the number of full calendar months from the date of termination until the date in which Mr. Griffin and his spouse are Medicare eligible. In addition, except in the limited circumstances described above, upon termination all outstanding RSUs that are then unvested will continue to vest on their vesting schedule. Mr. Griffin is retiring in May 2020, and the Company and Mr. Griffin have agreed that this retirement is at the end of the term.
Promotion of Brandon Gall
In connection with the promotion of Mr. Gall to be the Company's Vice President of Finance and Financial Officer effective in April 2019, the Company's Board of Directors approved his base salary, short-term incentives, and long-term incentives. The following is a summary of Mr. Gall's compensation as approved:
Base salary: Mr. Gall was provided a base salary of $285,000.
Short-Term Incentive: Mr. Gall was eligible to receive his short-term incentive award under the Company's short-term incentive plan for the attainment of the Company's performance measures with a target award of 50% of his base salary.
Long-term Incentive: Mr. Gall was eligible to participate in the Company's long-term incentive program, with an award for each year as determined by the Compensation Committee. For 2019, Mr. Gall was eligible for a target award of 65% of his base salary.
Colo Employment Agreement
In connection with Mr. Colo’s appointment as an officer of the Company, initially as President and Chief Operating Officer effective March 16, 2020, and as Chief Executive Officer upon Mr. Griffin’s retirement, the Company and Mr. Colo entered into an employment agreement on February 7, 2020. The employment agreement sets forth Mr. Colo’s base salary, signing bonus and short-term incentives as follows:
Base Salary. Mr. Colo will receive a base salary of $650,000 per year,year. Mr. Colo’s base salary will be reviewed annually by the Human Resources and Compensation Committee of the Board in accordance with the performance evaluation practices of the Company, but it may not be decreased without Mr. Griffin’sColo’s consent.
Signing Bonus. Mr. Griffin received a one-time signing bonusColo was granted an award of 12,0008,000 restricted stock units under the Company’s 2014 Equity Incentive Plan (the "Equity Plan"), which will cliff vest on July 31, 2017, subjectMarch 16, 2023.
Short-Term Incentive. For 2020, Mr. Colo’s target short-term incentive award pursuant to the Company’s short-term incentive plan ("STI Plan") for the attainment of the Company’s 2020 performance measures will be $650,000, prorated from the effective date of his employment agreement. The amount and timing of payments under the STI Plan will be at the discretion of the Human Resources and Compensation Committee based on the attainment by the Company of quantitative performance measures set by the Board and qualitative goals for Mr. Colo determined by the Human Resources and Compensation Committee. For 2020, Mr. Colo’s threshold STI Plan award is 90% of the target STI Plan award and Mr. Colo’s maximum STI Plan award, for attainment of Company performance measures greater than 120% of the target, is 200% of the target award. The terms and conditions of Mr. Griffin’s award agreementthe STI Plan for future years will be reviewed and the 2014 Equity Incentive Plan. The employment agreement with Mr. Griffin provides that he be eligible to participate in the Company’s long-term equity incentive program, with an award for each year following 2014 as determinedestablished annually by the Human Resources and Compensation Committee. Additionally, the Company will provide one year’s base salary as severance in the event of a termination of
Long-term Incentive. Mr. Griffin without cause.
Pigott Offer Letter
In connection with the retention of Mr. Pigott as the Company’s Vice President of Finance and Chief Financial Officer, the Company and Mr. Pigott entered into an offer letter. The offer letter provides Mr. Pigott an initial base salary of $285,000 per year. Under the terms of the offer letter, Mr. Pigott received a one-time signing bonus of 6,000 restricted stock units under the Company’s 2014 Equity Incentive Plan which will cliff vest on September 14, 2018, subject to the terms and conditions of Mr. Pigott’s award agreement and the 2014 Equity Incentive Plan. The offer letter further provides that Mr. PigottColo will be eligible to participate in the Company’s long-term equity incentive program for each fiscal year during which he is employed under the terms of the employment agreement, with an award for each year following 2015during its term as determined by the Human Resources and Compensation Committee. Additionally,The awards made under the offer letter provides thatEquity Plan in any given year will be for performance for the immediately preceding year pursuant to the Equity Plan. For 2020, the Compensation Committee has approved the long-term incentive goals for his service in 2020, and based on these goals and the Company’s performance in 2020, Mr. Colo will in February 2021 receive an award of restricted stock units, with performance at target resulting in an award of restricted stock units with a grant date fair value equal to 125% of his base salary, prorated from the effective date of his employment agreement.
For 2020, Mr. Colo’s threshold LTI award is 90% of the target LTI award and Mr. Colo’s maximum LTI award, for attainment of Company performance measures greater than 120% of the target, is 200% of the target award. The terms and conditions of the LTI awards for future year will be reviewed and established annually by the Human Resources and Compensation Committee.
Severance. Except in the event of a voluntary termination by Mr. Colo without good reason, termination by the Company with cause, or upon a termination at death or for disability, Mr. Colo will provide one year’sreceive severance of (i) two times his base salary, (ii) a pro-rata short-term incentive award based on actual performance for the full year in which the termination occurs or the full-year award for any completed year unpaid as severanceof the date of termination, and (iii) a pro-rata long-term incentive award for the year in which termination occurs or the full-year award for any completed year unpaid as of the date of termination. In addition, except in the event of a termination by the Company with cause, upon termination all outstanding restricted stock units that are then unvested will vest. Upon a termination for disability or death, Mr. Colo or his estate will receive severance of Mr. Pigott without cause.(i) one times his base salary, (ii) a pro-rata short-term incentive award based on actual performance for the full year in which the termination occurs or the full-year award for any completed year unpaid as of the date of termination and (iii) the full-year long-term incentive award for any completed year unpaid as of the date of termination.
Stock Ownership Guidelines
Our Board has adopted stock ownership guidelines to better align the interests of our executive officers and directors with the interests of stockholders and further promote our commitment to sound corporate governance. On May 20, 2015, our Board updated the stock ownership guidelines applicable to directors.
Under the guidelines, our executive officers are required to achieve ownership of our Common Stock valued at two times their annual base salary (five times in the case of the Chief Executive Officer and two and a half times in the case of the Chief Financial Officer). The individual guideline level for each executive officer is initially calculated using the executive officer’s base salary as of the date the person is first appointed as an executive officer. This guideline level is then recalculated at each January 1st. Unless an executive officer has satisfied his or her applicable guideline level, the executive officer is required to retain an amount equal to 50% of the net shares received as the result of the exercise, vesting or payment of any equity awards granted to the executive officer. Executive officers are expected to be in compliance with their guideline level within five (5) years of the later of (a) becoming an executive officer and (b) implementation of this policy. With the exception of Mr. RindomGall, who was appointed to his position in 2019, and Mr. Dykstra haveGlaser, who was appointed to his current position in 2015, each of the named executive officers has satisfied the ownership requirements, and both Mr. Griffin, Mr. Pigott,Gall and Mr. ButtshawGlaser are progressing toward attaining theirthe applicable ownership requirements.
guideline.
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Under the guidelines, the chairman of the Board is expected to beneficially own Common Stock valued at five times the annual cash retainer as a director and each other non-employee director is expected to beneficially own Common Stock valued at three times the annual cash retainer payable to such director. The guideline level is calculated using the annual cash retainer due the director when first elected to the Board. This guideline level is then recalculated at each January 1st. Non-employee directors are required to satisfy their guideline level within three (3) years of joining the Board, and are expected to continuously own sufficient shares to satisfy the guideline once attained for so long as they remain a member of the Company’s Board.
Shares that count toward satisfaction of the stock ownership guidelines for executive officers and directors include the following: (i) shares owned outright by the executive officer or director, or his or her immediate family members residing in the same household; (ii) shares held in trust for the benefit of the executive officer or director, or his or her immediate family members; (iii) vested shares of restricted stock; and (iv) vested shares of restricted stock units. The following do not count towards satisfaction of the stock ownership guidelines: (i) unvested shares of restricted stock or restricted stock units; (ii) shares pledged as collateral for a loan; (iii) unexercised stock options (whether vested or unvested); and (iv) incentive performance awards that may be settled in cash (whether vested or unvested).
The stock ownership guidelines are administered, interpreted, and construed by the Human Resources and Compensation Committee. In administering the stock ownership guidelines, the Human Resources and Compensation Committee will annually review the extent to which each executive officer and director of the Company has complied with the stock ownership policy.
The ownership levels of our named executive officers and non-employee directors as of January 31, 2017May 4, 2020 are set forth in the table entitled “Principal Stockowners”Stockholders” below. We also have an insider trading policy that, among other things, prohibits executive officers from entering into any hedging or monetization transactions or otherwise trading in any instrument relating to the future price of our securities, such as a put or call option, futures contract, short sale, collar or other derivative security. Other than the stock ownership guidelines described above, we do not have a policy regarding the length of time executives or directors have to hold their stock after exercise or vesting.
Tax and
Accounting Considerations and Other Matters
Tax Considerations. Under IRC Section 162(m), publicly-held companies may not deduct compensation paid to named executive officers to the extent that an executive’s compensation exceeds $1,000,000 in any one year, unless such compensation is “performance based.” Although deductibility of compensation is preferred, tax deductibility is not a primary objective of our compensation programs. We believe it is important to retain flexibility to compensate executives competitively even if such compensation is potentially not deductible for tax purposes. The Board and the Compensation Committee may determine, after balancing tax efficiency with long-term strategic objectives, that it is in the best interests of our stockholders to approve compensation that is not deductible under Section 162(m).
Accounting Considerations. We do not expect accounting treatment of differing forms of equity awards to vary significantly and, therefore, accounting treatment is not expected to have a material effect on the selection of forms of compensation. Compensation expense related to our performance-accelerated restricted stock awards that were granted in prior years is based on the market price of stock on the date the Board approved the program. Total expected compensation expense for each grant program is amortized over the vesting period of the awards, three years, five years or seven years.awards. Compensation expense related to the restricted stock unit awards in 20162019 and 20172020 was based on market price of stock on the award dates and is being amortized over the term of the award in each case.dates.
Other Matters. Our code of conduct discourages short sales and trading in our stock on a short-term basis.
Under our clawback policy, a participant under any of our annual incentive or other performance-based compensation plans is required to repay or forfeit, to the fullest extent permitted by law and as directed by the Board, any annual incentive or other performance-based compensation received by him or her if:
•the payment, grant or vesting of such compensation was based on the achievement of financial results that were subsequently determined to be erroneous,
•the amount of the compensation that would have been received by the participant had the financial results been properly reported would have been lower than the amount actually received, and
•the Board determines in its sole discretion that it is in the best interests of the Company and its stockholders for the participant to repay or forfeit all or any portion of the compensation. In this regard, compensation includes proceeds, gains or other economic benefit actually or constructively received by the participant upon receipt or exercise of an award or upon receipt of resale of any shares of stock underlying an award.
All determinations and decisions made by the Board pursuant to the provisions of this policy are final, conclusive and binding on all persons.
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Our policy applies to any annual incentive or other performance-based award granted to an officer with respect to fiscal periods beginning on or after July 1, 2009 and to other participants with respect to any annual incentive or other performance-based award granted with respect to fiscal periods beginning on or after July 1, 2011.participants. The remedy specified in this policy is not intended to be exclusive, but in addition to every other right or remedy at law or in equity that may be available to us.
Our policy will be amended if and as required to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act, as it is implemented. Any such amendment will be applicable to any annual incentive or other performance-based award made to any executive officer with respect to prior periods to the extent required by law.
Compensation Matters
In 2015 the Company announced a new five-year strategic plan. The Company updates the plan annually. Under the 2015 plan:
•We intend to maximize the value of our current production volume;
•We will work to develop partnerships to support brand creation and long-term growth, and to combine our innovation capabilities and industry expertise to provide unique solutions and offerings to the marketplace;
•We will invest to support our growth, including (i) capital expenditures to support innovation and increase our operational reliability and strengthen our commitmentability to support all aspects of growth in the American whiskey category, (ii) increases in our stockinventories of aged whiskey,premium whiskeys, and (iii) selected investments in our resources and capabilities, particularly in sales and marketing and research and development;;
•We will continue to focus on disciplined risk management practices;build a solid commitment to operational excellence in all stages of operations, from sourcing through processing, and, ultimately, delivering the finest quality products; and
•We will build the MGP brand with all of our stakeholders.
For 2017, like 2016,2020, as in 2019, 10% of the award will be based on subjective evaluation of the executive officer’s qualitative performance, and 90% will be based on the attainment of goals established pursuant to certain quantitative metrics. The quantitative metrics used for evaluating 20172020 executive officer performance will be:
•Operating income;
•EBITDA; and
•Earnings per share.
These goals reflect the strategies adopted with our new plan. Payments at any of these levels of performance are conditioned upon (i) there being no uncured default in compliance with the Company’s debt covenants under its Credit Agreement and (ii) the production and warehousing of at least 25,000 barrels of premium whiskey in new white oak barrels for MGP inventory. If Credit Agreement waivers are issued during a plan year to allow for debt covenant compliances,compliance, the HRCC shallHuman Resources and Compensation Committee will review the waivers for compliance with the quantitative metrics used for evaluating 20172020 performance.
The Human Resources and Compensation Committee has determined that the short-term incentive opportunity for Mr. Griffin for 2017 is 100% of his base salary, while the short-term incentive opportunity for the other named executive officers, other than Mr. Griffin who is retiring in May 2020, ranges from 70% of each such officer’s base salary for Mr. Pigott and Mr. Rindom, to 60% to Mr. Gall, and 50% of each such officer’s base salary for Mr. Dykstra and Mr. Buttshaw.Glaser. Mr. Colo, who will become a named executive officer following Mr. Griffin’s retirement, has a target opportunity of 100% of his base salary, prorated from the date of his employment agreement.
The long-term incentive opportunity for 20172020 for the named executive officers, other than Mr. Griffin who is 100% of his base salary, while the long-term incentive opportunity for the other executive officersretiring in May 2020, is 70%80% of such officer’s base salary for Mr. Pigott and Mr. Rindom, and 50%65% of such officer's base salary for Mr. Dykstra, Mr. Gall, and Mr. Buttshaw.Glaser. Mr. Colo, who will become a named executive officer following Mr. Griffin’s retirement, has a target opportunity of 125% of his base salary, prorated from the date of his employment agreement. The equity incentive awards based on 20172020 performance will be made in early 2018.2021. The awards willprovide for a cliff vest at the end of a three-year service period.
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SUMMARY COMPENSATION TABLE
YEARS ENDED DECEMBER 31, 20162019 AND DECEMBER 31, 20152018 AND DECEMBER 31, 20142017
The following table shows the compensation that we paid for services rendered to us in all capacities to the persons who served as our principal executive officer (“PEO”), principal financial officer (“PFO”), and the three most highly-compensated executive officers serving as such at the end of 2016.2019. The table also includes information for each such person during the years ended December 31, 20152018 and December 31, 20142017 that he also was deemed a named executive officer.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | | Year | | Salary ($) | | Stock Awards ($)(1) | | Non-Equity Incentive Plan Compensation ($)(2) | | All Other Compensation ($)(3) | | Total ($) |
Augustus C. Griffin (a) | | 2019 | | $ | 655,000 | | | $ | 778,050 | | | $ | 96,785 | | | $ | 38,176 | | | $ | 1,568,011 | |
(PEO) | | 2018 | | 595,001 | | | 741,458 | | | 778,055 | | | 38,714 | | | 2,153,228 | |
| | 2017 | | 565,010 | | | 411,527 | | | 741,449 | | | 151,080 | | | 1,869,066 | |
Thomas K. Pigott (b) | | 2019 | | 113,114 | | | 356,928 | | | — | | | 9,171 | | | 479,213 | |
(Former PFO) | | 2018 | | 390,000 | | | 346,284 | | | 357,313 | | | 26,231 | | | 1,119,828 | |
| | 2017 | | 375,000 | | | 576,292 | | | 344,479 | | | 40,410 | | | 1,336,181 | |
Brandon M. Gall (c) | | 2019 | | 256,692 | | | 235,787 | | | 20,280 | | | 17,450 | | | 530,209 | |
(Current PFO) | | | | | | | | | | | | |
David E. Rindom (d) | | 2019 | | 355,000 | | | 309,348 | | | 39,294 | | | 27,164 | | | 730,806 | |
| | 2018 | | 338,000 | | | 301,526 | | | 309,391 | | | 28,342 | | | 977,259 | |
| | 2017 | | 327,999 | | | 130,121 | | | 301,304 | | | 65,347 | | | 824,771 | |
David E. Dykstra (e) | | 2019 | | 315,000 | | | 192,816 | | | 19,374 | | | 22,839 | | | 550,029 | |
| | 2018 | | 295,000 | | | 187,143 | | | 192,759 | | | 26,610 | | | 701,512 | |
| | 2017 | | 285,000 | | | 116,598 | | | 187,003 | | | 63,258 | | | 651,859 | |
Stephen J. Glaser (f) | | 2019 | | 295,000 | | | 179,790 | | | 20,364 | | | 23,340 | | | 518,494 | |
| | 2018 | | 275,000 | | | 173,830 | | | 179,691 | | | 23,436 | | | 651,957 | |
| | 2017 | | 265,000 | | | 110,931 | | | 173,880 | | | 37,494 | | | 587,305 | |
|
| | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | | Year | | Salary ($) | | Stock Awards ($)(1) | | Non-Equity Incentive Plan Compensation ($)(2) | | All Other Compensation ($)(3) | | Total ($) |
Augustus C. Griffin(a) | | 2016 | | $ | 465,000 |
| | $ | 578,993 |
| | $ | 411,525 |
| | $ | 26,771 |
| | $ | 1,482,289 |
|
(PEO) | | 2015 | | 386,000 |
| | 311,436 |
| | 579,000 |
| | 15,273 |
| | 1,291,709 |
|
| | 2014 | | 160,601 |
| | 96,720 |
| | 142,788 |
| | 8,093 |
| | 408,202 |
|
Thomas K. Pigott (b) | | 2016 | | 311,420 |
| | 65,777 |
| | 185,466 |
| | 15,985 |
| | 578,648 |
|
(PFO) | | 2015 | | 82,212 |
| | 94,380 |
| | 81,389 |
| | 1,598 |
| | 259,579 |
|
David E. Rindom (c) | | 2016 | | 275,668 |
| | 179,047 |
| | 164,174 |
| | 22,869 |
| | 641,758 |
|
| | 2015 | | 221,947 |
| | 90,021 |
| | 223,795 |
| | 18,777 |
| | 554,540 |
|
| | 2014 | | 220,917 |
| | 82,950 |
| | 130,050 |
| | 18,347 |
| | 452,264 |
|
David E. Dykstra (d) | | 2016 | | 247,000 |
| | 165,605 |
| | 145,903 |
| | 21,153 |
| | 579,661 |
|
| | 2015 | | 205,626 |
| | 83,052 |
| | 207,000 |
| | 15,022 |
| | 510,700 |
|
| | 2014 | | 182,420 |
| | 82,950 |
| | 109,453 |
| | 14,646 |
| | 389,469 |
|
Michael Buttshaw (e) | | 2016 | | 235,000 |
| | 154,137 |
| | 137,992 |
| | 14,250 |
| | 541,379 |
|
(a)Mr. Griffin served as President and Chief Executive Officer from July 28, 2014 until March 16, 2020 and currently serves as Chief Executive Officer. Mr. Griffin will retire in May 2020.
| |
(a) | Mr. Griffin has served as President and Chief Executive Officer since July 28, 2014. |
(b)Mr. Pigott served as Vice President Finance and Chief Financial Officer from September 14, 2015 until March 29, 2019.
| |
(b) | Mr. Pigott has served as Vice President of Finance and Chief Financial Officer since September 14, 2015. |
| |
(c) | Mr. Rindom served as Vice President, Human Resources from June 2000 until December 2015, when he was appointed Vice President and Chief Administrative Officer. |
| |
(d) | Mr. Dykstra has served as Vice President, Alcohol and Marketing since 2009. |
| |
(e) | Mr. Buttshaw has served as Vice President of Ingredients Sales and Marketing since December 2014. |
| |
(1) | The amount shown is the grant date fair value of awards made during the period computed in accordance with FASB ASC Topic 718. Accelerated full or pro rata vesting may be permitted upon a change of control or if employment is terminated as a result of death, disability, retirement or termination without cause. We pay dividends on these shares during the vesting period, which are not taken into account in determining their grant date fair value. Mr. Griffin, Mr. Pigott, Mr. Rindom, Mr. Dykstra, and Mr. Buttshaw were granted Restricted Stock Units based on 2016 performance in February 2017 in the amounts of $411,525, $146,990, $130,115, $116,584 and $110,920, respectively. These grants are not included in the table. |
| |
(2) | Amounts due under the cash incentive payments for 2014 performance were made in the first quarter of 2015 and are reflected in the table above. Amounts due under the cash incentive payments for 2015 performance were made in the first quarter of 2016 and are reflected in the table above. Amounts due under the cash incentive payments for 2016 performance were made in the first quarter of 2017 and are reflected in the table above. |
| |
(3) | Includes dividends paid on unvested restricted stock awards in 2016 in the following amounts: Mr. Rindom - $1,650; Mr. Dykstra - $1,250. Includes dividend equivalents paid on restricted stock unit awards in 2016 in the following amounts: Mr. Griffin – $6,847; Mr. Pigott - $1,056; Mr. Rindom - $7,413; Mr. Dykstra - $6,689; Mr. Buttshaw $1,507. Includes the Company’s contributions to the Company’s 401(k) plan allocated to the accounts of each named executive officer for 2016 in the following amounts: Mr. Griffin – $13,250; Mr. Pigott - $14,256; Mr. Rindom - $13,133; Mr. Dykstra - $12,540; and Mr. Buttshaw - $12,069. Includes an automobile allowance for Mr. Griffin. Also includes amount paid by the Company towards the purchase of life insurance, accidental death and dismemberment insurance, and long-term disability insurance. |
(c)Mr. Gall was appointed Vice President of Finance and Chief Financial Officer on April 1, 2019. In connection with his promotion, his base salary was increased to $285,000.
(d)Mr. Rindom served as Vice President, Human Resources from June 2000 until December 2015, when he was appointed Vice President and Chief Administrative Officer.
(e)Mr. Dykstra has served as Vice President, Alcohol and Marketing since 2009.
(f)Mr. Glaser has served as Vice President of Production and Engineering since October 2015.
(1)The amount shown is the grant date fair value of awards made during the period computed in accordance with FASB ASC Topic 718. Accelerated full or pro-rata vesting may be permitted upon a change of control or if employment is terminated as a result of death, disability, retirement or termination without cause. We pay dividend equivalents on these shares during the vesting period, which are not taken into account in determining their grant date fair value. Mr. Griffin, Mr. Gall, Mr. Rindom, Mr. Dykstra, and Mr. Glaser were granted Restricted Stock Units based on 2019 performance in 2020 in the amounts of $120,970, $24,653, $41,978, $30,268, and $28,316, respectively. These grants are not included in the table.
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(2)Amounts due under the cash incentive payments for 2017 performance were made in the first quarter of 2018 and are reflected in the table above. Amounts due under the cash incentive payments for 2018 performance were made in the first quarter of 2019 and are reflected in the table above. Amounts due under the cash incentive payments for 2019 performance were made in the first quarter of 2020 and are reflected in the table above.
(3)Includes dividend equivalents paid on restricted stock unit awards in 2019 in the following amounts: Mr. Griffin – $11,700; Mr. Pigott - $2,253; Mr. Gall - $1,814; Mr. Rindom - $4,375; Mr. Dykstra - $3,053; Mr. Glaser $2,864. Includes the Company’s contributions to the Company’s 401(k) plan allocated to the accounts of each named executive officer for 2019 in the following amounts: Mr. Griffin – $16,800; Mr. Pigott - $6,784; Mr. Gall - $15,062; Mr. Rindom - $16,800; Mr. Dykstra - $16,800; and Mr. Glaser - $16,800. Includes an automobile allowance for Mr. Griffin. Also includes amount paid by the Company towards the purchase of life insurance, accidental death and dismemberment insurance, and long-term disability insurance.
GRANTS OF PLAN-BASED AWARDS
The following table sets forth information with respect to each named executive officer concerning grants of awards during the year ended December 31, 2016, of awards2019, under both the Company’s equity and non-equity plans.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Estimated future payouts under non-equity incentive plan awards | | | | | | Estimated future payouts under equity incentive plan awards | | | | | | | | |
Name | | Grant date | | Threshold ($) | | Target ($) | | Max ($) | | Threshold ($) | | Target ($) | | Max ($) | | All other stock awards: Number of shares of stock or units (#) | | Grant date fair value of stock and option awards ($) |
Augustus C. Griffin | | | | | | | | | | | | | | | | | | |
LTI Opportunity | | 2/18/19(1)(3) | | | | | | | | $ | 409,375 | | | $ | 818,750 | | | $ | 1,637,500 | | | | | |
STI Opportunity | | 2/18/19(2) | | $ | 327,500 | | | $ | 655,000 | | | $ | 1,310,000 | | | | | | | | | | | |
RSUs | | 2/25/19(3) | | | | | | | | | | | | | | 9,975 | | | $ | 778,050 | |
Brandon M. Gall | | | | | | | | | | | | | | | | | | |
LTI Opportunity | | 2/18/19(1)(3) | | | | | | | | $ | 92,625 | | | $ | 185,250 | | | $ | 370,500 | | | | | |
STI Opportunity | | 2/18/19(2) | | $ | 71,250 | | | $ | 142,500 | | | $ | 285,000 | | | | | | | | | | | |
RSUs | | 2/25/19(3) | | | | | | | | | | | | | | 579 | | | $ | 45,162 | |
Retention RSUs | | 2/18/19(4) | | | | | | | | | | | | | | 2,500 | | | $ | 190,625 | |
David E. Rindom | | | | | | | | | | | | | | | | | | |
LTI Opportunity | | 2/18/19(1)(3) | | | | | | | | $ | 142,000 | | | $ | 284,000 | | | $ | 568,000 | | | | | |
STI Opportunity | | 2/18/19(2) | | $ | 124,250 | | | $ | 248,500 | | | $ | 497,000 | | | | | | | | | | | |
RSUs | | 2/25/19(3) | | | | | | | | | | | | | | 3,966 | | | $ | 309,348 | |
David E. Dykstra | | | | | | | | | | | | | | | | | | |
LTI Opportunity | | 2/18/19(1)(3) | | | | | | | | $ | 102,375 | | | $ | 204,750 | | | $ | 409,500 | | | | | |
STI Opportunity | | 2/18/19(2) | | $ | 78,750 | | | $ | 157,500 | | | $ | 315,000 | | | | | | | | | | | |
RSUs | | 2/25/19(3) | | | | | | | | | | | | | | 2,472 | | | $ | 192,816 | |
Stephen J. Glaser | | | | | | | | | | | | | | | | | | |
LTI Opportunity | | 2/18/19(1)(3) | | | | | | | | $ | 95,875 | | | $ | 191,750 | | | $ | 383,500 | | | | | |
STI Opportunity | | 2/18/19(1)(3) | | $ | 73,750 | | | $ | 147,500 | | | $ | 295,000 | | | | | | | | | | | |
RSUs | | 2/25/19(3) | | | | | | | | | | | | | | 2,305 | | | $ | 179,790 | |
(1)The amounts reported under the Threshold, Target and Maximum columns in this table are the values of the possible incentive compensation awards calculated in accordance with the provisions set forth in the LTI Plan. The Threshold column reports the awards that would have been paid if 87% of the performance targets were met. If less than 87% of a performance target is met, no incentive award is paid with respect to that target. The Target column reports the awards that would have been paid if 100% of the performance targets were met and the Maximum column reports the amount that would have been paid if 120% of the performance targets were met and represents the maximum awards available under the plan regardless of the amount by which the performance targets are exceeded. The performance targets performance goals relate to both quantitative and qualitative criteria. The award amounts are denominated in dollars but are payable in restricted stock units in the number of shares that the award equates to at the time of payout. For 2019, each executive received an award amount that was below the threshold award payable under the LTI Plan as described in “Compensation Discussion and Analysis - Long-Term Incentives”
(2)The amounts reported under the Threshold, Target and Maximum columns in this table are the possible incentive compensation awards calculated in accordance with the provisions set forth in the STI Plan. The Threshold column reports the awards that would have been paid if 87% of the performance targets were met. If less than 87% of a performance target is met, no incentive award is paid with respect to that target. The Target column reports the awards that would have been paid if 100% of the performance targets were met and the Maximum column reports the amount that would have been paid if 120% of the performance targets were met and represents the maximum awards available under the plan regardless of the amount
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Estimated future payouts under non-equity incentive plan awards | | Estimated future payouts under equity incentive plan awards | | | | |
Name (a) | | Grant date (b) | | Threshold ($) (c) | | Target ($) (d) | | Max ($) (e) | | Threshold (#) (f) | | Target (#) (g) | | Max (#) (h) | | All other stock awards: Number of shares of stock or units (#) (i) | | Grant date fair value of stock and option awards ($) (l) |
Augustus C. Griffin | | | | | | | | | | | | | | | | | | |
LTI Opportunity | | 2/17/16(1)(3) | | | | | | | | 4,062 | | 8,124 | | 16,248 | | | | |
STI Opportunity | | 2/17/16 (2) | | $ | 174,375 |
| | $ | 348,750 |
| | $ | 697,500 |
| | | | | | | | | | |
RSUs | | 2/17/16 (3) | | | | | | | | | | | | | | 24,638 | | $ | 578,993 |
|
Thomas K. Pigott | | | | | | | | | | | | | | | | | | |
LTI Opportunity | | 2/17/16 (1)(3) | | | | | | | | 1,444 | | 2,887 | | 5,775 | | | | |
STI Opportunity | | 2/17/16 (2) | | 77,475 |
| | 154,950 |
| | 309,900 |
| | | | | | | | | | |
RSUs | | 2/17/16 (3) | | | | | | | | | | | | | | 2,799 | | 65,777 |
|
David E. Rindom | | | | | | | | | | | | | | | | | | |
LTI Opportunity | | 2/17/16 (1)(3) | | | | | | | | 1,284 | | 2,569 | | 5,137 | | | | |
STI Opportunity | | 2/17/16 (2) | | 68,917 |
| | 137,834 |
| | 275,668 |
| | | | | | | | | | |
RSUs | | 2/17/16 (3) | | | | | | | | | | | | | | 7,619 | | 179,047 |
|
David E. Dykstra | | | | | | | | | | | | | | | | | | |
LTI Opportunity | | 2/17/16 (1)(3) | | | | | | | | 1,151 | | 2,301 | | 4,603 | | | | |
STI Opportunity | | 2/17/16 (2) | | 61,750 |
| | 123,500 |
| | 247,000 |
| | | | | | | | | | |
RSUs | | 2/17/16 (3) | | | | | | | | | | | | | | 7,047 | | 165,605 |
|
Michael Buttshaw | | | | | | | | | | | | | | | | | | |
LTI Opportunity | | 2/17/16 (1)(3) | | | | | | | | 1,095 | | 2,190 | | 4,379 | | | | |
STI Opportunity | | 2/17/16 (2) | | 58,750 |
| | 117,500 |
| | 235,000 |
| | | | | | | | | | |
RSUs | | 2/17/16 (3) | | | | | | | | | | | | | | 6,559 | | 154,137 |
|
by which the performance targets are exceeded. The performance targets performance goals relate to both quantitative and qualitative criteria. For 2019, each executive received an award amount that was below the threshold award payable under the STI Plan as reported in the Summary Compensation Table.
| |
(1) | The amounts reported under the Threshold, Target and Maximum columns in this table are the possible incentive compensation awards calculated in accordance with the provisions set forth in the LTI Plan. The Threshold column reports the awards that would have been paid if 90% of the performance targets were met. If less than 90% of a performance target is met, no incentive award is paid with respect to that target. The Target column reports the awards that would have been paid if 100% of the performance targets were met and the Maximum column reports the amount that would have been paid if 150% of the performance targets were met and represents the maximum awards available under the plan regardless of the amount by which the performance targets are exceeded. The performance targets performance goals relate to both quantitative and qualitative criteria. For 2016, each executive received an award amount that fell between the target and maximum award payable under the LTI Plan as described in “Compensation Discussion and Analysis - Long-Term Incentives”. |
| |
(2) | The amounts reported under the Threshold, Target and Maximum columns in this table are the possible incentive compensation awards calculated in accordance with the provisions set forth in the STI Plan. The Threshold column reports the awards that would have been paid if 90% of the performance targets were met. If less than 90% of a performance target is met, no incentive award is paid with respect to that target. The Target column reports the awards that would have been paid if 100% of the performance targets were met and the Maximum column reports the amount that would have been paid if 150% of the performance targets were met and represents the maximum awards available under the plan regardless of the amount by which the performance targets are exceeded. The performance targets performance goals relate to both quantitative and qualitative criteria. For 2016, each executive received an award amount that fell between the target and maximum award payable under the STI Plan as reported in the Summary Compensation Table. |
(3)The grant of RSUs reported for this award will vest on the third anniversary of each such award’saward's grant date.
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(4)The grant of RSUs reported for this award will vest on the fifth anniversary of such award's grant date.
OUTSTANDING EQUITY AWARDS ON DECEMBER 31, 20162019
The following table shows information concerning restricted stock and restricted stock unit awards outstanding held by the named executive officers on December 31, 2016.2019. No options were outstanding to any named executive officers as of such date. Amounts shown are based on a price of $49.98$48.45 per share, the closing market price on December 30, 2016.31, 2019.
| | | | | | | | | | | | | | |
Name | | Number of Shares or Units of Stock That Have Not Vested (#) | | Market Value Of Shares or Units of Stock That Have Not Vested ($) |
Augustus C. Griffin | | 9,691 | (1) | | $ | 469,529 | |
| | 9,586 | (2) | | 464,442 | |
| | 9,975 | (3) | | 483,289 | |
Brandon M. Gall | | 579 | (3) | | 28,053 | |
| | 2,500 | (4) | | 121,125 | |
| | 880 | (2) | | 42,636 | |
| | 576 | (1) | | 27,907 | |
David E. Rindom | | 3,941 | (1) | | 190,941 | |
| | 3,031 | (2) | | 146,852 | |
| | 3,966 | (3) | | 192,153 | |
David E. Dykstra | | 2,446 | (1) | | 118,509 | |
| | 2,472 | (3) | | 119,768 | |
| | 2,716 | (2) | | 131,590 | |
Stephen J. Glaser | | 2,272 | (1) | | 110,078 | |
| | 2,584 | (2) | | 125,195 | |
| | 2,305 | (3) | | 111,677 | |
|
| | | | | | |
Name | | Number of Shares or Units of Stock That Have Not Vested (#) | | Market Value Of Shares or Units of Stock That Have Not Vested ($) |
Augustus C. Griffin** | | 12,000 (1) | | $ | 599,760 |
|
| | 20,422 (6) | | 1,020,692 |
|
| | 24,638 (7) | | 1,231,407 |
|
Thomas K. Pigott** | | 6,000 (2) | | 299,880 |
|
| | 2,799 (7) | | 139,894 |
|
David E. Rindom** | | 18,250 (3) | | 912,135 |
|
| | 15,000 (4) | | 749,700 |
|
| | 15,000 (5) | | 749,700 |
|
| | 5,903 (6) | | 295,032 |
|
| | 7,619 (7) | | 380,798 |
|
David E. Dykstra** | | 13,250 (3) | | 662,235 |
|
| | 15,000 (4) | | 749,700 |
|
| | 15,000 (5) | | 749,700 |
|
| | 5,446 (6) | | 272,191 |
|
| | 7,047 (7) | | 352,209 |
|
Michael Buttshaw** | | 5,000 (8) | | 249,900 |
|
| | 1,000 (6) | | 49,980 |
|
| | 6,559 (7) | | 327,819 |
|
(1) These sharesThis award will vest on July 31, 2017.March 5, 2021.
(2) These shares will vest on September 14, 2018.
(3) These sharesThis award vested on February 28, 2017.14, 2020.
(4) These shares will vest on November 28, 2017.
(5) These shares will vest on January 22, 2019.
(6) These shares(3)This award will vest on February 25, 2018.2022.
(7) These shares(4)This award will vest on February 16, 2019.
(8) These shares will vest on December 15, 2017.
** Mr. Griffin, Mr. Pigott, Mr. Rindom, Mr. Dykstra and Mr. Buttshaw received grants of restricted stock units, based on 2016 operating results, in February 2017 in the following amounts: 9,586, 3,424, 3,031, 2,716 and 2,584, respectively. These grants will vest on February 14, 2020 and are not reflected in this table.
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OPTION EXERCISES AND STOCK VESTED
The following table sets forth information with respect to each named executive officer concerning the exercise of options and the vesting of stock during the year ended December 31, 2016.2019.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Option Awards | | | | Stock Awards | | |
Name
(a) | | Number of shares acquired on exercise (#) (b) | | Value realized on exercise ($)
(c) | | Number of shares acquired on vesting (#)
(d) | | Value realized on vesting ($) (1)
(e) |
Augustus C. Griffin | | — | | | $ | — | | | 24,638 | | | $ | 1,878,648 | |
Brandon M. Gall | | | | | | 6,489 | | | 459,066 | |
Thomas K. Pigott | | — | | | — | | | 2,799 | | | 213,424 | |
David E. Rindom | | — | | | — | | | 22,619 | | | 1,590,749 | |
David E. Dykstra | | — | | | — | | | 22,047 | | | 1,547,134 | |
Stephen J. Glaser | | — | | | — | | | 9,566 | | | 693,688 | |
|
| | | | | | | | | | |
| | Option Awards | | Stock Awards |
Name
(a) | | Number of shares acquired on exercise (#) (b) | | Value realized on exercise ($)
(c) | | Number of shares acquired on vesting (#)
(d) | | Value realized on vesting ($) (1)
(e) |
Augustus C. Griffin | | - | | - | | - | | - |
|
Thomas K. Pigott | | - | | - | | - | | - |
|
David E. Rindom | | - | | - | | 16,500 | | $ | 624,525 |
|
David E. Dykstra | | - | | - | | 12,500 | | 473,125 |
|
Michael Buttshaw | | - | | - | | - | | - |
|
(1)The value realized upon vesting was calculated using the closing price of the Company’s Common Stock on the date the shares vested multiplied by the number of shares vested. | |
(1) | The value realized upon vesting was calculated using the closing price of the Company’s Common Stock on the date the shares vested multiplied by the number of shares vested. |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL
General
As noted above, our long-term incentive plans contain change-in-control provisions. The employment agreements with some of our named executive officers discussed above in “Compensation Discussion and Analysis - Employment Agreements and Other Arrangements” contain change-in-control provisions as well.
Employment Agreements
As discussed above, the Company entered into an employment agreement with Mr. Griffin upon his retention as President and Chief Executive Officer. Pursuant to his employment agreement,in October 2017. Except in the event of hisa voluntary termination of employment,by Mr. Griffin would havewithout good reason or by the right to receive any annual bonusCompany with respect tocause (each as defined in the Employment Agreement), upon a year ending prior to the date of such termination but unpaid at such date, payableother than at the same time as such payment would be made ifexpiration of the term, Mr. Griffin remained employed. Unlesswill receive severance of two times his base salary, which base salary was $655,000 as of December 31, 2019. Except in the event of a voluntary termination by Mr. Griffin’s employment is terminatedGriffin without good reason or by the Company for Cause (as definedcause, a pro-rata long-term incentive award for the year in which termination occurs or the agreement) or he terminates his employment, he would receivefull-year award for any completed year unpaid as of the date of termination, and an amount equal to $2,000 times the number of full calendar months from the date of termination until the date in which Mr. Griffin and his annual base salary paid in equal installments onspouse are Medicare-eligible. As of December 31, 2019, the dates on which his base salarylump sum payment of $2,000 per month would have been paid had he continued employment. Unless Mr. Griffin were terminated for Cause or terminated his own employment, Mr. Griffin would receive any performance bonus related to$144,000. In addition, except in the year in which hislimited circumstances described above, upon termination occurred, calculated based on actual performance through the end of the performance period prorated for the number of days of his employment during the year in which his termination occurred.all RSUs that are then unvested will vest. In the event of a termination due to death or disability, Mr. Griffin would receive a pro-rata bonus, an amount equal to Mr. Griffin’s base compensation, and any full-year short-term and long-term awards for any completed year unpaid at the same amountsdate of such termination event. Values for these events as ifof December 31, 2019 are shown in the table below, except for the pro-rata bonus amount, which as of that date was the full-year amount reflected in the Summary Compensation Table under Non-Equity Incentive Plan Compensation. Unless Mr. Griffin is terminated for cause or terminated his employment for good reason, the Company were to have terminatedwill purchase Mr. Griffin's Atchison, Kansas residence from him without cause.following the expiration of the term for his original purchase price of $325,000. Mr. Griffin is retiring in May 2020.
Additionally, as discussed above, the Company entered into an offer letter with Pigott Resignation and Forfeiture
Mr. Pigott uponresigned his retentionposition as the Company’s Vice President of Finance and Chief Financial Officer. The offer letter provides that the Company will provide one year’s base salaryOfficer effective as severance in the event of March 29, 2019. As a terminationresult of his resignation, Mr. Pigott without cause.forfeited all unvested equity awards and received no severance payments.
Restricted Stock and
Restricted Stock Unit Awards
2004 Plan
For awards under our 2004 Plan, immediate vesting occurs under our restricted stock unit awards upon a change of control. Accelerated or pro-rata vesting is permitted for restricted stock units if employment is terminated as a result of death, disability, retirement or, in the discretion of the Human Resources and Compensation Committee, termination without cause. The following summarizes the arrangements provided for outstanding restricted stock unit awards in the event of termination or change in control, although the Committee has discretion under the 2004 Plan to modify these arrangements and has generally exercised such discretion in the event of involuntary termination. We provide for change- in-control payments in our long-term incentive plans so that employees will remain focused on our business in the event of potential or actual changes in control.
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Under our 2004 Plan, restricted stock unit awards vested in five years. In the event of a participant’s death, disability, retirement or, in the sole discretion of the Human Resources and Compensation Committee, involuntary termination of employment without cause, in any such case after three years from the date of grant specified in the agreement evidencing the stock award, restricted stock units issued on March 1, 2012, November 29, 2012, and January 23, 2014 vest as to the number of restricted stock units issued to the participant multiplied by a fraction, the numerator of which equals the number of months (including fractional months as full months) that such participant was employed by us, commencing as of March 1, 2012, November 29, 2012 and January 23, 2014, respectively, and ending on the date of termination of employment, and the denominator of which is sixty. The balance of restricted stock units issued to the participant is forfeited. Restricted stock unit awards granted in 2012 provide for pro-rata vesting after one year in the event of a participant’s death, disability, retirement or, in the sole discretion of the Human Resources and Compensation Committee, involuntary termination of employment without cause. Further, in accordance with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”), the vested portion of a participant’s restricted stock unit award will be distributed in shares of the Company’s Common Stock on the earliest to occur of (i) the end of the five-year vesting period, (ii) the participant’s death or “separation from service” (as defined in the Section 409A Treasury regulations) or (iii) certain change-in-control events described below. If a participant is a “specified employee” under the Section 409A Treasury regulations (generally an officer whose annual compensation exceeds $160,000), a distribution of vested restricted stock unit award shares on account of the participant’s separation from service will be delayed until the first business day immediately following the six-month anniversary of the date the participant separates from service.
The 2004 Plan permits accelerated vesting on a pro-rata basis of restricted stock unit awards not intended to be qualified under Section 162(m) of the Internal Revenue Code when employment is terminated by reason of disability, death, retirement or, at the discretion of Human Resources and Compensation Committee, involuntarily without cause. The Committee has exercised its discretion to waive minimum vesting periods to permit such pro-rata vesting of awards.
All restricted stock unit awards under the 2004 Plan become fully vested in the event of a change of control. A change in control is deemed to occur in the event of (i) certain acquisitions of 30% or more of our outstanding Common Stock and 50% of our outstanding Preferred Stock, or 30% of the combined voting power of our then outstanding voting securities entitled to vote generally in the election of directors, (ii) certain changes of more than a majority of the membership of the Board of Directors, or (iii) certain mergers which result in our stockholders owning less than 50% of the combined voting power of the surviving corporation. All restricted stock unit awards also become fully vested and the shares of Company Common Stock covered by the awards are immediately distributed to the participants upon a “change in the ownership” of the Company or the subsidiary for which a participant performs services, a “change in effective control” of the Company or a “change in the ownership of a substantial portion of the assets” of the Company (in each case as defined in the Section 409A Treasury regulations). Generally, (i) a change in ownership of the Company or a subsidiary occurs upon an acquisition that gives the acquirer ownership of more than 50% of the total fair market value or voting power of the Company or a subsidiary, respectively, (ii) a change in effective control of the Company occurs upon either (A) the acquisition of 30% or more of the total voting power of the Company during a twelve-month period or (B) the replacement of a majority of the members of the Company’s Board of Directors during a twelve-month period where such replacement was not endorsed by a majority of the existing members and (iii) a change in the ownership of a substantial portion of assets of the Company occurs upon an acquisition during a twelve-month period of 50% or more of the total gross fair market value of all the assets of the Company.
2014 Plan
Restricted stock units granted under the 2014 Plan will generally vest over a period of not less than three (3) years from the date of grant of such Award, provided that such Award may vest earlier on a pro-rata basis over any vesting period. Upon the occurrence of a change in control (as defined in the 2014 Equity Incentive Plan) or upon the participant’s death or disability any restricted stock units that have not previously vested will vest. Upon termination of employment or separation from service without cause, or upon the occurrence of such other event to the extent specified in the applicable Award Agreement, any restricted stock units that have not previously vested shall be forfeited. Upon retirement at or after age 65, generally the award will vest, with the payment under the award made on the settlement date originally contemplated by the award agreement. The Committee may, in its sole discretion, waive such vesting requirement, or provide for continued vesting consistent with the vesting period in an Award; provided that it shall not waive such requirement or continue such vesting to the extent such action would create adverse tax consequences for a Participant under Code Section 409A or result in any Awards that are intended to constitute performance-based compensation for purposes of Code Section 162(m) to cease to so constitute performance-based compensation. Generally, any Award under the 2014 Equity Incentive Plan to a participant who has experienced a termination of employment, separation from service, or termination of some other service relationship with the Company and its affiliates may be cancelled,canceled, accelerated, paid or continued, as provided in the applicable Award Agreement, or, as the Committee may otherwise determine to the extent not prohibited by the 2014 Equity Incentive Plan.
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Assuming retirement at or after age 62,65, termination without cause, the holder’s death or disability, or that a change in control occurred as of December 31, 2016,2019, the value of the restricted stock unit awards outstanding as of such date held by the named executive officers that would vest (a) in accordance with the terms of their grant awards for each event other than termination without causeevent; and (b) ifpursuant to the Human Resources and Compensation Committee were to waive all vesting requirements in the eventterms of a termination without cause or upon another event, is as shown below. In the event of a termination without cause, no amounts would vest absent waiver of vesting requirements.his employment agreement for Mr. Griffin. Amounts shown are based on a price of $49.98$48.45 per share, the closing market price on December 30, 2016.31, 2019.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Termination Value ($) | | | | | | |
Name* | | Retirement at or after Age 65 | | Termination Without Cause | | Change in Control Value ($) | | Death Or Disability Value ($) |
Augustus C. Griffin | | $ | — | | | $ | 2,871,259 | | | $ | 2,871,259 | | | $ | 2,871,259 | |
Brandon M. Gall | | — | | | — | | | 219,721 | | | 219,721 | |
David E. Rindom | | — | | | — | | | 529,946 | | | 529,946 | |
David E. Dykstra | | — | | | — | | | 369,867 | | | 369,867 | |
Stephen J. Glaser | | — | | | — | | | 346,950 | | | 346,950 | |
|
| | | | | | | | | | | | | | | | |
| | Termination Value ($) | | | | |
Name | | Retirement at or after Age 62 | | Termination Without Cause if Vesting Waived | | Change in Control Value ($) | | Death Or Disability Value (S) |
Augustus C. Griffin | | -- |
| | $ | 2,851,859 |
| | $ | 2,851,859 |
| | $ | 2,851,859 |
|
David E. Rindom | | $ | 1,956,317 |
| | 2,632,147 |
| | 3,087,365 |
| | 2,632,147 |
|
David E. Dykstra | | -- |
| | 2,339,114 |
| | 2,786,035 |
| | 2,339,114 |
|
Thomas K. Pigott | | -- |
| | 439,774 |
| | 439,774 |
| | 439,774 |
|
Michael Buttshaw | | -- |
| | 627,699 |
| | 627,699 |
| | 627,699 |
|
* Mr. Pigott is not included in the table because he was not an employee on December 31, 2019.
Annual Incentive Plan
IfExcept in the case of Mr. Griffin, if an employee’s employment during a plan year terminates for any reason, he or she shall not be entitled to the payment of incentive compensation for the plan year. However, the Human Resources and Compensation Committee has full discretion to determine that payment of a prorated annual component may be made when termination results from job elimination, reduction in work forceworkforce or other similar Company initiative or is otherwise without cause, or is encouraged or induced by incentives offered by us. Upon a change in control, the annual incentive plan terminates. The Committee will determine payments on an annualized basis, based on our performance through the most recently completed quarter for which financial results are available. Incentive compensation will be paid on a pro-rata basis (measured through the end of such quarter) in accordance with the guidelines for payment of annual incentive compensation described in “Compensation Overview – Annual Cash Incentive.” The Committee may elect to make a partial incentive compensation payment on the basis of estimated results before the end of the year. Payment is to be made in a lump sum as soon as feasible following the change in control, but in no event later than two and one-half months following the end of the plan year in which the change in control occurs.
CHIEF EXECUTIVE OFFICER PAY RATIO
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Mr. Griffin, our Chief Executive Officer. The paragraphs that follow describe our methodology and the resulting CEO Pay ratio.
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On November 1, 2017, we identified the median employee using our employee population. Under the relevant rules, we were required to identify the median employee by use of a “consistently applied compensation measure,” or CACM. We chose a CACM that closely approximates the annual total compensation of our employees. Specifically, we identified the median employee by looking at payroll data for compensation paid through the measurement date. We did not perform adjustments to the compensation paid to part-time employees to calculate what they would have been paid on a full-time basis.
After applying our CACM methodology, we identified the median employee for 2017. Under the SEC rules, we are only required to identify the median employee once every three years. However, if it is no longer appropriate for us to continue to use the median employee identified last year due to a change in the median employee's circumstances that we reasonably believe would result in a significant change in our pay ratio disclosure, we are permitted to use another employee whose compensation is substantially similar to the original median employee based on the CACM used to select the original median employee. The original median employee's compensation for 2018 was significantly reduced due to a prolonged medical leave during 2018. As a result, the median employee for 2018 was another employee whose compensation is substantially similar to the original median employee based on the CACM used to select the original median employee. The same employee was determined to be the median employee for 2019.
Once the median employee was identified for 2019, we calculated the median employee’s total annual compensation in accordance with the requirements of the Summary Compensation Table.
Our median employee compensation as calculated using Summary Compensation Table requirements was $76,415. Our CEO’s compensation as reported in the Summary Compensation Table was $1,568,011. Therefore, our CEO to median employee pay ratio is 21:1.
This information is being provided for compliance purposes. Neither the Compensation Committee nor management of the Company used the pay ratio measure in making compensation decisions.
The pay ratio included in this information is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. SEC rules for identifying the median compensated employee and calculating the pay ratio allow companies to adopt a variety of methodologies and apply various assumptions. As a result, the pay ratio reported by other companies may not be comparable with the pay ratio that we have reported. A multitude of factors that could cause ratios to be less meaningful for company-to-company comparisons include the following, among others:
•Differences in industry and business type;
•Variations in the way companies organize their workforces to accomplish similar tasks;
•Differences in the geographical distribution of employees;
•Degree of vertical integration;
•Reliance on contract and outsourced workers; and
•Ownership structure.
Compensation of Directors
Members of the Board who are not Company employees (“Non-Employee Directors”) receive compensation for their service. Mr. Griffin, our CEO, does not receive any compensation for his service as a member of the Board, and following his employment with the Company in March 2020, Mr. Colo does not receive any compensation for his service as a member of the Board. The Human Resources and Compensation Committee annually reviews the total compensation of our Non-Employee Directors and each element of our Non-Employee Director compensation program. As part of this process, the Human Resources and Compensation Committee evaluates market data, including data provided by its independent compensation consulting firm, and makes a recommendation to the Board.
DIRECTOR COMPENSATION
YEAR ENDED DECEMBER 31, 20162019
The following table shows compensation earned by or paid to all persons who were directors during 20162019 who were not also executive officers during such period.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | | Fees Earned or Paid in Cash ($)(1)(3)(4) | | Common Stock (vested) ($)(2)(3)(4) | | All Other Compensation ($) | | Total ($) |
James L. Bareuther | | $ | 62,396 | | | $ | 85,604 | | | $ | — | | | $ | 148,000 | |
David J. Colo | | 121 | | | 151,879 | | | — | | | 152,000 | |
Terrence P. Dunn | | 121 | | | 151,879 | | | — | | | 152,000 | |
Anthony P. Foglio | | 82,019 | | | 64,981 | | | — | | | 147,000 | |
Lynn M. Jenkins (5) | | 32,550 | | | 126,425 | | | — | | | 158,975 | |
George W. Page, Jr. (6) | | 40,000 | | | — | | | — | | | 40,000 | |
Karen L. Seaberg | | 104 | | | 187,146 | | | — | | | 187,250 | |
Kerry A. Walsh Skelly (7) | | 22,029 | | | 44,821 | | | — | | | 66,850 | |
M. Jeannine Strandjord | | 69,298 | | | 89,702 | | | — | | | 159,000 | |
|
| | | | | | | | | | | | | | |
Name | | Fees Earned or Paid in Cash ($)(1)(3)(4) | | Common Stock (vested) ($)(2)(3) | | All Other Compensation ($) | | Total ($) |
James L. Bareuther | | $ | 43,758 |
| | $ | 44,492 |
| | - | | $ | 88,250 |
|
John P. Bridendall, Former Director | | 10,801 |
| | 10,699 |
| | - | | 21,500 |
|
David J. Colo | | 83 |
| | 110,167 |
| | - | | 110,250 |
|
Terrence P. Dunn | | 85 |
| | 111,915 |
| | - | | 112,000 |
|
Anthony P. Foglio | | 16,322 |
| | 91,678 |
| | - | | 108,000 |
|
George W. Page, Jr. | | 75,027 |
| | 29,973 |
| | - | | 105,000 |
|
Daryl R. Schaller | | 75,027 |
| | 29,973 |
| | - | | 105,000 |
|
Karen L. Seaberg | | 104,527 |
| | 29,973 |
| | - | | 134,500 |
|
M. Jeannine Strandjord | | 69,296 |
| | 49,704 |
| | - | | 119,000 |
|
(1)Employee directors do not receive any fees for attendance of any meeting of the Board of Directors. Directors elected other than at the Annual Meeting of Stockholders receive pro-rated compensation for their service. For 2019, non-employee directors received an annual retainer of $130,000 payable as follows: $65,000 in cash paid in quarterly installments (in advance at the election of the director) and $65,000 in restricted stock (which shall vest upon the election of the director). The chair of the Audit Committee was paid an additional retainer of $14,000, the chair of the Human Resources and Compensation Committee was paid an additional retainer of $7,000 and the chair of the Nominating and Governance Committee was paid an additional retainer of $7,000. The annual fee for serving as Chairman of the Board was $50,000. Additionally, non-employee directors were paid additional compensation for meetings in excess of four board meetings and twelve committee meetings of $3,000 for unscheduled “on-site” meetings, $1,500 for a telephonic Board call and $1,000 for a telephonic committee call.
(2)Pursuant to the Non-Employee Directors’ Restricted Stock Plan, on the first business day following the date of each Annual Meeting of stockholders, each non-employee director then-serving was awarded shares of restricted stock with a fair market value of $65,000, as determined on such first business day following the Annual Meeting. Fractional shares were paid in cash. The amount shown in the table is the grant date fair value of the awards computed in accordance with FASB ASC Topic 718. Grant date fair value per share was assumed to be the closing price of the Company’s Common Stock on the grant date.
(3)Messrs. Bareuther, Colo, Dunn, and Ms. Jenkins, Ms. Seaberg, and Ms. Strandjord each elected to receive a portion of their cash compensation in shares of common stock.
(4)Fees for fourth quarter 2019 meetings and retainers were paid during first quarter 2020.
(5)Ms. Jenkins was elected to the Board in January 2019.
(6)Mr. Page retired from the Board at the time of the 2019 Annual Meeting of Stockholders.
(7)Ms. Walsh Skelly was elected to the Board in September 2019.
| |
(1) | Employee directors do not receive any fees for attendance of any meeting of the Board of Directors. Non-employee directors receive an annual retainer of $95,000 payable as follows: $65,000 in cash paid in quarterly installments (in advance at the election of the director) and $30,000 in restricted stock (which shall vest upon the election of the director). The chairperson of the Audit Committee is paid an additional retainer of $14,000, the chairperson of the Human Resources and Compensation Committee is paid an additional retainer of $7,000 and the chairperson of the Nominating and Governance Committee is paid an additional retainer of $7,000. The annual fee for serving as Chairperson of the Board is $35,000. Additionally, non-employee directors are paid additional compensation for meetings in excess of four board meetings and twelve committee meetings of $3,000 for unscheduled “on-site” meetings, $1,500 for a telephonic Board call and $1,000 for a telephonic committee call. |
| |
(2) | Pursuant to the Non-Employee Directors’ Restricted Stock Plan, on the first business day following the date of each Annual Meeting of stockholders, each non-employee director was awarded shares of restricted stock with a fair market value of $30,000, as determined on such first business day following the Annual Meeting. Fractional shares were paid in cash. The amount shown in the table is the grant date fair value of the awards computed in accordance with FASB ASC Topic 718. Grant date fair value per share was assumed to be the closing price of the Company’s Common Stock on the grant date. |
| |
(3) | Mr. Bridendall elected to receive half of his cash compensation in shares of Common Stock. Mr. Bareuther elected to receive a quarter of his cash compensation in shares of Common Stock. Mrs. Strandjord elected to receive all of her cash compensation relating to first quarter 2016 in shares of Common Stock. Mr. Foglio elected to receive all of his cash compensation relating to the second, third and fourth quarters of 2016 in shares of Common Stock. Messrs. Colo and Dunn elected to receive all of their cash compensation in shares of Common Stock. |
| |
(4) | Fees for fourth quarter 2016 meetings and retainers were paid during first quarter 2017. |
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PRINCIPAL STOCKHOLDERS
The following table sets forth, as of March 17, 2017,May 4, 2020, the number of shares beneficially owned and the percentage of ownership of the Company’s Preferred Stock and Common Stock by (i) each person who is known by the Company to own beneficially more than 5% of either class of the Company’s capital stock outstanding, (ii) each director and director nominee of the Company, (iii) each of the named executive officers named in the Summary Compensation Table, and (iv) all directors and executive officers of the Company as a group.
| | | | | | | | | | | | | | |
| Amount and nature of beneficial ownership (a) | | | |
Name of beneficial owner | Common Stock | | Preferred Stock | |
| No. of Shares | % | No. of Shares | % |
James L. Bareuther | 4,522 | | * | — | | — | |
David J. Colo | 14,818 | | * | — | | — | |
Terrence P. Dunn (b) | 70,414 | | * | — | | — | |
David E. Dykstra | 29,344 | | * | — | | — | |
Anthony P. Foglio (c) | 39,284 | | * | — | | — | |
Brandon M. Gall | 20,348 | | * | — | | — | |
Stephen J. Glaser (d) | 14,845 | | * | — | | — | |
Augustus C. Griffin | 121,809 | | * | — | | — | |
Lori L.S. Mingus (e) | 64,367 | | * | — | | — | |
Thomas K. Pigott | 12,589 | | * | — | | — | |
Lynn M. Jenkins | 2,604 | | * | — | | — | |
David E. Rindom (f) | 32,287 | | * | — | | — | |
Karen L. Seaberg (g) | 3,632,869 | | 21.50 | | 297 | | 68 | |
Kerry A. Walsh Skelly | 946 | | * | — | | — | |
M. Jeannine Strandjord (h) | 44,210 | | * | — | | — | |
All executive officers and directors as a group (17)(i) | 4,064,342 | | 24.06 | | 297 | | 68 | |
Thomas Cray | 12,000 | | * | 111 | | 25.4 | |
The Vanguard Group** | 934,083 | | 6 | | — | | — | |
Conestoga Capital Advisors, LLC *** | 1,325,296 | | 7.84 | | — | | — | |
Champlain Investment Partners, LLC**** | 1,406,420 | | 8.32 | | — | | — | |
BlackRock, Inc. ***** | 2,026,887 | | 12 | | — | | — | |
|
| | | | |
| Amount and nature of beneficial ownership (a) |
Name of beneficial owner | Common Stock | Preferred Stock |
| No. of Shares | % | No. of Shares | % |
James L. Bareuther | 1,572 | * | – | – |
David J. Colo | 5,038 | * | – | – |
Terrence P. Dunn (b) | 58,170 | * | – | – |
David E. Dykstra (c) | 29,440 | * | – | – |
Anthony P. Foglio (d) | 31,648 | * | – | – |
Michael Buttshaw | – | * | – | – |
Augustus C. Griffin | 44,681 | * | – | – |
George W. Page, Jr. (e) | 35,818 | * | 18 | 4.1 |
Thomas Pigott | 5,500 | * | – | – |
David E. Rindom (f) | 88,290 | * | – | – |
Daryl R. Schaller, Ph.D. (g) | 71,095 | * | – | – |
Karen L. Seaberg (h) | 3,518,645 | 21.1 | 297 | 68.0 |
M. Jeannine Strandjord (i) | 41,560 | * | – | – |
All executive officers and directors as a group (15) | 3,931,769 | 23.5 | 315 | 72.1 |
Kansas University Endowment Association** | – | – | 111 | 25.4 |
Dimensional Fund Advisors LP*** | 1,038,925 | 6.2 | – | – |
* less than 1%
**Based on a Schedule 13D13G filed by Karen L. Seaberg on December 12, 2013, Kansas University Endowment Association (“KU”) received 111February 11, 2020, The Vanguard Group has a business address of 100 Vanguard Blvd., Malvern, Pennsylvania 19355. Its Schedule 13G indicates sole voting power over 27,306 shares of preferred stock as a result of terminationthe Company's Common Stock and sole dispositive power over 905,733 shares of the MGP Ingredients, Inc. Voting Trust.Company's Common Stock.
***Based on itsa Schedule 13G/A filed on February 9, 2017, Dimensional FundJanuary 17, 2020, Conestoga Capital Advisors, LP (“Dimensional”)LLC has a business address of Palisades West, Building One, 6300 Bee Cave Road, Austin, Texas, 78746.550 E. Swedesford Rd., Ste 120, Wayne, Pennsylvania 19087. Its Schedule 13G/A indicates sole voting power over 1,030,8691,203,546 shares of the Company’sCompany's Common Stock and sole dispositive power over 1,038,9251,325,296 shares of the Company’sCompany's Common Stock. Dimensional furnishes investment advice to investment companies and serves as investment manager to certain trusts and separate accounts, which hold all
**** Based on a Schedule 13G filed on February 13, 2020, Champlain Investment Partners, LLC has a business address of 180 Battery St., Burlington, Vermont 05401. Its Schedule 13 indicates sole voting power over 1,031,070 shares of the Company’sCompany's Common Stock reportedand sole dispositive power over 1,406,420 shares of the Company's Common Stock.
***** Based on Schedule 13G/A filed on February 4, 2020, BlackRock, Inc. has a business address of 55 East 52nd Street, New York, New York 10555. Its Schedule 13G/A indicates sole voting power over 2,003,464 shares of the Company's Common Stock and sole dispositive power over 2,026,887 shares of the Company's Common Stock.
(a)For the purposes of the table, a person is deemed to be a beneficial owner of shares if the person has or shares the power to vote or to dispose of them. Except as beneficially owned on Dimensional’s Schedule 13G/A. Dimensional disclaimsotherwise indicated in the table or the footnotes below, as of May 4, 2020, each person had sole voting and investment power over the shares listed in the beneficial ownership table and all stockholders shown in the table as having beneficial ownership of such securities.
| |
(a) | For the purposes of the table, a person is deemed to be a beneficial owner of shares if the person has or shares the power to vote or to dispose of them. Except as otherwise indicated in the table or the footnotes below, as of March 17, 2017, each person had sole voting and investment power over the shares listed in the beneficial ownership table and all stockholders shown in the table as having beneficial ownership of 5% or more of either of the classes of stock had as a business address Cray Business Plaza, 100 Commercial Street, Atchison, Kansas 66002. Stockholders disclaim beneficial ownership in the shares described in the footnotes as being “held by” or “held for the benefit of” other persons. |
| |
(b) | Includes 1,409 shares of Common Stock held directly and 56,761 shares of Common Stock held in a trust. |
| |
(c) | Includes 23,702 shares held directly and 5,738 shares held jointly with spouse. |
| |
(d) | Includes 6,648 shares of Common Stock held directly and 25,000 shares of Common Stock held in an IRA. |
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(e) | Includes 13,545 shares of Common Stock held jointly with a spouse, 16,000 shares held in an IRA, and 6,273 shares held in a family trust and 18 shares of Preferred Stock held directly. |
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(f) | Includes 23,601 shares of Common Stock held directly and 64,689 shares of Common Stock held in a trust. |
5% or more of either of the classes of stock had as a business address Cray Business Plaza, 100 Commercial Street, Atchison, Kansas 66002. Stockholders disclaim beneficial ownership in the shares described in the footnotes as being “held by” or “held for the benefit of” other persons.
28(b)Includes 6,361 shares of Common Stock held directly and 64,053 shares of Common Stock held in a trust.
(c)Includes 9,284 shares of Common Stock held directly and 30,000 shares of Common Stock held in an IRA.
CORE/3001926.0002/131169639.14
(d)Includes 14,801 shares of Common Stock held directly and 44.65 shares held in ESPP.(e)Includes 963 shares of Common Stock held by her spouse and 63,404 shares that are held in trust for Ms. Mingus's benefit, but she does not have voting or dispositive powers with respect to these shares and disclaims beneficial ownership.
(f)Includes 32,287 shares of Common Stock held directly and 8,840 shares of Common Stock held in a trust.
(g)Includes 3,977 shares of Common Stock held directly, 99,066 shares of Common Stock in an IRA, 2,382,603 shares of Common Stock held by Cray MGP Holdings LP over which Ms. Seaberg has sole voting and dispositive power, 59,013 shares of Common Stock held by Seaberg Family Foundation over which Ms. Seaberg may be deemed to have voting and disposition power, and 1,087,210 shares held in various trusts over which Ms. Seaberg has sole voting and dispositive power. Ms. Mingus is a beneficiary of one of the trusts that holds 63,404 shares.
(h)Includes 2,650 shares of Common Stock held directly and 41,560 shares of Common Stock held in a trust.
(i)Includes director nominees.
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(g) | Includes 2,258 shares of Common Stock held directly, 5,000 shares of Common Stock held in an IRA and 63,837 shares of Common Stock held in a trust. |
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(h) | Includes 10,000 shares of Common Stock held directly, 2,502,945 shares of Common Stock held by the Cray MGP Holdings LP, 212,838 shares of Common Stock held in a trust over which Ms. Seaberg has voting and disposition power, 611,069 shares of Common Stock in spouse’s trust over which Ms. Seaberg may be deemed to have voting and disposition power, 112,627 shares of Common Stock in an IRA, 69,166 shares of Common Stock in the Seaberg Family Foundation over which Ms. Seaberg may been deemed to have voting and disposition power, 226 shares of Preferred Stock held directly and 71 shares of Preferred Stock held by spouse. |
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(i) | Includes 41,650 shares of Common Stock held in a trust. |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s executive officers and directors, and persons who own more than 10% of the Company’s Common Stock, to file reports of ownership and changes in ownership with the SEC and NASDAQ. Executive officers, directors and greater-than-10% beneficial owners are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. Based on a review of the copies of such forms furnished to the Company and the Company’s officers’ and directors’ written representations, the Company believes that during 2016,2019, all required reports were filed except as follows: (i) two Forms 4 were filed late for James L. Bareuther, relating to two total transactions; (ii) two Forms 4 and one Form 5 were filed late for Augustus C. Griffin, relating to four total transactions; (iii) one Form 5 was filed late for M. Jeannine Strandjord, relating to one transaction; (iv) two Forms 4 and one Form 5 (which related to 2015 transactions) were filed late for Karen L. Seaberg, relating to twenty total transactions; and (v) one Form 4 filings for Ms. Seaberg on March 19, 2019 and May 29, 2019; late Form 4 filing for Mr. Gall on August 16, 2019; and late Form 4 filings for Mr. Bareuther, Mr. Glaser, Mr. Foglio, Ms. Jenkins, Mr. Dunn and Ms. Strandjord all filed on May 24, 2019.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the persons who served on the Company’s Human Resources and Compensation Committee during the last completed fiscal year: (i) was filed late for David E. Dykstra, relating toformerly an officer of the Company; (ii) during the last fiscal year, was an officer or employee of the Company; or (iii) had any relationship requiring disclosure under Item 404 of Regulation S-K. None of the Company’s executive officers, during the last completed fiscal year, served as: (i) a member of the compensation committee of another entity, one transaction (which occurred in 2014).of whose executive officers served on the Company’s Human Resources and Compensation Committee; (ii) a director of another entity, one of whose executive officers served on the Company’s Human Resources and Compensation Committee; or (iii) a member of the compensation committee of another entity, one of whose executive officers served as the Company’s director.
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RELATED PARTY TRANSACTIONS
Written policies and procedures adopted by the Company's Audit Committee address its review of transactions that would or potentially would be transactions of more than $120,000 in which the Company's participates and in which any "related person" has a direct or indirect material interest. A "related person" is a director, executive officer, 5% or more stockholder, or immediate family member of any such person. The policies and procedures require our directors and executive officers to notify our CEOChief Executive Officer of the facts and circumstances of the transaction. If our CEOChief Executive Officer determines that the proposed transaction is a related person transaction as defined in the written policies and procedures, then the proposed transaction is submitted to the Audit Committee for consideration.
For each potential or actual transaction that is or would be a related party transaction, the Audit Committee considers, where applicable:
•the benefits to the Company;
•the impact on a director's independence in the event the related person is a director, an immediate family member of a director or an entity in which a director is a partner, shareholder or executive officer;
•the availability of other sources for comparable products and services;
•the terms and conditions of the proposed transaction; and
•the terms and conditions available with unrelated third persons.
The policies and procedures prohibit interested Audit Committee members from participating in the review, consideration or approval of any transaction with respect to which such member is directly or indirectly the related person. The Audit Committee only approves those transactions that are in, or not inconsistent with, the best interests of the Company and its stockholders, as the Audit Committee determines in good faith. Annually, the Audit Committee reviews any previously approved related person transaction that remains ongoing, to ensure that the transaction remains in, or is not inconsistent with, the best interests of the Company and its stockholders. The Audit Committee has approved the transactions described below.
Anthony Foglio, a director of the Company, serves as an employee and is trustee of trusts holding 25% of the equity interest in another company that entered into transactions with the Company in 2016. The Company recorded revenue from these transactions that totaled $155,466. Mr. Foglio did not have any involvement in the negotiation of the transactions for either party.
OTHER MATTERS
We know of no other business that will be presented at the meeting. If any other matter properly comes before the stockholders for a vote at the meeting, however, the proxy holders will vote your shares in accordance with their best judgment. A proxy also confers discretionary authority on the persons named to approve minutes of last year’s Annual Meeting, to vote on matters incident to the conduct of the meeting and to vote on the election of any person as a director if a nominee herein named should decline or become unable to serve as a director for any reason.
INDEPENDENT PUBLIC ACCOUNTANTS
In 2016,2019, KPMG LLP served as independent registered public accountants. Representatives of KPMG LLP will be present at the stockholders’ meeting.2020 Annual Meeting of stockholders. They will have the opportunity to make a statement and will be available to respond to appropriate questions.
AUDIT AND CERTAIN OTHER FEES PAID ACCOUNTANTS
Set forth below are the aggregate fees billed the Company by its principal accountant, KPMG LLP, for the years ended December 31, 2016, December 31, 20152019 and December 31, 20142018 for (i) professional services rendered for the audit of the Company’s annual financial statements and the reviews of the financial statements included in the Company’s reports on Form 10-Q during such year (“Audit Fees”), (ii) assurance and related services that are reasonably related to the performance of the audit or review of the Company financial statements but are not included in Audit Fees (“Audit-Related Fees”), (iii) professional services rendered for tax compliance, tax advice or tax planning (“Tax Fees”) and (iv) other products and services (“Other Fees”).
The Audit Committee considers whether the provision of such services is compatible with maintaining the independence of its principal auditor. The Audit Committee has the sole right to engage and terminate the Company’s independent auditor, to pre-approve the performance of audit services and permitted non-audit services and to approve all audit and non-audit fees. The Audit Committee has empowered its chairman to act on the Committee’s behalf between meetings to approve permitted non-audit services; the chairman must report any such services to the Audit Committee at its next scheduled meeting. The Audit Committee may provide for the pre-approval of services through the adoption of additional pre-approval policies and procedures, provided the policies and procedures are detailed as to the particular services, the Audit Committee is informed of each service and the procedures do not include delegation to management of audit committee responsibilities under the Securities Exchange Act of 1934, as amended. The Audit Committee pre-approved of all services KPMG LLP rendered to the Company for 2016.2019.
| | | | | | | | | | | | | | |
Type of Fee | | Amount | | |
| | 2019 | | 2018 |
Audit Fees | | $ | 906,000 | | | $ | 866,000 | |
Audit-Related Fees | | — | | | — | |
Tax Fees | | — | | | — | |
All Other Fees | | — | | | — | |
Total | | $ | 906,000 | | | $ | 866,000 | |
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|
| | | | | | | | | | | | |
Type of Fee | | Amount |
| | 2016 | | 2015 | | 2014 |
Audit Fees | | $ | 866,300 |
| | $ | 836,400 |
| | $ | 856,350 |
|
Audit Related Fees | | 0 |
| | 0 |
| | 0 |
|
Tax Fees | | 0 |
| | 0 |
| | 0 |
|
All Other Fees | | 0 |
| | 0 |
| | 0 |
|
Total | | $ | 866,300 |
| | $ | 836,400 |
| | $ | 856,350 |
|
PROXY SOLICITATIONS
This proxy is being solicited by the Board of Directors of the Company. The cost of soliciting proxies will be borne directly by the Company. In addition to soliciting proxies by mail, certain officers and employees of the Company, without extra compensation, may also solicit proxies personally or by telephone. Copies of proxy solicitation materials will be furnished to fiduciaries, custodians and brokerage houses for forwarding to the beneficial owners of shares held in their names. The Company will reimburse brokers, banks or other persons for reasonable expenses in sending proxy material to beneficial owners.
STOCKHOLDER PROPOSALS
Including Stockholder Proposals in the 20182021 Annual Meeting Proxy Statement. Stockholders who intend to present proposals for inclusion in the Company’s proxy statement for the 20182021 Annual Meeting of Stockholders pursuant to Rule 14a-8 under the Exchange Act (“Rule 14a-8”) must forward them to the Company at Cray Business Plaza, 100 Commercial Street, P.O. Box 130, Atchison, Kansas 66002, Attention: Lori Norlen,TJ Lynn, Corporate Secretary, so that they are received on or before December 11, 2017.January 19, 2021. The proposal must comply with applicable securities regulations. In addition, proxies solicited by management may confer discretionary authority to vote on matters which are not included in the proxy statement but which are raised at the Annual Meeting by stockholders.
Stockholder Proposals Presented at the 20182021 Annual Meeting. With respect to stockholder proposals to be presented at the 20182021 Annual Meeting that are not intended to be included in our proxy statement relating to that meeting, pursuant to the Company’s Amended and Restated Bylaws (the “Bylaws”), a stockholder’s written notice of such proposal, in the form specified in the Bylaws, must be delivered to or mailed and received at our principal executive offices no earlier than February 1, 2018March 2, 2021 and no later than March 3, 2018.April 1, 2021. Pursuant to Rule 14a-4(c)(1) promulgated under the Exchange Act, the Company’s management will have discretionary authority to vote on any matter of which the Company does not receive notice of by March 3, 2018,April 1, 2021, with respect to proxies submitted for the 20182021 Annual Meeting of the Company’s stockholders.
Stockholder Director Nominations. Pursuant to the Bylaws, in order to nominate persons for election to the Board of Directors at the 20182021 Annual Meeting of the Company’s stockholders, a stockholder must deliver notice of the intention to submit nominations at the meeting, in the form specified in the Bylaws, to the Secretary of the Company no earlier than February 1, 2018March 2, 2021 and no later than March 3, 2018.April 1, 2021.
MGP reserves the right to reject, rule out of order, or take other appropriate actions with respect to any proposal or nomination that does not comply with these and other applicable requirements.
HOUSEHOLDING
Only one copy of the Company’s Notice, and if applicable, our annual report (as amended) and the Proxy Statement, has been sent to multiple stockholders of the Company who share the same address and last name, unless the Company has received contrary instructions from one or more of those stockholders. This procedure is referred to as “householding.” In addition, the Company has been notified that certain intermediaries, i.e., brokers or banks, will household proxy materials. The Company will deliver promptly and free of charge, upon oral or written request, a separate copy of the Notice, and if applicable, annual report (as amended) and Proxy Statement, to any stockholder at the same address. If you wish to receive a separate copy of the Notice, annual report (as amended) and Proxy Statement, free of charge, you may write to the Corporate Secretary of the Company at MGP Ingredients, Inc., Cray Business Plaza, 100 Commercial Street, P.O. Box 130, Atchison, Kansas 66002 or call the Corporate Secretary at 913-360-5448.913-367-1480. You can contact your broker or bank to make a similar request. Stockholders sharing an address who now receive multiple copies of the proxy materials may request delivery of a single copy by writing or calling the Company at the above address or by contacting their broker or bank, provided they have determined to household proxy materials.
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COMMUNICATIONS WITH DIRECTORS AND DIRECTOR
ATTENDANCE AT STOCKHOLDER MEETINGS
The Company’s policy is to ask directors to attend the Annual Meeting of stockholders, and all of the directors attended last year’s Annual Meeting. Stockholders may communicate directly with Board members by writing the Board or individual Board members in care of the Company’s Secretary at the Company’s executive offices. Letters should be addressed as follows: Name of director - In care of Lori Norlen,TJ Lynn, Corporate Secretary - MGP Ingredients, Inc. – Cray Business Plaza, 100 Commercial Street, P.O. Box 130 - Atchison, Kansas 66002.
By Order of the Board of Directors
Karen Seaberg
ChairpersonChairman of the Board
April 18, 2017 May 19, 2020
Cray Business Plaza 100 Commercial Street
P.O. Box 130
Atchison, Kansas 66002-0130
Phone: 913-367-1480
www.mgpingredients.com
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