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<CONFORMED-NAME>MIDWEST GRAIN PRODUCTS INC
<CIK>0000835011
<ASSIGNED-SIC>2040
<IRS-NUMBER>480531200
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<CITY>ATCHISON
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<ZIP>66002
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<TEXT>
   As Filed with the Securities and Exchange Commission on September 13, 2001
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K


                      Annual Report Pursuant to Section 13
                     of the Securities Exchange Act of 1934

                     For the Fiscal Year Ended June 30, 2001

                          MIDWEST GRAIN PRODUCTS, INC.

                                1300 Main Street
                                     Box 130
                             Atchison, Kansas 66002
                            Telephone: (913) 367-1480

                       Incorporated in the State of Kansas


                           COMMISSION FILE NO. 0-17196

                               IRS No. 48-0531200

     The Company has no securities  registered  pursuant to Section 12(b) of the
Act. The only class of common stock outstanding  consists of Common Stock having
no par value,  8,203,354  shares of which were outstanding at June 30, 2001. The
Common Stock is registered pursuant to Section 12(g) of the Act.

     The  aggregate  market  value of the Common  Stock of the  Company  held by
non-affiliates, based upon the last reported sales price of such stock on August
13, 2001, was $59,767,424.

     The  Company  has filed all  reports  required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and
has been subject to such filing requirements for the past 90 days.

     As indicated by the following check mark,  disclosure of delinquent  filers
pursuant to Rule 405 of Regulation S-K is not contained herein,  and will not be
contained,  to the best of  registrant's  knowledge,  in a  definitive  proxy or
information  statement  incorporated by reference in Part III of this Form 10-K:
[ ].

     The following documents are incorporated herein by reference:

     (1)  Portions  of  Midwest  Grain  Products,  Inc.  2001  Annual  Report to
          Stockholders,  pages  17  through  36  thereof,  are  incorporated  by
          reference into Part II and contained in Exhibit 13.

     (2)  Portions of Midwest  Grain  Products,  Inc.  Proxy  Statement  for the
          Annual Meeting of Stockholders  to be held on October 11, 2001,  dated
          September 14, 2001,  are  incorporated  by reference  into Part III of
          this report to the extent set forth herein.
================================================================================
<PAGE>

                                    CONTENTS

                                                                            PAGE
PART I
 Item 1.   Business..........................................................2
           General Information...............................................2
           Wheat Protein Products............................................3
           Premium Wheat Starch..............................................7
           Alcohol Products..................................................8
           Flour and Other Mill Products....................................10
           Transportation...................................................10
           Raw Materials....................................................11
           Energy...........................................................11
           Employees........................................................11
           Regulation.......................................................12
 Item 2.   Properties.......................................................12
 Item 3.   Legal Proceedings................................................13
 Item 4.   Submission of Matters to a Vote of Security Holders..............13
 Item 4A.  Executive Officers of the Registrant.............................14

PART II
 Item 5    Market for the Registrant's Common Equity and Related
           Stockholder Matters................................................16
 Item 6.   Selected Financial Data............................................16
 Item 7.   Management's Discussion and Analysis of Financial Condition
           and Results of Operation...........................................16
 Item 7A.  Quantitative and Qualitative Disclosure About Market Risk..........16
 Item 8.   Financial Statements and Supplementary Data........................16
 Item 9.   Changes in and Disagreements with Accountants on Accounting and
           Financial Disclosure...............................................17

PART III
 Item 10.  Directors of the Registrant........................................17
 Item 11.  Executive Compensation.............................................17
 Item 12.  Security Ownership of Certain Beneficial Owners
           and Management.....................................................17
 Item 13.  Certain Relationships and Related Transactions.....................17

PART IV
 Item 14.  Exhibits, Financial Statement Schedules and Reports on
           Form 8-K...........................................................17

SIGNATURES....................................................................20

FINANCIAL STATEMENT SCHEDULES................................................S-1
 Report of Independent Public Accountants on Schedules.......................S-2
 Schedule VIII.  Valuation and Qualifying Accounts...........................S-3

     The  calculation  of the aggregate  market value of the Common Stock of the
Company held by non-affiliates is based on the assumption that non-affiliates do
not include  directors.  Such assumption does not constitute an admission by the
Company or any director that any director is an affiliate of the Company.

     This  report,  including  the  portions of the Annual  Report  incorporated
herein by reference,  contains forward-looking  statements as well as historical
information.  Forward-looking  statements  are  usually  identified  by  or  are
associated with such words such as "intend,"  "believe,"  "estimate,"  "expect,"
"anticipate,"  "hopeful," "should," "may" and similar expressions.  They reflect
management's  current  beliefs and estimates of future  economic  circumstances,
industry  conditions,  Company  performance  and  financial  results and are not
guarantees of future performance.  The  forward-looking  statements are based on
many assumptions and factors including those relating to grain prices,  gasoline
prices,  energy costs,  product  pricing,  competitive  environment  and related
market  conditions,  operating  efficiencies,  access to capital  and actions of
governments.  Any changes in the assumptions or factors could produce materially
different results than those predicted and could impact stock values.

                                       1
<PAGE>
                                     PART I
Item 1.  Business.

         General Information

     Midwest  Grain  Products,  Inc.  (the  Company)  is  a  Kansas  corporation
headquartered in Atchison,  Kansas. It is the successor to a business founded in
1941 by Cloud L. Cray, Sr.

     The Company is a fully integrated producer of wheat protein, which includes
vital wheat  gluten and  specialty  wheat  proteins,  premium  wheat  starch and
alcohol  products.  These grain  products  are  processed  at plants  located in
Atchison,  Kansas and Pekin, Illinois. The Company also operates a wheat protein
and wheat  starch  mixing  facility in Kansas City,  Kansas.  Wheat is purchased
directly  from local and  regional  farms and grain  elevators  and milled  into
flour.  The flour is  processed  with water to extract  vital  wheat  gluten,  a
portion of which is further processed into specialty wheat proteins. Vital wheat
gluten  and most  wheat  protein  products  are dried  into  powder  and sold in
packaged or bulk form.  The starch slurry which results after the  extraction of
the gluten and wheat  proteins is further  processed  to extract  premium  wheat
starch  which is also dried into powder and sold in  packaged or bulk form.  The
remaining slurry is mixed with corn or milo and water and then cooked, fermented
and distilled into alcohol.  The residue of the  distilling  operations is dried
and sold as a high protein  additive for animal feed.  Carbon  dioxide  which is
produced  during the  fermentation  process is trapped and sold.  As a result of
these processing operations,  the Company sells approximately 95% (by weight) of
grain processed.

     The table below shows the  Company's  sales from  continuing  operations by
product  group for each of the five years ended June 30,  2001,  as well as such
sales as a percent of total sales.

                              PRODUCT GROUP SALES
<TABLE>
<CAPTION>
<S>                         <C>        <C>         <C>     <C>       <C>        <C>     <C>        <C>    <C>        <C>
                                                             Year Ended June 30,

                                    2001                 2000             1999               1998              1997
                                    ----                 ----             ----               ----              ----
                                                            (thousands of dollars)
                             Amount      %         Amount     %      Amount     %       Amount     %      Amount      %

Wheat Protein Products      $49,762     21.7      $70,912   30.6   $ 56,153    26.0   $ 42,489    19.0   $ 39,968   17.8
Premium Wheat Starch         27,907     12.2       29,186   12.6     27,173    12.6     27,791    12.4     29,935   13.3
Alcohol Products:
  Food Grade Alcohol
    Beverage Alcohol         25,005     10.9       27,728   11.9     30,373    14.1     35,934    16.1     43,118   19.2
    Food Grade               17,315      7.6       16,136    7.0     19,276     8.9     27,487    12.3     38,004   16.9
    Industrial
  Fuel Grade Alcohol         83,686     36.4       62,066   26.7     54,639    25.3     51,227    23.0     34,992   15.6
  Alcohol By-products        23,532     10.3       23,093   10.0     25,441    11.8     33,259    14.9     34,553   15.4
                             ------     ----      -------  -----    -------   -----    -------   -----    -------  -----
    Total Alcohol           149,538     65.2      129,023   55.6    129,729    60.1    147,957    66.3    150,667   67.1
                            -------     ----      -------  -----    -------   -----    -------   -----    -------  -----
    Products
Flour and Other Mill
Products                      2,034      0.9        2,759    1.2      3,046     1.4      5,017     2.3      4,163    1.8
                              -----     ----      -------   ----     ------    ----     ------    ----     ------  -----
    Net Sales              $229,241      100%    $231,880  100.0   $216,101   100.0   $223,354   100.0   $224,733  100.0
                           ========     ====     ========  =====   ========   =====   ========   =====   ========  =====
</TABLE>

     The Company's  results for fiscal 2001 declined from the prior fiscal year.
Net  income was $2.7  million  compared  to $4.9  million  in fiscal  2000,  due
principally  to abnormally  high energy costs  resulting from a dramatic rise in
natural gas prices.  Reduced sales for the Company's vital wheat gluten, premium
wheat  starches and food grade  alcohol were also  affecting  factors.  Improved
selling prices for the Company's alcohol products,  non-operating  income from a
two year  Department of Agriculture  program that began in June, 2001 and growth
in  sales  of  specialty  wheat  proteins  were the  principal  reasons  for the
Company's profitability for the current fiscal year.

                                       2
<PAGE>
     The bulk of the Company's  sales are made  directly to large  institutional
food and beverage  processors and distributors with respect to which the Company
has longstanding  relationships.  Sales to these customers are usually evidenced
by short term  agreements  that are  cancelable  within 30 days and under  which
products  are  usually  ordered,  produced,  sold and  shipped  within  60 days.
However, a substantial amount of the Company's fuel alcohol is sold under longer
term  contracts,  primarily  to cover  the  needs of  gasoline  refiners  during
September through April of each year. None of the Company's  customers accounted
for more than ten percent of the Company's  consolidated  revenues during fiscal
2001.

     Historically,  the  Company's  sales  have not  been  seasonal  except  for
variations  affecting  alcohol and vital wheat gluten sales.  Fuel alcohol sales
usually  increase  during the period August through March due to requirements of
the Clean Air Act which  inhibit  the sale of ethanol  in  certain  areas of the
country  during  May 1 through  September  15 each year.  Certain  environmental
regulations  also favor  greater use of ethanol  during the winter months of the
year. See "Alcohol Products- Fuel Grade Alcohol." Beverage alcohol sales tend to
peak in the fall as  distributors  order  stocks for the holiday  season,  while
vital wheat gluten  sales have tended to increase to a minor  extent  during the
second half of the fiscal  year as demand  increases  for hot dog and  hamburger
buns and  similar  bakery  products.  During the next year the  Company  expects
declining vital wheat gluten sales due to the expiration of the quota on imports
of wheat gluten into the United States. See "Vital Wheat Gluten - Competition."

     The  Company's  strategy in recent years has been to focus on the marketing
and development of specialty wheat protein and starch products for use in unique
market niches.  During 2001,  specialty  wheat protein sales increased by 24% to
approximately  23% of total  wheat  protein  product  sales.  As a result of the
expiration of the import quota on foreign wheat gluten,  the Company  intends to
intensify  its efforts to focus on developing  markets for its  specialty  wheat
proteins and starch products.  As described  herein,  the Company is eligible to
receive approximately $26 million over the next two years under a new government
program  designed to assist  manufacturers  of wheat gluten in their  transition
from the historical vital wheat gluten business to new markets. These funds will
be used for  research,  marketing,  promotional  and  capital  costs  related to
specialty  wheat  protein and starch  products  and should help  accelerate  the
Company's growth in these markets.

     For further information,  see the Consolidated  Financial Statements of the
Company and  Management's  Discussion  and Analysis of the  Company's  Financial
Condition and Results of  Operations  which appear at pages 18 through 24 of the
Annual Report.

Wheat Protein Products

     The  Company's  wheat  protein  products  consist of vital wheat gluten and
specialty wheat proteins that are derived from vital wheat gluten. During fiscal
2001, sales of vital wheat gluten declined by  approximately  39% over the prior
year due primarily to pricing pressures from subsidized  European Union ("E.U.")
producers.  As noted above,  the Company's  overall  strategy is to focus on the
marketing and development of specialty wheat protein and starch products for use
in unique market  niches.,  and specialty  wheat  proteins are accounting for an
increasing share of the Company's total wheat protein sales. During fiscal 2001,
specialty  wheat protein sales increased by 24%, to  approximately  23% of total
wheat  protein  sales.  That share is expected  to  continue to increase  due to
increased  marketing,  customer  recognition  of the  advantages of these unique
products and an increase in capacity,  as well as declining sales of vital wheat
gluten  resulting  from an  increase  in supplies  and  pricing  pressures  from
European Union producers.

     Vital Wheat Gluten.  Vital wheat gluten is a free-flowing  light tan powder
which contains approximately 75% to 80% protein. Its vitality,  water absorption
and retention and film-forming  properties make it desirable as an ingredient in
many food  products.  It is the only  commercially  available  high protein food
additive which  possesses  vitality.  The vitality of the Company's  vital wheat
gluten results from its elastic and cohesive characteristics when added to dough
or otherwise reconstituted with water.

     Vital wheat gluten is added by bakeries and food processors to baked goods,
such as breads, and to pet foods, cereals, processed meats, fish, and poultry to
improve the nutritional  content,  texture,  strength,  shape, and volume of the
product.  The neutral flavor and color of wheat gluten also  enhances,  but does
not change, the flavor and color of

                                       3
<PAGE>

food. The  cohesiveness  and elasticity of the gluten enables the dough in wheat
and other high protein breads to rise and to support added ingredients,  such as
whole cracked grains, raisins and fibers. This allows the baker to make an array
of  different  breads by varying  the gluten  content of the dough.  Vital wheat
gluten is also added to white breads, hot dog buns and hamburger buns to improve
the strength and  cohesiveness of the product.  For example,  vital wheat gluten
provides greater hinge strength for hot dog buns.

     The Company  produces vital wheat gluten from modernized  facilities at the
Atchison and Pekin  plants.  It is shipped  throughout  the  continental  United
States  in bulk and in 50 to 100  pound  bags to  distributors  and also is sold
directly to major food processors and bakeries.

     Specialty Wheat Proteins. In recent years the Company began the development
of a number of specialty  wheat  proteins  for food and  non-food  applications.
Specialty  wheat  proteins are derived from vital wheat gluten through a variety
of  proprietary  processes  which change the molecular  structure of vital wheat
gluten. Food application wheat proteins include gliadin,  glutenin,  products in
the Wheatex(TM)  and FP(TM) series and Pasta  Power(TM).  Non-food  applications
include wheat proteins designed for use primarily in cosmetics and personal care
products  and in  biodegradable  gluten  protein  that can be  molded  to form a
variety  of  biodegradable   plastic-like  objects.   Specialty  wheat  proteins
generally  compete with other  ingredients and modified  proteins having similar
characteristics.  Although a number of the  specialty  wheat  proteins have been
launched, additional products are in the test marketing or development stage.

     Food Applications

     o Gliadin and Glutenin are the two principal  molecules  that make up vital
       wheat gluten.  The Company's  patented  process enables the separation of
       each for a variety of end uses.  Glutenin,  a large molecule  responsible
       for the elastic  character of vital wheat gluten,  increases the strength
       of bread  doughs,  improves  the  freeze-thaw  characteristics  of frozen
       doughs and may be used as a functional  protein source in beef jerky-type
       products,  as well as in meat extension.  Gliadin, the smaller of the two
       molecules, is soluble in water and other liquids,  including alcohol, and
       is  responsible  for  the  viscous  properties  of  wheat  gluten.  Those
       characteristics  make it ideal to improve  the  texture  of  noodles  and
       pastas.  Gliadin is also used in a number of cosmetics  and personal care
       products as described below under "Non-Food Applications."

     o Wheatex(TM)Series  consists of texturized  wheat proteins made from vital
       wheat  gluten by changing  it into a pliable  substance  through  special
       processing. The resulting solid food product can be further enhanced with
       flavoring and coloring and  reconstituted  with water.  Texturized  wheat
       proteins are used for meat,  poultry and fish substitutes,  extenders and
       binders. Wheatex(TM)mimics the textural characteristics and appearance of
       meat,  fish and poultry  products.  It is available in a variety of sizes
       and colors and can be easily formed into patties,  links or virtually any
       other  shape  the  customer  requires.  Because  of  its  neutral  taste,
       Wheatex(TM)will  not alter flavors that are added to the product. It also
       has excellent water-binding  capacities for the retention of natural meat
       juices. Wheatex(TM)is presently being sold for applications in vegetarian
       and extended meat products.

     o FP(TM) Series.  The Midsol FP(TM) series of products consist of specialty
       wheat proteins,  each tailored for use in a variety of food applications.
       These  include  proteins  that  can be used to form  barriers  to fat and
       moisture penetration to enhance the crispness and improve batter adhesion
       in fried  products,  increase the  freshness and shelf life of frozen and
       refrigerated dough products after they are baked,  effectively bond other
       ingredients in vegetarian patties and extended meat products, and fortify
       nutritional drinks.

     o Pasta  Power(TM) is a specialty  wheat  protein that is a  cost-effective
       replacement  for whole  eggs and egg whites and  enhances  the  strength,
       texture,  quality and  functionality of fresh,  frozen and flavored pasta
       products.  The  added  strength  enables  the  canning  of pasta  and its
       treatment with spices without significant  deterioration of the noodle or
       other  pasta  product,  as in the case of canned  spaghetti  and  similar
       products.

                                       4
<PAGE>

Non-Food Applications

     o Cosmetics and Personal Care Products.  Specialty  wheat proteins  include
       proteins that have been hydrolyzed or otherwise altered to become soluble
       in water and other  liquids.  This  enables  their use in food as well as
       non-food  cosmetic  applications  such as  hair  sprays,  shampoos,  skin
       lotions and similar  products.  These include Foam Pro(TM),  a hydrolyzed
       wheat  protein  that has been  developed  as a foam  booster to naturally
       enhance  detergent  systems such as shampoos,  liquid hand soaps and bath
       and shower gels;  Aqua  Pro(TM)II WAA, a solution of amino acids produced
       from natural wheat proteins that helps provide excellent moisturizing and
       film forming properties in both hair and skin systems; Aqua Pro(TM)11 WP,
       an  additive   for  shampoo;   Aqua   Pro(TM)QWL,   which   enhances  the
       functionality  of hair  conditioners;  and Aqua  Pro(TM)II WG, which is a
       gliadin  formulation  that  is  used  in  hair  and  skin  cleansers  and
       conditioners.

     o Biodegradable    Gluten/Starch    Resins.    Polytriticum(TM)   200   and
       Polytriticum(TM)   2000  are  the  Company's   environmentally   friendly
       biodegradable  gluten/starch  resins  that can be  molded  to  produce  a
       variety of plastic-like  objects.  Polytriticum(TM)  200 may be used as a
       commercial  raw  material  for the  production  of pet  treats and chews.
       Polytriticum(TM)  2000 has been  developed for use in  disposable  eating
       utensils, golf tees, food and feed containers and similar type vessels.

     In February of 2001, the Company  acquired a  state-of-the-art  facility in
Kansas City, Kansas for $6.5 million which is principally dedicated to producing
Wheatex(TM).  The acquisition has allowed the Company to forego earlier plans to
construct  a  Wheatex(TM)  plant at a similar  cost.  The  Company  expects  the
acquisition  will allow it to increase the production of textured wheat proteins
and bio-polymers at an accelerated  rate. Also, the Company  anticipates that in
addition to providing more space than was incorporated into the design for a new
plant,  the facility will provide greater  flexibility for producing other lines
of value-added specialty wheat proteins.

     In July of 2001,  the  Company  received  the first $17  million  out of an
expected  total of  approximately  $26 million that it has been awarded  under a
Bush  Administration  program  intended  to enable the gluten  industry  to move
forward in the face of subsidized  and protected  competition  from the European
Union. See "Competition - Vital Wheat Gluten". The Company will use the funds to
pay certain  capital,  research,  marketing and  promotional  costs  incurred in
developing  products and markets for value-added wheat gluten, or wheat protein,
and wheat starch products.

     The Company believes that its wheat protein processing operations produce a
quality of vital wheat gluten and specialty  wheat proteins that are equal to or
better  than that of any others on the  market.  The  Company's  location in the
center of the United  States grain belt,  its  production  capacity and years of
operating experience,  enable it to provide a consistently high level of service
to customers.

     Competition-Vital  Wheat Gluten. The Company's principal competitors in the
U.S.  vital wheat  gluten  market  consist  primarily  of three  other  domestic
producers  and  producers in the E.U.,  Australia  and certain  other  regulated
countries  (the "Foreign  Exporters").  Between June 30, 1994 and June 30, 1998,
the E.U. took an increasingly large share of the U.S. gluten market.  Imports of
wheat gluten  shipped into the United States from the E.U.  during the crop year
ended June 30, 1995,  were  approximately  51.9 million  pounds.  Those  imports
increased to 70.2 million  pounds in the crop year ending June 30, 1996, to 91.1
million pounds in the crop year ending June 30, 1997, and to 97.5 million pounds
in the crop year ending June 30, 1998, for an aggregate  increase of 88%. Due to
the  imposition of import quotas  beginning on June 1, 1998,  U.S.  Customs data
shows that E.U. imports declined to 65.5 million pounds in the quota year ending
May 31,  1999,  to 45.8  million  pounds  (excluding  Poland) for the quota year
ending May 31, 2000,  but  increased  to 61.9 million  pounds for the quota year
ending May 31, 2001.  Because the quota has expired,  as  discussed  below,  the
Company expects that future imports will approach or exceed pre-quota levels and
that U.S. producers will have difficulty  effectively  competing with subsidized
producers in the sale of vital wheat gluten.

     Vital wheat gluten is considered a commodity and therefore  competition  is
based  primarily  upon price.  Since the increasing  surge of large,  subsidized
volumes of E.U. wheat gluten into the U.S.,  vital wheat gluten prices have been
primarily  affected by (i) excess  E.U.  capacity,  (ii) high  tariff  barriers,
subsidies and other protective measures ("Subsidies") provided to E.U. exporters
by their host governments, (iii) low U.S. tariffs and (iv) gluten import quotas.

                                       5
<PAGE>

The Subsidies and low U.S.  tariffs  encouraged  E.U.  producers to expand wheat
starch and wheat gluten  production  capacity and to continue the development of
even greater capacities. Based on industry sources, from January 1, 1998 through
December 31, 2000, an estimated 160 million pounds of additional  E.U.  capacity
were completed.  Additional capacity may have been added subsequently.  In light
of the expiration of the import quota on vital wheat gluten, it is expected that
a majority  of the excess  wheat  gluten  production  from these  plants will be
targeted for shipment to the U.S.

     The Wheat  Gluten  Industry  Council  of the  United  States,  of which the
Company is a  principal  supporter,  has engaged in a number of  initiatives  to
combat the surge in subsidized  E.U. wheat gluten.  Initially,  the Wheat Gluten
Industry Council attempted to establish equal  opportunity,  or a "level playing
field", in the U.S. market through negotiations under a Grains Agreement between
the E.U. and the United States. A lack of meaningful discussions was followed by
an action under Section 301 of the Trade Act of 1974.  Following a further round
of unsatisfactory  discussions in connection with that action,  the Wheat Gluten
Council   initiated  a  second  proceeding  on  September  19,  1997,  with  the
International  Trade  Commission  of the United  States under section 201 of the
Trade Act of 1974 (the "Section 201 Proceeding").

     The  Section  201  Proceeding  met with  success  during the second half of
fiscal 1998. On March 18, 1998, the International Trade Commission  submitted to
President Clinton a unanimous  affirmative  determination  that imports of wheat
gluten were being imported into the United States in such  increased  quantities
as to be a substantial  cause of serious  injury to the domestic  industry.  The
International Trade Commission also recommended to the President that a quota be
placed on imports of  foreign  wheat  gluten.  As a result of that  finding  and
recommendation  and  pursuant  to  Section  203 of the  Trade  Act of 1974,  the
President issued  Proclamation  7103 on May 30, 1998. The  Proclamation  imposed
annual quantitative  limitations for three years on imports of wheat gluten from
the E. U. and other  Foreign  Exporters at an amount equal to the total  average
imports of wheat gluten shipped into the United States by the Foreign  Exporters
during the three crop years ended June 30,  1995.  The  aggregate  quota for the
first  year was 126.8  million  pounds.  Annual  increases  in that quota of six
percent prevailed in the second year and in the third year. Due to violations of
the quota by the E.U.  during  the first  quota  year,  the  President  issued a
proclamation  on May 29, 1999,  that reduced the E.U.'s second year quota by the
amount of illegally  shipped gluten in the first year and placed in effect other
measures designed to preclude further violations.  Due to the importation of the
EU's entire annual amount  allowed in the first quarter of the second quota year
and the shipment of large  quantities  of gluten  through  Poland (a  previously
exempt  country),  the President in May 2000, took further  action.  That action
restricted  shipment of the annual  amount to one fourth of the annual amount in
each of the four quarters of the quota year.  The action removed Poland from the
list of exempted  countries.  The quotas for "goods  entered,  or withdrawn from
warehouse for consumption, on or after June 1, 2000" in millions of pounds were,
per quarter, beginning June 1, 2000:
                                           Per Quarter
                                   --------------------
                 Australia         17.525 million pounds
        European Community         15.175 million pounds
           Other Countries          2.925 million pounds

     In fiscal 2000, a proceeding was commenced in the World Trade  Organization
("WTO")  to set  aside the  action of the ITC in  establishing  the  quota.  The
essential basis of the claim was that the ITC and the President had not used the
appropriate  methodology in determining  the cause of serious injury to the U.S.
industry. Subsequently, the EU imposed a special duty on a portion of imports of
corn gluten from the United States. On June 28, 2000, the WTO dispute resolution
panel ruled in favor of the claim.  The decision was appealed by the U.S.  Trade
Representative.

     On appeal,  the  Appellate  Body of the World  Trade  Organization  ("WTO")
confirmed  the  ruling  that the  safeguard  action  implementing  the quota was
inconsistent  with the United  States'  obligations  under the WTO  Agreement on
Safeguards.  However, the U.S.  International Trade Commission ("USITC") had the
opportunity  to bring the safeguard  into  conformity  with the  Appellate  Body
decision,  and the quota  remained  in place  until its  scheduled  May 31, 2001
termination date.

     At the request of the Wheat Gluten Industry  Council of the U.S., the USITC
recommended  a two-year  extension  of the quota,  based on grounds that through
circumvention  and  similar  tactics,   E.U.   producers  had  deliberately

                                       6
<PAGE>

and effectively prevented the U.S. wheat gluten industry from receiving the full
extent of relief that the quota  intended.  However,  in lieu of  extending  the
quota, the Bush  Administration  announced a program to provide the wheat gluten
industry up to $40 million over two years to help it complete its  transition to
competitiveness.  The Company is eligible for  approximately  $26 million of the
total  industry  allotment  and has received  approximately  $17 million for the
first  year of the  program.  The  program  is  administered  through  the  U.S.
Department of Agriculture's Commodity Credit Corporation.

     Since the  imposition of the quota,  the Company has focused its efforts on
developing and increasing the production and sales of specialty  wheat proteins.
These  are  niche  products  that  are  expected  to be  able  to  compete  more
effectively  with increased  foreign imports.  Although  additional quota relief
would have been helpful,  the Commodity  Credit  program  supports the Company's
strategy  and  should  strengthen  its  efforts  to move  increasingly  into the
development,  production  and  marketing  of  value  added  wheat  proteins  and
starches.  However,  there can be no assurance  that the Company will be able to
compete  effectively  in a market that is  inundated  with low cost,  subsidized
foreign gluten.

     The   Company's   sales  of  vital  wheat  gluten   during  2001   declined
approximately  39% below  gluten  sales in fiscal  2000 as the  Company  reduced
production due to increased pricing pressures from subsidized E.U. producers.

Premium Wheat Starch

     Wheat starch constitutes the  carbohydrate-bearing  portion of wheat flour.
The Company  produces a pure white premium wheat starch powder by extracting the
starch from the starch slurry,  substantially free of all impurities and fibers,
and then by spray, flash or drum drying the starch. Premium wheat starch differs
from low grade or B wheat  starches,  which are extracted  along with impurities
and  fibers  and  are  used   primarily  as  a  binding  agent  for   industrial
applications,  such as the manufacture of charcoal briquettes.  The Company does
not produce low grade or B starches because its integrated processing facilities
are able to process the slurry  remaining  after the extraction of premium wheat
starch  into  alcohol,  animal feed and carbon  dioxide.  Premium  wheat  starch
differs from corn starch in its granular  structure,  color,  granular  size and
name identification.

     A substantial portion of the Company's premium wheat starch is also altered
during  processing  to produce  certain  unique  modified  and  specialty  wheat
starches designed for special applications in niche markets.

     The Company's premium wheat starches are used primarily as an additive in a
variety of food products to affect their appearance, texture, tenderness, taste,
palatability, cooking temperature, stability, viscosity, binding and freeze-thaw
characteristics.  Important  physical  properties  contributed  by wheat  starch
include  whiteness,  clean  flavor,  viscosity  and texture.  For  example,  the
Company's  starches are used to improve the taste and mouth feel of cream puffs,
eclairs,  puddings,  pie fillings,  breadings and batters;  to improve the size,
symmetry and taste of angel food cakes; to alter the viscosity of soups,  sauces
and gravies;  to improve the freeze-thaw  stability and shelf life of fruit pies
and other frozen foods; to improve moisture retention in microwavable foods; and
to add stability and to improve  spreadability in frostings,  mixes,  glazes and
sugar coatings.  The Company's modified and specialty starches are also sold for
a number of  industrial  and non-food  applications,  which  include uses in the
manufacture of adhesives, paper coatings and carbonless paper.

     The Company's  premium wheat starch is sold  nationwide to food  processors
and distributors and for export,  with the bulk of international  sales going to
Japan, Mexico and East Asian countries which do not have wheat-based economies.

     The  Company  believes  that it is the largest  producer  of premium  wheat
starch in the United  States.  Although  wheat starch enjoys a relatively  small
portion of the total United  States starch  market,  the market is one which has
experienced substantial growth over the years. Growth in the wheat starch market
reflects a growing  appreciation for the unique  characteristics of wheat starch
which  provide it with a number of advantages  over corn and other  starches for
certain  baking  and other end  uses.  The  Company  has  developed  a number of
different  modified and specialty wheat  starches,  and continues to explore the
development of additional  starch products with the view to increasing  sales of
value added modified and specialty starches.

                                       7
<PAGE>

     Premium wheat starch competes  primarily with corn starch,  which dominates
the United  States  market.  Competition  is based upon price,  name,  color and
differing granular and chemical characteristics which affect the food product in
which it is used. Premium wheat starch prices usually enjoy a price premium over
corn  starches and low grade wheat  starches.  Wheat  starch price  fluctuations
generally track the  fluctuations in the corn starch market,  except in the case
of modified and specialty wheat  starches.  The wheat starch market also usually
permits  pricing  consistent  with costs which  affect the  industry in general,
including increased grain costs. The Company's strategy is to market its premium
wheat  starches in special  market  niches where the unique  characteristics  of
premium  wheat  starch or one of the  Company's  modified  and  specialty  wheat
starches are better suited to a customer's requirements for a specific use.

     Starch  sales  for 2001  declined  slightly  from  those of 2000;  a modest
decline in volume offset minimal price increases for the Company's starches.

Alcohol Products

     The Company's  Atchison and Pekin plants process corn and milo,  mixed with
the starch slurry from gluten and starch processing operations,  into food grade
alcohol, fuel grade alcohol, animal feed and carbon dioxide.

     Food grade alcohol, or grain neutral spirits,  consists of beverage alcohol
and  industrial  food grade alcohol that are distilled to remove all  impurities
and all but  approximately  5% of the water  content to yield high  quality  190
proof  alcohol.  Fuel grade  alcohol,  or  "ethanol,"  is a lower grade of grain
alcohol  that is  distilled  to remove  all  water to yield  200  proof  alcohol
suitable for blending with gasoline.

     Food Grade Alcohol

     Beverage Alcohol Food grade beverage  alcohol  consists  primarily of grain
neutral spirits and gin. Grain neutral spirits is sold in bulk or processed into
vodka and gin and sold in bulk  quantities  at various proof  concentrations  to
bottlers and rectifiers, which further process the alcohol for sale to consumers
under numerous labels.

     The Company  believes that in terms of fiscal 2001 net sales,  it is one of
the three  largest bulk sellers of grain neutral  spirits,  vodka and gin in the
United  States.  The Company's  principal  competitors  in the beverage  alcohol
market are Grain  Processing  Company  of  Muscatine,  Iowa and  Archer  Daniels
Midland of Decatur, Illinois. Beginning in 1997, competition in beverage markets
increased significantly as producers of fuel grade alcohol converted portions of
fuel grade production into food grade production. Competition is based primarily
upon  price  and  service,  and in the  case of gin,  formulation.  The  Company
believes that the centralized  location of its Illinois and Kansas  distilleries
and the  capacity  of its dual  production  facilities  combine to  provide  the
Company with a customer service advantage within the industry.

     Food  Grade  Industrial  Alcohol  Food grade  alcohol  which is not sold as
beverage  alcohol is  marketed  as food  grade  industrial  alcohol.  Food grade
industrial  alcohol is sold as an  ingredient  in foods (e.g.,  vinegar and food
flavorings), personal care products (e.g., hair sprays and deodorants), cleaning
solutions, biocides, insecticides, fungicides, pharmaceuticals, and a variety of
other products. Although grain alcohol is chemically the same as petroleum-based
or synthetic alcohol,  certain customers prefer a natural  grain-based  alcohol.
Food  grade  industrial  alcohol  is sold in tank  truck or rail car  quantities
direct to a number of  industrial  processors  from both the  Atchison and Pekin
plants.

     The Company is a minor  competitor  in the total United  States  market for
food  grade  industrial  alcohol,  which  is  dominated  by  petroleum-based  or
synthetic alcohol.  Food grade industrial alcohol prices are normally consistent
with prices for synthetic industrial alcohol.

     Food grade industrial and beverage alcohol sales increased by approximately
$2.2 million  during 2001 over 2000.  Improved  selling  prices more than offset
declined  unit volume  which  resulted  largely from the  Company's  decision to
reduce export sales.

                                       8
<PAGE>

     During the year, the Company took several  initiatives  to improve  alcohol
production.  In the first quarter of the fiscal year, the Company  completed the
installation  of new  distillery  columns  to  replace  older  equipment  at its
Atchison,  Kansas  plant,  which permit the  realization  of improved food grade
alcohol production efficiencies at that location.  During the third quarter, the
Company's  Board of  Directors  approved a $2.1 million  distillery  improvement
project at the  Atchison  plant.  Expected  to be  completed  early in the third
quarter of 2002,  the project is designed  to enhance the  Company's  production
capabilities for both food grade and fuel grade alcohol. In June 2001, the Board
of  Directors  approved  a plan  for  installation  of a new  feed  drier at the
Company's Pekin, Illinois plant. Expected to be completed in late fiscal 2002 at
a cost of  approximately  $5  million,  the new  drier  should  improve  alcohol
production efficiencies at the Pekin plant.

     Fuel Grade Alcohol

     Fuel grade  alcohol,  which is commonly  referred  to as  ethanol,  is sold
primarily for blending with gasoline to increase the oxygen and octane levels of
the gasoline. As an octane enhancer,  ethanol can serve as a substitute for lead
and petroleum based octane enhancers. As an oxygenate,  ethanol permits gasoline
to meet certain environmental  regulations and laws that regulate air quality by
reducing carbon  monoxide,  hydrocarbon  particulates  and other toxic emissions
generated from the burning of gasoline  ("toxics").  Because ethanol is produced
from grain, a renewable resource, it also provides a fuel alternative that tends
to reduce the country's dependence on foreign oil.

     Although  ethanol can be blended  directly with gasoline as an oxygenate to
enable it to reduce toxic air  emissions,  it also  increases the  volatility of
gasoline or its tendency to evaporate  and release  volatile  organic  compounds
("VOC's").  This latter  characteristic  has  precluded it from meeting  certain
Clean Air Act requirements for gasoline that pertain to nine of the smoggiest U.
S. metropolitan  areas during the summer months (May 1 through September 15). As
a consequence, the demand for ethanol typically increases during the period from
August through March of each fiscal year as gasoline blenders acquire stocks for
blending with  gasoline to be marketed in the period  September 16 through April
30.

     Since the adoption of the Clean Air Act,  the gasoline  industry has relied
primarily upon methyl  tertiary butyl ether (MTBE) to reduce toxic  emissions of
air pollutants to meet the  requirements of the Act and related EPA regulations.
Ethanol is also used to a lesser  extent  during the cooler  months of the year.
However,  the EPA has  recently  concluded  that the use of MTBE has  created  a
"significant  and   unacceptable   risk  to  drinking  water  and  ground  water
resources."  Concerns  have also been  raised  as to the  effectiveness  of MTBE
versus the  effectiveness  of Ethanol  as a reducer  of air  pollutants.  As the
result  of  these  concerns,  the EPA  commissioned  a "Blue  Ribbon  Panel"  to
investigate the matter and recommend solutions. In March 2000, the EPA announced
the recommendations of the Panel. The recommendations propose that the Clean Air
Act be amended to provide  the EPA with  authority  to  significantly  reduce or
eliminate the use of MTBE, and to "replace the 2 percent  oxygenate  requirement
in the  Clean Air Act with a  renewable  fuel  annual  average  content  for all
gasoline at a level that  maintains  the current  level of  renewable  fuel (1.2
percent of the gasoline  supply) and allows for  sustained  growth over the next
decade ."

     Several  states  also  have  begun to take  action to curb the use of MTBE,
including  California,  which has adopted  regulations that will require a phase
out of the use of MTBE in that state by January 1, 2003.  Based upon information
published by the Renewable Fuels Association, other states that have taken steps
to restrict or ban MTBE over the next few years  include  Arizona,  Connecticut,
Michigan  and  New  York.  In June  of  2001,  the  Bush  Administration  denied
California's  request for a waiver from the clean octane provisions of the Clean
Air Act that require  oxygenates in gasoline.  As a result of such actions,  the
Company expects that both the demand for ethanol and the capacity of the ethanol
industry  will  expand  in  the  future.   According  to  the  Renewable   Fuels
Association,  projected annual industry  production capacity is expected to grow
to 3.5  billion  gallons  by the end of  2003,  up from  the  current  estimated
industry capacity of 2 billion gallons.

     The  cost of  producing  ethanol  has  historically  exceeded  the  cost of
producing  gasoline  and  gasoline  additives,  such as MTBE,  all of which  are
derived  from fossil  non-renewable  fuels such as  petroleum.  Accordingly,  to
encourage the production of ethanol for use in gasoline,  the Federal government
and  various  states  have  enacted  tax and other  incentives  designed to make
ethanol competitive with gasoline and gasoline additives. In December, 2000, the
U.S.  Department of  Agriculture  initiated a program to provide a two-year cash
incentive  for ethanol  producers  who  increase

                                       9
<PAGE>

their grain usage by  specifiedamounts  to raise fuel  alcohol  production.  The
Company expects to meet the program's eligibility requirements and has increased
alcohol production in the fuel area in response to the program.

     Under the internal  revenue code, and until the end of 2007,  gasoline that
has been blended in qualifying  proportions  with ethanol provide sellers of the
blend with certain income tax credits and excise tax  reductions  that amount to
up to $0.54 per gallon of ethanol that is mixed with the gasoline  (the "Federal
Tax Credit"). A mix of at least 10% ethanol by volume is required to receive the
maximum credit. Although the Federal Tax Credit is not directly available to the
Company,  it allows the Company to sell its ethanol at prices  competitive  with
less expensive additives and gasoline. From time to time legislation is proposed
to eliminate, reduce or extend the tax benefits enjoyed by the ethanol industry,
and indirectly by producers of the grain that is converted into ethanol.  During
1998  legislation  was enacted that extended the credit  through 2007,  with the
credit being reduced to $0.51 per gallon beginning in 2005.

     The Kansas Qualified  Agricultural  Ethyl Alcohol Producer  Incentive Fund,
which has been  extended  to 2011,  provides  incentives  for  sales of  ethanol
produced in Kansas to gasoline blenders.  However, after 2004 incentives will be
paid only for increased  production.  Fiscal 2001 payments to the Company out of
the fund  totaled  $360,000  for the  ethanol  produced  by the  Company  at the
Atchison plant during that year.

     The fuel grade alcohol market is dominated by Archer Daniels Midland,  with
the  Company  being  the  smaller  of a few other  larger  second  tier  ethanol
producers.  The Company  competes with other  producers of fuel grade alcohol on
the basis of price and delivery service.

     Fuel grade alcohol sales increased by approximately  $21.6 million, or 35%,
during 2001, due primarily to increased volume and prices throughout the year.

     Alcohol By-Products

     The  bulk  of  fiscal  2001  sales  of  alcohol  by-products  consisted  of
distillers feeds.  Distillers feeds are the residue of corn, milo and wheat from
alcohol  processing  operations.  The  residue  is dried and sold  primarily  to
processors of animal feeds as a high protein additive. The Company competes with
other  distillers  of alcohol as well as a number of other  producers  of animal
food additives in the sale of distillers feeds and mill feeds.

     The balance of alcohol  by-products  consists  primarily of carbon dioxide.
During the  production of alcohol,  the Company traps carbon dioxide gas that is
emitted in the fermentation  process. The gas is purchased and liquefied on site
by two  principal  customers,  one at the  Atchison  Plant  and one at the Pekin
Plant, who own and operate the carbon dioxide  processing and storage  equipment
under long term contracts with the Company. The liquefied gas is resold by these
processors  to a variety of  industrial  customers  and  producers of carbonated
beverages.

     Sales of alcohol by-products during fiscal 2001 increased by 2% relative to
2000 sales, due primarily to increased  volume resulting from increased  alcohol
production.

Flour and Other Mill Products

     The  Company  owns and  operates a flour mill at the  Atchison  plant.  The
mill's  output of flour is used  internally  to  satisfy a  majority  of the raw
material  needed for the  production  of vital wheat  gluten and  premium  wheat
starch.

     In addition to flour,  the wheat milling  process  generates  mill feeds or
"midds." Midds are sold to processors of animal feeds as a feed additive.

Transportation

     The Company's  output is transported to customers by truck,  rail and barge
transportation  equipment,  most of which is provided by common carriers through
arrangements made by the Company.  The Company leases 329 rail cars which may be
dispatched  on short notice.  Shipment by barge is offered to customers  through
barge loading facilities on the Missouri and Illinois Rivers. The barge facility
on the  Illinois  River is adjacent to the Pekin plant and owned by

                                       10
<PAGE>

the Company. The facility on the Missouri River, which is not company-owned,  is
approximately one mile from the Atchison plant.

Raw Materials

     The Company's  principal raw material is grain,  consisting of wheat, which
is processed into all of the Company's  products,  and corn and milo,  which are
processed  into  alcohol,  animal feed and carbon  dioxide.  Grain is  purchased
directly from surrounding  farms,  primarily at harvest time, and throughout the
year  from  grain  elevators.  Historically,  the cost of grain  is  subject  to
substantial  fluctuations  depending  upon a  number  of  factors  which  affect
commodity  prices in general,  including crop  conditions,  weather,  government
programs, and purchases by foreign governments.  Such variations in grain prices
have had and are expected to have from time to time significant  adverse effects
on the results of the Company's  operations.  This is primarily due to a variety
of  factors.  From  time to time  it has  been  difficult  for  the  Company  to
compensate  for increases in grain costs through  adjustments  in prices charged
for the Company's  vital wheat gluten due to the surge of subsidized  E.U. wheat
gluten,  whose  artificially low prices are not affected by such costs. Now that
the quota has been lifted,  the Company  expects it will be more difficult to do
so. Also, fuel grade alcohol prices, which historically have tracked the cost of
gasoline, do not usually adjust to rising grain costs.

     During  fiscal  2001,  market  prices for grain  remained  reasonable.  The
average  Kansas City market  price per bushel for corn and milo was $1.88 during
2001 and $1.87  during  2000,  while the average  Kansas City market price for a
bushel of wheat was $2.87 during 2001 versus $2.59 during 2000.

     The Company engages in the purchase of commodity  futures to hedge economic
risks associated with fluctuating grain and grain products prices. During fiscal
2001, the Company hedged approximately 19% of corn processed, compared to 11% in
2000,  and 9% of wheat  processed,  compared to 22% in 2000.  The  contracts are
accounted  for as hedges and,  accordingly,  gains and losses are  deferred  and
recognized in cost of sales as part of contract  costs when  contract  positions
are settled and related  products are sold.  For fiscal 2001, raw material costs
included a net loss of  approximately  $1.2 million on contracts  settled during
the  year  compared  to a  net  loss  of  $1.3  million  for  fiscal  2000.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations - Market Risk" in the Annual Report.

Energy

     Because energy  comprises a major cost of operations,  the Company seeks to
assure  the  availability  of  fuels  for  the  Pekin  and  Atchison  plants  at
competitive  prices.  This  proved a  difficult  challenge  in fiscal  2001,  as
exorbitant energy costs plagued the Company during a substantial  portion of the
year,  especially  during  the  third  quarter.  For the  year as a  whole,  the
Company's  utility  costs were 45% higher than the prior year.  Although  prices
have declined recently,  during the fourth quarter they were 27% higher than the
comparable quarter in the prior year.

     All of the  natural  gas demand for the  Atchison  plant is procured in the
open market from various suppliers. Depending on existing market conditions, the
Company has the ability to transport  the gas through a gas pipeline  owned by a
wholly-owned  subsidiary  of the Company.  The Atchison  boilers may also be oil
fired.

     In 1995 the Company entered into a long-term  arrangement  with an Illinois
utility to satisfy  the energy  needs of the Pekin,  Illinois  plant.  Under the
arrangement,  the  utility  constructed  a new  gas  fired  electric  and  steam
generating  facility on ground leased from the Company.  The utility sells steam
and electricity to the Company,  generally at fixed rates, using gas procured by
the Company.

     In order to control energy costs, the Company has a risk management program
whereby at  pre-determined  prices,  the Company will  purchase a portion of its
natural gas requirements for future delivery.

Employees

     As of June 30, 2001, the Company had 416 employees, 268 of whom are covered
by two collective  bargaining  agreements  with one labor union.  One agreement,
which expires on August 31, 2002,  covers 178  employees at the


<PAGE>

Atchison  Plant.
The other agreement,  which expires in November 2002, covers 90 employees at the
Pekin plant. As of June 30, 2000, the Company had 433 employees.

     The Company  considers its relations  with its personnel to be good and has
not experienced a work stoppage since 1978.

Regulation

     The  Company's  beverage  and  industrial  alcohol  business  is subject to
regulation  by the Bureau of Alcohol,  Tobacco  and  Firearms  ("BATF")  and the
alcoholic  beverage  agencies  in  the  States  of  Kansas  and  Illinois.  Such
regulation  covers virtually every aspect of the Company's  alcohol  operations,
including production facilities,  marketing,  pricing, labeling,  packaging, and
advertising.  Food  products are also subject to regulation by the Food and Drug
Administration.  BATF regulation includes periodic BATF audits of all production
reports,  shipping  documents,  and  licenses to assure that proper  records are
maintained.  The Company is also required to file and maintain  monthly  reports
with the BATF of alcohol inventories and shipments.

     The  Company  is  subject  to  extensive  environmental  regulation  at the
federal, state and local levels. The regulations include the regulation of water
usage,  waste water  discharge,  disposal of hazardous  wastes and  emissions of
volatile  organic  compounds,  particulates  and other  substances into the air.
Under these  regulations the Company is required to obtain operating permits and
to submit  periodic  reports to  regulating  agencies.  During 1997 the Illinois
Environmental  Protection  Agency  commenced an action  against the Company with
respect to alleged  noncompliance  of the Pekin  Plant with  certain air quality
regulations. This action is further described under "Item 3. Legal Proceedings."
The Company has submitted an application to the Agency for  construction  of new
pollution  control equipment that is expected to bring emissions into compliance
with all applicable regulations.

Item 2. Properties.

        The Company maintains the following principal plants, warehouses and
office facilities:
<TABLE>
<CAPTION>
<S>    <C>                     <C>                                        <C>            <C>
                                                                     Plant Area       Tract Area
     Location                Purpose                                (in sq. ft.)      (in acres)
     --------                -------                                ------------      ----------

     Atchison, Kansas..      Principal executive offices,                494,640           25
                             grain processing, warehousing,
                             and research and quality
                             control laboratories.

     Kansas City, Kansas     Specialty protein and starch                 83,200           12.5
                             mixing facility and warehouse

     Pekin, Illinois         Grain processing, warehousing,              462,926           49
                             and quality control laboratories.
</TABLE>
     The facilities  mentioned above are generally in good operating  condition,
are currently in normal operation,  are generally  suitable and adequate for the
business activity conducted therein, and have productive  capacities  sufficient
to maintain  prior levels of production.  The Atchison and Pekin  facilities are
owned and the Kansas City  facility is leased  from the  Unified  Government  of
Wyandotte  County,  Kansas City,  Kansas pursuant to an industrial  revenue bond
financing  consummated  in  August  2001.  The  Company  has  entered  into loan
agreements  which  contain  covenants  that  limit its  ability  to  pledge  its
facilities to others. The Company also owns  transportation  equipment and a gas
pipeline described under Transportation and Energy.

                                       12
<PAGE>
Item 3.  Legal Proceedings.

     On April 13,  1997,  an  administrative  proceeding  was filed  against the
Company's  Illinois  subsidiary before the Illinois Pollution Control Board (the
"Board"),   by  the  Illinois   Attorney  General  on  behalf  of  the  Illinois
Environmental  Protection Agency (the "Agency").  The proceeding  relates to the
Company's  installation  and  operation  of two feed  dryers at its  facility in
Pekin,  Illinois.  The Complaint  alleges that the dryers exceed the particulate
emission  limitations  specified in the construction permits for the units; that
the dryers are being operated  without  operating  permits;  and that the dryers
were  constructed  without  a  Prevention  of  Significant  Deterioration  (PSD)
construction  permit setting forth a best available control technology  ("BACT")
emission  limitation.  The Complaint seeks a Board order ordering the Company to
cease and desist from  violations of the Illinois  Environmental  Protection Act
and associated  regulations,  assessing a civil penalty,  and awarding the state
its attorneys fees.

     The Company has filed an Answer before the Board  admitting that compliance
tests have shown particulate  emissions in excess of the limits set forth in the
construction permits, but denying the remainder of the State's claims. Since the
time  operational  problems were discovered with the dryers'  pollution  control
equipment,  the Company has been conferring and  negotiating  with the Agency on
the issues  involved  in the  Complaint.  The  Company  and the Agency have been
conducting  air modeling to support the  construction  of new pollution  control
equipment for the dryers, at an estimated cost of approximately $1.0 million. It
is anticipated  that the new equipment will bring emissions into compliance with
all applicable  limitations.  Once the modeling is complete, the Company expects
to obtain permission from the Agency to construct this equipment.

     Proceedings  under the Complaint are being held in abeyance by agreement of
the  parties  pending  completion  of the air  modeling  and  completion  of the
Company's compliance activities.  Once compliance has been achieved, the Company
anticipates  negotiating a settlement  of the  remainder of the State's  claims.
Based on the circumstances and a preliminary review of decisions by the Board in
air  pollution  matters,  the Company does not believe that any such  settlement
will be material to the business or financial condition of the Company.

     There are no other legal proceedings  pending as of June 30, 2001 which the
Company believes to be material. Legal proceedings which are pending,  including
the  proceeding  with the Illinois  Environmental  Protection  Agency  described
above,  are believed by the Company to consist of matters  normally  incident to
the business conducted by the Company and taken together do not appear material.

Item 4.  Submissions of Matters to a Vote of Security Holders.

     No matters have been submitted to a vote of stockholders  during the fourth
quarter of fiscal year covered by this report.

                                       13


<PAGE>

Item 4A.  Executive Officers of the Registrant.

         Executive officers of the Company are as follows:

Name                     Age    Position
----                     ---    --------

Cloud L. Cray, Jr.       78     Chairman of the Board

Laidacker M. Seaberg     55     President, Chief Executive Officer

Sukh Bassi, Ph.D.        60     Vice President, Research and Development

Robert G. Booe           64     Vice President, Finance and Administration.
                                Controller, Treasurer and Chief Financial
                                Officer

Gerald Lasater           63     Vice President, Export Marketing and Sales

Marta L. Myers           41     Secretary and Administrative Assistant to the
                                President

Steven J. Pickman        48     Vice President, Corporate Relations

David E. Rindom          46     Vice President, Human Resources

Randy M. Schrick         51     Vice President, Operations

Dennis E. Sprague        55     Vice President, Alcohol and Feed Products
                                Marketing and Sales

William R. Thornton      49     Vice President, Quality Management

Michael J. Trautschold   53     Executive Vice President, Marketing and Sales

     Mr. Cray,  Jr. has served as Chairman of the Board since 1980. He served as
Chief Executive Officer from 1980 to September, 1988, and has been an officer of
the Company and its affiliates for more than thirty years.

     Mr.  Seaberg  joined the Company in 1969 and has served as the President of
the Company since 1980 and as Chief Executive Officer since September,  1988. He
is the son-in-law of Mr. Cray, Jr.

     Dr. Bassi has served as Vice  President of Research and  Development  since
1985, and Vice President Specialty  Ingredients Marketing and Sales between 1998
and 2000. He previously served as Technical  Director from 1989 to 1998 and Vice
President - Vital Wheat Gluten Marketing from 1992 to 1998. From 1981 to 1992 he
was Manager of the Vital Wheat Gluten Strategic Business Unit. He was previously
a professor of biology at Benedictine College for ten years.

     Mr.  Booe has  served as Vice  President,  Treasurer  and  Chief  Financial
Officer  of the  Company  since  1988.  He  joined  the  Company  in 1966 as its
Treasurer  and became  the  Controller  and  Treasurer  in 1980.  In 1992 he was
assigned the additional task of Vice President - Administration.

     Mr.  Lasater  joined the Company in 1962. He has served as Vice President -
Export Marketing and Sales since 1998. Previously, he served as Vice President -
Starch Marketing from 1992 to 1998. Prior to that he served as Vice President in
charge of the Wheat Starch Strategic Business Unit.

     Ms.  Myers joined the Company in 1996.  She has served as  Secretary  since
October  1996 and as  Administrative  Assistant  to the  President  since  1999.
Previously she was executive secretary for Superintendent of

                                       14
<PAGE>

Schools for Unified School District 409, Atchison, Kansas.

     Mr.  Pickman  joined the Company in 1985. He has served as Vice  President,
Corporate  Relations since June, 2000.  Previously he was Executive  Director of
Corporate  Relations from 1999 to June 2000 and prior to that Corporate Director
of  Public  and  Investor  Relations.  Between  1985 and 1989 he  served  as the
Director of Public  Relations  and  Marketing  Administration  for the Company's
former subsidiary, McCormick Distilling Company, Weston, Missouri.

     Mr.  Rindom  joined the Company in 1980.  He has served as Vice  President,
Human  Resources  since June 2000. He was Corporate  Director of Human Relations
from 1992 to June  2000,  Personnel  Director  from  1988 to 1992 and  Assistant
Personnel Director from 1984 to 1988.

     Mr.  Schrick,  a Director  since 1987,  joined the Company in 1973.  He has
served as Vice President - Operations since 1992. From 1984 to 1992 he served as
Vice President and General Manager of the Pekin plant.  From 1982 to 1984 he was
the Plant Manager of the Pekin Plant.  Prior to 1982, he was Production  Manager
at the Atchison plant.

     Mr.  Sprague  joined the  Company in  October  1998.  He has served as Vice
President,  Alcohol and Feed Products since June, 2000. Previously, he served as
Vice President,  Corporate Marketing and Sales. Prior to joining the Company, he
held a variety of management,  sales and plant operations  positions with Joseph
E. Seagrams & Sons, Inc.

     Mr. Thornton joined the Company in 1994. He has served as Vice President of
Quality  Management  since  June  2000.  He was  Corporate  Director  of Quality
Management from 1997 to June 2000 and Corporate  Director of Continuous  Quality
Improvement from 1994 to 1997.

     Mr.  Trautschold  joined the Company in September 2000. He has served since
then as Executive Vice  President of Marketing and Sales.  He was Vice President
of  Product   Strategy  in  the  Consumer  direct  Division  of  Schwan's  Sales
Enterprises,  Inc. from 1999 to September  2000 and Vice  President of Corporate
Marketing Services for ConAgra, Inc. prior to that time.

                                       15
<PAGE>
                                     PART II

Item 5.  Market for Registrants Common Equity and Related Stockholders Matters.

     The Common  Stock of the  Company  has been  traded on the NASDAQ  National
Market System under the symbol MWGP since November 1988.

     The following  table below  reflects the high and low closing prices of the
Common Stock for each  quarter of fiscal 2001 and 2000.  The Company paid a cash
dividend of $.10 per share in November 2000. The Board of Directors has declared
a dividend  of $.15 per share  payable on November  6, 2001 to  stockholders  of
record on October 11, 2001.  Previously,  cash dividends had not been paid since
the end of 1995.  Any future  dividends  will be paid at the  discretion  of the
Board of Directors, which will consider various factors, including the Company's
operating  results  and cash  requirements,  in making any  decision  respecting
dividends.

                                                            Sales Price
                                                   High             Low
         2001:
                  First Quarter                    $ 11.00        $ 8.25
                  Second Quarter                     10.25          8.75
                  Third Quarter                       9.00          8.25
                  Fourth Quarter                     11.25          8.13

         2000:
                  First Quarter                    $ 11.50        $ 9.38
                  Second Quarter                      9.75          7.00
                  Third Quarter                       9.25          6.38
                  Fourth Quarter                      8.63          6.13

     At June 30,  2001 there  were  approximately  787  holders of record of the
Company's  Common  Stock.  It is  believed  that  the  Common  Stock  is held by
approximately 1960 beneficial owners.

Item 6.  Selected Financial Data.

     Incorporated  by reference to the  information  under  "Selected  Financial
Information"  on page 17 of the Annual Report,  a copy of which page is included
in Exhibit 13 to this Report.

Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations.

     Incorporated by reference to the information under "Managements  Discussion
and  Analysis of  Financial  Condition  and Results of  Operations"  on pages 18
through 24 of the Annual  Report,  copies of which pages are included in Exhibit
13 to this Report.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.

     Incorporated by reference to the information under "Managements  Discussion
and Analysis of Financial  Condition and Results of Operations - Market Risk" on
page 23 of the Annual Report,  a copy of which page is included in Exhibit 13 to
this Report.

Item 8.  Financial Statements and Supplementary Data.

     Incorporated  by reference to the  consolidated  financial  statements  and
related notes on pages 25 through 36 of the Annual Report, copies of which pages
are included in Exhibit 13 to this Report.

                                       16

<PAGE>

Item 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure.

     Not applicable.

                                    PART III

Item 10.  Directors of the Registrant.

     Incorporated by reference to the information  under "Election of Directors"
at  pages  2  through  4  and  "Section  16(a)  Beneficial  Ownership  Reporting
Compliance" at page 16 of the Proxy Statement.

Item 11. Executive Compensation.

     Incorporated by reference to the information under "Executive Compensation"
on pages 7 through 9 of the Proxy  Statement;  the  material  under the captions
"Report of The Human Resources  Committee" on pages 11 to 13 and "Performance of
the Company's Common Stock" on page 10 is not incorporated by reference.

Item 12.  Security Ownership of Certain Beneficial Owners and Management.

     Incorporated by reference to the information under "Principal Stockholders"
beginning on page 14 of the Proxy Statement.

Item 13.  Certain Relationships and Related Transactions.

     None.


                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K.

     The following documents are filed as part of this report:

     (a) Financial Statements:

         Auditors' Report on Financial Statements.
         Consolidated Balance Sheets at June 30, 2001 and 2000.
         Consolidated Statements of Income - for the Three Years Ended
         June 30, 2001, 2000, and 1999. Consolidated Statements of
         Stockholders' Equity for the Three Years Ended June 30, 2001,
         2000, and 1999.
         Consolidated Statements of Cash Flow - for the Three Years
         Ended June 30, 2001, 2000, and 1999.
         Notes to Consolidated Financial Statements.

     The foregoing have been  incorporated  by reference to the Annual Report as
indicated under Item 8.

     (b) Financial Statement Schedules:

         Auditors' Report on Financial Statement Schedules:
         VIII - Valuation and Qualifying Accounts

     All other  schedules  are omitted  because they are not  applicable  or the
information  is  contained in the  Consolidated  Financial  Statements  or notes
thereto.

                                       17
<PAGE>

     (c) Exhibits:

         Exhibit No.                                  Description
         -----------                                          -----------

            3(a)       Articles of Incorporation of the Company (Incorporated by
                       reference to Exhibit 3(a) of the  Company's  Registration
                       Statement No. 33-24398 on Form S-1).

            3(b)       Bylaws  of the  Company  (Incorporated  by  reference  to
                       Exhibit 3(b) of the Company's  Registration Statement No.
                       33-24398 on Form S-1).

            4(a)       Copy  of Note  Agreement  dated  as of  August  1,  1993,
                       providing  for the  issuance  and sale of $25  million of
                       6.68% term notes ("Term Notes", incorporated by reference
                       to Exhibit 4.1 to the  Company's  Report on Form 10-Q for
                       the  quarter  ended   September  30,  1993  (file  number
                       0-17196)).

            4(b)       Copy of Term Notes dated August 27, 1993 (incorporated by
                       reference to Exhibit 4.2 to the Company's  Report on Form
                       10-Q for the  quarter  ended  September  30,  1993  (file
                       number 0-17196)).

            4(c)       Copy of  Sixth  Amended  Line of  Credit  Loan  Agreement
                       providing  for the  Issuance  of a Line of Credit Note in
                       the amount of $20,000,000  (incorporated  by reference to
                       Exhibit 4.1 to the Company's  Report on Form 10-Q for the
                       quarter ended December 31, 1999 (file number 0-17196)).

            4(d)       Copy of Line of Credit Note Under Sixth  Amended  Line of
                       Credit  Loan  Agreement  (incorporated  by  reference  to
                       Exhibit 4.2 to the Company's  Report on Form 10-Q for the
                       quarter ended December 31, 1999 (file number 0-17196)).

            4(e)       In accordance with Item  601(b)(4)(iii)(A)  of Regulation
                       S-K, certain instruments respecting long-term debt of the
                       Registrant have been omitted but will be furnished to the
                       Commission upon request.

            9(a)       Copy of Cray Family Trust  (Incorporated  by reference to
                       Exhibit 1 of Amendment  No. 1 to Schedule 13D of Cloud L.
                       Cray, Jr. dated November 17, 1995).

            *10(a)     Summary of informal cash bonus plan.

            10(b)      Executive  Stock  Bonus  Plan as  amended  June 15,  1992
                       (incorporated  by  reference  to  Exhibit  10(b)  to  the
                       Company's  Form  10-K for the year  ended  June 30,  1992
                       (file number 0-17196)).

            10(c)      Copy of Midwest Grain Products, Inc. Stock Incentive Plan
                       of 1996,  as amended as of August 26, 1996  (incorporated
                       by  reference  to  Exhibit A to the  Company's  Notice of
                       Annual Meeting and Proxy  Statement  filed  September 17,
                       1996).

            10(d)      Copy of amendment to Midwest Grain  Products,  Inc. Stock
                       Incentive  Plan of 1996  (incorporated  by  reference  to
                       Exhibit 10.1 to the  Company's  Form 10-Q for the quarter
                       ended September 30, 1998 (file number 0-17196)).

            10(e)      Form of  Stock  Option  with  respect  to  stock  options
                       granted  under the Midwest  Grain  Products,  Inc.  Stock
                       Incentive  Plan of 1996  (incorporated  by  reference  to
                       Exhibit  10(e) to the  Company's  Form  10-K for the year
                       ended June 30, 1996 (file number 0-17196)).

            10(f)      Copy of Midwest  Grain  Products,  Inc. 1996 Stock Option
                       Plan for Outside  Directors,  as amended as of August 26,
                       1996  (incorporated  by  reference  to  Exhibit  B to the
                       Company's  Notice of Annual  Meeting and Proxy  Statement
                       filed September 17, 1996).

                                       18
<PAGE>

            10(g)      Copy of amendment to Midwest  Grain  Products,  Inc. 1996
                       Stock Option Plan for Outside Directors  (incorporated by
                       reference to Exhibit 10.2 to the Company's  Form 10-Q for
                       the  quarter  ended   September  30,  1998  (file  number
                       0-17196)).

            10(h)      Copy of Midwest Grain Products, Inc. 1998 Stock Incentive
                       Plan for Salaried Employees (incorporated by reference to
                       Appendix A to the Company's  Notice of Annual Meeting and
                       Proxy Statement dated September 17, 2000,  filed with the
                       Securities  and  Exchange  Commission  on  September  15,
                       2000).

            10(i)      Form of  Stock  Option  with  respect  to  stock  options
                       granted under the Midwest Grain Products, Inc. 1998 Stock
                       Incentive Plan for Salaried  Employees  (incorporated  by
                       reference to Exhibit 10(e) to the Company's Form 10-K for
                       the year ended June 30, l996 (file number 0-17196)).

            10(j)      Copy of amendments to Options granted under Midwest Grain
                       Products,   Inc.  Stock  Option  Plans  (incorporated  by
                       reference to Exhibit 10.3 to the Company's  Form 10-Q for
                       the  quarter  ended   September  30,  1998  (file  number
                       0-17196)).

            10(k)      Form of Option  Agreement  for the grant of Options under
                       the Midwest Grain  Products,  Inc. 1996 Stock Option Plan
                       for  Outside  Directors,   as  amended  (incorporated  by
                       reference to Exhibit 10.4 to the Company's  Form 10-Q for
                       the  quarter  ended   September  30,  1998  (file  number
                       0-17196)).

            10.5       Form  of  Amended  Option  Agreements  for the  grant  of
                       Options under the Midwest Grain Products, Inc. 1998 Stock
                       Incentive Plan for Salaried  Employees  (incorporated  by
                       reference to Exhibit 10.5 to the Company's  Form 10-Q for
                       the  quarter  ended   September  30,  1998  (file  number
                       0-17196)).

            10.6       Form of Option  Agreement  for the grant of Options under
                       the Midwest Grain Products,  Inc. Stock Incentive Plan of
                       1996,  as amended  (incorporated  by reference to Exhibit
                       10.6 to the  Company's  Form 10-Q for the  quarter  ended
                       September 30, 1998 (file number 0-17196)).

            10.7       Form of  Incentive  Stock  Option  Agreement  approved on
                       December  7,  2000,  for use  thereafter  under the Stock
                       Incentive  Plan of 1996  (incorporated  by  reference  to
                       Exhibit 10.1 to the  Company's  Form 10-Q for the quarter
                       ended December 31, 2000 (file number 0-17196)).

            10.8       Form of  Incentive  Stock  Option  Agreement  approved on
                       December 7, 2000 for use thereafter  under the 1998 Stock
                       Incentive Plan for Salaried  Employees  (incorporated  by
                       reference to Exhibit 10.2 to the Company's  Form 10-Q for
                       the  quarter   ended   December  31,  2000  (file  number
                       0-17196)).

            10.9       Form  of  Memorandum  of  Agreement   Concerning  Options
                       approved  on  December  7, 2000  between  the Company and
                       certain  members  of  senior  management,  including  the
                       following  named  executive  officers:  Ladd M.  Seaberg,
                       Randall M. Schrick, Robert G. Booe, Dennis E. Sprague and
                       Dr. Sukh Bassi  incorporated by reference to Exhibit 10.3
                       to the Company's Form 10-Q for the quarter ended December
                       31, 2000 (file number 0-17196)).


                                       19
<PAGE>

            *10.10     Form of Lease  Agreement  dated  as  of  August  1,  2001
                       among GE  Public Finance, Inc., The Unified Government of
                       Wyandotte County,  Kansas City, Kansas, and Midwest Grain
                       Products, Inc.

            *13        Information contained in the Midwest Grain Products, Inc.
                       2000 Annual Report to  Stockholders  that is incorporated
                       herein by reference.

            22         Subsidiaries  of the  Company  other  than  insignificant
                       subsidiaries:

                                        State of Incorporation
                       Subsidiary                                or Organization

                       Midwest Grain Pipeline, Inc.                  Kansas

                       Midwest Grain Products of Illinois, Inc.      Illinois

                       Kansas City Ingredient Technologies, Inc.     Kansas

            *23        Consent of Baird, Kurtz & Dobson.

            25         Powers of Attorney executed by all officers and directors
                       of the  Company  who have signed this report on Form 10-K
                       (incorporated by reference to the signature pages of this
                       report).

------------
*  Filed herewith

No reports on Form 8-K have been filed during the quarter ended June 30, 2001.


                                   SIGNATURES

     Pursuant to  requirements  of Section 13 of the Securities  Exchange Act of
1934,  the  Registrant has duly caused this report to be signed on its behalf by
the undersigned,  thereunto duly authorized,  in the city of Atchison,  State of
Kansas, on this 13th day of September, 2001.

                                          MIDWEST GRAIN PRODUCTS, INC.

                                          By /s/Laidacker M. Seaberg
                                                Laidacker M. Seaberg, President

                                       20
<PAGE>
                                POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS,  that each person whose  signature  appears
below  constitutes  and appoints  Cloud L. Cray,  Jr.,  Laidacker M. Seaberg and
Robert  G.  Booe and each of them,  his true and  lawful  attorneys-in-fact  and
agents, with full power of substitution and re-substitution,  for him and in his
name, place and stead, in any and all capacities, to sign any and all reports of
the  Registrant on Form 10-K and to sign any and all  amendments to such reports
and to file  the  same  with  all  exhibits  thereto,  and  other  documents  in
connection therewith,  with the Securities & Exchange Commission,  granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary to be done in
and about the  premises,  as fully to all  intents  and  purposes as he might or
could  do  in  person,   hereby   ratifying   and   confirming   all  that  said
attorneys-in-fact  and  agents  or any of them,  or their or his  substitute  or
substitutes, may lawfully do or cause to be done by virtue hereof.

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant in the capacities indicated on the dates indicated.

Name                        Title                             Date
----                        -----                             ----
/s/Laidacker M. Seaberg     President (Principal              September 13, 2001
   Laidacker M. Seaberg     Executive Officer) and Director

/s/Robert G. Booe           Vice President, Treasurer         September 13, 2001
   Robert G. Booe           and Controller (Principal
                            Financial and Accounting Officer)

/s/Michael Braude           Director                          September 13, 2001
   Michael Braude

/s/Cloud L. Cray, Jr.       Director                          September 13, 2001
   Cloud L. Cray, Jr.

/s/Michael R. Haverty       Director                          September 13, 2001
   Michael R. Haverty

/s/Linda E. Miller          Director                          September 13, 2001
   Linda E. Miller

/s/Robert J. Reintjes       Director                          September 13,2001
   Robert J. Reintjes

/s/Randy M. Schrick         Director                          September 13,2001
   Randy M. Schrick

/s/Daryl R. Schaller        Director                          September 13, 2001
   Daryl R. Schaller

/s/James A. Schlindwein     Director                          September 13, 2001
   James A. Schlindwein

                                       21
<PAGE>

                          MIDWEST GRAIN PRODUCTS, INC.

                   Consolidated Financial Statement Schedules
                                   (Form 10-K)

                          June 30, 2001, 2000, and 1999

                         (With Auditors' Report Thereon)



                                      S-1
<PAGE>

BKD, LLP
Certified Public Accountants
Twelve Wyandotte Plaza
120 West 12th Street, Suite 1200
Kansas City, MO 64105-1936

--------------------------------------------------------------------------------
                        REPORT OF INDEPENDENT ACCOUNTANTS
                         ON FINANCIAL STATEMENT SCHEDULE


Board of Directors and Stockholders
Midwest Grain Products, Inc.
Atchison, Kansas


     In connection with our audit of the  consolidated  financial  statements of
MIDWEST  GRAIN  PRODUCTS,  INC.  for each of the three years in the period ended
June 30, 2001, we have also audited the following  financial statement schedule.
This  financial  statement  schedule  is the  responsibility  of  the  Company's
management.  Our  responsibility  is to express  an  opinion  on this  financial
statement  schedule based on our audits of the basic financial  statements.  The
schedule is presented for purposes of complying with the Securities and Exchange
Commission's   rules  and  regulations  and  is  not  a  required  part  of  the
consolidated financial statements.

     In our opinion,  the financial  statement  schedule referred to above, when
considered  in  relation  to the basic  financial  statements  taken as a whole,
presents  fairly,  in all  material  respects,  the  information  required to be
included therein.


                                               /s/ BKD, LLP

Kansas City, Missouri
August 1, 2001
Member of Moores Rowland International


                                      S-2

<PAGE>

                          MIDWEST GRAIN PRODUCTS, INC.

                     VIII. VALUATION AND QUALIFYING ACCOUNTS




<TABLE>
<CAPTION>
<S>                  <C>                <C>             <C>             <C>             <C>
                  Balance,         Charged to        Charged                        Balance,
                  Beginning        Costs and         to Other                       End of
                  Of Period        Expenses          Accounts     Write-Offs        Period
                  ---------        --------          --------     ----------        ------
                                                     (In Thousands)
Year Ended
June 30, 2001
  Allowance for
  doubtful
  accounts         $252           $   82                            $   82            $252

Year Ended
June 30, 2000
  Allowance for
  doubtful
  accounts          285              202               ---             235            252

Year Ended
June 30, 1999
  Allowance for
  doubtful
  accounts          285            1,037               ---           1,037            285

</TABLE>



                                      S-3

<PAGE>
                                                   EXHIBIT INDEX

Exhibit No.           Description
-----------           -----------

   3(a)               Articles of Incorporation of the Company  (Incorporated by
                      reference  to Exhibit 3(a) of the  Company's  Registration
                      Statement No. 33-24398 on Form S-1).

   3(b)               Bylaws  of  the  Company  (Incorporated  by  reference  to
                      Exhibit 3(b) of the Company's  Registration  Statement No.
                      33-24398 on Form S-1).

   4(a)               Copy  of  Note  Agreement  dated  as of  August  1,  1993,
                      providing  for the  issuance  and sale of $25  million  of
                      6.68% term notes ("Term Notes",  incorporated by reference
                      to Exhibit  4.1 to the  Company's  Report on Form 10-Q for
                      the  quarter   ended   September  30,  1993  (file  number
                      0-17196)).

   4(b)               Copy of Term Notes dated August 27, 1993  (incorporated by
                      reference to Exhibit 4.2 to the  Company's  Report on Form
                      10-Q for the quarter ended September 30, 1993 (file number
                      0-17196)).

   4(c)               Copy of  Sixth  Amended  Line  of  Credit  Loan  Agreement
                      providing for the Issuance of a Line of Credit Note in the
                      amount  of  $20,000,000   (incorporated  by  reference  to
                      Exhibit 4.1 to the  Company's  Report on Form 10-Q for the
                      quarter ended December 31, 1999 (file number 0-17196)).

   4(d)               Copy of Line of Credit  Note Under Sixth  Amended  Line of
                      Credit  Loan  Agreement   (incorporated  by  reference  to
                      Exhibit 4.2 to the  Company's  Report on Form 10-Q for the
                      quarter ended December 31, 1999 (file number 0-17196)).

   4(e)               In accordance  with Item  601(b)(4)(iii)(A)  of Regulation
                      S-K, certain instruments  respecting long-term debt of the
                      Registrant  have been omitted but will be furnished to the
                      Commission upon request.

   9(a)               Copy of Cray Family  Trust  (Incorporated  by reference to
                      Exhibit 1 of  Amendment  No. 1 to Schedule 13D of Cloud L.
                      Cray, Jr. dated November 17, 1995).

   *10(a)             Summary of informal cash bonus plan.

   10(b)              Executive  Stock  Bonus  Plan as  amended  June  15,  1992
                      (incorporated   by  reference  to  Exhibit  10(b)  to  the
                      Company's Form 10-K for the year ended June 30, 1992 (file
                      number 0-17196)).

   10(c)              Copy of Midwest Grain Products,  Inc. Stock Incentive Plan
                      of 1996, as amended as of August 26, 1996 (incorporated by
                      reference to Exhibit A to the  Company's  Notice of Annual
                      Meeting and Proxy Statement filed September 17, 1996.

   10(d)              Copy of amendment to Midwest Grain  Products,  Inc.  Stock
                      Incentive  Plan  of 1996  (incorporated  by  reference  to
                      Exhibit  10.1 to the  Company's  Form 10-Q for the quarter
                      ended September 30, 1998 (file number 0-17196)).

   10(e)              Form of Stock Option with respect to stock options granted
                      under the Midwest Grain  Products,  Inc.  Stock  Incentive
                      Plan of 1996  (incorporated  by reference to Exhibit 10(e)
                      to the  Company's  Form 10-K for the year  ended  June 30,
                      1996 (file number 0-17196)).


<PAGE>

   10(f)              Copy of Midwest  Grain  Products,  Inc.  1996 Stock Option
                      Plan for  Outside  Directors,  as amended as of August 26,
                      1996  (incorporated  by  reference  to  Exhibit  B to  the
                      Company's  Notice of Annual  Meeting  and Proxy  Statement
                      filed September 17, 1996.

   10(g)              Copy of amendment to Midwest  Grain  Products,  Inc.  1996
                      Stock Option Plan for Outside  Directors  (incorporated by
                      reference to Exhibit 10.2 to the  Company's  Form 10-Q for
                      the  quarter   ended   September  30,  1998  (file  number
                      0-17196)).

   10(h)              Copy of Midwest Grain Products,  Inc. 1998 Stock Incentive
                      Plan for Salaried Employees  (incorporated by reference to
                      Appendix A to the Company's  Notice of Annual  Meeting and
                      Proxy Statement  dated September 17, 2000,  filed with the
                      Securities and Exchange Commission on September 15, 2000).

   10(i)              Form of Stock Option with respect to stock options granted
                      under  the  Midwest  Grain   Products,   Inc.  1998  Stock
                      Incentive  Plan for Salaried  Employees  (incorporated  by
                      reference to Exhibit 10(e) to the Company's  Form 10-K for
                      the year ended June 30, l996 (file number 0-17196)).

   10(j)              Copy of amendments to Options  granted under Midwest Grain
                      Products,   Inc.  Stock  Option  Plans   (incorporated  by
                      reference to Exhibit 10.3 to the  Company's  Form 10-Q for
                      the  quarter   ended   September  30,  1998  (file  number
                      0-17196)).

   10(k)              Form of Option  Agreement  for the grant of Options  under
                      the Midwest  Grain  Products,  Inc. 1996 Stock Option Plan
                      for  Outside  Directors,   as  amended   (incorporated  by
                      reference to Exhibit 10.4 to the  Company's  Form 10-Q for
                      the  quarter   ended   September  30,  1998  (file  number
                      0-17196)).

   10.5               Form of Amended Option Agreements for the grant of Options
                      under  the  Midwest  Grain   Products,   Inc.  1998  Stock
                      Incentive  Plan for Salaried  Employees  (incorporated  by
                      reference to Exhibit 10.5 to the  Company's  Form 10-Q for
                      the  quarter   ended   September  30,  1998  (file  number
                      0-17196)).

   10.6               Form of Option  Agreement  for the grant of Options  under
                      the Midwest Grain  Products,  Inc. Stock Incentive Plan of
                      1996,  as amended  (incorporated  by  reference to Exhibit
                      10.6 to the  Company's  Form  10-Q for the  quarter  ended
                      September 30, 1998 (file number 0-17196)).

   10.7               Form of  Incentive  Stock  Option  Agreement  approved  on
                      December 7, 2000 for use  thereafter  under the 1998 Stock
                      Incentive  Plan  of 1996  (incorporated  by  reference  to
                      Exhibit  10.1 to the  Company's  Form 10-Q for the quarter
                      ended December 31, 2000 (file number 0-17196)).

   10.8               Form of  Incentive  Stock  Option  Agreement  approved  on
                      December 7, 2000 for use  thereafter  under the 1998 Stock
                      Incentive  Plan for Salaried  Employees  (incorporated  by
                      reference to Exhibit 10.2 to the  Company's  Form 10-Q for
                      the  quarter   ended   December   31,  2000  (file  number
                      0-17196)).


   10.9               Form  of  Memorandum  of  Agreement   Concerning   Options
                      approved  on  December  7, 2000  between  the  Company and
                      certain  members  of  senior  management,   including  the
                      following  named  executive  officers:  Ladd  M.  Seaberg,
                      Randall M.


<PAGE>

                      Schrick,  Robert G. Booe,  Dennis E.  Sprague and Dr. Sukh
                      Bassi  incorporated  by  reference  to Exhibit 10.3 to the
                      Company's  Form 10-Q for the quarter  ended  December  31,
                      2000 (file number 0-17196)).

   *10.10             Form of Lease Agreement  dated  as of August 1, 2001 among
                      GE  Public  Finance,  Inc.,  The  Unified   Government  of
                      Wyandotte County,  Kansas City, Kansas,  and Midwest Grain
                      Products, Inc.

   *13                Information contained in the Midwest Grain Products,  Inc.
                      2000 Annual Report to  Stockholders  that is  incorporated
                      herein by reference.

   22                 Subsidiaries  of  the  Company  other  than  insignificant
                      subsidiaries:

                                        State of Incorporation
                           Subsidiary                            or Organization
                           ----------                            ---------------
                      Midwest Grain Pipeline, Inc.                     Kansas
                      Midwest Grain Products of Illinois, Inc.         Illinois
                      Kansas City Ingredient Technologies, Inc.        Kansas

  *23                 Consent of Baird, Kurtz & Dobson.

   25                 Powers of Attorney  executed by all officers and directors
                      of the  Company  who have  signed this report on Form 10-K
                      (incorporated  by reference to the signature pages of this
                      report).

------------
*  Filed herewith

No reports on Form 8-K have been filed during the quarter ended June 30, 2001.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>2
<FILENAME>x1010.txt
<DESCRIPTION>LEASE AGREEMENT
<TEXT>
                                                                  EXECUTION COPY


                                 LEASE AGREEMENT


                                      Among


                        GE CAPITAL PUBLIC FINANCE, INC.,


                                 as Bondholder,


                                       and


         THE UNIFIED GOVERNMENT OF WYANDOTTE COUNTY/KANSAS CITY, KANSAS,

                                   as Lessor,


                                       and


                          MIDWEST GRAIN PRODUCTS, INC.,

                                    as Lessee


                           Dated as of August 1, 2001

                         -------------------------------


                This instrument constitutes a security agreement
                    under the Kansas Uniform Commercial Code.

                        ---------------------------------

<PAGE>

                                 LEASE AGREEMENT

Bondholder:     GE Capital Public Finance, Inc.
                Suite 470
                8400 Normandale Lake Boulevard
                Minneapolis, MN  55437
                Telephone:  (800) 346-3164
                Telecopier:  (952) 897-5601

Lessor:         The Unified Government of Wyandotte County/Kansas City, Kansas
                701 N. 7th Street, 9th Floor
                Kansas City, KS  66101
                Telephone:  (913) 573-5076
                Telecopier:  (913) 573-5243

Lessee:         Midwest Grain Products, Inc.
                1300 Main Street
                Atchinson, KS  66002
                Telephone:  (913) 367-1480
                Telecopier:  (913) 367-0192


     THIS LEASE AGREEMENT dated as of August 1, 2001 (this "Agreement") among GE
Capital Public Finance,  Inc., a Delaware  corporation,  as bondholder (with its
successors  and  assigns,  "Bondholder"),  The Unified  Government  of Wyandotte
County/Kansas  City, Kansas, a municipal  corporation duly organized and validly
existing  under  the laws of the  State  of  Kansas  (the  "State"),  as  lessor
("Lessor"),  and Midwest Grain Products,  Inc., a Kansas corporation,  as lessee
("Lessee").

     WHEREAS,  Lessor is authorized  and empowered  under the laws of the State,
including  KSA ss.  12-1740 et.  seq.,  as now in effect and as may from time to
time  hereafter be amended and  supplemented  (the "Act"),  to issue  industrial
development  revenue  bonds and to enter into lease  agreements,  contracts  and
other instruments and documents necessary or convenient to obtain Leases for the
purpose of  facilitating  the financing of certain  projects as described in the
Act; and

     WHEREAS,  in  furtherance  of the purposes of the Act,  Lessor  proposes to
finance all or a portion of the  acquisition and  rehabilitation  of the Project
(as  hereinafter  defined) by Lessee  pursuant to this  Agreement by issuing the
Bond (as hereinafter defined); and

     WHEREAS,  Lessee has  obtained or will obtain title to the Project and will
sell the  Project to Lessor in  exchange  for  Lessor's  agreeing  to obtain the
financing from  Bondholder and to make certain  payments in accordance with this
Agreement; and

     WHEREAS, in order to obtain funds to make such payments, Lessor proposes to
lease the  Project to Lessee in  exchange  for  Lessee's  agreeing to make Lease
Payments (as hereinafter defined) in accordance with this Agreement; and

                                       1

<PAGE>

     WHEREAS,  Lessee  shall make  Lease  Payments  directly  to  Bondholder  as
assignee  of Lessor  and holder of the Bond  pursuant  to the terms set forth in
this Agreement; and

     WHEREAS,  this  Agreement  and the Bond shall not be deemed to constitute a
debt or liability or moral obligation of the State or any political  subdivision
thereof, or a pledge of the faith and credit or taxing power of the State or any
political  subdivision thereof, but shall be a special obligation payable solely
from the Lease Payments payable hereunder by Lessee to Bondholder as assignee of
Lessor;

     NOW, THEREFORE,  for good and valuable  consideration,  receipt of which is
hereby  acknowledged,  and in  consideration  of the premises  contained in this
Agreement, Bondholder, Lessor and Lessee agree as follows:

                                   ARTICLE I
                            DEFINITIONS AND EXHIBITS

     Section 1.01.  Definitions.  The following  terms used herein will have the
meanings indicated below unless the context clearly requires otherwise:

     "Acquisition  Costs"  means the  contract  price  paid or to be paid to the
Vendors or  reimbursed  to Lessee for any portion of the Project  upon  Lessee's
acceptance thereof, including administrative,  engineering, legal, financial and
other costs incurred by Bondholder,  Lessor, Lessee, Escrow Agent and Vendors in
connection with the acquisition and  rehabilitation  and financing by Bondholder
of such Project.

     "Agreement" means this Agreement,  including all exhibits hereto, as any of
the same may be supplemented or amended from time to time in accordance with the
terms hereof.

     "Assignment" means the Assignment of Rents and Leases dated as of August 1,
2001 executed by Lessee in favor of Bondholder.

     "Bond"  means  Lessor's  $6,500,000  Industrial  Development  Revenue  Bond
(Midwest Grain Products,  Inc.  Project) Series 2001 in the form attached hereto
as Exhibit F.

     "Bondholder"  means  (i)  GE  Capital  Public  Finance,   Inc.,  acting  as
bondholder  under this  Agreement,  (ii) any surviving,  resulting or transferee
corporation  of GE Capital  Public  Finance,  Inc.,  and (iii)  except where the
context requires otherwise, any assignee(s) of Bondholder.

     "Business  Day" means a day other than a Saturday  or Sunday on which banks
are generally open for business in New York, New York.

     "Code" means the  Internal  Revenue  Code of 1986,  as amended,  and United
States Treasury regulations promulgated thereunder.

     "Default"  means an event that, with giving of notice or passage of time or
both, would constitute an Event of Default as provided in Article XI hereof.

                                       2
<PAGE>

     "Determination of Taxability" means any  determination,  decision or decree
by the Commissioner of Internal  Revenue,  or any District  Director of Internal
Revenue  or any court of  competent  jurisdiction,  or an  opinion  obtained  by
Bondholder  of counsel  qualified in such  matters,  that an Event of Taxability
shall have occurred.  A Determination of Taxability also shall be deemed to have
occurred on the first to occur of the following:

          (a) the date when Lessee files any statement,  supplemental statement,
     or other tax schedule, return or document, which discloses that an Event of
     Taxability shall have occurred; or

          (b) the effective  date of any federal  legislation  enacted after the
     date of this  Agreement or  promulgation  of any income tax  regulation  or
     ruling by the Internal  Revenue  Service that causes an Event of Taxability
     after the date of this Agreement; or

          (c) if upon sale, lease or other deliberate  action taken with respect
     to the  Project  within the  meaning of Treas.  Reg.  ss.  1.141-2(d),  the
     failure  to receive an  unqualified  opinion of bond  counsel to the effect
     that such  deliberate  action  will not cause  interest  payable  by Lessee
     hereunder to become includable in the gross income of the recipient.

     "Environmental  Laws" means any federal,  state and local laws  relating to
emissions,  discharges,  releases of Hazardous  Wastes or Materials into ambient
air,  surface  water,  ground  water  or  land,  or  otherwise  relating  to the
manufacture,   processing,  distribution,  use,  treatment,  storage,  disposal,
transport or handling of Hazardous Wastes or Materials.

     "Escrow Agent" means Commerce Bank,  N.A., as escrow agent under the Escrow
Agreement, and its successors and assigns permitted under the Escrow Agreement.

     "Escrow  Agreement"  means the Escrow  Agreement dated as of August 1, 2001
among Bondholder, Lessor, Lessee and Escrow Agent.

     "Escrow Fund" means the fund  established and held by Escrow Agent pursuant
to the Escrow Agreement.

     "Event of Taxability" means, if as the result of any act, failure to act or
use  of the  proceeds  of the  Lease,  a  change  in use of the  Project  or any
misrepresentation  or  inaccuracy in any of the  representations,  warranties or
covenants contained in this Agreement or the Tax Compliance  Agreement by Lessor
or Lessee or the  enactment  of any federal  legislation  after the date of this
Agreement  or the  promulgation  of any income tax  regulation  or ruling by the
Internal  Revenue Service after the date of this  Agreement,  the Interest is or
becomes includable in Bondholder's gross income.

     "Gross-Up  Rate" means,  with respect to any  Interest  payment  (including
payments made prior to the Event of Taxability), the rate necessary to calculate
a total  payment  in an  amount  sufficient  such  that the sum of the  Interest
payment  plus an  additional  payment  would,  after  reduced by the federal tax
(including interest and penalties) actually payable thereon, equal the amount of
the Interest payment.

                                       3
<PAGE>
     "Hazardous  Substances  Agreement"  means  the  Certificate  and  Indemnity
Agreement regarding Hazardous  Substances dated as of August 1, 2001 executed by
Lessee for the benefit of Bondholder.

     "Hazardous  Waste or Materials"  means any substance or material defined in
or  designated  as hazardous or toxic  wastes,  hazardous or toxic  material,  a
hazardous,  toxic or  radioactive  substance,  or  other  similar  term,  by any
Environmental Law now or hereafter in effect.

     "Interest"  means the  portion of any  payment  from  Lessor to  Bondholder
designated as and comprising interest as shown in Exhibit A hereto.

     "Lease" means the lease from Lessor to Lessee pursuant to this Agreement.

     "Lease Payments" means the lease payments payable by Lessee pursuant to the
provisions of this Agreement and the Bond as specifically set forth in Exhibit A
hereto.  As provided in Article II hereof,  Lease  Payments  shall be payable by
Lessee directly to Bondholder,  as assignee of Lessor and holder of the Bond, in
the amounts and at the times as set forth in Exhibit A hereto.

     "Lease  Proceeds"  means the total amount of money to be paid to (i) Escrow
Agent for deposit and  application in accordance  with the Escrow  Agreement and
(ii) Lessee for reimbursement of expenditures made by Lessee for the Project.

     "Lessee" means Midwest Grain Products, Inc., a Kansas corporation.

     "Lessor"  means The Unified  Government  of Wyandotte  County/Kansas  City,
Kansas, acting as lessor under this Agreement.

     "Mortgage" means the Mortgage, Security Agreement, Assignment of Leases and
Rents and Fixture Filing dated as of the date hereof executed by Lessee in favor
of Bondholder, relating to the Project.

     "Note  Agreement"  means the Note Agreement  dated as of August 1, 1993, as
amended and  supplemented  and in effect on the date hereof,  between Lessee and
Principal Mutual Life Insurance Company,  without giving effect to any amendment
thereof or supplement thereto after the date hereof,  which Note Agreement shall
be deemed to apply to Lessee and to the Lease under this  Agreement  (in lieu of
the  obligations  under the Note  Agreement)  and shall  survive this  Agreement
notwithstanding any termination of the Note Agreement.

     "Permitted  Exceptions" means the permitted  exceptions listed on Exhibit J
hereto.

     "Personal  Property"  means the property and equipment  acquired as part of
the Project as set forth on Exhibit B hereto.

                                       4
<PAGE>
     "Prepayment  Amount" means the amount which Lessee may or must from time to
time pay or cause to be paid to  Bondholder  as assignee of Lessor and holder of
the Bond in order to prepay the Lease and the Bond,  as provided in Section 2.07
hereof, such amounts being set forth in Exhibit A hereto,  together with accrued
interest and all other amounts due hereunder.

     "Principal" means the portion of any Lease Payment  designated as principal
in Exhibit A hereto.

     "Project" means (i) all of Lessee's estate, right, title and interest,  now
owned,  including  any  reversion or remainder  interest,  in the real  property
located  in the City of  Kansas  City,  County  of  Wyandotte,  State of  Kansas
described  on Exhibit I hereto,  including  all  heretofore  vacated  alleys and
streets  abutting  the  property,  and  all  easements,  rights,  appurtenances,
tenements,  hereditaments,  rents,  royalties,  mineral,  oil and gas rights and
profits,  water,  water  rights  and water  stock  appurtenant  to the  property
(collectively,  the "Premises"), (ii) all buildings,  structures,  improvements,
parking areas,  landscaping and fixtures now erected on, attached to, or used or
adapted  for use in the  operation  of such real  property,  including  (without
limitation)  all  heating,  air  conditioning,  manufacturing  and  incinerating
apparatus and  equipment;  all boilers,  engines,  motors,  dynamos,  generating
equipment,   piping  and  plumbing  fixtures,  water  heaters,  ranges,  cooking
apparatus and mechanical kitchen equipment,  refrigerators,  freezers,  cooling,
ventilating,   sprinkling  and  vacuum  cleaning  systems,   fire  extinguishing
apparatus, gas and electric fixtures, carpeting, floor coverings,  underpadding,
elevators,  escalators,  partitions,  mantels,  built-in mirrors, window shades,
blinds,  draperies,  screens, storm sash, awnings, signs,  furnishings of public
spaces,  halls and lobbies,  and shrubbery and plants (other than  manufacturing
equipment  not  included  as a  portion  of the  Personal  Property),  (iii) the
Personal  Property,  and (iv) the  property  and the  improvements  acquired  or
constructed with the Rehabilitation Expenditures.

     "Property" means,  collectively,  all of Lessee's estate,  right, title and
interest, now owned or hereafter acquired,  including any reversion or remainder
interest,  in the real  property  located in the City of Kansas City,  County of
Wyandotte,  State of  Kansas  described  on  Exhibit  I  hereto,  including  all
heretofore or hereafter  vacated alleys and streets  abutting the property,  and
all  easements,  rights,   appurtenances,   tenements,   hereditaments,   rents,
royalties,  mineral,  oil and gas rights and  profits,  water,  water rights and
water stock  appurtenant to the property;  together with all of Lessee's estate,
right, title and interest, now owned or hereafter acquired, in:

          (a)  all   buildings,   structures,   improvements,   parking   areas,
     landscaping,  equipment,  software  intangibles,  fixtures  and articles of
     property now or hereafter  erected on,  attached to, or used or adapted for
     use in the operation of the Premises,  including  (without  limitation) all
     heating,  air conditioning,  manufacturing  and incinerating  apparatus and
     equipment;  all boilers,  engines,  motors, dynamos,  generating equipment,
     piping and plumbing fixtures,  water heaters, ranges, cooking apparatus and
     mechanical   kitchen   equipment,    refrigerators,    freezers,   cooling,
     ventilating,  sprinkling and vacuum cleaning  systems,  fire  extinguishing
     apparatus,   gas  and  electric  fixtures,   carpeting,   floor  coverings,
     underpadding, elevators, escalators, partitions, mantels, built-in mirrors,
     window shades,  blinds,  draperies,  screens,  storm sash, awnings,  signs,
     furnishings of public spaces,  halls and lobbies, and shrubbery and plants,
     and including also all interest of any owner of the Premises in any of such
     items  hereafter at any time  acquired  under

                                       5
<PAGE>

     conditional  sale contract,  chattel  mortgage or other title  retaining or
     security  instrument,  but  excluding  any  manufacturing  equipment now or
     hereafter  acquired  that does not consist of any  portion of the  Personal
     Property (all of the foregoing  together with any replacements  thereto are
     referred to herein as the "Improvements");

          (b) all compensation,  awards, damages, rights of action and proceeds,
     including interest thereon and/or the proceeds of any policies of insurance
     therefor,  arising  out of or  relating  to a (i) taking or damaging of the
     Premises  or  Improvements  thereon  by  reason of any  public  or  private
     improvement,  condemnation  proceeding (including change of grade), sale or
     transfer in lieu of condemnation, or fire, earthquake or other casualty, or
     (ii)  any  injury  to or  decrease  in the  value  of the  Premises  or the
     Improvements for any reason whatsoever;

          (c) all the right,  title and  interest of Lessee in, to and under all
     written  and oral  leases  and  rental  agreements  (including  extensions,
     renewals  and  subleases;  all  of  the  foregoing  shall  be  referred  to
     collectively  herein  as the  "Leases")  now  or  hereafter  affecting  the
     Premises including,  without  limitation,  all rents,  issues,  profits and
     other  revenues  and  income  therefrom  and from the  renting,  leasing or
     bailment  of  Improvements  and  equipment,   all  guaranties  of  tenants'
     performance  under the  Leases,  all letter of credit  rights and all other
     supporting  obligations  associated  with the  Leases,  and all  rights and
     claims of any kind that Lessee may have against any tenant under the Leases
     or in  connection  with the  termination  or  rejection  of the Leases in a
     bankruptcy  or  insolvency   proceeding;   and  the  leasehold  estate,  if
     applicable;

          (d)  plans,  specifications,   contracts,   documents  and  agreements
     relating to the design or construction of the Improvements; Lessee's rights
     under any payment,  performance or other bond in connection with the design
     or construction  of the  Improvements;  all  landscaping  and  construction
     materials,  supplies  and  equipment  used  or to be used  or  consumed  in
     connection  with  construction of the  Improvements,  whether stored on the
     Premises or at some other location; and contracts,  agreements and purchase
     orders  with   contractors,   subcontractors,   suppliers  and  materialmen
     incidental to the design or construction of the Improvements;

          (e) all books, records,  surveys,  reports and other documents related
     to the Premises,  the  Improvements,  the Leases or other items of Property
     described herein; and

          (f) all additions, accessions, replacements,  substitutions,  proceeds
     and products of the real and personal  property,  tangible and  intangible,
     described herein.

     "Purchase  Agreements" means Lessee's  purchase  agreements with Vendors of
the Project.

     "Purchase Price" means $6,500,000.

     "Rehabilitation  Expenditures"  means  those  capital  expenditures  to  be
incurred by Lessee with respect to the Project as set forth on Exhibit C hereto.

     "State" means the State of Kansas.

                                       6
<PAGE>

     "Tax Compliance  Agreement" means the Tax Compliance Agreement of even date
herewith among Lessee, Lessor and Escrow Agent, as such Tax Compliance Agreement
may be amended from time to time in accordance with its terms.

     "UCC"  means the  Uniform  Commercial  Code as adopted and in effect in the
State.

     "Vendor" means the manufacturer, contractor or vendor of any portion of the
Project,  as well as the agents or dealers of the  manufacturer  or  contractor,
from whom Lessee has purchased or is purchasing portions of the Project.

     Section 1.02.  Exhibits The following exhibits are attached hereto and made
a part hereof:

          Exhibit A:  Schedule  of  Lease  Payments   setting  forth  the  Lease
                      Payments and Prepayment Amounts.

          Exhibit B:  Description of Personal Property.

          Exhibit C:  Description of Rehabilitation Expenditures.

          Exhibit D:  Reserved.

          Exhibit E:  Reserved.

          Exhibit F:  Form of Bond.

          Exhibit G:  Form of Certificate of Chief Financial Officer.

          Exhibit H:  Reserved.

          Exhibit I:  Legal Description of Real Property.

          Exhibit J:  List of Permitted Exceptions.

          Exhibit K:  List of Trade Names.

          Exhibit L:  Survey Requirements.

          Exhibit M:  Permanent Lease Insurance Requirements.

          Exhibit N:  Phase I Requirements.

     Section 1.03. Rules of Construction. (a) The singular form of any word used
herein,  including the terms  defined in Section 1.01 hereof,  shall include the
plural,  and vice versa.  The use herein of a word of any gender  shall  include
correlative words of all genders.

     (b) Unless otherwise specified,  references to Articles, Sections and other
subdivisions  of this  Agreement are to the  designated  Articles,  Sections and
other subdivision of this


<PAGE>

Agreement as originally executed.  The words "hereof," "herein," "hereunder" and
words of similar import refer to this Agreement as a whole.

     (c) The headings or titles of the several  articles  and sections  shall be
solely  for   convenience  of  reference  and  shall  not  affect  the  meaning,
construction or effect of the provisions hereof.

                                   ARTICLE II
                     FINANCING OF PROJECT AND TERMS OF LEASE

     Section  2.01.  Acquisition  of Project.  (a) Lessee either has obtained or
shall obtain the Project pursuant to one or more Purchase Agreements from one or
more Vendors.  Lessee shall remain liable to the Vendor or Vendors in respect of
its duties and obligations in accordance with each Purchase  Agreement and shall
bear the risk of loss with respect to any loss or claim  relating to any portion
of the Project  covered by any Purchase  Agreement,  and neither  Bondholder nor
Lessor shall assume any such  liability or risk of loss.  Lessee  covenants  and
agrees to pay or cause to be paid such  amounts as may be  necessary to complete
the acquisition,  installation,  construction and improvement of the Project and
to ensure that the Project is  operational to the extent that the Lease Proceeds
are  insufficient  to cause such  acquisition,  installation,  construction  and
improvement.

     (b) Lessee  agrees to sell,  and does hereby sell, to Lessor the Project on
the terms and conditions of this Agreement,  and Lessor agrees to purchase,  and
subject to the  satisfaction of the conditions  contained in Article III hereof,
does  purchase the Project in accordance  with the terms and  conditions of this
Agreement,  at the Purchase Price. Lessor and Lessee agree that, upon payment of
the Purchase Price by Lessor to Lessee,  title to the Project shall be deemed to
be  conveyed  to and vested in  Lessor.  Lessee  agrees to  execute  any and all
documents,  certificates and agreements necessary to effectuate such purchase of
the Project.

     (c) Lessor  agrees to lease and hereby  leases the  Project to Lessee,  and
Lessee agrees to lease and hereby leases,  the Project from Lessor in accordance
with the terms and conditions of this Agreement.  Lessee agrees that it shall be
liable for all of its obligations under any agreements with Vendors in the event
that the  conditions  contained  in Article III hereof are not  satisfied or the
Lease  Proceeds  are not  applied as  provided  in Section  2.02  hereof for any
reason.  Lessor and Lessee agree to execute any and all documents,  certificates
and agreements necessary to effectuate such lease of the Project.

     (d) Title to the Project shall pass from Lessor to Lessee automatically and
without further act upon the end of the term of this Agreement. Lessor agrees to
execute  any  and  all  documents,  certificates  and  agreements  necessary  to
effectuate such transfer of the Project.

     Section 2.02.  Lease.  Bondholder  hereby agrees,  subject to the terms and
conditions of this Agreement,  to purchase the Bond in the amount of $6,500,000;
Lessor hereby agrees, subject to the terms and conditions of this Agreement,  to
issue the Bond and to use the  proceeds  thereof to purchase  the  Project  from
Lessee;  and Lessee  hereby  agrees to lease the Project from Lessor.  The basic
term  of the  Lease  is  seven  years,  commencing  upon  the  delivery  of this
Agreement,

                                       8
<PAGE>

and with a scheduled  termination date of September 1, 2008. Upon fulfillment of
the  conditions  set forth in Article III hereof,  Bondholder  shall (i) deposit
$900,000.00  of the Lease  Proceeds in the Escrow Fund to be held,  invested and
disbursed for Rehabilitation  Expenditures,  as provided in the Escrow Agreement
and  (ii)  disburse   $5,600,000.00   of  the  Lease   Proceeds  to  Lessee  for
reimbursement  of  expenditures  previously  made by  Lessee  for  the  Project.
Lessor's  obligation  to make payments on the Bond,  and Lessee's  obligation to
repay the Lease, shall commence, and interest shall begin to accrue, on the date
that Lease Proceeds are deposited in the Escrow Fund and disbursed to Lessee.

     Section  2.03.  Interest.  The  principal  amount of the Bond and the Lease
hereunder  outstanding  from time to time shall bear  interest  (computed on the
basis  of  actual  days  elapsed  in a  360-day  year)  at the  rate of five and
twenty-three  hundredths  percent  (5.23%).  Interest  accruing on the principal
balance of the Bond and the Lease outstanding from time to time shall be payable
as provided in Exhibit A and in the Bond and upon earlier  demand in  accordance
with the terms hereof or prepayment in accordance with the terms of the Bond and
Section 2.07 hereof.  Upon the  occurrence  of a  Determination  of  Taxability,
Lessee  shall,  with  respect to future  interest  payments,  begin making Lease
Payments  calculated  at the  Gross-Up  Rate.  In  addition,  Lessee  shall make
immediately  upon demand of  Bondholder a payment to  Bondholder  sufficient  to
supplement prior Lease Payments to the Gross-Up Rate.

     Section 2.04. Payments.  Lessor shall pay the principal of, premium, if any
in accordance  with Section 2.07 hereof,  and interest on the Bond, but only out
of the amounts paid by Lessee  pursuant to this  Agreement.  Lessee shall pay to
Bondholder,  as assignee of Lessor,  Lease  Payments,  in the amounts and on the
dates set forth in Exhibit A hereto.  As security for its  obligation to pay the
principal  of,  premium,  if any in  accordance  with Section  2.07 hereof,  and
interest on the Bond,  Lessor  assigns to  Bondholder  all of Lessor's  right to
receive Lease Payments from Lessee  hereunder,  all of Lessor's rights hereunder
and all of Lessor's right, title and interest in and to the Project,  and Lessor
irrevocably  constitutes  and  appoints  Bondholder  and any  present  or future
officer  or agent of  Bondholder  as its  lawful  attorney,  with full  power of
substitution  and  resubstitution,  and in the name of Lessor or  otherwise,  to
collect the Lease  Payments and any other  payments due  hereunder and under the
Bond and to sue in any court  for such  Lease  Payments  or other  payments,  to
exercise all rights  hereunder  with respect to the Project,  and to withdraw or
settle any claims,  suits or  proceedings  pertaining  to or arising out of this
Agreement  upon any terms.  Such Lease Payments and other payments shall be made
by Lessee directly to Bondholder,  as Lessor's  assignee and holder of the Bond,
and shall be credited against Lessor's payment  obligations  hereunder and under
the Bond. No provision, covenant or agreement contained in this Agreement or any
obligation  imposed on Lessor herein or under the Bond,  or the breach  thereof,
shall constitute or give rise to or impose upon Lessor a pecuniary liability,  a
charge  upon its  general  credit  or taxing  powers or a pledge of its  general
revenues.  In making the agreements,  provisions and covenants set forth in this
Agreement,  Lessor has not  obligated  itself except with respect to the Project
and the  application of the Lease Payments to be paid by Lessee  hereunder.  All
amounts required to be paid by Lessee hereunder shall be paid in lawful money of
the United States of America in immediately  available  funds. No recourse shall
be had by Bondholder or Lessee for any claim based on this  Agreement,  the Bond
or the Tax Compliance Agreement against any director, officer, employee or agent
of Lessor alleging  personal  liability on the part of such person,  unless such
claim is based on the willful  dishonesty of or intentional  violation of law by
such person.

                                       9
<PAGE>
     Section 2.05. Payment on Non-Business Days. Whenever any payment to be made
hereunder  or under  the Bond  shall be stated to be due on a day which is not a
Business Day, such payment may be made on the next succeeding  Business Day, and
such  extension  of time shall in such case be  included in the  computation  of
interest or the fees hereunder, as the case may be.

     Section 2.06. Lease Payments To Be Unconditional. The obligations of Lessee
to make the Lease  Payments  required  under  this  Article II and to make other
payments  hereunder  and to perform  and observe the  covenants  and  agreements
contained  herein shall be absolute  and  unconditional  in all events,  without
abatement,  diminution,  deduction,  setoff or defense for any reason, including
(without  limitation)  any failure of the Project to be delivered or  installed,
any  defects,  malfunctions,  breakdowns  or  infirmities  in the Project or any
accident, condemnation, destruction or unforeseen circumstances. Notwithstanding
any  dispute  between  Lessee and any of Lessor,  Bondholder,  any Vendor or any
other  person,  Lessee  shall  make all  Lease  Payments  when due and shall not
withhold any Lease Payments pending final resolution of such dispute,  nor shall
Lessee  assert any right of set-off or  counterclaim  against its  obligation to
make such payments required under this Agreement.

     Section 2.07.  Prepayments.  (a) Lessee may, in its discretion,  prepay the
Lease and the Bond in whole at any time after the third  anniversary of the date
hereof by paying the applicable Prepayment Amount.

     (b) Lessee  shall  prepay the Lease and the Bond in whole or in part at any
time pursuant to Article IX hereof by paying the applicable Prepayment Amount.

     (c) Lessee  shall  prepay the Lease and the Bond in full  immediately  upon
demand of Bondholder  after the  occurrence of an Event of Default by paying the
applicable Prepayment Amount.

     (d) Lessee  shall  prepay the Lease and the Bond in full  immediately  upon
demand of Bondholder  after the occurrence of a  Determination  of Taxability by
paying the applicable  Prepayment  Amount plus an amount necessary to supplement
the prior Lease Payments to the Gross-Up Rate.

     (e) The amounts due  hereunder  shall be repaid,  and the amounts due under
the Bond shall be paid,  in part with funds  remaining  in the Escrow  Fund upon
termination of the Escrow  Agreement as provided in Sections 2.03 or 2.04 of the
Escrow Agreement.

     Upon any  prepayment  in part of the Lease and the Bond other than pursuant
to Section 2.03 of the Escrow Agreement,  the prepayment shall be applied to the
Principal portion of the Lease Payments in the inverse order of maturity.

     Section  2.08.  Security.  The  obligations  of  Lessee  to make the  Lease
Payments required by this Article II and to make other payments hereunder and to
perform or observe  the  covenants  and  agreements  contained  herein  shall be
secured, among other things, by a security interest in the Project, and pursuant
to the Mortgage covering the Project as described therein,  and by certain other
documents  executed and delivered in connection  herewith.  Nothing herein shall
limit the liability of Lessee under the Hazardous Substances Agreement.

                                       10
<PAGE>

                                  ARTICLE III
                              CONDITIONS PRECEDENT

     Bondholder's  agreement  to  purchase  the Bond and to  disburse  the Lease
Proceeds shall be subject to the condition  precedent that Bondholder shall have
received  all of the  following,  each in form  and  substance  satisfactory  to
Bondholder:

          (a) This Agreement,  properly executed on behalf of Lessor and Lessee,
     and each of the Exhibits hereto properly completed.

          (b) The Bond, properly executed on behalf of Lessor.

          (c) The Tax  Compliance  Agreement,  properly  executed  on  behalf of
     Lessor and Lessee.

          (d) The Mortgage, properly executed on behalf of Lessee.

          (e) The Assignment, property executed on behalf of Lessee.

          (f) The Hazardous Substances Agreement, properly executed on behalf of
     Lessee.

          (g) The  Escrow  Agreement,  properly  executed  on behalf of  Lessor,
     Lessee and Escrow Agent.

          (h) A  certificate  of the  Secretary  or an  Assistant  Secretary  of
     Lessee, certifying as to (i) the resolutions of the board of directors and,
     if  required,  the  shareholders  of  Lessee,  authorizing  the  execution,
     delivery and performance of this Agreement,  the Mortgage,  the Assignment,
     the  Hazardous  Substance  Agreement,  the  Escrow  Agreement  and  the Tax
     Compliance Agreement and any related documents,  (ii) the bylaws of Lessee,
     and (iii) the signatures of the officers or agents of Lessee  authorized to
     execute and deliver this  Agreement,  the  Mortgage,  the  Assignment,  the
     Hazardous Substance Agreement,  the Escrow Agreement and the Tax Compliance
     Agreement and other  instruments,  agreements and certificates on behalf of
     Lessee.

          (i) Currently  certified  copies of the Articles of  Incorporation  of
     Lessee.

          (j) A  Certificate  of  Good  Standing  issued  as to  Lessee  by  the
     Secretary of the State of the state of Lessee's incorporation not more than
     10 days prior to the date hereof.

          (k)  Certificates of the insurance  required  hereunder,  containing a
     lender's loss payable  clause or  endorsement  in favor of  Bondholder  and
     permanent loan insurance requirements set forth in Exhibit M hereto.

          (l) A completed and executed  Form 8038 or evidence of filing  thereof
     with the Secretary of Treasury.

                                       11
<PAGE>

          (m) An  ordinance  taken by or on behalf of  Lessor to  authorize  the
     transactions contemplated hereby.

          (n)  Evidence  that  the  issuance  of the  Bond  for the  purpose  of
     financing  of the Project  has been  approved  by the  "applicable  elected
     representative"  of Lessor  after a public  hearing  held  upon  reasonable
     notice.

          (o) As applicable, financing statements executed by Lessee, as debtor,
     and naming Lessor, as secured party, and Bondholder, as assignee.

          (p) Financing  statements  executed by Lessor,  as debtor,  and naming
     Bondholder, as secured party.

          (q) Current searches of appropriate filing offices showing that (i) no
     state or federal  tax liens  have been  filed and remain in effect  against
     Lessee,  (ii) no financing  statements have been filed and remain in effect
     against Lessee  relating to the Project except those  financing  statements
     filed  by  Bondholder,  (iii)  Bondholder  has  duly  filed  all  financing
     statements  necessary to perfect the security  interest created pursuant to
     this Agreement and (iv) Bondholder has duly filed all financing  statements
     necessary  to perfect the transfer of Lessor's  interest in this  Agreement
     and the Lease Payments.

          (r) An  opinion of counsel to  Lessee,  addressed  to  Bondholder  and
     Lessor, in form and substance acceptable to Bondholder and Lessor.

          (s) An  opinion of counsel to  Lessor,  addressed  to  Bondholder  and
     Lessee, in form and substance acceptable to Bondholder and Lessee.

          (t) An environmental  engineering  report for the Premises prepared by
     an engineer,  and in a manner  satisfactory  to  Bondholder,  based upon an
     investigation  relating to and making appropriate  inquiries concerning the
     Premises  and in  substantial  compliance  with the  Environmental  Phase I
     Requirements set forth in Exhibit N hereto.

          (u) A completed  Environmental  Questionnaire  in the form provided by
     Bondholder executed on behalf of Lessee.

          (v) An as built survey of the Project  prepared in compliance with the
     requirements set forth in Exhibit L hereto.

          (w) An ALTA (or equivalent) mortgagee policy of title insurance in the
     amount of  $3,120,000.00,  with  endorsements  as  Bondholder  may require,
     containing  no  exceptions  to  title  (printed  or  otherwise)  which  are
     unacceptable   to   Bondholder,   and  insuring  that  the  Mortgage  is  a
     first-priority lien on the Project.  Without limitation,  such policy shall
     (i) be in the ALTA 1992 form (deleting  arbitration and creditors'  rights,
     if permissible) or, if not available,  the form commonly used in the State,
     insuring  Bondholder and its  successors and assigns;  and (ii) include the
     following   endorsements   and/or   affirmative   coverages:   (A)  ALTA  9
     Comprehensive,  (B) Survey, (C) Access, (D) Subdivision, (E) Tax Parcel and
     (F) Address and Improvement.

                                       12
<PAGE>

          (x) A zoning  compliance  letter from the applicable  City  Planner's,
     County Clerk's or Zoning  Department's  office.  Without  limitation,  such
     zoning compliance letter shall (i) provide the zoning  classification  code
     for the property, (ii) be addressed to Lessee and Bondholder, (iii) include
     the address of the Property,  (iv) describe the type(s) of permitted use of
     the  Property,  and (v) include an  expiration-dated  copy of conditions or
     restrictions of use. If the applicable  governmental agency does not, or is
     unwilling to, provide the required  zoning  compliance  letter,  Bondholder
     will require an ALTA 3.1 Zoning  Endorsement (with additional  coverage for
     number  and  type of  parking  spaces)  to the  mortgagee  policy  of title
     insurance.

          (y) A copy of the final,  permanent and  unconditional  Certificate of
     Occupancy for the Project.

          (z) An engineer's  "walk-through"  inspection  prepared by an engineer
     acceptable to Bondholder at Lessee's  expense  stating that the Project was
     built in conformance with approved plans and specifications with no evident
     structural  deficiencies  and including the building's  compliance with the
     Americans with  Disabilities  Act of 1990 and all  regulations  promulgated
     thereunder.

          (aa) A Final Appraisal of the Project addressed to Bondholder, in form
     and substance  acceptable  to  Bondholder  and prepared by an MAI certified
     appraiser  acceptable to Bondholder in conformance  with the guidelines and
     recommendations   set  forth  in  the  Uniform  Standards  of  Professional
     Appraisal Practice (USPAP) and the requirements of the Code of Professional
     Ethics and Standards of  Professional  Appraisal  Practice of the Appraisal
     Institute. In addition to the foregoing  requirements,  whenever the Income
     Approach is utilized by the  appraiser,  the report shall  include a direct
     capitalization  analysis as well as a discounted  cash flow  analysis and a
     final estimate of value based on the property's fee simple estate.

          (bb) An opinion of  special  tax  counsel,  addressed  to  Bondholder,
     Lessor and Lessee, in form and substance acceptable to the addressees.

          (cc) Payment of Bondholder's  fees,  commissions and expenses required
     by Section 12.01 hereof.

          (dd) Payment of Lessor's fees,  commissions  and expenses  incurred in
     connection with this Agreement and the transactions contemplated hereby.

          (ee) Any other documents or items reasonably required by Bondholder.

          (ff) Payment of Lessor's Bond origination fee.

     Bondholder's agreement to purchase the Bond, to disburse the Lease Proceeds
and to  consider  approval  of any  disbursement  from the Escrow  Fund shall be
subject to the further conditions precedent that on the date thereof:

          (gg) Each of the items  required  for a  disbursement  pursuant to the
     Escrow Agreement.

                                       13
<PAGE>
          (hh) Invoice(s) and/or bill(s) of sale relating to the Project and, if
     such  invoices  have been paid by Lessor or  Lessee,  evidence  of  payment
     thereof and, if applicable,  evidence of official  intent to reimburse such
     payment as required by the Code.

          (ii) The representations and warranties contained in Articles IV and V
     hereof  are  correct on and as of the date of such  disbursement  as though
     made on and as of such date, except to the extent that such representations
     and warranties relate solely to an earlier date.

          (jj) No event has occurred and is continuing, or would result from the
     Bond or the Lease  which  constitutes  a Default,  an Event of Default or a
     Determination of Taxability.

                                   ARTICLE IV
               REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSOR

         Lessor represents, warrants and covenants for the benefit of Bondholder
and Lessee, as follows:

          (a)  Lessor  is a  municipal  corporation  duly  created  and  validly
     existing under the Constitution and laws of the State.

          (b) Lessor will exercise its best efforts to preserve and keep in full
     force and effect its existence as a municipal corporation.

          (c) Lessor is authorized  under the Constitution and laws of the State
     to issue the Bond and to enter into this Agreement,  the Escrow  Agreement,
     the Tax Compliance  Agreement and the transactions  contemplated hereby and
     to perform all of its obligations hereunder.

          (d)  Lessor  has  duly  authorized  the  issuance  of the Bond and the
     execution and delivery of this Agreement,  the Escrow Agreement and the Tax
     Compliance  Agreement  under the terms and  provisions of the resolution of
     its governing body or by other appropriate  official approval,  and further
     represents,  covenants and warrants that all requirements have been met and
     procedures have occurred in order to ensure the enforceability of the Bond,
     this  Agreement,  the Escrow  Agreement  and the Tax  Compliance  Agreement
     against   Lessor,   and  Lessor  has  complied  with  such  public  bidding
     requirements as may be applicable to the Bond,  this Agreement,  the Escrow
     Agreement and the Project.  Lessor has taken all  necessary  action and has
     complied with all  provisions of the Act,  including but not limited to the
     making of the findings required by the Act, required to make the Bond, this
     Agreement,  the Escrow Agreement and the Tax Compliance Agreement the valid
     and binding obligation of Lessor.

          (e) The officer of Lessor  executing  the Bond,  this  Agreement,  the
     Escrow  Agreement,  the Tax Compliance  Agreement and any related documents
     has been duly  authorized to issue the Bond and to execute and deliver this
     Agreement,  the Escrow Agreement and the Tax Compliance  Agreement and such
     related  documents  under the

                                       14
<PAGE>

     terms and  provisions  of a resolution  of Lessor's  governing  body, or by
     other appropriate official action.

          (f)  The  Bond,  this  Agreement,  the  Escrow  Agreement  and the Tax
     Compliance  Agreement are legal,  valid and binding  obligations of Lessor,
     enforceable in accordance with their respective terms, except to the extent
     limited by bankruptcy,  reorganization or other laws of general application
     relating to or affecting the enforcement of creditors' rights.

          (g) Lessor has assigned to  Bondholder  all of Lessor's  rights in the
     Project and this Agreement  (except any  indemnification  payable to Lessor
     pursuant to Sections  7.07(d) and 7.12 hereof and notice to Lessor pursuant
     to Section  12.03  hereof)  including  the  assignment of all rights in the
     security interest granted to Lessor by Lessee.

          (h) Lessor will not pledge,  mortgage or assign this  Agreement or its
     duties and obligations hereunder to any person, firm or corporation, except
     as provided under the terms hereof.

          (i) None of the issuance of the Bond or the  execution and delivery of
     this Agreement,  the Escrow Agreement or the Tax Compliance Agreement,  the
     consummation of the transactions  contemplated hereby or the fulfillment of
     or compliance  with the terms and conditions of the Bond,  this  Agreement,
     the Escrow  Agreement  or the Tax  Compliance  Agreement  violates any law,
     rule, regulation or order,  conflicts with or results in a breach of any of
     the terms,  conditions or provisions of any restriction or any agreement or
     instrument  to  which  Lessor  is now a party  or by  which  it is bound or
     constitutes a default under any of the foregoing or results in the creation
     or imposition of any prohibited  lien,  charge or encumbrance of any nature
     whatsoever  upon any of the property or assets of Lessor under the terms of
     any instrument or agreement.

          (j)  There  is  no  action,  suit,   proceeding,   claim,  inquiry  or
     investigation,  at law or in  equity,  before or by any  court,  regulatory
     agency, public board or body pending or, to the best of Lessor's knowledge,
     threatened against or affecting Lessor,  challenging  Lessor's authority to
     issue the Bond or to enter into this Agreement, the Escrow Agreement or the
     Tax Compliance  Agreement or any other action wherein an unfavorable ruling
     or finding would  adversely  affect the  enforceability  of the Bond,  this
     Agreement,  the Escrow  Agreement  or the Tax  Compliance  Agreement or any
     other  transaction of Lessor which is similar  hereto,  or the exclusion of
     the Interest from gross income for federal tax purposes  under the Code, or
     would materially and adversely affect any of the transactions  contemplated
     by this Agreement.

          (k) Lessor will submit or cause to be  submitted  to the  Secretary of
     the Treasury a Form 8038 (or other information  reporting statement) at the
     time and in the form required by the Code.

          (l) The issuance of the Bond for the purpose of financing  the Project
     has been approved by the "applicable elected representative" (as defined in
     Section  147(f)  of the Code) of Lessor  after a public  hearing  held upon
     reasonable notice.

                                       15
<PAGE>

          (m) Lessor  will  comply  fully at all times  with the Tax  Compliance
     Agreement, and Lessor will not take any action, or omit to take any action,
     which, if taken or omitted, respectively,  would violate the Tax Compliance
     Agreement.

          (n) Lessor will take no action that would cause the Interest to become
     includable in gross income for federal  income tax purposes  under the Code
     (including,  without  limitation,  intentional  acts under Treas.  Reg. ss.
     1.148-2(c)  or  consenting  to a  deliberate  action  within the meaning of
     Treas.  Reg.  ss.  1.141-2(d)),  and  Lessor  will take and will  cause its
     officers,  employees  and agents to take all  affirmative  actions  legally
     within its power  necessary  to ensure  that the  Interest  does not become
     includable in gross income of the recipient for federal income tax purposes
     under the Code (including,  without limitation, the calculation and payment
     of any rebate required to preserve such exclusion).

                                    ARTICLE V
               REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSEE

     Lessee represents, warrants and covenants for the benefit of Bondholder and
Lessor, as follows:

          (a) Lessee is a corporation  duly organized,  validly  existing and in
     good  standing  under the laws of the State of  Kansas,  has power to enter
     into this Agreement, the Mortgage, the Assignment, the Hazardous Substances
     Agreement, and by proper corporate action has duly authorized the execution
     and delivery of this Agreement, the Mortgage, the Assignment, the Hazardous
     Substances   Agreement,   the  Escrow  Agreement  and  the  Tax  Compliance
     Agreement.  Lessee is in good standing and is duly licensed or qualified to
     transact business in the State and in all jurisdictions where the character
     of the property owned or leased or the nature of the business transacted by
     it makes such licensing or  qualification  necessary.  Lessee's exact legal
     name is as set forth on the execution page hereof.

          (b) Lessee has been fully  authorized  to  execute  and  deliver  this
     Agreement,   the  Mortgage,   the  Assignment,   the  Hazardous  Substances
     Agreement,  the Escrow Agreement and the Tax Compliance Agreement under the
     terms and  provisions of the  resolution  of its board of directors,  or by
     other appropriate official approval, and further represents,  covenants and
     warrants that all requirements  have been met, and procedures have occurred
     in order to ensure the enforceability of this Agreement,  the Mortgage, the
     Assignment,  the Hazardous Substances  Agreement,  the Escrow Agreement and
     the Tax Compliance Agreement and this Agreement,  Mortgage, the Assignment,
     the  Hazardous  Substances  Agreement,  the  Escrow  Agreement  and the Tax
     Compliance Agreement have been duly authorized, executed and delivered.

          (c) The  officer  of  Lessee  executing  this  Agreement,  the  Escrow
     Agreement,   the  Mortgage,   the  Assignment,   the  Hazardous  Substances
     Agreement,  and the Tax Compliance  Agreement and any related documents has
     been duly authorized to execute and deliver this  Agreement,  the Mortgage,
     the Assignment,  the Hazardous Substances

                                       16
<PAGE>

     Agreement,  the Escrow Agreement and the Tax Compliance  Agreement and such
     related  documents  under the  terms  and  provisions  of a  resolution  of
     Lessee's board of directors.

          (d) This  Agreement,  the  Mortgage,  the  Assignment,  the  Hazardous
     Substances Agreement, the Escrow Agreement and the Tax Compliance Agreement
     constitute  valid and legally  binding  obligations of Lessee,  enforceable
     against Lessee in accordance  with their  respective  terms,  except to the
     extent  limited  by  bankruptcy,  reorganization  or other  laws of general
     application relating to or affecting the enforcement of creditors' rights.

          (e) The execution and delivery of this  Agreement,  the Mortgage,  the
     Assignment,  the Hazardous Substances  Agreement,  the Escrow Agreement and
     the  Tax  Compliance  Agreement,   the  consummation  of  the  transactions
     contemplated  hereby and the fulfillment of the terms and conditions hereof
     do not and will not violate any law,  rule,  regulation or order,  conflict
     with or  result  in a  breach  of any of the  terms  or  conditions  of the
     articles  of  incorporation  or  bylaws  of  Lessee  or  of  any  corporate
     restriction  or of any  agreement  or  instrument  to which Lessee is now a
     party  and do not and  will  not  constitute  a  default  under  any of the
     foregoing or result in the creation or imposition of any liens,  charges or
     encumbrances  of any nature  upon any of the  property  or assets of Lessee
     contrary to the terms of any instrument or agreement.

          (f) The  authorization,  execution,  delivery and  performance of this
     Agreement  by Lessee do not require  submission  to,  approval of, or other
     action by any governmental  authority or agency,  which action with respect
     to this Agreement has not been taken and which is final and nonappealable.

          (g)  There  is  no  action,  suit,   proceeding,   claim,  inquiry  or
     investigation,  at law or in  equity,  before or by any  court,  regulatory
     agency, public board or body pending or, to the best of Lessee's knowledge,
     threatened against or affecting Lessee,  challenging  Lessee's authority to
     enter into this  Agreement,  the Mortgage,  the  Assignment,  the Hazardous
     Substances Agreement,  the Escrow Agreement or the Tax Compliance Agreement
     or any  other  action  wherein  an  unfavorable  ruling  or  finding  would
     adversely affect the  enforceability of this Agreement,  the Mortgage,  the
     Assignment, the Hazardous Substances Agreement, the Escrow Agreement or the
     Tax  Compliance  Agreement  or any other  transaction  of  Lessee  which is
     similar  hereto,  or the  exclusion of the  Interest  from gross income for
     federal tax purposes  under the Code,  or would  materially  and  adversely
     affect any of the transactions contemplated by this Agreement.

          (h) The  property at which the Project and the Property are located is
     properly  zoned  for its  current  and  anticipated  use and the use of the
     Project and the Property will not violate any applicable zoning,  land use,
     environmental  or similar law or  restriction.  Lessee has all licenses and
     permits to use the Project and the Property.

          (i) Lessee has  furnished to Bondholder a Phase I  Environmental  Site
     Assessment dated December 6, 2000,  prepared by Black & Veatch Corporation,
     and an Environmental Questionnaire dated August 17, 2001 (collectively, the
     "Report").  Except as disclosed to  Bondholder in writing or in the Report,
     Lessee  has  received  no  notification  of any  kind  suggesting  that the
     Property  or any  adjacent  property  is or may be

                                       17
<PAGE>

     contaminated with any Hazardous Waste or Materials or is or may be required
     to be cleaned up in accordance  with any applicable law or regulation;  and
     Lessee further represents and warrants that, except as previously disclosed
     to Bondholder in writing or in the Report,  to the best of its knowledge as
     of the date hereof after due and diligent  inquiry,  there are no Hazardous
     Waste or Materials located in, on or under the Property, or incorporated in
     any  Improvements,  nor has the Property  ever been used as a landfill or a
     waste disposal site, or a manufacturing, handling, storage, distribution or
     disposal facility for Hazardous Waste or Materials. Lessee has obtained all
     permits,  licenses  and  other  authorizations  which  are  required  under
     federal,  state and local laws or any  Environmental Law at the Property or
     in  connection  with the  operation  of the Project.  Except as  previously
     disclosed to Bondholder in writing,  Lessee and all activities of Lessee at
     the  Property  comply  with all  Environmental  Laws and with all terms and
     conditions of any required permits,  licenses and authorizations applicable
     to  Lessee  with  respect  thereto.   Except  as  previously  disclosed  to
     Bondholder in writing, with respect to the Property and the Project, Lessee
     is also in  compliance  with  all  limitations,  restrictions,  conditions,
     standards,   prohibitions,   requirements,   obligations,   schedules   and
     timetables contained in Environmental Laws or contained in any plan, order,
     decree,  judgment or notice of which Lessee is aware.  Except as previously
     disclosed to Bondholder in writing,  Lessee is not aware of, nor has Lessee
     received  notice of, any  events,  conditions,  circumstances,  activities,
     practices,  incidents, actions or plans which may interfere with or prevent
     continued  compliance  with,  or which  may give rise to any  liability  of
     Lessee under, any  Environmental  Laws with respect to the Property and the
     Project.

          (j) The Project is of the type authorized and permitted to be financed
     with the proceeds of the Bond pursuant to the Act.

          (k) Lessee intends to operate the Project,  or cause the Project to be
     operated,  as a "project," within the meaning of the Act, until the date on
     which all of the Lease  Payments  have been  fully  paid or the  applicable
     Prepayment Amount has been fully paid.

          (l) Lessee will not take any action  that would cause the  Interest to
     become  includable in gross income of the recipient for federal  income tax
     purposes under the Code (including,  without  limitation,  intentional acts
     under Treas. Reg. ss. 1.148-2(c) or deliberate action within the meaning of
     Treas.  Reg.  ss.  1.141-2(d)),  and  Lessee  will take and will  cause its
     officers,  employees  and agents to take all  affirmative  actions  legally
     within its power  necessary  to ensure  that the  Interest  does not become
     includable in gross income of the recipient for federal income tax purposes
     under the Code (including,  without limitation, the calculation and payment
     of any rebate required to preserve such exclusion).

          (m)  Lessee  has  heretofore   furnished  to  Bondholder  the  audited
     financial  statements  of Lessee for its fiscal  years ended June 30, 1997,
     June 30, 1998, June 30, 1999 and June 30, 2000 and the unaudited  financial
     statement of Lessee for the  nine-months  ended March 31,  2001,  and those
     statements  fairly  present the financial  condition of Lessee on the dates
     thereof  and the results of its  operations  and cash flows for the periods
     then  ended  and  were  prepared  in  accordance  with  generally  accepted

                                       18
<PAGE>

     accounting  principles.  Since  the  date  of  the  most  recent  financial
     statements,  there has been no  material  adverse  change in the  business,
     properties or condition (financial or otherwise) of Lessee.

          (n)  Lessee  has paid or caused to be paid to the  proper  authorities
     when due all federal,  state and local taxes required to be withheld by it.
     Lessee  has filed all  federal,  state  and  local  tax  returns  which are
     required  to be  filed,  and  Lessee  has paid or  caused to be paid to the
     respective taxing  authorities all taxes as shown on said returns or on any
     assessment received by it to the extent such taxes have become due.

          (o) Lessee has or as of closing will have good and  absolute  title to
     its interest in the Project  subject to the rights of Lessor free and clear
     of all mortgages, security interests, liens and encumbrances except for the
     security  interest  created pursuant to this Agreement and the Mortgage and
     except for the Permitted Exceptions.

          (p) Lessee has  provided to  Bondholder  signed  financing  statements
     sufficient when filed to perfect the security  interest created pursuant to
     this  Agreement.  When such  financing  statements are filed in the offices
     noted  therein,  Bondholder,  as assignee of Lessor and holder of the Bond,
     will have a valid and perfected  security interest in the Project,  subject
     to no other security interest, assignment, lien or encumbrance. None of the
     Project  constitutes a replacement of, substitution for or accessory to any
     property of Lessee  subject to a lien of any kind.  Lessee owns the Project
     subject to no liens or  encumbrances  of any kind other than the  Permitted
     Exceptions and the liens created hereunder and under the Mortgage.

          (q) Lessee will aid and assist Lessor in connection with preparing and
     submitting  to  the  Secretary  of  the  Treasury  a Form  8038  (or  other
     applicable  information  reporting  statement)  at the time and in the form
     required by the Code.

          (r) Lessee  will  comply  fully at all times  with the Tax  Compliance
     Agreement, and Lessee will not take any action, or omit to take any action,
     which, if taken or omitted, respectively,  would violate the Tax Compliance
     Agreement.

          (s)  Expenses  for work done by  officers  or  employees  of Lessee in
     connection with the Project will be included as an Acquisition  Cost, if at
     all,  only to the extent (i) such  persons were  specifically  employed for
     such  particular  purpose,  (ii) the expenses do not exceed the actual cost
     thereof and (iii) such  expenses  are  treated or capable of being  treated
     (whether or not so treated) on the books of Lessee as a capital expenditure
     in conformity with generally  accepted  accounting  principles applied on a
     consistent basis.

          (t) Any costs  incurred  with respect to that part of the Project paid
     from the Lease Proceeds shall be treated or capable of being treated on the
     books of  Lessee as  capital  expenditures  in  conformity  with  generally
     accepted accounting principles applied on a consistent basis.

          (u) No part of the Lease Proceeds will be used to finance inventory or
     rolling  stock or will be used for working  capital or to finance any other
     cost not constituting an Acquisition Cost.

                                       19
<PAGE>

          (v) No person other than Lessee or Kansas City Ingredients Technology,
     Inc. is in occupancy or possession of any portion of the Property.

          (w) The Project is property of the character  subject to the allowance
     for depreciation under Section 167 of the Code.

                                   ARTICLE VI
                       TITLE TO PROject; SECURITY INTEREST

     Section 6.01. Title to Project.  Legal title to the Project and any and all
repairs, replacements,  substitutions and modifications to such Project shall be
in Lessor.  Lessee will at all times  protect  and  defend,  at its own cost and
expense,  its and  Lessor's  title from and against all claims,  liens and legal
processes of creditors of Lessee, and keep all the Property and the Project free
and clear of all such  claims,  liens and  processes  except  for the  Permitted
Exceptions and the liens created hereunder and under the Mortgage.

     Section 6.02.  Security Interest in Project.  This Agreement is intended to
constitute a security  agreement  within the meaning of the UCC. As security for
Lessee's payment to Bondholder, as assignee of Lessor, of Lease Payments and all
other amounts payable to Bondholder hereunder,  Lessee hereby grants to Lessor a
security interest constituting a first lien on all of Lessee's rights, title and
interest  as  lessee  in and to (i) the  Project,  (ii) all  securities,  funds,
moneys, deposits and other property at any time held in or subject to the Escrow
Fund, (iii) all repairs and modifications to any of the foregoing property, (iv)
all  substitutions  for or  replacement  of any of the foregoing  property,  (v)
products and proceeds of any of the foregoing property, and (vi) all of Lessee's
rights  hereunder.  As security for the Bond,  Lessor  hereby  grants a security
interest to Bondholder  constituting a lien on all of Lessor's rights, title and
interest in and to (i) the Project, (ii) all securities, funds, moneys, deposits
and other property at any time held in or subject to the Escrow Fund,  (iii) all
repairs  and  modifications  to  any  of  the  foregoing   property,   (iv)  all
substitutions for or replacement of any of the foregoing property,  (v) products
and proceeds of any of the  foregoing  property and (vi) all of Lessor's  rights
hereunder,  including  rights to receive  Lease  Payments.  Lessee  ratifies its
previous  authorization for Bondholder to pre-file UCC financing  statements and
any amendments thereto describing the Project and all other collateral described
above and  containing  any other  information  required by the  applicable  UCC.
Lessee authorizes  Bondholder,  and hereby grants Bondholder a power of attorney
(which is coupled with an interest), to file financing statements and amendments
thereto describing the Project and containing any other information  required by
the applicable UCC and all proper  terminations  of the filings of other secured
parties with respect to the Project or the Property,  in such form and substance
as Bondholder, in its sole discretion, may determine. Lessor and Lessee agree to
execute such additional documents,  including financing statements,  demands for
terminations,  assignments, affidavits, notices and similar instruments, in form
satisfactory to Bondholder,  and take such other actions that  Bondholder  deems
necessary or appropriate to establish and maintain the security interest created
by this Section,  and Lessor and Lessee hereby designate and appoint  Bondholder
as their agent,  and grant to  Bondholder a power of attorney  (which is coupled
with an  interest),  to execute on behalf of Lessor and Lessee,  as the case may
be, such  additional  documents  and to take such other  actions.  Lessee hereby
waives any right that Lessee may have to file with the applicable filing officer
any financing  statement,

                                       20
<PAGE>

amendment,  termination  or  other  record  pertaining  to  the  Project  and/or
Bondholder's interest therein.

     Section 6.03.  Change in Name or Corporate  Structure of Lessee;  Change in
Location of Lessee's Chief Executive Office.  Lessee's chief executive office is
located at the address set forth above,  and all of Lessee's records relating to
its business and the Property and the Project are kept at such location.  Lessee
hereby agrees to provide  written  notice to Bondholder and Lessor of any change
or proposed change in its name, corporate structure or chief executive office or
change or proposed change in the location of the Personal Property.  Such notice
shall be  provided  30 days in advance of the date that such  change or proposed
change is planned to take effect.  Lessee does business,  and has done business,
only  under its own name and the trade  names,  if any,  set forth on  Exhibit K
hereto.

     Section 6.04. Liens and Encumbrances to Title.  Lessee shall not,  directly
or indirectly,  create,  incur, assume or suffer to exist any mortgage,  deed of
trust, pledge, lien, charge, encumbrance or claim (together, "Liens") on or with
respect to the  Project or the  Property  other  than the  respective  rights of
Bondholder and Lessor as herein provided and provided in the Mortgage and except
for the Permitted Exceptions.

     Section  6.05.  Assignment of  Insurance.  As  additional  security for the
payment and performance of Lessee's obligations hereunder, Lessee hereby assigns
to Bondholder,  as assignee of Lessor,  any and all moneys  (including,  without
limitation,  proceeds of insurance  and refunds of unearned  premiums) due or to
become due under any and all policies of insurance now or at any time  hereafter
covering the Project or any evidence thereof or any business records or valuable
papers  pertaining  thereto,  and Lessee  hereby  directs the issuer of any such
policy to pay all such moneys  directly to  Bondholder if Lessee fails to comply
with Section 9.01 hereof.  Lessee hereby assigns to  Bondholder,  as assignee of
Lessor,  and grants a security interest to Bondholder in, any and all moneys due
or to become  due with  respect to any  condemnation  proceeding  affecting  the
Project.  At any time,  whether  before or after the  occurrence of any Event of
Default,  Bondholder  may (but need not),  in  Bondholder's  name or in Lessee's
name,  execute and deliver  proof of claim,  receive  all such  moneys,  endorse
checks and other instruments  representing  payment of such moneys,  and adjust,
litigate,  compromise or release any claim against the Lessor of any such policy
or party in any condemnation proceeding.

     Section 6.06. Agreement as Financing Statement.  To the extent permitted by
applicable law, a carbon,  photographic or other  reproduction of this Agreement
or of any  financing  statements  signed by Lessee is  sufficient as a financing
statement  in any  state to  perfect  the  security  interests  granted  in this
Agreement.

     Section 6.07.  Subordination of Leasehold Interest.  The leasehold interest
created  pursuant to this  Agreement is now, and shall at all times  continue to
be,  unconditionally  subject and subordinate in each and every respect,  to the
Mortgage and to any and all renewals, modifications,  extensions, substitutions,
replacements and/or consolidations of the Mortgage.  For so long as the Mortgage
is a lien on the Project,  Lessee  shall not mortgage or otherwise  encumber its
leasehold  interest or subordinate the estate of Lessee in this Agreement to any
other mortgage or any other security instrument.

                                       21
<PAGE>
                                   ARTICLE VII
                         AFFIRMATIVE COVENANTS OF LESSEE

     So long as the Lease  shall  remain  unpaid,  Lessee  will  comply with the
following requirements:

     Section 7.01. Reporting  Requirements.  Lessee will deliver, or cause to be
delivered,  to  Bondholder  each of the  following,  which  shall be in form and
detail acceptable to Bondholder:

          (a) as soon as  available,  and in any event within 120 days after the
     end of each fiscal year of Lessee,  audited financial  statements of Lessee
     with the unqualified  opinion of independent  certified public  accountants
     selected by Lessee and  acceptable to  Bondholder,  which annual  financial
     statements  shall include the balance sheet of Lessee as at the end of such
     fiscal year and the related  statements  of income,  retained  earnings and
     cash flows of Lessee  for the fiscal  year then  ended,  all in  reasonable
     detail and  prepared  in  accordance  with  generally  accepted  accounting
     principles  applied on a consistent  basis,  together with a certificate of
     the chief  financial  officer  of  Lessee  in the form of  Exhibit G hereto
     stating (i) that such financial statements have been prepared in accordance
     with  generally  accepted  accounting  principles  applied on a  consistent
     basis,  (ii) whether or not such officer has knowledge of the occurrence of
     any Default or Event of Default hereunder and, if so, stating in reasonable
     detail the facts with  respect  thereto all  relevant  facts in  reasonable
     detail to evidence,  and (iii) all relevant  facts in reasonable  detail to
     evidence,  the  computations  as to, whether or not Lessee is in compliance
     with the requirements set forth in Sections 7.14 through 7.16 hereof;

          (b) as soon as available and in any event within 90 days after the end
     of each fiscal quarter of Lessee, an  unaudited/internal  balance sheet and
     statements  of income and retained  earnings of Lessee as at the end of and
     for such quarter and for the year to date period then ended,  in reasonable
     detail and stating in  comparative  form the figures for the  corresponding
     date and periods in the  previous  year,  all prepared in  accordance  with
     generally accepted accounting  principles applied on a consistent basis and
     certified  by the chief  financial  officer of Lessee  subject to  year-end
     audit adjustments;  and accompanied by a certificate of that officer in the
     form of Exhibit G hereto  stating (i) that such financial  statements  have
     been prepared in accordance with generally accepted  accounting  principles
     applied  on a  consistent  basis,  (ii)  whether  or not such  officer  has
     knowledge of the  occurrence  of any Default or Event of Default  hereunder
     not  theretofore  reported and remedied  and, if so,  stating in reasonable
     detail the facts with  respect  thereto,  and (iii) all  relevant  facts in
     reasonable  detail to evidence,  and the computations as to, whether or not
     Lessee is in compliance  with the  requirements  set forth in Sections 7.14
     through 7.16 hereof;

          (c) immediately after the commencement  thereof,  notice in writing of
     all litigation and of all proceedings before any governmental or regulatory
     agency  affecting Lessee of the type described in Article V hereof or which
     seek a monetary recovery against Lessee in excess of $1,000,000;

                                       22
<PAGE>

          (d) as  promptly as  practicable  (but in any event not later than ten
     Business  Days)  after  an  officer  of  Lessee  obtains  knowledge  of the
     occurrence  of any event that  constitutes a Default or an Event of Default
     hereunder, notice of such occurrence, together with a detailed statement by
     a responsible  officer of Lessee of the steps being taken by Lessee to cure
     the effect of such Default or Event of Default;

          (e) promptly upon  knowledge  thereof,  notice of loss or any material
     destruction  of or damage to the Project or the Property or of any material
     adverse change in the Project or the Property;

          (f)  promptly  upon  their  distribution,   copies  of  all  financial
     statements, reports and proxy statements that Lessee shall have sent to its
     stockholders;

          (g)  promptly  after  the  amending  thereof,  copies  of any  and all
     amendments to its certificate of  incorporation,  articles of incorporation
     or bylaws;

          (h) within 30 days of request by Bondholder,  evidence satisfactory to
     Bondholder   that  Lessee  has  complied   with  the  capital   expenditure
     limitations of Code section 144(a)(4).

     Section 7.02. Books and Records;  Inspection and  Examination.  Lessee will
keep accurate  books of record and account for itself  pertaining to the Project
and the Property and pertaining to Lessee's business and financial condition and
such other matters as Bondholder may from time to time request in which true and
complete entries will be made in accordance with generally  accepted  accounting
principles consistently applied and, upon request of Bondholder, will permit any
officer,  employee,  attorney or  accountant  for  Bondholder,  at  Bondholder's
expense, to audit, review, make extracts from, or copy any and all corporate and
financial  books,  records and properties of Lessee  relating to the Project and
the Property at all times during  ordinary  business  hours,  and to discuss the
affairs of Lessee  with any of its  directors,  officers,  employees  or agents.
Lessee will permit  Bondholder,  or its  employees,  accountants,  attorneys  or
agents,  to examine and copy any or all of its records  relating to the Property
and the Project  and to examine and inspect the Project and the  Property at any
time during Lessee's business hours.

     Section 7.03. Compliance With Laws;  Environmental  Indemnity.  Lessee will
(a)  comply  with the  requirements  of  applicable  laws and  regulations,  the
noncompliance  with which would  materially and adversely affect its business or
its financial condition,  (b) comply with all applicable  Environmental Laws and
regulations and obtain any permits,  licenses or similar  approvals  required by
any such laws or regulations  and (c) use and keep the Project and the Property,
and will require that others use and keep the Project and the Property, only for
lawful purposes,  without violation of any federal,  state or local law, statute
or ordinance.  Lessee shall secure all permits and licenses,  if any,  necessary
for the installation and operation of the Project and the Property. Lessee shall
comply in all respects (including,  without limitation, with respect to the use,
maintenance  and operation of each portion of the Project and the Property) with
all laws of the jurisdictions in which its operations involving any component of
the  Project  or the  Property  may extend  and of any  legislative,  executive,
administrative  or judicial body exercising any power or  jurisdiction  over the
portions of the Project or the  Property  or its  interest

                                       23
<PAGE>

or rights under this Agreement.  Lessee will  indemnify,  defend and hold Lessor
and  Bondholder  harmless  from and against any claims,  loss or damage to which
Lessor or Bondholder may be subjected as a result of any past, present or future
existence, use, handling,  storage,  transportation or disposal of any hazardous
waste or substance or toxic substance by Lessee on the Property or Project. This
indemnification  shall survive the  termination of this Agreement and payment of
the indebtedness hereunder and under the Bond.

     Section 7.04. Environmental  Compliance.  Lessee shall promptly comply with
all  statutes,  regulations  and  ordinances,  and with all  orders,  decrees or
judgments of governmental authorities or courts having jurisdiction, relating to
the use, collection,  treatment,  disposal, storage, control, removal or cleanup
of Hazardous Waste or Materials in, on or under the Property or the Project,  at
Lessee's  expense.  In the  event  that  Bondholder  upon an  Event  of  Default
reasonably  believes  that  the  Property  or the  Project  is not  free  of all
Hazardous  Waste  or  Materials  or that  Lessee  has  violated  any  applicable
Environmental   Laws  with  respect  to  the  Property  or  the  Project,   then
immediately,  upon  request by  Bondholder,  Lessee  shall obtain and furnish to
Bondholder,  at  Lessee's  sole cost and  expense,  an  environmental  audit and
inspection  of the  Property  or the  Project  from an  expert  satisfactory  to
Bondholder.  In the event that Lessee fails to immediately  obtain such audit or
inspection,  Bondholder  or its  agents  may  perform  or obtain  such  audit or
inspection  at  Lessee's  sole  cost and  expense.  Bondholder  may,  but is not
obligated to, enter upon the Property and take such actions and incur such costs
and  expenses to effect such  compliance  as it deems  advisable  to protect its
interest in the Project;  and whether or not Lessee has actual  knowledge of the
existence of Hazardous  Waste or Materials on the  Property,  the Project or any
adjacent  property as of the date hereof,  Lessee shall reimburse  Bondholder as
provided  herein  for the full  amount  of all costs and  expenses  incurred  by
Bondholder   prior  to  Bondholder   acquiring  title  to  the  Project  through
foreclosure or acceptance of a deed in lieu of  foreclosure,  in connection with
such compliance  activities.  Neither this provision nor any provision herein or
in the  Mortgage,  the  Assignment  or related  documents  shall  operate to put
Bondholder  in the position of an owner of the Property or the Project  prior to
any  acquisition of the Project by Bondholder.  The rights granted to Bondholder
herein and in the  Mortgage,  the  Assignment  or related  documents are granted
solely for the protection of Bondholder's  lien and security  interest  covering
the  Project  and do not  grant to  Bondholder  the  right to  control  Lessee's
actions, decisions or policies regarding Hazardous Waste or Materials.

     Section  7.05.  Payment  of Taxes  and  Other  Claims.  Lessee  will pay or
discharge,  when due, (a) all taxes, assessments and governmental charges levied
or  imposed  upon it or upon its income or  profits,  upon the  Project  and the
Property or upon or against  the  creation,  perfection  or  continuance  of the
security interest created pursuant to this Agreement, prior to the date on which
penalties attach thereto, (b) all federal,  state and local taxes required to be
withheld  by it, and (c) all lawful  claims for labor,  materials  and  supplies
which,  if unpaid,  might by law become a lien or charge upon the Project or the
Property;  provided,  that  Lessee  shall not be  required  to pay any such tax,
assessment,  charge or claim whose  amount,  applicability  or validity is being
contested in good faith by appropriate proceedings. Lessee will pay, as the same
respectively come due, all taxes and governmental charges of any kind whatsoever
that may at any time be lawfully  assessed or levied  against or with respect to
the Project or the  Property,  as well as all gas,  water,  steam,  electricity,
heat,  power,  telephone,  utility and other charges  incurred in the operation,
maintenance, use, occupancy and upkeep of the Project or the Property.

                                       24
<PAGE>

     Section 7.06. Maintenance of Project and Property. (a) Lessee shall, at its
own expense,  maintain,  preserve and keep the Property in good repair,  working
order  and  condition,  and  shall  from  time  to time  make  all  repairs  and
replacements  necessary to keep the Project and the Property in such  condition,
and in compliance with state and federal laws,  ordinary wear and tear excepted,
(b) shall not commit waste or permit  impairment or deterioration of the Project
or the Property,  (c) shall not abandon the Project or the  Property,  (d) shall
restore or repair promptly and in a good and workmanlike  manner all or any part
of the  Project or the  Property  in a way that does not  diminish  the value or
utility  of the  Project  or the  Property,  (e)  shall  keep all  improvements,
fixtures, equipment, machinery and appliances on the Project or the Property, in
good repair and shall replace fixtures,  equipment,  machinery and appliances on
the Property when necessary to keep such items in good repair,  (f) shall comply
with all laws, ordinances, regulations and requirements of any governmental body
applicable to the Project or the Property,  (g) if all or part of the Project or
the  Property is for rent or lease,  then  Bondholder,  at its option  after the
occurrence  of  an  Event  of  Default,   may  require  Lessee  to  provide  for
professional  management of the Property by a property  manager  satisfactory to
Bondholder pursuant to a contract approved by Bondholder in writing, unless such
requirement  shall be waived  by  Bondholder  in  writing,  (h) shall  generally
operate and maintain the Project and the Property in a manner to ensure  maximum
rentals,  and (i) shall  give  notice in writing to  Bondholder  of and,  unless
otherwise directed in writing by Bondholder,  appear in and defend any action or
proceeding  purporting  to affect the Project or the  Property,  the security of
this Agreement or the rights or powers of Bondholder  hereunder.  Neither Lessee
nor any tenant or other person shall remove,  demolish or alter any  improvement
now existing or hereafter erected on the Project or the Property or any fixture,
equipment,  machinery or appliance that  constitutes a portion of the Project or
the Property  except when incident to the  replacement  of fixtures,  equipment,
machinery and appliances with items of like kind. In the event that any parts or
accessories  forming  part of any item or items of the Project  become worn out,
lost,  destroyed,  damaged  beyond repair or otherwise  rendered  unfit for use,
Lessee,  at its own  expense  and  expeditiously,  will  replace  or  cause  the
replacement of such parts or  accessories  by  replacement  parts or accessories
free and clear of all liens and  encumbrances  and with a value and  utility  at
least equal to that of the parts or accessories  being  replaced  (assuming that
such replaced  parts and  accessories  were  otherwise in good working order and
repair).  All such  replacement  parts  and  accessories  shall be  deemed to be
incorporated  immediately  into and to  constitute  an  integral  portion of the
Project and, as such,  shall be subject to the terms of this Agreement.  Neither
Bondholder nor Lessor shall have any responsibility in any of these matters,  or
for the making of improvements or additions to the Project or the Property.

     (b) Lessee will defend the Project and the  Property  against all claims or
demands of all persons (other than  Bondholder and Lessor)  claiming the Project
or the  Property  or any  interest  therein.  Lessee  represents,  warrants  and
covenants that the Project and the Property,  if applicable,  is and shall be in
compliance  with  the  American  with  Disabilities  Act of 1990  and all of the
regulations  promulgated  thereunder,  as the same may be  amended  from time to
time.

     (c) Lessee  will keep the Project  and the  Property  free and clear of all
security interests,  liens and encumbrances except the security interest created
pursuant  to this  Agreement  and the  Mortgage  and  except  for the  Permitted
Exceptions.


                                       25
<PAGE>

     Section 7.07. Insurance. (a) Lessee shall obtain and maintain the following
types of insurance upon and relating to the Project:

          (i) "All Risk"  property and fire insurance  (with  extended  coverage
     endorsement  including  malicious  mischief and vandalism) in an amount not
     less than the full replacement  value of the Project (with a deductible not
     to exceed $100,000 and with co-insurance limited to a maximum of 10% of the
     amount of the policy),  naming  Bondholder and Lessor under a lender's loss
     payee  endorsement (form 438BFU or equivalent) and including agreed amount,
     inflation guard, replacement cost and waiver of subrogation endorsements;

          (ii) Comprehensive  general liability  insurance in an amount not less
     than  $1,000,000.00  insuring against  personal injury,  death and property
     damage and naming Bondholder and Lessor as additional insured;

          (iii) Business interruption insurance covering loss of rental or other
     income  (including  all expenses  payable by tenants) for up to twelve (12)
     months; and

          (iv)  Such  other  types of  insurance  or  endorsements  to  existing
     insurance as may be reasonably required from time to time by Bondholder.

     (b) All of the insurance  policies  required  hereunder  shall be issued by
corporate insurers licensed to do business in the state in which the Property is
located  and  rated A:X or better  by A.M.  Best  Company,  and shall be in form
acceptable  to  Bondholder.  If and to the  extent  that the  Project is located
within an area that has been or is hereafter designated or identified as an area
having special flood hazards by the Department of Housing and Urban  Development
or such other  official as shall from time to time be  authorized  by federal or
state law to make such designation  pursuant to any national or state program of
flood insurance,  Lessee shall carry flood insurance with respect to the Project
in amounts  not less than the  maximum  limit of coverage  then  available  with
respect  to  the  Project  or  the  amount  of  the  Bond,  whichever  is  less.
Certificates  of all  insurance  required to be  maintained  hereunder  shall be
delivered to Bondholder,  along with evidence of payment in full of all premiums
required   thereunder,   contemporaneously   with  Lessee's  execution  of  this
Agreement.  All such certificates  shall be in form acceptable to Bondholder and
shall require the  insurance  company to endeavor to give to Bondholder at least
30 days'  prior  written  notice  before  canceling  the policy for any  reason.
Certificates  evidencing all renewal and substitute  policies of insurance shall
be delivered to  Bondholder,  along with  evidence of the payment in full of all
premiums  required  thereunder,  at  least  15 days  before  termination  of the
policies being renewed or substituted.  If any loss shall occur at any time when
Lessee  shall be in  default  hereunder,  Bondholder  shall be  entitled  to the
benefit of all insurance  policies  held or  maintained  by Lessee,  to the same
extent as if same had been made  payable  to  Bondholder,  and upon  foreclosure
hereunder,  Bondholder shall become the owner thereof. Bondholder shall have the
right, but not the obligation, to make premium payments, at Lessee's expense, to
prevent any cancellation, endorsement, alteration or reissuance of any policy of
insurance  maintained  by Lessee,  and such  payments  shall be  accepted by the
insurer to prevent same.

                                       26
<PAGE>
     (d) As among  Bondholder,  Lessee and Lessor,  Lessee assumes all risks and
liabilities from any cause whatsoever,  whether or not covered by insurance, for
loss or damage to any portion of the  Project or  Property  and for injury to or
death of any person or damage to any  property,  whether such injury or death be
with respect to agents or employees of Lessee or of third  parties,  and whether
such property damage be to Lessee's property or the property of others.  Whether
or not covered by insurance, Lessee hereby assumes responsibility for and agrees
to  reimburse  Bondholder  and  Lessor for and will  indemnify,  defend and hold
Bondholder and Lessor  harmless from and against all  liabilities,  obligations,
losses,  damages,  penalties,  claims,  actions,  costs and expenses  (including
reasonable attorneys' fees) of whatsoever kind and nature,  imposed on, incurred
by or asserted  against  Bondholder or Lessor that in any way relate to or arise
out of this Agreement, the transactions contemplated hereby, the Project and the
Property,  including  but  not  limited  to,  (i)  the  selection,  manufacture,
purchase,  acceptance  or  rejection  of the  Project  and the  Property  or the
ownership  of  the  Project  and  the  Property  ,  (ii)  the  delivery,  lease,
possession,  maintenance, use, condition, return or operation of the Project and
the  Property,  (iii) the  condition  of the  Project and the  Property  sold or
otherwise  disposed of after possession by Lessee,  (iv) any patent or copyright
infringement,  (v) the conduct of Lessee,  its  officers,  employees and agents,
(vi) a breach of Lessee of any of its  covenants or  obligations  hereunder  and
(vii)  any  claim,  loss,  cost  or  expense  involving  alleged  damage  to the
environment relating to the Project or the Property,  including, but not limited
to  investigation,  removal,  cleanup and remedial costs. All amounts payable by
Lessee pursuant to the immediately  preceding sentence shall be paid immediately
upon demand of Lessee or Bondholder,  as the case may be. This  provision  shall
survive the termination of this Agreement.

     Section 7.08. Preservation of Corporate Existence. Lessee will preserve and
maintain  its  corporate  existence  and  all  of  its  rights,  privileges  and
franchises  necessary or desirable in the normal  conduct of its  business;  and
shall conduct its business in an orderly, efficient and regular manner.

     Section 7.09.  Performance  by  Bondholder.  If Lessee at any time fails to
perform  or  observe  any of the  covenants  or  agreements  contained  in  this
Agreement,  and if Lessee  shall not have  commenced  to cure  such  failure  10
calendar days after  Bondholder  gives Lessee  written notice thereof (or in the
case of the agreements  contained in Sections 7.06 and 7.07 hereof,  immediately
upon  the  occurrence  of such  failure,  without  notice  or  lapse  of  time),
Bondholder may, but need not,  perform or observe such covenant on behalf and in
the name, place and stead of Lessee (or, at Bondholder's option, in Bondholder's
name) and may, but need not, take any and all other actions which Bondholder may
reasonably  deem necessary to cure or correct such failure  (including,  without
limitation,  the payment of taxes, the satisfaction of security interests, liens
or encumbrances, the performance of obligations owed to account debtors or other
obligors,  the  procurement  and  maintenance  of  insurance,  the  execution of
assignments,  security agreements and financing statements,  and the endorsement
of  instruments);  and Lessee shall  thereupon  pay to  Bondholder on demand the
amount of all moneys expended and all costs and expenses  (including  reasonable
attorneys' fees and legal expenses) incurred by Bondholder in connection with or
as a result of the performance or observance of such agreements or the taking of
such action by Bondholder, together with interest thereon from the date expended
or incurred at the lesser of 18% per annum or the highest rate permitted by law.
To facilitate  the  performance or observance by Bondholder of such covenants of
Lessee,  Lessee  hereby  irrevocably  appoints  Bondholder,  or the  delegate of
Bondholder,  acting alone, as the attorney in

                                       27

<PAGE>

fact of Lessee  with the right  (but not the duty)  from time to time to create,
prepare,  complete,  execute, deliver, endorse or file in the name and on behalf
of Lessee any and all instruments,  documents, assignments, security agreements,
financing  statements,  applications  for  insurance  and other  agreements  and
writings  required to be  obtained,  executed,  delivered  or endorsed by Lessee
under this Agreement.

     Section 7.10. Limitations of Liability. In no event, whether as a result of
breach of contract,  warranty,  tort (including negligence or strict liability),
indemnity or otherwise,  shall Bondholder,  its assignees,  if any, or Lessor be
liable for any special,  consequential,  incidental,  punitive or penal damages,
including,  but not limited  to,  loss of profit or revenue,  loss of use of the
Premises or any associated equipment,  service materials or software,  damage to
associated  equipment,  service materials or software,  cost of capital, cost of
substitute  property,  service  materials or software,  facilities,  services or
replacement power or downtime costs.

     Section 7.11.  Kansas  Retailers'  Sales Tax. The parties have entered into
this Agreement in contemplation  that,  under the existing  provisions of K.S.A.
79-3606(d) and other  applicable laws,  sales of tangible  personal  property or
services  purchased in connection with  construction of the Project are entitled
to exemption  from the tax imposed by the Kansas  Retailers'  Sales Tax Act. The
parties  agree  that  Lessor  shall,  upon  the  request  of and  with  Lessee's
assistance,  promptly  obtain from the State and furnish to the  contractors and
suppliers an exemption  certificate for the construction of the Project.  Lessee
covenants that the exemption  will be used only in connection  with the purchase
of tangible personal property or services becoming a part of the Project.

     Section 7.12. Indemnification. (a) Lessee releases Lessor from, agrees that
Lessor shall not be liable for, and indemnifies Lessor against, all liabilities,
losses,  damages  (including  reasonable  attorneys'  fees),  causes  of  action
(including  negligent  acts),  suits,  claims,  costs and expenses,  demands and
judgments of any nature imposed upon or asserted against Lessor on account of:

          (i) any loss or damage to property or injury to or death of or loss by
     any person that may be occasioned by any cause whatsoever pertaining to the
     construction, maintenance, operation and use of the Project;

          (ii) any breach or default on the part of Lessee in the performance of
     any covenant or  agreement  of Lessee  under this  Agreement or any related
     document,  or arising  from any act or failure to act by Lessee,  or any of
     its agents, contractors, servants, employees or licensees;

          (iii)  violation of any law,  ordinance or  regulation  affecting  the
     ownership, occupancy or use of the Project;

          (iv)  the  authorization,  issuance  and  sale  of the  Bond,  and the
     provision of any  information  furnished by Lessee in connection  therewith
     concerning  the  Project  or  Lessee  or  arising  from (A) any  errors  or
     omissions of any nature  whatsoever  such that the Bond,  when delivered to
     Bondholder, are not validly issued and binding obligations of Lessor or (B)
     any fraud or  misrepresentations  or omissions contained in the proceedings
     of Lessor
                                       28
<PAGE>

     furnished by or attributable to Lessee relating to the issuance of the Bond
     which, if known to the original  purchaser of the Bond, might reasonably be
     considered a material factor in its decision to purchase the Bond; and

          (v) any claim or action or proceeding  with respect to the matters set
     forth in subsections (i), (ii), (iii) and (iv) above brought thereon.

     (b) Lessee agrees to indemnify  Lessor for and to hold it harmless  against
all  liabilities,  claims,  costs and expenses  incurred  without  negligence or
willful  misconduct  on the part of Lessor,  on  account of any action  taken or
omitted to be taken by Lessor in  accordance  with the terms of this  Agreement,
the Bond or the Escrow  Agreement  or any action taken at the request of or with
the consent of Lessee,  including  the costs and expenses of Lessor in defending
itself against any such claim,  action or proceeding  brought in connection with
the exercise or performance of any of its powers or duties under this Agreement,
the Bond or the Escrow Agreement.

     (c) In case any action or proceeding is brought  against  Lessor in respect
of which indemnity may be sought  hereunder,  the party seeking  indemnity shall
promptly  give notice of that action or  proceeding  to Lessee,  and Lessee upon
receipt of that  notice  shall have the  obligation  and the right to assume the
defense of the action or proceeding;  provided,  that failure of a party to give
that notice  shall not relieve  Lessee  from any of its  obligations  under this
Section  unless that failure  prejudices the defense of the action or proceeding
by Lessee.  At its own expense,  an indemnified  party may employ separate legal
counsel  and  participate  in the  defense.  Lessee  shall not be liable for any
settlement without its consent.

     (d) The  indemnification  set forth above is intended to and shall  include
the  indemnification  of  all  affected  commissioners,   officials,  directors,
officers,  attorneys,  accountants,  financial advisors,  staff and employees of
Lessor.  That  indemnification is intended to and shall be enforceable by Lessor
to the full extent permitted by law.

     Section 7.13. Agreement to Pay Attorneys' Fees and Expenses.  In connection
with any Event of Default by Lessee, if Lessor employs attorneys or incurs other
expenses for the collection of amounts  payable  hereunder or the enforcement of
the  performance  or  observance  of any  covenants or agreements on the part of
Lessee herein contained,  Lessee agrees that it will, on demand  therefore,  pay
such party the  reasonable  fees of such  attorneys  and such  other  reasonable
expenses so incurred by such party.

     Section 7.14.  Current Ratio.  Borrower will at all times keep and maintain
the ratio of  Consolidated  Current Assets (as defined in the Note Agreement) to
Consolidated  Current Liabilities (as defined in the Note Agreement) at not less
than 1.50 to 1.00.

     Section 7.15.  Consolidated  Tangible Net Worth. Borrower will at all times
keep and  maintain  Consolidated  Tangible  Net  Worth (as  defined  in the Note
Agreement)  at an amount not less than the greater of (i)  $70,000,000  and (ii)
the sum of $70,000,000  plus 50% of  Consolidated  Net Income (as defined in the
Note  Agreement)  for the period  from and after  March 31,  1993 to the date of
determination thereof (considered as a single accounting period).

                                       29
<PAGE>

     Section 7.16. Fixed Charges Coverage Ratio. Borrower will not permit, as at
the end of each  fiscal  quarter,  the ratio of Net Income  Available  for Fixed
Charges (as defined in the Note  Agreement)  to Fixed Charges (as defined in the
Note Agreement) for the period of four  consecutive  fiscal quarters then ending
to be less than 1.50 to 1.00.

                                  ARTICLE VIII
                          NEGATIVE COVENANTS OF LESSEE

     So long as the Lease and the Bond shall remain unpaid, Lessee agrees that:

     Section 8.01.  Lien.  Lessee will not create,  incur or suffer to exist any
mortgage, deed of trust, pledge, lien, security interest, assignment or transfer
upon or of any of the Project or the Property  except for the security  interest
created  pursuant  to this  Agreement  and the  liens  created  pursuant  to the
Mortgage and the Permitted Exceptions.

     Section 8.02. Sale of Assets. Lessee will not sell, lease, assign, transfer
or  otherwise  dispose  of all or a  substantial  part of its  assets  or of any
portion of the Project or the Property or any interest  therein  (whether in one
transaction  or in a series  of  transactions).  Notwithstanding  any  provision
herein,  in the  Mortgage  or in the  Assignment  to the  contrary,  Lessee  may
sub-lease the Property and the Project to any wholly-owned subsidiary of Lessee,
provided that such wholly-owned subsidiary subordinates in writing its leasehold
interest in the Project and the Property to the Mortgage.

     Section 8.03. Consolidation and Merger. Lessee will not consolidate with or
merge into any person,  or permit any other  person to merge into it, or acquire
(in a transaction  analogous in purpose or effect to a consolidation  or merger)
all or substantially all of the assets of any other person, unless:

          (a) Lessee shall be the  continuing  corporation,  or the successor or
     transferee corporation ("Successor") shall be a corporation organized under
     the laws of the United State of America or a state  thereof or the District
     of Columbia;

          (b)  Successor,  if any,  expressly  assumes in writing  delivered  to
     Bondholder  the due and  punctual  payment  of all  obligations  under this
     Agreement according to their tenor and the due and punctual performance and
     observance  of  all  covenants  and  conditions  of  this  Agreement  to be
     performed by Successor,  and Bondholder  has received a legal  opinion,  in
     form and  substance  acceptable  to  Bondholder,  to the  effect  that this
     Agreement  is  the  legal,   valid  and  binding  obligation  of  Successor
     enforceable in accordance with its terms;

          (c) if Lessee  becomes a  wholly-owned  subsidiary  of another  entity
     ("Parent"),  Parent delivers to Bondholder a guaranty in form and substance
     acceptable to Bondholder,  guaranteeing the due and punctual payment of all
     obligations hereunder;

          (d)  Bondholder  has received an opinion of bond counsel,  in form and
     substance acceptable to Bondholder,  to the effect that under then existing
     laws the

                                       30
<PAGE>

     consummation  of such  merger,  consolidation  or sale  would not cause the
     interest on the Bond to become includable in gross income under the Code or
     adversely affect the validity of this Agreement or the Bond;

          (e) immediately  after such merger,  consolidation or sale,  Lessee or
     Survivor shall meet the  requirements of Sections 7.14 through 7.16 hereof;
     and

          (f)  immediately  after such  consolidation  or merger,  no Default or
     Event of Default exists under this Agreement.

     Section 8.04.  Accounting.  Lessee will not adopt, permit or consent to any
material  change in  accounting  principles  other than as required by generally
accepted accounting principles.  Lessee will not adopt, permit or consent to any
change in its fiscal year.

     Section  8.05.  Transfers.  Lessee  will  not in any  manner  transfer  any
property without prior or present receipt of full and adequate consideration.

     Section 8.06. Other Defaults. Lessee will not permit any breach, default or
event of default by Lessee to occur under any note, loan  agreement,  indenture,
lease,  mortgage,  contract for deed,  security  agreement or other  contractual
obligation binding upon Lessee or any judgment,  decree,  order or determination
applicable  to Lessee  that  would have a material  adverse  effect on  Lessee's
financial or operating condition.

     Section 8.07.  Modifications  and  Substitutions.  Lessee will not make any
material alterations,  modifications or additions to the Project or the Property
without the prior written  consent of  Bondholder  unless  required  pursuant to
Section  7.06 hereof.  Lessee shall  provide  such  documents or  assurances  as
Bondholder may reasonably  request to maintain or confirm the security  interest
assigned  to  Bondholder  in the  Project  and the  Property  as so  modified or
substituted.

     Section 8.08. Use of the Project and the Property. Lessee will not install,
use, operate or maintain the Project or the Property improperly,  carelessly, in
violation of any applicable law or in a manner contrary to that  contemplated by
this Agreement. Also, unless required by applicable law or unless Bondholder has
otherwise agreed in writing, Lessee shall not allow changes in the use for which
all or any part of the  Property or the  Project  was  intended at the time this
Agreement was executed.  Lessee shall not,  without  Bondholder's  prior written
consent,  (a)  initiate or  acquiesce  in a change in the zoning  classification
(including any variance under any existing  zoning  ordinance  applicable to the
Property or the  Project),  (b) permit the use of the Property or the Project to
become a non-conforming  use under applicable  zoning  ordinances,  (c) file any
subdivision  or parcel map affecting the Property or the Project,  or (d) amend,
modify or consent to any  easement or  covenants,  conditions  and  restrictions
pertaining to the Property or the Project.

                                       31
<PAGE>
                                   ARTICLE IX
            DAMAGE AND DESTRUCTION; USE OF NET PROCEEDS; CONDEMNATION

     Section  9.01.  Damage  and  Destruction  Lessee  shall  provide a complete
written  report  to  Bondholder  immediately  upon any  loss,  theft,  damage or
destruction  of any  portion of the Project  that  exceeds  $100,000  and of any
accident  involving  any  Project.  If all or any portion of the Project  with a
value of at least $100,000 is lost,  stolen,  destroyed or damaged beyond repair
("Damaged  Property"),  Lessee  shall as soon as  practicable  after  such event
either:  (a) replace the same at Lessee's  sole cost and expense  with  property
having substantially similar specifications and of equal or greater value to the
Damaged  Property  immediately  prior to the time of the loss  occurrence,  such
replacement  property to be subject to  Bondholder's  approval,  whereupon  such
replacement  property  shall be  substituted  in this  Agreement  and the  other
related  documents  by  appropriate  endorsement  or  amendment;  or (b) pay the
applicable  Prepayment  Amount of the  Damaged  Property.  Lessee  shall  notify
Bondholder  of which course of action it will take within 15 calendar days after
the loss  occurrence.  If, within 45 calendar days of the loss  occurrence,  (a)
Lessee fails to notify Bondholder;  (b) Lessee and Bondholder fail to execute an
amendment  to  this  Agreement  to  delete  the  Damaged  Property  and  add the
replacement  property  or (c)  Lessee  fails  to pay the  applicable  Prepayment
Amount,  then  Bondholder  may, at its sole  discretion,  declare the applicable
Prepayment  Amount to be immediately due and payable,  and Lessee is required to
pay the same.  The  payment  of the  Prepayment  Amount and the  termination  of
Bondholder's interest in the Damaged Property is subject to the terms of Section
2.07 hereof.  For purposes of this Article,  the term "Net Proceeds"  shall mean
the  amount  remaining  from  the  gross  proceeds  of any  insurance  claim  or
condemnation award after deducting all expenses (including reasonable attorneys'
fees) incurred in the collection of such claim or award.

     Section 9.02.  Condemnation.  If the Project, or any part thereof, shall be
condemned  for any  reason,  including  without  limitation  fire or  earthquake
damage,  or otherwise  taken for public or  quasi-public  use under the power of
eminent domain, or be transferred in lieu thereof,  all damages or other amounts
awarded for the taking of, or injury to, the Project shall be paid to Bondholder
who shall  have the right,  in its sole and  absolute  discretion,  to apply the
amounts so received against (a) the costs and expenses of Bondholder,  including
attorneys' fees incurred in connection with collection of such amounts,  and (b)
the balance against the Indebtedness; provided, however, that if (i) no Event of
Default shall have occurred and be continuing  hereunder,  (ii) Lessee  provides
evidence  satisfactory to Bondholder of its ability to pay all amounts  becoming
due  hereunder  during  the  pendency  of  any  restoration  or  repairs  to  or
replacement of the Project, (iii) Bondholder determines, in its sole discretion,
that the proceeds of such award are sufficient to restore,  repair,  replace and
rebuild the Project as nearly as possible to its value,  condition and character
immediately  prior  to such  taking  (or,  if the  proceeds  of such  award  are
insufficient   for  such  purpose,   if  Lessee  provides   additional  sums  to
Bondholder's satisfaction so that the aggregate of such sums and the proceeds of
such  award will be  sufficient  for such  purpose),  and (iv)  Lessee  provides
evidence satisfactory to Bondholder that none of the tenants of the Project will
terminate  their  lease  agreements  as a result of either the  condemnation  or
taking or the repairs to or  replacement  of the  Project,  the proceeds of such
award,  together with additional  sums provided by Lessee,  shall be placed in a
separate account for the benefit of Bondholder and Lessee to be used to restore,
repair,  replace  and  rebuild  the  Project as nearly as possible to its value,
condition  and  character  immediately  prior  to such  taking.  All  work to be

                                       32
<PAGE>

performed  in  connection  therewith  shall be  pursuant  to a written  contract
therefore,  which contract shall be subject to the prior approval of Bondholder.
To the extent that any funds  remain  after the Project has been so restored and
repaired,  the same shall be applied  against the  Indebtedness in such order as
Bondholder  may elect.  To enforce  its rights  hereunder,  Bondholder  shall be
entitled to participate in and control any  condemnation  proceedings  and to be
represented  therein by counsel of its own choice,  and Lessee will deliver,  or
cause to be delivered to Bondholder  such  instruments as may be requested by it
from time to time to permit such  participation.  In the event Bondholder,  as a
result of any such  judgment,  decree or award,  believes  that the  payment  or
performance  of the Lease or the Bond is  impaired,  Bondholder  may declare the
obligations hereunder immediately due and payable.

                                   ARTICLE X
                       ASSIGNMENT, SUBLEASING AND SELLING

     Section  10.01.   Assignment  by  Bondholder.   This  Agreement,   and  the
obligations of Lessee to make payments hereunder, may be assigned and reassigned
in whole  or in part to one or more  assignees  or  subassignees  (who  shall be
purchaser  of the  Bond  or an  interest  therein)  by  Bondholder  at any  time
subsequent to its  execution,  without the necessity of obtaining the consent of
Lessor or Lessee;  provided,  however,  that no such  assignment or reassignment
shall be effective  unless and until (a) Lessor and Lessee  shall have  received
notice of the assignment or reassignment  disclosing the name and address of the
assignee or  subassignee,  which notice Lessor shall maintain as evidence of the
ownership  and  registration  of  the  Bond,  and  (b) in the  event  that  such
assignment  or  reassignment  is made to a bank or trust  company as trustee for
holders of certificates  representing  interests in this Agreement and the Bond,
such bank or trust  company  agrees to maintain,  or cause to be  maintained,  a
book-entry  system by which a record of the names and  addresses of such holders
as of any particular time is kept and agrees,  upon request of Lessor or Lessee,
to  furnish  such  information  to Lessor or Lessee.  Upon  receipt of notice of
assignment,  Lessee will reflect in a book-entry the assignee designated in such
notice of  assignment,  and shall  agree to make all  payments  to the  assignee
designated  in the notice of  assignment,  notwithstanding  any claim,  defense,
setoff  or  counterclaim  whatsoever  (whether  arising  from a  breach  of this
Agreement  or  otherwise)  that  Lessor  and  Lessee  may from time to time have
against  Bondholder  or the  assignee.  Lessor and Lessee  agree to execute  all
documents,  including  notices of assignment and chattel  mortgages or financing
statements,  which may be reasonably  requested by Bondholder or its assignee to
protect their interest in the Project and in this Agreement.

     Section  10.02.  No Sale or  Assignment by Lessee.  This  Agreement and the
interest  of Lessee in the  Project or the  Property  may not be sold,  assumed,
assigned or encumbered by Lessee.

                                   ARTICLE XI
                         EVENTS OF DEFAULT AND REMEDIES

     Section  11.01.  Events of Default.  The  following  constitute  "Events of
Default" under this Agreement:

                                       33

<PAGE>

          (a)  failure by Lessee to pay to  Bondholder,  as  assignee of Lessor,
     when due any Lease Payment or to pay any other payment  required to be paid
     hereunder and the continuation of such failure for a period of 10 days;

          (b)  failure  by  Lessee  to  maintain  insurance  on the  Project  in
     accordance with Section 7.06 hereof;

          (c) failure by Lessee to comply with the  provisions of Sections 6.04,
     7.14, 7.15, 7.16, 8.01, 8.02 or 8.03 hereof;

          (d)  failure  by Lessee or Lessor to  observe  and  perform  any other
     covenant, condition or agreement contained herein, in the Escrow Agreement,
     in the Mortgage, in the Assignment,  in the Hazardous Substances Agreement,
     in the Tax  Compliance  Agreement  or in any other  document  or  agreement
     executed in connection herewith on its part to be observed or performed for
     a period of 30 days after written  notice is given to Lessee or Lessor,  as
     the case may be, specifying such failure and directing that it be remedied;
     provided,  however,  that,  if the failure  stated in such notice cannot be
     corrected  within  such 30-day  period,  Bondholder  will not  unreasonably
     withhold its consent to an extension of such time if  corrective  action is
     instituted by Lessee or Lessor,  as the case may be, within the  applicable
     period and diligently pursued until the default is corrected;

          (e)  initiation  by Lessor of a proceeding  under any federal or state
     bankruptcy or insolvency law seeking relief under such laws  concerning the
     indebtedness of Lessor;

          (f)  Lessee  shall be or become  insolvent,  or admit in  writing  its
     inability to pay its debts as they mature,  or make an  assignment  for the
     benefit  of  creditors;  or  Lessee  shall  apply  for  or  consent  to the
     appointment of any receiver,  trustee or similar  officer for it or for all
     or any  substantial  part of its  property;  or such  receiver,  trustee or
     similar  officer shall be appointed  without the  application or consent of
     Lessee,  as the  case may be;  or  Lessee  shall  institute  (by  petition,
     application,  answer,  consent or otherwise)  any  bankruptcy,  insolvency,
     reorganization, arrangement, readjustment of debt, dissolution, liquidation
     or similar proceeding relating to it under the laws of any jurisdiction; or
     any such  proceeding  shall be  instituted  (by  petition,  application  or
     otherwise) against Lessee; or any judgment,  writ, warrant of attachment or
     execution  or  similar   process  shall  be  issued  or  levied  against  a
     substantial part of the property of Lessee;

          (g)  determination by Bondholder that any  representation  or warranty
     made by Lessee or Lessor herein, in the Mortgage, in the Assignment, in the
     Hazardous Substance  Agreement,  in the Tax Compliance  Agreement or in any
     other document  executed in connection  herewith was untrue in any material
     respect when made;

          (h) Lessee improperly files an amendment or termination  relating to a
     filed  financing  statement  describing  any of the  Project or (ii) anyone
     (other  than  Lessee  or  Bondholder)  improperly  files  an  amendment  or
     termination  relating to a filed financing statement  describing any of the
     Project and such filing  remains of record for 20 days after written notice
     is given to Lessee by Bondholder;

          (i) an Event of Taxability shall occur;

                                       34
<PAGE>

          (j) the occurrence of a default or event of default under the Mortgage
     or the Assignment; or

          (k) the  occurrence  of a  default  or an event of  default  under any
     instrument,  agreement  or other  document  evidencing  or  relating to any
     indebtedness  or other  monetary  obligation  of Lessee that has a material
     adverse effect on Lessee's financial or operating condition.

     Section  11.02.  Remedies on Default.  Whenever any Event of Default  shall
have occurred,  Bondholder,  as assignee of Lessor, shall have the right, at its
sole  option  without  any  further  demand  or  notice,  to take any one or any
combination of the following remedial steps insofar as the same are available to
secured  parties  under Article 9 of the UCC in effect in the State from time to
time and which are otherwise  accorded to Bondholder,  as assignee of Lessor, by
applicable law:

          (a) by  notice  to  Lessor  and  Lessee,  declare  the  entire  unpaid
     principal amount of the Lease and the Bond then  outstanding,  all interest
     accrued and unpaid thereon and all amounts  payable under this Agreement to
     be  forthwith  due and  payable,  whereupon  the  Lease,  all such  accrued
     interest  and all  such  amounts  shall  become  and be  forthwith  due and
     payable, without presentment, notice of dishonor, protest or further notice
     of any kind, all of which are hereby expressly waived by Lessee;

          (b) take  possession  of the Project  wherever  situated,  without any
     court order or other process of law and without  liability for entering the
     premises,  and lease, sublease or make other disposition of the Project for
     use over a term in a commercially reasonable manner, all for the account of
     Bondholder,  provided  that Lessee  shall  remain  directly  liable for the
     deficiency,  if any,  between the rent or other amounts paid by a lessee or
     sublessee of the Project pursuant to such lease or sublease during the same
     period  of  time,  after  deducting  all  costs  and  expenses,   including
     reasonable  attorneys'  fees and  expenses,  incurred  with  respect to the
     recovery, repair and storage of the Project during such period of time;

          (c) take  possession  of the Project  wherever  situated,  without any
     court order or other process of law and without  liability for entering the
     premises,  and sell the Project in a commercially  reasonable  manner.  All
     proceeds from such sale shall be applied in the following manner:

               FIRST,  to pay all  proper  and  reasonable  costs  and  expenses
          associated with the recovery, repair, storage and sale of the Project,
          including reasonable attorneys' fees and expenses;

               SECOND,  to pay (i)  Bondholder  the amount of all  unpaid  Lease
          Payments or other  obligations  (whether  direct or  indirect  owed by
          Lessee to Bondholder),  if any, which are then due and owing, together
          with  interest  and late charges  thereon,  (ii)  Bondholder  the then
          applicable  Prepayment  Amount  (taking  into  account  the payment of
          past-due Lease Payments as aforesaid),  plus a pro rata  allocation of
          interest,  at the rate utilized to calculate the Lease Payments,  from
          the

                                       35
<PAGE>

          next  preceding  due date of a Lease Payment until the date of payment
          by the buyer,  and (iii) any other  amounts due  hereunder,  including
          indemnity payments, taxes, charges,  reimbursement of any advances and
          other amounts payable to Bondholder or Lessor hereunder; and

               THIRD, to pay the remainder of the sale proceeds, purchase moneys
          or other amounts paid by a buyer of the Project to Lessee;

          (d)  exercise  all  rights and  remedies  under the  Mortgage  and the
     Assignment;

          (e)  proceed  by   appropriate   court  action  to  enforce   specific
     performance  by  Lessor  or  Lessee  of the  applicable  covenants  of this
     Agreement or to recover for the breach  thereof,  including  the payment of
     all amounts due from  Lessee.  Lessee shall pay or repay to  Bondholder  or
     Lessor  all  costs of such  action  or  court  action,  including,  without
     limitation, reasonable attorneys' fees; and

          (f) take whatever action at law or in equity that may appear necessary
     or  desirable  to enforce its rights with  respect to the  Project.  Lessee
     shall  pay or repay to  Bondholder  or Lessor  all costs of such  action or
     court action, including, without limitation, reasonable attorneys' fees.

     Notwithstanding any other remedy exercised  hereunder,  Lessee shall remain
obligated to pay to Bondholder any unpaid portion of the Prepayment Amount.

     Section  11.03.  No Remedy  Exclusive.  No remedy herein  conferred upon or
reserved to  Bondholder  or Lessor is intended  to be  exclusive  and every such
remedy shall be cumulative  and shall be in addition to every other remedy given
under this Agreement or now or hereafter  existing at law or in equity. No delay
or omission to exercise  any right or power  accruing  upon any Event of Default
shall  impair  any such  right or  power  or shall be  construed  to be a waiver
thereof,  but any such right or power may be exercised  from time to time and as
often as may be deemed  expedient.  In order to entitle  Bondholder or Lessor to
exercise any remedy reserved to it in this Article, it shall not be necessary to
give any notice other than such notice as may be required by this  Article.  All
remedies herein conferred upon or reserved to Bondholder or Lessor shall survive
the termination of this Agreement.

     Section  11.04.  Late Lease  Payments.  If Lessee is set up on an automatic
debit/credit  payment  system in  connection  with  making  the  Lease  Payments
hereunder,  any Lease  Payment not paid by Lessee on the due date  hereof  shall
bear  interest  from the due date to the date of payment at the lesser of 18% or
the highest rate permitted by law, and Lessee shall be obligated to pay the same
immediately upon receipt of Bondholder's written invoice therefore. If Lessee is
not set up on an automatic  debt/credit  payment  system,  any Lease Payment not
paid by Lessee on the due date thereof shall, to the extent  permissible by law,
bear a late  charge  equal to the lesser of five cents  ($.05) per dollar of the
delinquent  amount or the lawful  maximum,  and Lessee shall be obligated to pay
the same immediately upon receipt of Bondholder's written invoice therefor.

                                       36
<PAGE>

                                   ARTICLE XII
                                  MISCELLANEOUS

     Section  12.01.  Costs and  Expenses  of  Bondholder.  Lessee  shall pay to
Bondholder,  in addition to the Lease Payments payable by Lessee hereunder, such
amounts  in each year as shall be  required  by  Bondholder  in  payment  of any
reasonable  costs and expenses  incurred by Bondholder  in  connection  with the
enforcement of this Agreement  (including,  without limitation,  attorneys' fees
and  disbursements)  and all other direct and  necessary  costs of Bondholder or
charges  required  to be paid by it in order to enforce its rights  under,  this
Agreement.  Such costs and expenses shall be billed to Lessee by Bondholder from
time to time, together with a statement certifying that the amount so billed has
been paid by Bondholder  for one or more of the items above  described,  or that
such amount is then  payable by  Bondholder  for such  items.  Amounts so billed
shall be due and payable by Lessee  within 30 days after  receipt of the bill by
Lessee.

     Section  12.02.  Disclaimer of  Warranties.  BONDHOLDER  AND LESSOR MAKE NO
WARRANTY OR REPRESENTATION,  EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, DESIGN,
CONDITION,  MERCHANTABILITY  OR FITNESS FOR A PARTICULAR  PURPOSE OR FITNESS FOR
USE OF THE PROJECT OR THE  PROPERTY,  OR ANY OTHER  WARRANTY OR  REPRESENTATION,
EXPRESS OR IMPLIED, WITH RESPECT THERETO. In no event shall Bondholder or Lessor
be liable  for any loss or  damage in  connection  with or  arising  out of this
Agreement, the Project, the Property or the existence,  furnishing,  functioning
or  Lessee's  use of any  item or  products  or  services  provided  for in this
Agreement.

     Section 12.03. Notices. All notices,  certificates,  requests,  demands and
other communications provided for hereunder or under the Escrow Agreement or the
Tax  Compliance  Agreement  shall be in  writing  and  shall  be (a)  personally
delivered,  (b) sent by first class United  States  mail,  (c) sent by overnight
courier of national  reputation,  or (d)  transmitted by telecopy,  in each case
addressed to the party to whom notice is being given at its address as set forth
above and, if telecopied, transmitted to that party at its telecopier number set
forth above or, as to each party, at such other address or telecopier  number as
may hereafter be designated by such party in a written notice to the other party
complying  as to  delivery  with the terms of this  Section.  All such  notices,
requests, demands and other communications shall be deemed to have been given on
(a) the date  received  if  personally  delivered,  (b) the third  Business  Day
following  deposit when deposited in the mail if delivered by mail, (c) the date
after delivery to an overnight carrier if sent by overnight courier,  or (d) the
date of  transmission  if  delivered  by  telecopy.  If  notice to Lessee of any
intended  disposition of the Project or any other intended action is required by
law  in  a  particular  instance,  such  notice  shall  be  deemed  commercially
reasonable  if given  (in the  manner  specified  in this  Section)  at least 10
calendar days prior to the date of intended disposition or other action.

     Section 12.04.  Further  Assurance and Corrective  Instruments.  Lessor and
Lessee hereby agree that they will, from time to time, execute,  acknowledge and
deliver, or cause to be executed, acknowledged and delivered, such further acts,
instruments,  conveyances,  transfers and assurances,  as Bondholder  reasonably
deems necessary or advisable for the implementation,

                                       37
<PAGE>

correction,  confirmation  or perfection of this  Agreement,  the Mortgage,  the
Assignment,  the Hazardous Substances Agreement, the Escrow Agreement or the Tax
Compliance Agreement and any rights of Bondholder hereunder or thereunder.

     Section 12.05.  Binding Effect;  Time of the Essence.  This Agreement shall
inure to the benefit of and shall be binding upon Bondholder, Lessor, Lessee and
their respective successors and assigns. Time is of the essence.

     Section 12.06.  Severability.  In the event any provision of this Agreement
shall be held invalid or unenforceable  by any court of competent  jurisdiction,
such holding shall not invalidate or render  unenforceable  any other  provision
hereof.

     Section  12.07.  Amendments.  To the extent  permitted by law, the terms of
this Agreement shall not be waived, altered,  modified,  supplemented or amended
in any manner  whatsoever  except by written  instrument  signed by the  parties
hereto, and then such waiver, consent, modification or change shall be effective
only in the specific instance and for the specific purpose given.

     Section 12.08. Execution in Counterparts. This Agreement may be executed in
several counterparts,  each of which shall be an original and all of which shall
constitute  one and the  same  instrument,  and any of the  parties  hereto  may
execute this Agreement by signing any such  counterpart,  provided that only the
original  marked  "Original:  1 of  6"  on  the  execution  page  thereof  shall
constitute chattel paper under the UCC.

     Section  12.09.  Applicable  Law. This  Agreement  shall be governed by and
construed in accordance with the laws of the State.

     Section 12.10. Captions. The captions or headings in this Agreement are for
convenience only and in no way define,  limit or describe the scope or intent of
any provisions or sections of this Agreement.

     Section  12.11.  Entire  Agreement.  This  Agreement,  the  Tax  Compliance
Agreement,  the Escrow Agreement and the exhibits hereto and thereto  constitute
the entire agreement among Bondholder,  Lessor,  Lessee and Escrow Agent.  There
are no understandings,  agreements,  representations  or warranties,  express or
implied,  not specified herein or in such documents  regarding this Agreement or
the Project financed hereby.

     Section 12.12.  Usury.  It is the intention of the parties hereto to comply
with any applicable usury laws; accordingly,  it is agreed that, notwithstanding
any  provisions  to the  contrary  in this  Agreement,  in no event  shall  this
Agreement require the payment or permit the collection of interest or any amount
in the  nature  of  interest  or fees in  excess  of the  maximum  permitted  by
applicable law.

     Section  12.13.  Bound  Transcripts.  Within 90 days of the day of closing,
Lessee  shall  prepare  and furnish or cause to be prepared  and  furnished,  at
Lessee's expense,  to Bondholder and its counsel,  bound transcripts  containing
this  Agreement,   the  Mortgage,  the  Assignment,   the  Hazardous  Substances
Agreement,  the Escrow  Agreement,  the Tax  Compliance  Agreement and all other
documents related thereto.

                                       38
<PAGE>

     Section  12.14.  No  Pecuniary  Liability.  No  provision,  representation,
covenant or agreement  contained in this Agreement,  the Escrow Agreement or the
Bond or any  obligation  herein or therein  imposed upon  Lessor,  or the breach
thereof,  shall  constitute  or give rise to or impose  upon  Lessor a pecuniary
liability  (except to the extent of any rental  payments,  revenues and receipts
derived by Lessor  pursuant to this  Agreement).  No  provision  hereof shall be
construed  to  impose a charge  against  the  general  credit  of  Lessor or any
personal or pecuniary  liability upon any commissioner,  official or employee of
Lessor.

     Section  12.15.  Extent of  Covenants  of Lessor;  No Personal or Pecuniary
Liability. (a) No covenant,  agreement or obligation contained in this Agreement
shall be deemed to be a  covenant,  agreement  or  obligation  of any present or
future  commissioner,  officer,  employee  or  agent  of  Lessor  in  his or her
individual  capacity,  and neither the  commissioners  of Lessor nor any officer
thereof  executing the Bond shall be liable personally on the Bond or be subject
to any personal  liability or  accountability by reason of the issuance thereof.
No commissioner,  officer,  employee or agent of Lessor shall incur any personal
liability  with  respect  to any  other  action  taken by him  pursuant  to this
Agreement or the Act, provided such member,  officer,  employee or agent acts in
good faith.

     (b) No  agreements  or  provisions  contained  in  this  Agreement  nor any
agreement,  covenant or undertaking by Lessor contained in any document executed
by Lessor in connection with the Project, or the issuance,  sale and delivery of
the Bond  shall  give  rise to any  pecuniary  liability  of  Lessor or a charge
against its general  credit,  or shall  obligate  Lessor  financially in any way
except as may be payable  from the Lease  Payments by Lessee and the proceeds of
the Bond. No failure of Lessor to comply with any term,  condition,  covenant or
agreement  herein or in any document  executed by Lessor in connection  with the
issuance and sale of the Bond shall  subject  Lessor to liability  for any claim
for damages,  costs or other financial or pecuniary  charge except to the extent
that the same can be paid or  recovered  from the Lease  Payments or proceeds of
the Bond.  Nothing in this  Agreement  precludes a proper party in interest from
seeking and  obtaining,  to the extent  permitted by law,  specific  performance
against Lessor for any failure to comply with any term,  condition,  covenant or
agreement herein, provided that no costs, expenses or other monetary relief will
be  recoverable  from Lessor  except as may be payable  from the  repayments  by
Lessee under this Lease Agreement or from the proceeds of the Bond.

     (c) No  recourse  shall  be had for the  payment  of this  principal  of or
premium  or  interest  on the Bond or for any claim  based  thereon  or upon any
obligation,  covenant or agreement contained in this Agreement against any past,
present or future officer, commissioner,  employee or agent of Lessor, or of any
successor  corporation,  as such,  either  directly  or  through  Lessor  or any
successor corporation,  under any rule of law or equity, statute or constitution
or by the  enforcement of any  assessment or penalty or otherwise,  and all such
liability of any such officers, commissioners,  employees or agents, as such, is
hereby expressly waived and released as a condition of, and  consideration  for,
the execution of this Agreement and the issuance of the Bond.

     (d)  Anything in this  Agreement  to the  contrary  notwithstanding,  it is
expressly  understood  and agreed by the parties hereto that (i) Lessor may rely
conclusively on the truth and accuracy of any certificate,  opinion,  notice, or
other  instrument  furnished to Lessor by Lessee as to the existence of any fact
or state of affairs  required  hereunder  to be noticed by Lessor;

                                       39
<PAGE>

(ii) Lessor  shall not be under any  obligation  hereunder to perform any record
keeping or to provide any legal  services;  and (iii) none of the  provisions of
this Agreement shall require Lessor to expend or risk its own funds or otherwise
incur  financial  liability  in the  performance  of any of its duties or in the
exercise of any of its rights or powers  under this  Agreement,  unless it shall
first have been  adequately  indemnified to its  satisfaction  against the cost,
expense, and liability which may be incurred.

     Section 12.16. Waiver of Jury Trial.  BONDHOLDER,  LESSOR AND LESSEE HEREBY
WAIVE  THEIR  RESPECTIVE  RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS AGREEMENT, ANY OF THE
RELATED DOCUMENTS,  ANY DEALINGS AMONG BONDHOLDER,  LESSOR OR LESSEE RELATING TO
THE SUBJECT  MATTER OF THE  TRANSACTIONS  CONTEMPLATED  BY THIS AGREEMENT OR ANY
RELATED  TRANSACTIONS,  AND/OR THE RELATIONSHIP  THAT IS BEING ESTABLISHED AMONG
BONDHOLDER,  LESSOR AND  LESSEE.  THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL
ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT  (INCLUDING,
WITHOUT LIMITATION,  CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL
OTHER COMMON LAW AND STATUTORY CLAIMS). THIS WAIVER IS IRREVOCABLE, MEANING THAT
IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,  AND THIS WAIVER SHALL APPLY
TO ANY SUBSEQUENT  AMENDMENTS,  RENEWALS,  SUPPLEMENTS OR  MODIFICATIONS TO THIS
AGREEMENT,  ANY  RELATED  DOCUMENTS,  OR TO ANY OTHER  DOCUMENTS  OR  AGREEMENTS
RELATING  TO THE  TRANSACTIONS  CONTEMPLATED  BY THIS  AGREEMENT  OR ANY RELATED
TRANSACTIONS.  IN THE  EVENT OF  LITIGATION,  THIS  AGREEMENT  MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.

        [REMAINDER OF PAGE INTENTIONALLY BLANK; EXECUTION PAGE FOLLOWS.]

                                       40
<PAGE>
                                                                   Exhibit 10.10

     IN WITNESS  WHEREOF,  the parties  hereto have executed  this  Agreement in
their respective  corporate names by their duly authorized  officers,  all as of
the date first written above.

Bondholder:                             GE CAPITAL PUBLIC FINANCE, INC.

                                        By: ___________________________
                                        Title: Vice President


Lessor:                                 THE UNIFIED GOVERNMENT OF
                                        WYANDOTTE COUNTY/KANSAS CITY,
                                        KANSAS



[SEAL]                                  By: __________________________
                                        Name:  Carol Marinovich
                                        Title: Mayor/CEO

ATTEST:

By: _____________________
Name:  Tom G. Roberts
Title: Unified Government Clerk

Lessee:                                 MIDWEST GRAIN PRODUCTS, INC.



                                        By: __________________________
                                        Title:


                               ORIGINAL: ___ OF 6

                      [EXECUTION PAGE OF LEASE AGREEMENT]
<PAGE>
                                                    Exhibit A to Lease Agreement
                           SCHEDULE OF LEASE PAYMENTS

Closing Date: August 22, 2001
Coupon Rate: 5.23%

<TABLE>
<CAPTION>
<S>       <C>           <C>        <C>             <C>          <C>            <C>
 Payment  Payment        Lease     Principal       Interest     Principal      Prepayment
  Date     Number       Payment    Component       Component     Balance*        Amount*
  ----     ------       -------    ---------       ---------    --------         -------
8/21/2001     0                       --             --        6,500,000.00    6,630,000.00
10/1/2001     1       114,208.87    77,380.95      36,827.92   6,422,619.05    6,551,071.43
11/1/2001     2       105,372.87    77,380.96      27,991.91   6,345,238.09    6,472,142.85
12/1/2001     3       105,035.62    77,380.96      27,654.66   6,267,857.13    6,393,214.27
 1/1/2002     4       104,698.36    77,380.95      27,317.41   6,190,476.18    6,314,285.70
 2/1/2002     5       104,361.11    77,380.95      26,980.16   6,113,095.23    6,235,357.13
 3/1/2002     6       104,023.86    77,380.95      26,642.91   6,035,714.28    6,156,428.57
 4/1/2002     7       103,686.61    77,380.96      26,305.65   5,958,333.32    6,077,499.99
 5/1/2002     8       103,349.36    77,380.96      25,968.40   5,880,952.36    5,998,571.41
 6/1/2002     9       103,012.10    77,380.95      25,631.15   5,803,571.41    5,919,642.84
 7/1/2002    10       102,674.85    77,380.95      25,293.90   5,726,190.46    5,840,714.27
 8/1/2002    11       102,337.60    77,380.95      24,956.65   5,648,809.51    5,761,785.70
 9/1/2002    12       102,000.35    77,380.96      24,619.39   5,571,428.55    5,682,857.12
10/1/2002    13       101,663.10    77,380.96      24,282.14   5,494,047.59    5,603,928.54
11/1/2002    14       101,325.84    77,380.95      23,944.89   5,416,666.64    5,524,999.97
12/1/2002    15       100,988.59    77,380.95      23,607.64   5,339,285.69    5,446,071.40
 1/1/2003    16       100,651.34    77,380.95      23,270.39   5,261,904.74    5,367,142.83
 2/1/2003    17       100,314.09    77,380.96      22,933.13   5,184,523.78    5,288,214.26
 3/1/2003    18        99,976.84    77,380.96      22,595.88   5,107,142.82    5,209,285.68
 4/1/2003    19        99,639.58    77,380.95      22,258.63   5,029,761.87    5,130,357.11
 5/1/2003    20        99,302.33    77,380.95      21,921.38   4,952,380.92    5,051,428.54
 6/1/2003    21        98,965.08    77,380.95      21,584.13   4,874,999.97    4,972,499.97
 7/1/2003    22        98,627.83    77,380.95      21,246.88   4,797,619.02    4,893,571.40
 8/1/2003    23        98,290.58    77,380.96      20,909.62   4,720,238.06    4,814,642.82
 9/1/2003    24        97,953.32    77,380.95      20,572.37   4,642,857.11    4,735,714.25
10/1/2003    25        97,616.07    77,380.95      20,235.12   4,565,476.16    4,656,785.68
11/1/2003    26        97,278.82    77,380.95      19,897.87   4,488,095.21    4,577,857.11
12/1/2003    27        96,941.57    77,380.95      19,560.62   4,410,714.26    4,498,928.55
 1/1/2004    28        96,604.32    77,380.96      19,223.36   4,333,333.30    4,419,999.97
 2/1/2004    29        96,267.06    77,380.95      18,886.11   4,255,952.35    4,341,071.40
 3/1/2004    30        95,929.81    77,380.95      18,548.86   4,178,571.40    4,262,142.83
 4/1/2004    31        95,592.56    77,380.95      18,211.61   4,101,190.45    4,183,214.26
 5/1/2004    32        95,255.31    77,380.95      17,874.36   4,023,809.50    4,104,285.69
 6/1/2004    33        94,918.06    77,380.96      17,537.10   3,946,428.54    4,025,357.11
 7/1/2004    34        94,580.80    77,380.95      17,199.85   3,869,047.59    3,946,428.54
 8/1/2004    35        94,243.55    77,380.95      16,862.60   3,791,666.64    3,867,499.97
 9/1/2004    36        93,906.30    77,380.95      16,525.35   3,714,285.69    3,788,571.40

<PAGE>

10/1/2004    37        93,569.05    77,380.95      16,188.10   3,636,904.74    3,709,642.83
11/1/2004    38        93,231.80    77,380.96      15,850.84   3,559,523.78    3,630,714.26
12/1/2004    39        92,894.54    77,380.95      15,513.59   3,482,142.83    3,551,785.69
 1/1/2005    40        92,557.29    77,380.95      15,176.34   3,404,761.88    3,472,857.12
 2/1/2005    41        92,220.04    77,380.95      14,839.09   3,327,380.93    3,393,928.55
 3/1/2005    42        91,882.79    77,380.95      14,501.84   3,249,999.98    3,314,999.98
 4/1/2005    43        91,545.54    77,380.96      14,164.58   3,172,619.02    3,236,071.40
 5/1/2005    44        91,208.28    77,380.95      13,827.33   3,095,238.07    3,157,142.83
 6/1/2005    45        90,871.03    77,380.95      13,490.08   3,017,857.12    3,078,214.26
 7/1/2005    46        90,533.78    77,380.95      13,152.83   2,940,476.17    2,999,285.69
 8/1/2005    47        90,196.53    77,380.95      12,815.58   2,863,095.22    2,920,357.12
 9/1/2005    48        89,859.28    77,380.96      12,478.32   2,785,714.26    2,841,428.55
10/1/2005    49        89,522.02    77,380.95      12,141.07   2,708,333.31    2,762,499.98
11/1/2005    50        89,184.77    77,380.95      11,803.82   2,630,952.36    2,683,571.41
12/1/2005    51        88,847.52    77,380.95      11,466.57   2,553,571.41    2,604,642.84
 1/1/2006    52        88,510.27    77,380.95      11,129.32   2,476,190.46    2,525,714.27
 2/1/2006    53        88,173.02    77,380.96      10,792.06   2,398,809.50    2,446,785.69
 3/1/2006    54        87,835.76    77,380.95      10,454.81   2,321,428.55    2,367,857.12
 4/1/2006    55        87,498.51    77,380.95      10,117.56   2,244,047.60    2,288,928.55
 5/1/2006    56        87,161.26    77,380.95      9,780.31    2,166,666.65    2,209,999.98
 6/1/2006    57        86,824.01    77,380.95      9,443.06    2,089,285.70    2,131,071.41
 7/1/2006    58        86,486.76    77,380.96      9,105.80    2,011,904.74    2,052,142.83
 8/1/2006    59        86,149.50    77,380.95      8,768.55    1,934,523.79    1,973,214.27
 9/1/2006    60        85,812.25    77,380.95      8,431.30    1,857,142.84    1,894,285.70
10/1/2006    61        85,475.00    77,380.95      8,094.05    1,779,761.89    1,815,357.13
11/1/2006    62        85,137.75    77,380.95      7,756.80    1,702,380.94    1,736,428.56
12/1/2006    63        84,800.50    77,380.96      7,419.54    1,624,999.98    1,657,499.98
 1/1/2007    64        84,463.24    77,380.95      7,082.29    1,547,619.03    1,578,571.41
 2/1/2007    65        84,125.99    77,380.95      6,745.04    1,470,238.08    1,499,642.84
 3/1/2007    66        83,788.74    77,380.95      6,407.79    1,392,857.13    1,420,714.27
 4/1/2007    67        83,451.49    77,380.95      6,070.54    1,315,476.18    1,341,785.70
 5/1/2007    68        83,114.24    77,380.96      5,733.28    1,238,095.22    1,262,857.12
 6/1/2007    69        82,776.98    77,380.95      5,396.03    1,160,714.27    1,183,928.56
 7/1/2007    70        82,439.73    77,380.95      5,058.78    1,083,333.32    1,104,999.99
 8/1/2007    71        82,102.48    77,380.95      4,721.53    1,005,952.37    1,026,071.42
 9/1/2007    72        81,765.23    77,380.95      4,384.28      928,571.42      947,142.85
10/1/2007    73        81,427.98    77,380.96      4,047.02      851,190.46      868,214.27
11/1/2007    74        81,090.72    77,380.95      3,709.77      773,809.51      789,285.70
12/1/2007    75        80,753.47    77,380.95      3,372.52      696,428.56      710,357.13
 1/1/2008    76        80,416.22    77,380.95      3,035.27      619,047.61      631,428.56
 2/1/2008    77        80,078.97    77,380.95      2,698.02      541,666.66      552,499.99
 3/1/2008    78        79,741.72    77,380.96      2,360.76      464,285.70      473,571.41
 4/1/2008    79        79,404.46    77,380.95      2,023.51      386,904.75      394,642.84
 5/1/2008    80        79,067.21    77,380.95      1,686.26      309,523.80      315,714.28
 6/1/2008    81        78,729.96    77,380.95      1,349.01      232,142.85      236,785.71
 7/1/2008    82        78,392.71    77,380.95      1,011.76      154,761.90      157,857.14

<PAGE>

 8/1/2008    83        78,055.46    77,380.96      77,380.94      78,928.56          674.50
 9/1/2008    84        77,718.20    77,380.94         337.26          (0.00)          (0.00)
                       ---------    ---------         ------          -----           -----
TOTAL               7,712,488.36 6,500,000.00   1,212,488.36
</TABLE>

*After payment of Lease Payment due opposite Prepayment Amount.

                                      A-2
<PAGE>
                                                    Exhibit B to Lease Agreement

                        DESCRIPTION OF PERSONAL PROPERTY

Asset
Number     Asset Description

 93   Cleaver Brooks 200 H.P. Boiler
 94   Boiler Electrical
259   Boiler Upgrades
314   Boiler Upgrades
 95   Boiler Mechanical
120   Wall Above the Boiler
363   Gas Meter Phone Line
375   Primary Switch Gear
386   Inspection Platform
390   Plant 6" Water Header
222   Steam Cleaning System
232   Freezer Room
354   Freezer Upgrades
226   Tx-144 Mix System Platforms
230   Process Electrical Tx-144
344   Tx-144 PLC Processor
231   Process Mechanical Tx-144
236   Tx-144 Cooking Extruder, Mix System, Cooler, Pneumatics
406   Tx-144 Comitrol Processor
400   Tx-144 Drying System
401   Tx-144 Drying System Electrical
402   Tx-144 Drying System Mechanical
404   Tx-144 Drying System Platform
272   Tx-144 Misc. Parts
326   Tx-85 Mix System
225   Tx-85 Extruder Modifications
104   Tx-85 Mix System Platform
124   Tx-85 Extruder Platform
294   Tx-85 Stuffer
405   Tx-85 Comitrol Processor
327   Tx-85 Magnum Upgrade
229   Fabrication of Tx-85 System Pneumatics
  8   Tx-80 Cylinder, Live Bin, Mix System, Pneumatics, Cooler
 24   Platforms & Ladders
 25   Bulk Bag Unloader
224   Silo Pad Expansion
328   F2/K2 Peabody TecTank Silos and Mac Equip. Pneumatics
267   F2/K2 Silo Kinergy Rings
224   Silo Pad Expansion For F3, F4, F5, K3 Silos
239   F3, F4, F5, K3 Peabody TecTank Silos

<PAGE>

337   Silo Modifications
237   Line #4 Bemis 7115 Packaging System
378   Line #3 Bemis 7115 Packaging System
366   Linx #4 Date Coder
377   2 Safe Line Metal Detectors
407   1 safe Line Bag Metal Detector
106   1 Gardner/Denver Air Compressor
373   2 Gardner/Denver Air Compressors
122   Moisture Analyzer
149   Break Room Water Heater
349   NIR Analyzer
353   Liquid Process Tanks
382   Moyno Pumps for Process Tanks
355   Plant Platform Scale
403   Scott Continuous Batching Mix System
388   Plant Racking
335   Dock Shelters
312   Trash Compactor Enclosure
370   Motorized Hand Jack
170   Mig Welder
364   Hydraulic Press
 53   Floor Crane
 26   Tool Cage
369   Shop Platforms
 55   Telephone System
171   Richcol Copier
275   Office Remodel
290   CFO Office Furniture
292   RTC Office Furniture

<PAGE>
                                                    Exhibit C to Lease Agreement

                   DESCRIPTION OF REHABILITATION EXPENDITURES

     BUILDING ROOF REPLACEMENT
     RESIN COOLER UPGRADE
     MILLING & PACKAGING UPGRADE
     MULTIPLE INGREDIENT BLENDING
     COMITROL PROJECT FOR TX-144
     OFFICE RENOVATION

<PAGE>
                                                    Exhibit F to Lease Agreement

                                  FORM OF BOND

                                   $6,500,000
         The Unified Government of Wyandotte County/Kansas City, Kansas
                       Industrial Development Revenue Bond
                     (Midwest Grain Products, Inc. Project)
                                   Series 2001


No.: R-1     $6,500,000

                Maturity Date                           Interest Rate
              September 1, 2008                            5.23%


     THE UNIFIED GOVERNMENT OF WYANDOTTE COUNTY/KANSAS CITY, KANSAS, a municipal
corporation  created and validly  existing under the laws of the State of Kansas
(hereafter referred to as "Lessor"), for value received,  hereby promises to pay
GE Capital Public Finance,  Inc.,  8400  Normandale  Lake Boulevard,  Suite 470,
Minneapolis,  Minnesota  55437,  or to registered  assigns,  but solely from the
Lease Payments hereinafter described, the principal sum of

                    SIX MILLION FIVE HUNDRED THOUSAND DOLLARS

in any coin or  currency  of the United  States of America  which on the date of
payment thereof is the legal tender for the payment of public and private debts,
and to pay, solely from such Lease Payments, in like coin and currency, interest
on the principal sum from the date hereof, such interest to be at the rates, and
all such payments of interest, principal or interest and principal to be payable
at the time and place, in the amounts and in accordance with the terms set forth
in that  certain  Lease  Agreement  dated  as of  August  1,  2001  (the  "Lease
Agreement")  among Lessor,  GE Capital  Public  Finance,  Inc. and Midwest Grain
Products,  Inc.  ("Lessee").  All terms used herein in capitalized  form and not
otherwise  defined herein shall have the meanings  ascribed thereto in the Lease
Agreement.

     This Bond is payable as to principal and prepayment premium, if any, solely
from Lease  Payments to be made by Lessee and is secured by, among other things,
a lien on the Project financed pursuant to the Lease Agreement.

     This Bond shall not  represent or  constitute a debt or pledge of the faith
and credit of Lessor,  and this Bond is payable solely from the revenues pledged
therefor  pursuant  to the Lease  Agreement,  and no moneys of Lessor  raised by
taxation  shall be obligated or pledged for the payment of Lease Payments or any
other amounts due under this Bond.

     This Bond is subject to prepayment  upon the terms and conditions set forth
in the Lease Agreement.


<PAGE>

     It is hereby certified,  recited and declared that all acts, conditions and
things  required to exist to happen and to be performed  precedent to and in the
issuance of this Bond exist,  have  happened and have been  performed in regular
and due form and time as required by the  Constitution  and laws of the State of
Kansas  applicable  thereto  and  that  the  issuance  of  this  Bond is in full
compliance with all  Constitutional  and statutory  limitations,  provisions and
restrictions.

     IN WITNESS WHEREOF, THE UNIFIED GOVERNMENT OF WYANDOTTE COUNTY/KANSAS CITY,
KANSAS  has  issued  this  Bond  and has  caused  the same to be  signed  by the
signature of its authorized representative this __ day of _________, 2001.

                                             THE UNIFIED GOVERNMENT OF WYANDOTTE
                                             COUNTY/KANSAS CITY, KANSAS


                                             By: ____________________
                                             Name: Carol Marinovich
                                             Its:  Mayor/CEO
[SEAL]

ATTEST:

By: ____________________
Name: Tom G. Roberts
Title: Unified Government Clerk


                                      F-2
<PAGE>

                                   ASSIGNMENT

     FOR VALUE RECEIVED, the undersigned  ___________________ (the "Transferor")
hereby   sells,   assigns  and   transfers   unto   _____________________   (the
"Transferee")

                        PLEASE INSERT SOCIAL SECURITY OR
                     OTHER IDENTIFYING NUMBER OF TRANSFEREE

the within Bond and all rights thereunder,  and hereby  irrevocably  constitutes
and  appoints  _________ as attorney to register the transfer of the within Bond
on the books  kept for  registration  of  transfer  thereof,  with full power of
substitution in the premises.

Date:
Signature Guaranteed:

_________________________________


NOTICE:  Signature(s)  must be guaranteed by an eligible  guarantor  institution
which is a member of a recognized signature guarantee program,  i.e., Securities
Transfer Agents Medallion  Program (STAMP),  Stock Exchanges  Medallion  Program
(SEMP) or New York Stock Exchange Medallion Signature Program.

NOTICE: No transfer will be registered and no new Bond will be issue in the name
of the Transferee, unless the signature(s) to this assignment correspond(s) with
the name as it  appears  on the  face of the  within  Bond in every  particular,
without alteration or enlargement or any change whatever and the Social Security
or Federal Employer Identification Number of the Transferee is supplied.

                                      F-3
<PAGE>
                                                    Exhibit I to Lease Agreement

                       LEGAL DESCRIPTION OF REAL PROPERTY

Tract I

A tract of land in the Southeast Quarter of Section 15, Township 11 South, Range
25 East of the Sixth Principal Meridian in Kansas City, Wyandotte County, Kansas
being more particularly described as follows:

Beginning at a point on the North  right-of-way  line of Berger  Avenue,  as now
established,  said point being 343.29 feet East of the East right-of-way line of
vacated  1st Street as now  established,  said point also being 906.0 feet North
and 1460.79 feet East of the Southwest  corner of the Southeast  Quarter of said
Section 15;

Thence Northwesterly 124.81 feet, along a curve concave to the Northeast, having
a radius of 1208.11 feet through a central  angle of 5E 55' 16" and to which the
center of the circle of said curve bears North 52E 15' 04" East;

Thence  North 29E 36' 07" West  139.08  feet,  along a line which  makes a right
deflection angle of 2E 13' 34" with the tangent of the curve last described;

Thence  North  28E 33' 48"  West  57.55  feet to a point on the  center  line of
vacated  Bayard Avenue (also know as Delaware  Avenue),  said point being 177.49
feet East of the East right-of-way line of vacated 1st Street;

Thence  North 9E 11' 48" East 278.87  feet to a point on the South  right-of-way
line of vacated Carr Avenue,  as now  established,  said point being 223.68 feet
East of the East right-of-way line of vacated 1st Street;

Thence North 0E 20' 15" West 30.0 feet to a point on the  centerline  of vacated
Carr Avenue;

Thence North 89E 38' 27" East 123.82 feet, along the center line of vacated Carr
Avenue,  to a point 347.5 feet East of the East right-of-way line of vacated 1st
Street;

Thence North 0E 20' 15" West 27.22 feet,  along a line  parallel  with and 347.5
feet East of the East right-of-way line of vacated 1st Street;

Thence  South 84E 28' 27" East 904.85 feet to a one-half  inch  reinforcing  bar
found with LS-533 survey cap;

Thence  South 05E 31' 33" West 261.82  feet to the  beginning  of a  non-tangent
curve  concave to the  Northwest  having a radius of 431.80  feet and a one-half
inch reinforcing bar found with LS-533 survey cap;

<PAGE>

Thence  Southwesterly  129.60  feet,  along said  non-tangent  curve,  through a
central  angle of 17E 11' 49"  having a chord  bearing of South 30E 09' 18" West
and a chord  distance of 129.12 feet,  said curve being  parallel  with and 46.5
feet Northwesterly of the center line of the Kansas City Belt Railway connection
to Badger  Lumber Yard,  as recorded in Book 82 at Page 420, to a one-half  inch
reinforcing bar found with LS-533 survey cap;

Thence  South  37E  10' 40"  West  12.06  feet,  parallel  with  and  46.5  feet
Northwesterly of the center line of said railway connection,  to a one-half inch
reinforcing bar found with LS-533 survey cap;

Thence  South 58E 47' 33" West 273.49 feet to a point on the North  right-of-way
line of Berger Avenue,  as now established,  and a one-half inch reinforcing bar
found with LS-533 survey cap;

Thence South 89E 38' 27" West 501.80 feet, along said North right-of-way line to
the point of beginning, containing 497,928 square feet or 11.4309 acres, more or
less.

Subject to all easements and restrictions of record.

Tract II

Lots 1, 10, 11,  12,  and 13,  Block 1 and Lots 1, 2, 3, 4, 5, 6 and 7, Block 2,
THE JUNCTION, a subdivision of land in Kansas City, Wyandotte County, Kansas.

<PAGE>
                                                    Exhibit J to Lease Agreement

                          LIST OF PERMITTED EXCEPTIONS


1.   All assessments and taxes for the year 2001 and all subsequent  years. None
     are now due and payable.

2.   Memorandum  of Agreement by and between  Union  Pacific  Railroad  Company,
     Cedrite  Technologies,  Inc.,  formerly  known as SNP,  Inc., by instrument
     dated November 9, 1987, filed for record November 30, 1987, as Document No.
     1044269 in Book 3262, Page 276.

3.   All coal,  oil,  gas and the minerals  and mineral  rights  reserved in the
     premises by the Union Pacific Railroad  Company,  in a Deed dated September
     24, 1987, and recorded in Book 3262, Page 283, as Document No. 1044270.

4.   Corporation  Easement by and between Prime Investments,  Inc., and the City
     of  Kansas  City,  Kansas  for the use and  benefit  of the Board of Public
     Utilities of Kansas City, Kansas filed January 25, 1988, in Book 3272, Page
     89, as Document  No.  1046997,  granting  the right to erect,  maintain and
     repair  wires  and all  appurtenances  thereto,  for the  transmission  and
     distribution of electric energy and the right to trim or remove such trees,
     branches,  shrubs,  bushes,  and other obstacles as may interfere with, the
     safe,  proper  and  expeditious  erection,  reconstruction,  operation  and
     maintenance under varying  conditions of operation,  renewal and removal of
     said line or any part thereof,  said right of way being over, under,  along
     and across the following lands in the City of Kansas City, Kansas, to wit:

     A strip of land  10.00  feet wide  situated  in the  Southeast  Quarter  of
     Section  15,  Township  11  South,  Range  25 East of the  Sixth  Principal
     Meridian in Kansas City, Wyandotte County, Kansas, said strip of land lying
     5.00 feet on each side of the following described center line: Beginning at
     a  point  on  the  North  right  of  way  line  of  Berger  Avenue,  as now
     established,  said point  being  640.05  feet East of the East right of way
     line of vacated First  Street,  as now  established,  said point also being
     906.0  feet  North and  1757.55  feet East of the  Southwest  corner of the
     Southeast  Quarter of said Section 15; thence North 2 degrees 18 minutes 39
     seconds West 12.92 feet, along said center line, to Point "A"; thence North
     32 degrees 57 minutes 47 seconds East 153.42 feet,  along said center line;
     thence South 84 degrees 28 minutes 27 seconds East 111.42 feet,  along said
     center line; thence North 5 degrees 31 minutes 33 seconds East 335.76 feet,
     along said center line;  thence North 84 degrees 28 minutes 27 seconds West
     237.42  feet,  along said center  line,  to the "point of terminus" of said
     easement  description.  Together with a 10.00 feet wide guy anchor easement
     lying  5.00  feet on each  side of the  following  described  center  line;
     Beginning  at Point "A" in the above  described  easement;  thence  North 2
     degrees 18 minutes 39 seconds West 20.00 feet to the "Point of Terminus" of
     said easement description.

     NOTE:The side lines of  the above described  easements are to be lengthened
     and/or shortened at the points of beginning,  points of intersection and/or
     points of  terminus to prevent  any gores,  gaps or  overlaps  which may be
     created by this description.
<PAGE>

5.   Easement  granted to City of Kansas City,  Kansas by the  instrument  filed
     April 25, 1989 as  Document  No.  1073766 in Book 3360 at Page 163,  over a
     portion of the premises in question, as more fully described therein.


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>3
<FILENAME>x13.txt
<TEXT>
                                                                      Exhibit 13
                         Selected Financial Information

<TABLE>
<CAPTION>
<S>                    <C>                        <C>              <C>               <C>              <C>               <C>
      Years ended June 30                         2001             2000              1999             1998              1997
  -------------------------------------------------------------------------------------------------------------------------------
      (in thousands, except per share amounts)

      Income Statement Data:
      Net sales                                  $229,241         $231,880          $216,101         $223,254          $224,733
      Cost of sales                               212,058          210,978           200,622          214,453           213,733
  -------------------------------------------------------------------------------------------------------------------------------
             Gross profit                          17,183           20,902            15,479            8,801            11,000

      Selling, general and administrative
             expenses                              13,545           12,109            11,908           11,363             9,169
      Other operating income (expense)                 (3)              39               136              100               370
  -------------------------------------------------------------------------------------------------------------------------------
             Income (Loss) from operations          3,635            8,832             3,707           (2,462)            2,201

      Other income (Loss), net                      2,109              719               350              658               618
      Interest expense                             (1,347)          (1,469)           (1,959)          (1,887)           (2,604)
  -------------------------------------------------------------------------------------------------------------------------------
             Income (Loss) before income taxes      4,397            8,082             2,098           (3,691)              215
      Provision (Credit) for income taxes           1,737            3,192               828           (1,455)               84
  -------------------------------------------------------------------------------------------------------------------------------
      Net income (loss)                         $   2,660          $ 4,890           $ 1,270         $ (2,236)        $     131
  -------------------------------------------------------------------------------------------------------------------------------
      Earnings (Loss) per common share          $    0.32           $ 0.54           $  0.13        $   (0.23)           $ 0.01
      Cash dividends per common share                0.10
      Weighted average common shares
             outstanding                            8,397            9,122             9,609            9,700             9,762
  -------------------------------------------------------------------------------------------------------------------------------
      Balance Sheet Data:
             Working capital                      $47,490         $ 45,089          $ 43,053         $ 39,825          $ 36,580
             Total assets                         174,450          155,779           157,370          161,978           165,330
             Long-term debt, less current
                maturities                         24,420           18,181            21,099           25,536            29,933
             Stockholders' equity                 100,544          102,378           105,445          106,325           108,561
  ===============================================================================================================================
</TABLE>

                                      -17-
                Midwest Grain Products, Inc., Annual Report 2001

<PAGE>
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

Results of Operations

     The  following  table  sets  forth  items  in  the  Company's  consolidated
statements  of  income  expressed  as  percentages  of net  sales  for the years
indicated and the percentage  change in the dollar amount of such items compared
to the prior period:

<TABLE>
<CAPTION>
<S>                                                 <C>                 <C>             <C>             <C>             <C>
                                                          Percentage of Net Sales                          Percentage
                                                          Years Ended June 30                Increase (Decrease)
                                                                                                   Fiscal 2001       Fiscal 2000
                                                      2001             2000             1999         Over 2000         Over 1999
                                                     -----            -----             -----    -------------     -------------
         Net sales                                  100.0%           100.0%            100.0%            (1.1)%             7.3%
         Cost of sales                               92.5             91.0              92.8              0.5               5.2
  ------------------------------------------------------------------------------------------------------------------------------
         Gross profit                                 7.5              9.0               7.2            (17.8)             35.0
         Selling, general and
              administrative expenses                 5.8              5.2               5.6             11.9               1.7
         Other operating income (loss)              (0.1)              0.0               0.1            107.7             (71.3)
  ------------------------------------------------------------------------------------------------------------------------------
         Income (Loss) from operations                1.6              3.8               1.7            (58.8)            138.3
         Other income (expense)                       0.3             (.3)             (0.7)            201.6             (53.4)
  ------------------------------------------------------------------------------------------------------------------------------
         Income before income taxes                   1.9              3.5               1.0            (45.6)            285.2
         Provision (Credit) for income taxes          0.8              1.4               0.4            (45.6)            285.5
  ------------------------------------------------------------------------------------------------------------------------------
         Net income (loss)                            1.1%             2.1%              0.6%           (45.6)            285.0%
  ==============================================================================================================================
</TABLE>


                                      -18-
                      Management's Discussion and Analysis

<PAGE>

                       FISCAL 2001 COMPARED TO FISCAL 2000

     The Company's  results for fiscal 2001 declined from fiscal 2000.  This was
largely due to abnormally  high energy costs  resulting  from a dramatic rise in
natural gas prices.  Reduced sales of vital wheat  gluten,  premium wheat starch
and food grade alcohol were also affecting  factors.  The decrease was partially
offset by increased sales of fuel grade alcohol and value-added  wheat proteins.
The  recognition  of  income  from a United  States  Department  of  Agriculture
Commodity Credit  Corporation  program,  which is detailed below, also helped to
partially offset the decrease.

     The severe  spike in natural gas prices was caused by low gas  reserves and
increased demand across the nation,  especially during the winter months.  After
reaching  record  levels  in  January,   gas  prices  began  to  fall,  dropping
substantially  in the fourth  quarter.  Additionally,  the  Company  was able to
satisfy a portion of the energy requirements at its Atchison,  Kansas plant with
lower  priced  fuel oil, a  situation  that  prevented  energy  costs from being
affected even more severely during the year.

     The  reduction  in vital wheat gluten  sales  occurred  because the Company
elected to curtail  production due to pricing  pressures from  artificially  low
priced gluten imports from the European Union (E.U).  The Company  believes that
competitive  pressures from the E.U. would have been even more intense but for a
three-year-long  quota  that was placed on gluten  imports  by former  President
Clinton in 1998.  The quota helped reduce the extent of injuries  caused to U.S.
producers by excess  amounts of low priced gluten imports from  subsidized  E.U.
producers.

     In February,  2001, the U.S.  International  Trade  Commission  unanimously
recommended  a  two-year  extension  of the quota  following  a  request  for an
extension by the Wheat Gluten  Industry  Council of the U.S. The  recommendation
was based on grounds  that  through  circumvention  and  similar  tactics,  E.U.
producers  deliberately and effectively prevented the U.S. wheat gluten industry
from  receiving the full extent of relief that the quota  intended.  Rather than
granting an extension,  however,  the White House approved a funding  program to
support the development of products and markets for value-added wheat gluten and
wheat starches.

     Administered  by the U.S.  Department  of  Agriculture's  Commodity  Credit
Corporation,  the program  began in June,  2001 and is  scheduled to end May 31,
2003. Under the program,  the Company is eligible for  approximately $26 million
of the program  total of $40  million.  For the first 12 months of the  program,
approximately  $17.3  million has been  allocated to the Company.  The remaining
amount is expected to become  available to the Company  starting in June,  2002.
The funds are to be used for capital, research,  marketing and promotional costs
related to value-added  gluten,  or wheat protein,  and starch  products.  Funds
received  will be  recognized  in income during the period during which they are
expended  for a  permitted  purpose.  However,  funds that are used for  capital
expenditure  projects will be recognized in income over the periods during which
those  projects  are  depreciated.  They are not  intended  to be used to reduce
production  and  marketing-related  costs for  commodity  vital wheat gluten and
wheat starches  which could extend the U.S.  industry's  participation  in these
markets.

     With the expiration of the import quota in June,  vital wheat gluten prices
in  the  U.S.  became  subjected  to  increased  downward  pressures  from  E.U.
suppliers.  As a result,  the Company elected to reduce wheat gluten  production
and sales  even  further  in the final  quarter of fiscal  2001.  Unless  future
conditions warrant  otherwise,  the Company plans to maintain a reduced presence
in the more  traditional,  commodity-related  gluten markets while continuing to
build its presence in specialty, value-added markets.

     Due  principally  to  increased   customer  interest  and  the  effects  of
intensified  marketing  programs,  demand  for  the  Company's  specialty  wheat
proteins  continued to strengthen  in fiscal 2001.  As a result,  sales of these
products  showed an  improvement  over the prior  fiscal  year.  Produced  for a
variety of food and non-food  applications,  these value-added  products include
dough  enhancers,  meat extenders and replacers,  ingredients  for hair care and
skin  care  systems,  and  bio-polymers  for  producing  pet  treats  as well as
degradable, plastic-like items.

<PAGE>

     In   February,   the  Company  was  named  the   successful   bidder  on  a
state-of-the-art manufacturing facility owned by a Kansas City, Kansas firm that
entered  Chapter 11 bankruptcy  proceedings.  The Company is using the facility,
which is operated by its subsidiary, Kansas City Ingredient Technologies,  Inc.,
primarily for the  production of  Wheatex(TM),  Midwest  Grain's  unique line of
textured  wheat  proteins  that are sold to enhance  the  flavor and  texture of
vegetarian  and extended meat  products,  as well as  wheat-based  bio-polymers.
Finalized in the third  quarter of fiscal 200l at a cost of  approximately  $6.5
million, the purchase replaces the Company's earlier plan to build a Wheatex(TM)
plant at a similar cost. The Company  expects the  acquisition  will allow it to
increase the production of textured wheat  proteins and  bio-polymers  at a more
accelerated  rate. Also, the Company  anticipates that, in addition to providing
more space than was  incorporated  into the design for a new plant, the facility
will  provide  greater  flexibility  for  producing  other lines of  value-added
specialty wheat proteins.

     The Company's  wheat starch sales in fiscal 2001 were down due partially to
a reduction in sales for export. The Company expects that starch sales in fiscal
2002 should show an improvement  based on  indications of increased  demand both
domestically and abroad.

     Increased  demand for fuel  grade  alcohol,  or  ethanol as it is  commonly
known,  drove up sales of this product  compared to the prior  fiscal year.  The
heightened  market  interest was  partially  attributable  to the  Environmental
Protection Agency's proposal to phase out MTBE, a competing fuel oxygenate that


                                      -19-
                Midwest Grain Products, Inc., Annual Report 2001

is  synthetically  derived  and has been  shown  to be  harmful  to  groundwater
supplies.  In response to the increased demand,  the Company raised fuel alcohol
production levels, while also experiencing substantial upward price adjustments.
The Company also experienced  improved selling prices for its food grade alcohol
for beverage and industrial applications. However, the unit volume of food grade
alcohol for beverage  uses  declined  compared to fiscal 2000 due largely to the
Company's decision to reduce sales to export markets.

     A program developed by the U.S.  Department of Agriculture and initiated in
December,  2000,  provides a two-year cash  incentive for ethanol  producers who
increase  their  grain  usage  by  specified   amounts  to  raise  fuel  alcohol
production.   The  Company   presently   satisfies  the  program's   eligibility
requirements  and began  experiencing its effects in the third quarter of fiscal
2001. Additionally,  the installation of new distillery columns to replace older
equipment at the Company's  Atchison,  Kansas plant during the first quarter has
allowed the Company to improve food grade  alcohol  production  efficiencies  at
that  location.  This  project  also is allowing  the Company to serve  beverage
alcohol customers with an even higher purity, higher quality premium product.

     In fiscal 2001,  the Company's  Board of Directors  approved a $2.1 million
distillery  improvement project at the Atchison plant.  Expected to be completed
early in the third  quarter of fiscal 2002,  this project is designed to enhance
food grade alcohol production, while also strengthening the Company's fuel grade
alcohol production  capabilities.  The Board has additionally approved plans for
the  installation of a new feed drier at Midwest Grain's Pekin,  Illinois plant.
Expected to be completed by the end of fiscal 2002 at a cost of $5 million,  the
new drier should  improve  alcohol  production  efficiencies  at that  location.
Distillers feed is the principal by-product of the alcohol production process.

     Although  slightly  higher than they were during the prior fiscal year, per
unit raw material costs for grain  continued to remain  relatively low in fiscal
2001.  However,  that  situation  was offset by the severe  rise in natural  gas
prices.  With the onset of more normal  energy costs  combined  with  reasonable
grain  costs,  continued  strength  in  alcohol  demand  and  growth in sales of
value-added  wheat gluten and starch  products,  the Company  should  experience
improved conditions for growth going forward.

<PAGE>
     Net sales in fiscal 2001  decreased  approximately  $2.6 million  below net
sales in fiscal 2000. The decrease  resulted  mainly from reduced sales of vital
wheat gluten throughout fiscal 2001, reduced sales of wheat starch in the second
and  third  quarters  and  lower  sales  of  food  grade  alcohol  for  beverage
applications  in the second,  third and fourth  quarters.  These  decreases were
partially  offset by increased fuel alcohol sales in all four quarters of fiscal
2001 and higher sales of food grade  alcohol for  industrial  uses in the first,
third and fourth quarters.

     Sales of vital wheat gluten  dropped due to  reductions  in both unit sales
and selling prices.  This decrease was partially  offset by increased unit sales
of the Company's specialty wheat proteins. Wheat starch sales declined primarily
due to lower unit sales compared to the prior year.  Sales of food grade alcohol
fell as the result of decreased unit sales in the beverage  market.  This offset
an increase in unit sales of food grade alcohol for industrial  uses, as well as
improved  selling prices in both the beverage and industrial  markets.  Sales of
fuel grade  alcohol  rose  compared  to fiscal 2000 as the result of higher unit
sales and  substantially  higher  prices  caused by increased  demand.  Sales of
distillers feed were  approximately even with the prior year's level as a slight
decrease in selling prices offset a small increase in unit sales.

     The cost of sales in fiscal 2001 rose by  approximately  $1.1 million above
the  cost of sales in the  prior  fiscal  year.  This  principally  was due to a
significant  increase in energy costs  resulting from higher natural gas prices.
Non-recurring  costs  related  to the  final  installation  of new  distillation
equipment at the Company's  Atchison plant in the first quarter also contributed
to the increase.  Lower raw material costs for grain,  due mainly to lower grain
requirements  resulting  from reduced vital wheat gluten  production,  partially
offset the higher costs resulting from the above.

     In  order to  control  energy  costs,  the  Company  has  developed  a risk
management program whereby, at pre-determined  prices, the Company will purchase
a portion of its natural gas requirements for future delivery.

     In  connection  with the purchase of raw  materials,  principally  corn and
wheat, for anticipated operating requirements, the Company enters into commodity
contracts  to  reduce  or  hedge  the  risk of  future  grain  price  increases.
Additionally,  the Company uses  gasoline  futures to hedge fuel  alcohol  sales
contractually sold at prices fluctuating with gasoline futures.  In fiscal 2001,
raw material costs  included a net hedging loss of $1,215,945  compared to a net
hedging loss of $1,345,329 on contracts in fiscal 2000.

     Selling,   general  and   administrative   expenses  in  fiscal  2001  were
approximately $1.4 higher than selling,  general and administrative  expenses in
fiscal 2000.  The  increase  was due largely to an increase in costs  associated
with  employee-related  benefits,  industry-related  fees and a  combination  of
various other factors, including increased marketing-related expenses and higher
technology costs.

     The increase in other income relates to the recognition of $1.35 million of
income from the previously  discussed USDA program for value-added  wheat gluten
and wheat starch products.

     The  consolidated  effective income tax rate is consistent for all periods.
The general effects of inflation were minimal.

     As the result of the foregoing factors,  the Company experienced net income
of  $2,660,000  in fiscal 2001  compared to net income of  $4,890,000  in fiscal
2000.

<PAGE>

FISCAL 2000 COMPARED TO FISCAL 1999

     The Company's  results for fiscal 2000 were up  substantially  over results
for the prior fiscal year. Net income rose to $4,890,000


                                      -20-
                      Management's Discussion and Analysis

     compared to $1,270,000 in fiscal 1999,  due  principally  to the effects of
heightened  demand for the Company's vital wheat gluten,  specialty and modified
wheat  proteins  and  wheat  starches.  Lower  per unit  costs  for  grain  also
contributed to the improvement.  These conditions partially offset the impact of
reduced  selling prices for the Company's  alcohol  products  resulting from the
availability of excess alcohol supplies throughout the industry.

     The  increased  demand for wheat  gluten  was mainly due to the  effects of
measures to create a more equitable competitive  environment in the U.S. market.
On June 1, 1998,  just one month prior to the start of the Company's 1999 fiscal
year,  President Clinton imposed a three-year annual quota on imports of foreign
wheat  gluten.  This  action  was  taken  after  the  U.S.  International  Trade
Commission  determined  that the U.S. wheat gluten  industry was being seriously
injured by excess imports of artificially-priced  gluten from the European Union
(E.U.).

     While the quota  helped  reduce  some of the severe  effects of  excessive,
artificially-priced  gluten shipments from the E.U. in fiscal 2000, expectations
of more  substantial  relief  failed to be  realized.  In the early  part of the
fiscal year, the U.S. was suddenly and rapidly  inundated  with gluten  imports,
due mainly to the E.U.'s entire  allocation  entering the market within just two
weeks after the second year of the quota  opened on June 1, 1999.  Additionally,
the U.S. saw a  substantial  increase in gluten  imports from other parts of the
world,  particularly Poland. In response,  President Clinton decided to allocate
imports of foreign  wheat  gluten on a  quarterly  rather  than an annual  basis
effective with the start of the third year of the three-year-long  quota on June
1, 2000. He additionally added Poland to the list of countries which were placed
under the quota after  determining that  dramatically  increased  shipments from
Poland "have impaired the effectiveness" of the quota.

     Demand  for  the  Company's  specialty  wheat  proteins  continued  to gain
momentum in fiscal 2000,  principally due to increased customer interest and the
effects of intensified  marketing  programs.  Produced for a variety of food and
non-food  applications,  these value-added  products include dough conditioners,
meat extenders and replacers,  ingredients  for hair care and skin care systems,
and bio-polymers for producing degradable, plastic-like items.

      Increased sales of wheat starch resulted largely from strengthened demand
  for the Company's modified and specialty starches. To further serve customers'
  requirements for these unique ingredients, the Company completed the
  installation of additional production capacity at its Atchison, Kansas, plant
  in the early part of fiscal 2000.

     In  addition,  in the final  quarter of fiscal 2000,  the Company  began to
experience increased demand for its fuel grade alcohol.  This resulted partially
from a proposal by the Environmental  Protection Agency (EPA) to phase-out MTBE,
a  synthetically-derived  fuel oxygenate,  due to  health-related  environmental
concerns associated with that product.

     Net sales in fiscal 2000  increased  nearly $16 million  above net sales in
fiscal  1999.  The  increase  resulted  principally  from higher  sales of wheat
gluten, premium wheat starch and fuel grade alcohol.

     Growth in wheat gluten sales occurred as the result of higher unit sales of
wheat gluten and specialty wheat proteins together with a modest  improvement in
selling prices.

<PAGE>

     Increased wheat starch sales resulted from higher unit sales, while selling
prices for this product were slightly  below selling  prices in fiscal 1999. The
lower selling prices occurred with a reduction in raw material prices for wheat.

     Fiscal 2000 alcohol  sales were just  slightly  above the level reached the
prior year due to an increase in unit sales of fuel grade alcohol. This increase
helped to offset a decline in unit sales of food grade  alcohol  for  industrial
applications,  as well as decreases in selling prices for food grade alcohol for
both industrial and beverage uses. The drop in food grade alcohol selling prices
was due to lower demand caused  mainly by the  availability  of excess  supplies
throughout  the  industry.  The  average  selling  price of fuel grade  alcohol,
meanwhile, was approximately even with the average selling price in fiscal 1999.
This was due mainly to a price  improvement in the fourth quarter of fiscal 2000
as the Company  experienced an upturn in demand.  Sales of distillers  feed, the
principal  by-product of the alcohol  production  process,  dropped below fiscal
1999  sales.  This  was  due to  lower  unit  sales  as the  selling  price  was
approximately even with prior year's level.

     The cost of sales in fiscal 2000 rose by approximately  $10.4 million above
the  cost of  sales  for the  prior  year.  This was due to  higher  energy  and
manufacturing  costs together with costs associated with increased volume sales,
largely of gluten and alcohol  products.  Lower per unit grain prices  partially
offset the higher costs resulting from increased volumes.

     In  connection  with the purchase of raw  materials,  principally  corn and
wheat, for anticipated operating requirements, the Company enters into commodity
contracts  to  reduce or hedge the risk of future  grain  price  increases.  The
contracts  are accounted  for as hedges and,  accordingly,  gains and losses are
deferred and recognized in cost of sales as part of contract costs when contract
positions  are settled and as related  products are sold.  For fiscal 2000,  raw
material costs  included a net hedging loss of $1,345,329 on contracts  compared
to a net hedging loss of $3,472,815 on contracts for fiscal 1999.

     Selling,  general and  administrative  expenses in fiscal 2000 increased by
approximately  $201,000 above selling,  general and  administrative  expenses in
fiscal 1999.  The increase  was due largely to increased  marketing  activities,
industry-related  fees and higher technology costs. A sizeable  reduction in bad
debts partially offset this increase.

     The  consolidated  effective income tax rate is consistent for all periods.
The general effects of inflation were minimal.

     As the result of the foregoing factors,  the Company experienced net income
of  $4,890,000  in fiscal 2000  compared to net income of  $1,270,000  in fiscal
1999.


                                      -21-
                Midwest Grain Products, Inc., Annual Report 2001

<PAGE>

QUARTERLY FINANCIAL INFORMATION

     Generally, the Company's sales have not been seasonal except for variations
affecting fuel grade alcohol,  beverage alcohol and vital wheat gluten sales. In
recent years,  demand for fuel grade  alcohol has tended to increase  during the
fall  and  winter  to  satisfy  clean  air  standards   during  those   periods.
Historically,  beverage  alcohol sales tend to peak in the fall as  distributors
order  stocks for the holiday  season,  while vital wheat  gluten  sales tend to
increase  during the second half of the fiscal year as demand  increases for hot
dog buns and similar bakery  products.  Vital wheat gluten sales are expected to
decline  during  the next  year due to the  expiration  of the  annual  quota on
imports of foreign wheat gluten. The table below shows quarterly information for
each of the years ended June 30, 2001 and 2000.

<TABLE>
<CAPTION>
<S>                                              <C>              <C>               <C>              <C>
  Quarter Ending                           Sept. 30          Dec. 31          March 31          June 30             Total
--------------------------------------------------------------------------------------------------------------------------
  (in thousands, except per share amounts)

  FISCAL 2001
  Sales                                    $58,287           $58,489          $55,434           $57,021          $229,241
  Gross profit                               2,765             6,153            2,541             5,724            17,183
  Net income (loss)                           (395)            1,724             (218)            1,549             2,660
  Earnings (Loss) per share                   (.05)              .20             (.03)              .19               .32

  FISCAL 2000
  Sales                                    $54,975           $59,962          $57,656           $59,287          $231,880
  Gross profit                               4,225             5,955            6,046             4,676            20,902
  Net income (loss)                            751             1,563            1,607               969             4,890
  Earnings (Loss) per share                    .08               .17              .18               .11               .54

</TABLE>

                                      -22-
                      Management's Discussion and Analysis

<PAGE>

MARKET RISK

     The Company  produces its products from wheat,  corn and milo and, as such,
is sensitive to changes in commodity  prices.  Grain futures  and/or options are
used as a hedge to protect against fluctuations in the market. For inventory and
open  futures,  the table below  presents the carrying  amount and fair value at
June 30, 2001 and 2000.

<TABLE>
<CAPTION>
<S>                                     <C>                   <C>                           <C>                     <C>
                                                        2001                                                2000
      As of June 30                     Carrying Amount       Fair Value                    Carrying Amount        Fair Value

  ----------------------------------------------------------------------------------------------------------------------------
      (in thousands)
      INVENTORIES
      Corn                                     $  1,598         $  1,603                              $ 965             $ 986
      Milo                                          169              171                                659               714
      Wheat                                       2,377            2,375                              1,649             1,652
   ===========================================================================================================================

                                     Expected Maturity*       Fair Value                  Expected Maturity*       Fair Value

  ----------------------------------------------------------------------------------------------------------------------------
      CORN FUTURES (long)
      Contract Volumes (bushels)           2.90 million
      Weighted Average Price                     $ 2.07
      Contract Amount                     $6.01 million    $5.72 million
   ===========================================================================================================================
</TABLE>

   *The latest expected maturity date occurs within one year from date
indicated.

     The Company also contractually sells a portion of its fuel grade alcohol at
prices that  fluctuate  with gasoline  futures.  Gasoline  futures are used as a
hedge  to  protect  against  these   fluctuations.   The  table  below  presents
information about open futures contracts as of June 30, 2001 and 2000.

<TABLE>
<CAPTION>
<S>                                         <C>               <C>                                  <C>                 <C>
                                                           2001                                                2000
         As of June 30                  Expected Maturity*       Fair Value                  Expected Maturity*       Fair Value

  -------------------------------------------------------------------------------------------------------------------------------
         GASOLINE FUTURES (short)
         Contract Volumes (gallons)           2.23 million                                        2.77 million
         Weighted Average Price                      $ .86                                               $ .93
         Contract Amount                     $1.92 million    $1.61 million                      $2.58 million     $2.62 million
      ===========================================================================================================================
      *The latest expected maturity date occurs within one year from date
indicated.
</TABLE>
                                      -23-
                Midwest Grain Products, Inc., Annual Report 2001
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

     The following  table is presented as a measure of the  Company's  liquidity
and financial condition:

<TABLE>
<CAPTION>
<S>           <C>                                                      <C>                                <C>
         June 30,                                                      2001                               2000

  --------------------------------------------------------------------------------------------------------------
         (in thousands)
         Cash and cash equivalents                                 $ 33,454                          $   7,728
         Working capital                                             47,490                             45,089
         Amounts available under lines of credit                      5,500                             23,000
         Notes payable and long-term debt                            26,693                             20,454
         Stockholders' equity                                       100,544                            102,378
  ==============================================================================================================
</TABLE>

     Cash flow generated from operations combined with $17.3 million received as
a result of the program  administered  by the U.S.  Department of  Agriculture's
Commodity Credit Corporation produced total cash provided by operations of $37.3
million.  Reduced levels of receivables  due primarily to lower gluten sales and
lower inventories also contributed to improved cash flow. While a portion of the
positive  operating  cash flow was used to pay for  capital  additions,  acquire
treasury  stock and pay dividends,  cash balances  increased to $33.4 million at
the end of the year.

     The Company  made open  market  purchases  of 403,743  shares of its common
stock during the year.  These  purchases  were made to fund the Company's  stock
option plans and for other  corporate  purposes.  As of June 30, 2001, the Board
has  authorized  the purchase of an additional  414,482  shares of the Company's
common stock.

     During the year,  the Company  completed  property and equipment  additions
totaling  $13.4  million,  including  the $6.5  million  acquisition  of the new
facility  for  the  production  of  Wheatex(TM)  and  the  installation  of  new
distillery  columns at the Atchison,  Kansas plant to improve food grade alcohol
production  efficiencies.  At June  30,  2001,  the  Company  had  $8.1  million
committed to improvements  and  replacements  of existing  equipment and for the
acquisition of a new feed dryer at the Pekin,  Illinois plant to improve alcohol
production  efficiencies at that location.  The Company is also developing plans
for other  additions  relating  to  value-added  wheat  gluten and wheat  starch
products.

     The Company has financed its new Wheatex(TM)  production facility through a
capital  lease  financing  involving  the  issuance on August 22, 2001 of a $6.5
million   industrial  revenue  bond  by  The  Unified  Government  of  Wyandotte
County/Kansas City, Kansas. The bond bears interest at a rate of 5.23% per annum
and matures in September  2008.  Under the lease,  the Company will make monthly
payments  declining from $114,200 in October 2001 to $77,700 in September  2008.
In connection with the financing,  the Company must maintain  certain  financial
ratios, including a current ratio of 1.5 to 1, minimum consolidated tangible net
worth of $84 million and a debt service coverage ratio of 1.5 to 1.

     The Company has added to its  normally  strong  equity and working  capital
positions while continuing to generate strong earnings before  interest,  taxes,
and  depreciation.  Management  believes  the  Company  is  well  positioned  to
effectively  expand  is  production  of  specialty  products  as well as  supply
customer needs for all its other products.

FUTURE CHANGES IN ACCOUNTING PRINCIPLES

     In June 2001, the Financial Accounting Standards Board issued Statements of
Financial  Accounting  Standards No. 141,  Business  Combinations,  and No. 142,
Goodwill and Other Intangible Assets, effective for fiscal years beginning after
December 15, 2001. Under the new rules,  goodwill (and tangible assets deemed to
have indefinite lives) will no longer be amortized but will be subject to annual
impairment tests in accordance with the Statements. Other intangible assets will
continue to be amortized  over their useful lives.  Because the Company does not
currently have any recorded


<PAGE>

intangible  assets  deemed  to  have  indefinite  lives,  the  adoption  of this
statement is not expected to have a material impact on the financial statements.

FORWARD-LOOKING INFORMATION

     This  report  contains  forward-looking  statements  as well as  historical
information. Forward-looking statements are identified by or are associated with
such words a "intend," "believe," "estimate," "expect,"  "anticipate," "hopeful"
and similar expressions. They reflect management's current beliefs and estimates
of future economic circumstances,  industry conditions,  Company performance and
financial   results  and  are  not   guarantees  of  future   performance.   The
forward-looking  statements are based on many assumptions and factors  including
those  relating to grain prices,  energy  costs,  product  pricing,  competitive
environment and related market  conditions,  operating  efficiencies,  access to
capital and actions of  governments.  Any changes in the  assumptions or factors
could produce  materially  different than those predicted and could impact stock
values.


                                      -24-
                      Management's Discussion and Analysis

<PAGE>

                        INDEPENDENT ACCOUNTANTS' REPORT


Board of Directors and Stockholders
Midwest Grain Products, Inc.
Atchison, Kansas

     We have audited the  accompanying  consolidated  balance  sheets of MIDWEST
GRAIN PRODUCTS,  INC. as of June 30, 2001 and 2000, and the related consolidated
statements of income,  stockholders' equity and cash flows for each of the three
years in the period  ended June 30, 2001.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

     We conducted our audits in accordance  with  auditing  standards  generally
accepted in the United States of America.  Those standards  require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

     In our opinion,  the consolidated  financial  statements  referred to above
present  fairly,  in all material  respects,  the financial  position of MIDWEST
GRAIN  PRODUCTS,  INC.  as of June 30,  2001 and 2000,  and the  results  of its
operations  and its cash flows for each of the three  years in the period  ended
June 30, 2001, in conformity with accounting  principles  generally  accepted in
the United States of America.


s/BKD, LLP
Kansas City, Missouri
August 1, 2001

                                      -25-
                Midwest Grain Products, Inc., Annual Report 2001

<PAGE>

                        CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
<S>                    <C>                                                               <C>              <C>               <C>
      Years ended June 30                                                                2001             2000              1999

  ------------------------------------------------------------------------------------------------------------------------------
      (in thousands, except per share amounts)

      Net sales                                                                     $229,241         $231,880          $216,101
      Cost of sales                                                                  212,058          210,978           200,622
  ------------------------------------------------------------------------------------------------------------------------------
      Gross profit                                                                    17,183           20,902            15,479
      Selling, general & administrative expenses                                      13,545           12,109            11,908
  ------------------------------------------------------------------------------------------------------------------------------
                                                                                       3,638            8,793             3,571
      Other operating income (loss)                                                       (3)              39               136
  ------------------------------------------------------------------------------------------------------------------------------
      Income from operations                                                           3,635            8,832             3,707
      Other income, net                                                                2,109              719               350
      Interest expense                                                                (1,347)          (1,469)           (1,959)
  ------------------------------------------------------------------------------------------------------------------------------
      Income before income taxes                                                       4,397            8,082             2,098
      Provision (Credit) for income taxes                                              1,737            3,192               828
  ------------------------------------------------------------------------------------------------------------------------------
      Net income                                                                  $    2,660       $    4,890           $ 1,270
  ==============================================================================================================================
      Earnings per common share                                                       $ 0.32           $ 0.54            $ 0.13
  ------------------------------------------------------------------------------------------------------------------------------
      Other comprehensive income
      Net income                                                                     $ 2,660          $ 4,890           $ 1,270
  ------------------------------------------------------------------------------------------------------------------------------
      Other comprehensive income, net of tax:
         Loss on cash flow hedge                                                       1,201
         Reclassification adjustment for (losses) included in net income              (1,216)
  ------------------------------------------------------------------------------------------------------------------------------
      Other comprehensive income                                                          15
  ------------------------------------------------------------------------------------------------------------------------------
      Comprehensive income                                                        $    2,675       $    4,890        $    1,270
  ==============================================================================================================================
</TABLE>

                                      -26-
                 See Notes to Consolidated Financial Statements
<PAGE>
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S>                                                                                                     <C>               <C>
      Years ended June 30                                                                                 2001              2000
  ---------------------------------------------------------------------------------------------------------------------------------
      (in thousands)

      ASSETS
      Current Assets
         Cash and cash equivalents                                                                   $  33,454           $ 7,728
         Receivables (less allowance for doubtful accounts;
              2001 and 2000--$252)                                                                      26,109            30,272
         Inventories                                                                                    18,230            19,246
         Prepaid expenses                                                                                1,625             1,617
         Deferred income taxes                                                                           2,451             4,058
         Refundable income taxes                                                                           299
  ---------------------------------------------------------------------------------------------------------------------------------
      Total Current Assets                                                                              82,168            62,921
  ---------------------------------------------------------------------------------------------------------------------------------
      Property & equipment, at cost                                                                    245,305           232,508
         Less accumulated depreciation                                                                 153,181           139,737
  ---------------------------------------------------------------------------------------------------------------------------------
      Property & equipment, net                                                                         92,124            92,771
  ---------------------------------------------------------------------------------------------------------------------------------
      Other assets                                                                                         158                87
  ---------------------------------------------------------------------------------------------------------------------------------
      Total Assets                                                                                    $174,450          $155,779
  =================================================================================================================================
      LIABILITIES AND STOCKHOLDERS' EQUITY
      Current Liabilities
         Current maturities of long-term debt                                                          $ 4,273        $    2,273
         Accounts payable                                                                               10,446            10,563
         Accrued expenses                                                                                4,008             4,044
         Deferred income                                                                                15,951
         Income taxes payable                                                                                                952
  ---------------------------------------------------------------------------------------------------------------------------------
      Total Current Liabilities                                                                         34,678            17,832
  ---------------------------------------------------------------------------------------------------------------------------------
      Long-term debt                                                                                    22,420            18,181
  ---------------------------------------------------------------------------------------------------------------------------------
      Post-retirement benefits                                                                           6,034             6,170
  ---------------------------------------------------------------------------------------------------------------------------------
      Deferred income taxes                                                                             10,774            11,218
  ---------------------------------------------------------------------------------------------------------------------------------
      Stockholders' equity
         Capital stock
           Preferred, 5% non-cumulative, $10 par value; authorized 1,000 shares;
              issued and outstanding 437 shares                                                              4                 4
           Common, no par; authorized 20,000,000 shares; issued 9,765,172 shares                         6,715             6,715
         Additional paid-in capital                                                                      2,485             2,485
         Retained earnings                                                                             105,878           104,073
         Accumulated other comprehensive income cash flow hedges                                            15
  ---------------------------------------------------------------------------------------------------------------------------------
                                                                                                       115,097           113,277
         Treasury stock, at cost
         Common; 2001--1,585,518 shares, 2000--1,181,775 shares                                         (14,553)          (10,899)
  ---------------------------------------------------------------------------------------------------------------------------------
      Total stockholders' equity                                                                       100,544           102,378
  ---------------------------------------------------------------------------------------------------------------------------------
      Total liabilities and stockholders' equity                                                      $174,450          $155,779
  =================================================================================================================================
      See Notes to Consolidated Financial Statements

</TABLE>
                                      -27-
                Midwest Grain Products, Inc., Annual Report 2001

<PAGE>

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
<S>                                     <C>    <C>              <C>       <C>           <C>                  <C>        <C>
                                                            Additional                 Accumulated Other
                                      Preferred  Common       Paid-in    Retained   Comprehensive Income  Treasury
      Years ended June 30               Stock      Stock      Capital    Earnings      Cash Flow Hedges     Stock        Total
  --------------------------------------------------------------------------------------------------------------------------------
      (in thousands)
      Balance, June 30, 1998            $4       $6,715      $2,485     $ 97,913                         $   (792)       $106,325
         Purchase of treasury stock                                                                        (2,150)         (2,150)
         1999 net income                                                   1,270                                            1,270
  --------------------------------------------------------------------------------------------------------------------------------
      Balance, June 30, 1999             4        6,715       2,485       99,183                           (2,942)        105,445
         Purchase of treasury stock                                                                        (7,957)         (7,957)
         2000 net income                                                   4,980                                            4,890
  --------------------------------------------------------------------------------------------------------------------------------
      Balance, June 30, 2000             4        6,715       2,485      104,073                          (10,889)        102,378
         Purchase of treasury stock                                                                        (3,654)         (3,654)
         2001 net income                                                   2,660                                            2,660
         Dividends paid--$.10 per share                                     (855)                                            (855)
         Unrealized gain on cash
           hedge                                                                             $ 15                              15
  --------------------------------------------------------------------------------------------------------------------------------
      Balance, June 30, 2001            $4       $6,715      $2,485      $105,878            $ 15        $(14,553)       $100,544
  ================================================================================================================================

</TABLE>

See Notes to Consolidated Financial Statements


                                      -28-
                   Notes to Consolidated Financial Statements

<PAGE>

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
<S>                                                                                      <C>              <C>           <C>
      Years Ended June 30                                                                2001             2000          1999
  ---------------------------------------------------------------------------------------------------------------------------------
      Cash Flows from Operating Activities
         Net income                                                                 $  2,660         $  4,890          $  1,270
         Items not requiring (providing) cash:
             Depreciation                                                             13,627           13,515            13,604
             (Gain) loss on sale of assets                                                 6                                (19)
             Deferred income taxes                                                     1,163            1,995                38
             Gain on retirement of long-term debt                                                        (603)

         Changes in:
              Accounts receivable                                                      4,163           (3,616)             (287)
              Inventories                                                              1,031            5,204            (4,020)
              Accounts payable                                                           226            1,334                38
              Deferred revenue                                                        15,951
              Income taxes (receivable) payable                                       (1,251)             495             1,791
              Other                                                                     (251)            (838)              298
  ---------------------------------------------------------------------------------------------------------------------------------
         Net cash provided by operating activities                                    37,325           22,376            12,713
  ---------------------------------------------------------------------------------------------------------------------------------
      Cash Flows from Investing Activities
         Additions to property & equipment                                           (13,384)          (8,127)           (6,054)
         Proceeds from sale of equipment                                                  55               12                31
  ---------------------------------------------------------------------------------------------------------------------------------
         Net cash used in investing activities                                       (13,329)          (8,115)           (6,023)
  ---------------------------------------------------------------------------------------------------------------------------------
      Cash Flows from Financing Activities
         Purchase of treasury stock                                                   (3,654)          (8,112)           (1,995)
         Principal payments on long-term debt                                         (2,273)          (2,475)           (5,364)
         Net proceeds on line of credit                                                8,512
         Dividends paid                                                                 (855)
  ---------------------------------------------------------------------------------------------------------------------------------
         Net cash provided by (used in) in financing activities                        1,730          (10,587)           (7,359)
  ---------------------------------------------------------------------------------------------------------------------------------
      Increase (Decrease) in Cash & Cash Equivalents                                  25,726             3,674             (669)
      Cash & Cash Equivalents, Beginning of Year                                       7,728            4,054             4,723
  ---------------------------------------------------------------------------------------------------------------------------------
      Cash & Cash Equivalents, End of Year                                           $33,454         $  7,728          $  4,054
  =================================================================================================================================
</TABLE>

      See Notes to Consolidated Financial Statements

                                      -29-
                Midwest Grain Products, Inc., Annual Report 2001

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Nature of Operations.  The activities of Midwest Grain  Products,  Inc. and
its  subsidiaries  consist  of the  processing  of  wheat,  corn and milo into a
variety of  products  through an  integrated  production  process.  The  process
produces wheat gluten  products,  which include vital wheat gluten and specialty
wheat proteins; premium wheat starch; alcohol products; and flour mill products.
The Company  sells its products on normal credit terms to customers in a variety
of  industries  located  primarily  throughout  the United  States.  Through its
wholly-owned  subsidiaries,  the Company operates in Atchison, Kansas and Pekin,
Illinois (Midwest Grain Products of Illinois, Inc.). Additionally, Midwest Grain
Pipeline,  Inc., another  wholly-owned  subsidiary,  supplies natural gas to the
Company's Atchison plant and Kansas City Ingredients Technology,  another wholly
owned subsidiary, supplies labor expertise in manufacturing specialty products.

     Use of Estimates.  The  preparation  of financial  statements in conformity
with  generally  accepted  accounting  principles  requires  management  to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting period. Actual results could differ from those estimates.

     Principles of Consolidation.  The consolidated financial statements include
the  accounts  of  Midwest  Grain  Products,  Inc.  and  all  subsidiaries.  All
significant  intercompany  balances and  transactions  have been  eliminated  in
consolidation.

     Inventories.  Inventories  are stated at the lower of cost or market on the
first-in,  first-out  (FIFO)  method.  In  connection  with the  purchase of raw
materials,  principally corn and wheat, for anticipated operating  requirements,
Midwest Grain Products,  Inc. enters into commodity contracts to reduce the risk
of future grain price  increases.  These  contracts  are accounted for as hedges
and, accordingly,  gains and losses are deferred and recognized in cost of sales
as part of product  cost when  contract  positions  are  settled  and as related
products are sold. If grain  requirements  fall below anticipated needs and open
contract levels, then gains and losses are recognized immediately for the excess
open contract levels.  Additionally,  the Company enters into futures  contracts
for the sale of fuel grade alcohol to protect its selling price to the customer.
At June 30, 2001, the Company had entered into contracts hedging future gasoline
prices  through the second  quarter of fiscal  2002 and corn prices  through the
first quarter of fiscal 2002.

     Property and Equipment.  Depreciation is computed using both  straight-line
and accelerated methods over the following estimated useful lives:

      Buildings and improvements                20-30 years
      Transportation equipment                   5-6  years
      Machinery and equipment                   10-12 years

     Earnings Per Common Share. Earnings per common share data is based upon the
weighted average number of common shares totaling 8,397,308 for 2001,  9,121,717
for 2000 and 9,608,769 for 1999.  The effect of employee  stock  options,  which
were  the  only  potentially  dilutive  securities  held  by  the  Company,  was
anti-dilutive in all three years.

     Cash  Equivalents.  The  Company  considers  all  liquid  investments  with
maturities of three months or less to be cash equivalents.

     Income Taxes.  Deferred tax  liabilities  and assets are recognized for the
tax effect of the differences  between the financial  statement and tax bases of
assets and liabilities.  A valuation allowance is established to reduce deferred
tax assets if it is more likely  than not that a deferred  tax asset will not be
realized.

<PAGE>


      NOTE 2:  INVENTORIES

      Inventories consist of the following:

<TABLE>
<CAPTION>
<S>                                                                   <C>                <C>
      June 30,                                                        2001               2000
      -----------------------------------------------------------------------------------------------
      (in thousands)
      Alcohol                                                       $ 4,216           $ 5,317
      Unprocessed grain                                               5,745             4,971
      Operating supplies                                              4,486             4,348
      Gluten and starch                                               3,393             4,186
      By-products and other                                             390               424
      -----------------------------------------------------------------------------------------------
                                                                    $18,230           $19,246
      ===============================================================================================

      NOTE 3:  PROPERTY AND EQUIPMENT

      Property and equipment consists of the following:

      June 30,                                                         2001              2000
      -----------------------------------------------------------------------------------------------
      (in thousands)
      Land, buildings and improvements                            $  20,553         $  19,516
      Transportation equipment                                        1,155             1,138
      Machinery and equipment                                       219,822           205,152
      Construction in progress                                        3,775             6,702
      -----------------------------------------------------------------------------------------------
                                                                    245,305           232,508
      Less accumulated depreciation                                 153,181           139,737
      -----------------------------------------------------------------------------------------------
                                                                  $  92,124         $  92,771
      ===============================================================================================
</TABLE>

                                      -30-

<PAGE>

NOTE 4:  ACCRUED EXPENSES

Accrued expenses consist of the following:

<TABLE>
<CAPTION>
<S>                                                                    <C>               <C>
      June 30,                                                         2001              2000
      -----------------------------------------------------------------------------------------------
      (in thousands)
      Excise taxes                                                  $   337           $   540
      Employee benefit plans (Note 10)                                1,795             1,661
      Salaries and wages                                                704               635
      Property taxes                                                    596               480
      Insurance                                                          20               138
      Interest                                                          528               569
      Other expenses                                                     28                21
      ------------------------------------------------------------------------------------------------
                                                                     $4,008            $4,044
      ================================================================================================
      NOTE 5:  LONG-TERM DEBT

      Long-term debt consists of the following:

      June 30,                                                         2001              2000
      -----------------------------------------------------------------------------------------------
      (in thousands)
      Senior notes payable                                          $18,181           $20,454
      Lines of credit                                                 8,512
      -----------------------------------------------------------------------------------------------
                                                                     26,693            20,454
      -----------------------------------------------------------------------------------------------
      Less current maturities                                         4,273             2,273
      ------------------------------------------------------------------------------------------------
      Long-term portion                                             $22,420           $18,181
      ================================================================================================
</TABLE>

     The unsecured senior notes are payable in annual installments of $2,273,000
from 2001 through 2008 with the final  principal  payment of  $2,270,000  due in
2009.  Interest is payable  semiannually at 6.68% per annum for the fifteen-year
term of the notes.

     At June 30, 2001, the Company had a $12,233,741 unsecured revolving line of
credit  expiring on November 30, 2002,  with interest at 1% below prime on which
there were  borrowings  of  $6,511,500  at June 30,  2001.  The Company had a $3
million  unsecured  term note  expiring on October 1, 2001,  with interest at 1%
below prime on which there was  $2,000,000 in  borrowings at June 30, 2001.  The
Company had an additional line of credit totaling $2.0 million expiring on April
26, 2002,  with interest of .5% below prime on which there were no borrowings at
June 30, 2001 and 2000.

     In  connection  with  the  above  borrowings,   the  Company,  among  other
covenants, is required to maintain certain financial ratios, including a current
ratio of 1.5 to 1, minimum consolidated  tangible net worth of $84 million, debt
to tangible net worth not to exceed 2.5 to 1, and debt service coverage ratio of
1.5 to 1.
<PAGE>

     Aggregate  annual  maturities  of  long-term  debt at June 30,  2001 are as
follows:

      (in thousands)
      2002                                        $  4,273
      2003                                           8,785
      2004                                           2,273
      2005                                           2,273
      2006                                           2,273
      Thereafter                                     6,816
      -----------------------------------------------------
                                                   $26,693
      =====================================================

NOTE 6:  INCOME TAXES

The provisions (credit) for income taxes is comprised of the following:
<TABLE>
<CAPTION>
<S>                                                   <C>              <C>               <C>
      June 30,                                        2001             2000              1999
      -----------------------------------------------------------------------------------------------
      (in thousands)
      Income taxes currently payable               $   574          $ 1,197              $790
      Income taxes deferred                          1,163            1,995                38
      -----------------------------------------------------------------------------------------------
                                                    $1,737          $ 3,192              $828
      ===============================================================================================
</TABLE>

     The tax effects of temporary differences related to deferred taxes shown on
the consolidated balance sheets are as follows:
<TABLE>
<CAPTION>
<S>                                                                    <C>               <C>
      June 30,                                                         2001              2000
      -----------------------------------------------------------------------------------------------
      (in thousands)
      Deferred tax assets:
        Accrued employee benefits                                 $     149         $     155
        Post-retirement liability                                     2,353             2,406
        Insurance accruals                                              226               478
        State operating loss carryforwards                              744               772
        Alternative minimum tax                                       2,411             2,259
        Other                                                           486             1,563
      -----------------------------------------------------------------------------------------------
                                                                      6,369             7,633
      -----------------------------------------------------------------------------------------------
      Deferred tax liabilities:
        Accumulated depreciation                                    (14,130)          (14,533)
        Deferred gain on involuntary conversion                        (247)             (260)
        Deferred income from federal grant                             (315)
      -----------------------------------------------------------------------------------------------
                                                                    (14,692)          (14,793)
      -----------------------------------------------------------------------------------------------
      Net deferred tax liability                                   $ (8,323)         $ (7,160)
      ===============================================================================================
</TABLE>

<PAGE>

     The above net  deferred tax  liability  is  presented  on the  consolidated
balance sheets as follows:

<TABLE>
<CAPTION>
<S>                                                                    <C>               <C>
      June 30,                                                         2001              2000
      ------------------------------------------------------------------------------------------------
      (in thousands)
      Deferred tax asset--current                                 $   2,451           $  4,058
      Deferred tax liability--long-term                             (10,774)           (11,218)
      ------------------------------------------------------------------------------------------------
      Net deferred tax liability                                  $  (8,323)          $ (7,160)
      ================================================================================================
</TABLE>

      No valuation allowance has been recorded at June 30, 2001 or 2000.


                                            -31-
                    Midwest Grain Products, Inc., Annual Report 2001

     A reconciliation  of the provision for income taxes at the normal statutory
federal rate to the provision (credit) included in the accompanying consolidated
statements of operations is shown below:

<TABLE>
<CAPTION>
<S>                                                   <C>              <C>               <C>
      Years Ended June 30,                            2001             2000              1999
      ------------------------------------------------------------------------------------------------
      (in thousands)
      "Expected" provision
          (credit) at federal
          statutory rate (34%)                      $1,495           $2,748              $714
      Increases (Decreases)
          resulting from:
        Effect of state
          income taxes                                 139              176                78
        Other                                          103              268                36
      ------------------------------------------------------------------------------------------------
      Provision (Credit) for income taxes           $1,737           $3,192              $828
      ================================================================================================
</TABLE>

NOTE 7:  CAPITAL STOCK

     The Common  Stock is entitled to elect four out of the nine  members of the
Board of Directors, while the Preferred Stock is entitled to elect the remaining
five directors. Holders of Common Stock are not entitled to vote with respect to
a merger,  dissolution,  lease,  exchange  or sale of  substantially  all of the
Company's assets,  or on an amendment to the Articles of  Incorporation,  unless
such action would increase or decrease the authorized shares or par value of the
Common or Preferred  Stock, or change the powers,  preferences or special rights
of the Common or  Preferred  Stock so as to affect the  holders of Common  Stock
adversely.

<PAGE>

NOTE 8:  OTHER OPERATING INCOME (EXPENSE)

Other operating income (expense) consists of the following:

<TABLE>
<CAPTION>
<S>                                                   <C>              <C>               <C>
      Years Ended June 30,                            2001             2000              1999
      ------------------------------------------------------------------------------------------------
      (in thousands)
      Truck operations                              $ (79)           $ (53)             $108
      Warehousing and
          storage operations                          (10)             (35)              (10)
      Miscellaneous                                    86              127                38
      ------------------------------------------------------------------------------------------------
                                                     $ (3)            $ 39              $136
      ================================================================================================
</TABLE>

NOTE 9:  ENERGY COMMITMENT

     During fiscal 1995, the Company  negotiated a 15 year agreement to purchase
steam heat and  electricity  from a utility for its Illinois  operations.  Steam
heat is being  purchased  for a  minimum  monthly  charge  of  $114,000,  with a
declining fixed charge for purchases in excess of the minimum usage. Electricity
purchases will occur at fixed rates through May 31, 2002. In connection with the
agreement,  the Company  leased  land to the utility  company for 15 years so it
could construct a co-generation  plant at the Company's Illinois  facility.  The
Company has also agreed to  reimburse  the utility for the net book value of the
plant if the lease is not renewed for an additional 19 years.  The estimated net
book value of the plant would be $10.6 million at that date.

NOTE 10: EMPLOYEE BENEFIT PLANS

     Employee  Stock  Ownership  Plans.  The Company and its  subsidiaries  have
employee stock  ownership  plans covering all eligible  employees  after certain
requirements are met. Contributions to the plans totaled $409,000,  $880,000 and
$947,000  for the  years  ended  June 30,  2001,  2000 and  1999,  respectively.
Contributions  are made in the form of cash and/or  additional  shares of common
stock.

     401(k) Profit Sharing Plans.  During 1998, the Company and its subsidiaries
formed  401(k)  profit  sharing  plans  covering  all  employees  after  certain
eligibility  requirements are met.  Contributions to the plans totaled $740,000,
$392,000  and  $215,000  for the  years  ended  June 30,  2001,  2000 and  1999,
respectively.

     Post-Retirement  Benefit  Plan.  The Company and its  subsidiaries  provide
certain   post-retirement  health  care  and  life  insurance  benefits  to  all
employees. The liability for such benefits is unfunded.


<PAGE>
The status of the Company's plans at June 30, 2001 and 2000 was as follows:
<TABLE>
<CAPTION>
<S>                                                                    <C>               <C>
      June 30,                                                         2001              2000
      ------------------------------------------------------------------------------------------------
      (in thousands)
      Accumulated post-retirement benefit obligations:
           Retirees                                                 $3,044             $3,390
           Active plan participants                                  3,207              2,872
      ------------------------------------------------------------------------------------------------
      Unfunded accumulated obligation                                6,251              6,262
      Unrecognized actuarial gain (loss)                              (217)              (92)
      ------------------------------------------------------------------------------------------------
      Accrued post-retirement benefit cost                          $6,034             $6,170
      ================================================================================================
</TABLE>
                                      -32-
Net post-retirement benefit cost included the following components:
<TABLE>
<CAPTION>
<S>                                                   <C>              <C>               <C>
      June 30,                                        2001             2000              1999
      ------------------------------------------------------------------------------------------------
      (in thousands)
      Service cost                                   $177              $154             $110
      Interest cost                                   407               355              323
      (Gain) loss amortization                        (16)                               (27)
      ------------------------------------------------------------------------------------------------
                                                     $568              $493             $406
      ================================================================================================
</TABLE>
     The weighted average annual assumed rate of increase in the per capita cost
of covered  benefits (i.e.,  health care cost trend rate) is assumed to be 8.75%
(compared to 9.00% assumed for 2000) reducing to 7.25% over seven years and 6.0%
over 13 years. A one  percentage  point increase in the assumed health care cost
trend rate would have increased the accumulated  benefit  obligation by $405,000
at June 30, 2000, and the service and interest cost by $56,000 for the year then
ended.

     A  weighted  average  discount  rate of 7.50% was used in  determining  the
accumulated benefit obligation.

     Stock  Options.  The  Company  has  three  stock  option  plans,  the Stock
Incentive  Plan of 1996 (the "1996  Plan"),  the Stock  Option  Plan for Outside
Directors (the "Directors Plan"), and the 1998 Stock Incentive Plan for Salaried
Employees  (the  "Salaried  Plan").  These  Plans  permit the  issuance of stock
awards,  stock options and stock  appreciation  rights to salaried employees and
outside directors of the Company. The Company accounts for these plans under APB
Opinion  No. 25,  under  which no  compensation  cost has been  recognized.  Had
compensation  cost been  determined  consistent with FASB Statement No. 123, the
Company's  2001, 2000 and 1999 net income and earnings per share would have been
reduced to the following pro forma amounts:
<PAGE>


<TABLE>
<CAPTION>
<S>                                                   <C>              <C>               <C>
                                                      2001             2000              1999
      -----------------------------------------------------------------------------------------------
      Net Income (loss):
        As Reported                                 $2,660           $4,890            $1,270
        Pro Forma                                   $1,979           $4,206              $697
      Basis Earnings Per Share:
        As Reported                                   $.32             $.54              $.13
        Pro Forma                                     $.24             $.46              $.07
      ===============================================================================================
</TABLE>

     Under the 1996 Plan,  the  Company may grant  incentives  for up to 600,000
shares of the Company's common stock to key employees. The term of each award is
determined by the committee of the Board of Directors charged with administering
the 1996 Plan.  Under the terms of the 1996 Plan,  options granted may be either
nonqualified  or incentive  stock options and the exercise price may not be less
than the fair value on the date of the grant. Through June 30, 2001, the Company
has granted  incentive  stock options to purchase  472,500  shares.  The options
become  exercisable  in yearly  increments  over  four-year  periods.  They have
ten-year  terms and have exercise  prices equal to fair market value on the date
of grant.

     Under the Directors  Plan, each  non-employee or "outside"  director of the
Company  receives on the day after each annual meeting of stockholders an option
to purchase  1,000 shares of the Company's  common stock at a price equal to the
fair market value of the  Company's  common stock on such date.  Options  become
exercisable  on the 184th day  following  the date of grant and expire not later
than ten years after the date of grant. Subject to certain adjustments,  a total
of 90,000 shares are reserved for annual grants under the Plan. Through June 30,
2001, the Company had granted  options to purchase  33,000 shares,  all of which
were exercisable as of June 30, 2001.

     Under the Salaried Plan,  the Company may grant stock  incentives for up to
300,000 shares of the Company's  common stock to full-time  salaried  employees.
The Salaried Plan provides that the amount, recipients, timing and terms of each
award be  determined  by the  Committee of the Board of  Directors  charged with
administering  the Salaried Plan. Under the terms of the Salaried Plan,  options
granted may be either  nonqualified  or incentive stock options and the exercise
price may not be less than the fair value on the date of the grant. Through June
30, 2001, the Company has granted incentive stock options on 288,320 shares. The
options become  exercisable in yearly  increments over four-year  periods.  They
have ten-year  terms and have exercise  prices equal to fair market value on the
date of grant.


                                      -33-
                Midwest Grain Products, Inc., Annual Report 2001
<PAGE>
     A summary of the status of the  Company's  three stock option plans at June
30,  2001,  2000 and 1999 and changes  during the years then ended is  presented
below:
<TABLE>
<CAPTION>
<S>                                                           <C>                        <C>                          <C>
                                                              2001                       2000                         1999
  --------------------------------------------------------------------------------------------------------------------------------
                                                                Weighted                   Weighted                     Weighted
                                                                 Average                    Average                      Average
                                                                Exercise                   Exercise                     Exercise
                                                    Shares         Price         Shares       Price           Shares       Price

  --------------------------------------------------------------------------------------------------------------------------------

      Outstanding Beginning of Year               729,360          12.30        544,860     $ 13.74          441,360      $14.04
      Granted                                     133,460           9.33        184,500        8.03          103,500       12.43
      Cancelled                                   (69,000)        $14.00
      Outstanding End of Year                     793,820         $11.65        729,360      $12.30          544,860      $13.74
  ================================================================================================================================
</TABLE>
      These are comprised as follows:
<TABLE>
<CAPTION>
<S>                                               <C>             <C>                     <C>                     <C>
                                                                                                                 Shares
                                                                                         Remaining          Exercisable
                                                                   Exercise            Contractual          at June 30,
                                                   Shares             Price          Lives (Years)                 2001
      ----------------------------------------------------------------------------------------------------------------------------
      1996 Plan                                     21,000           $14.00                   4.50               21,000
                                                    86,500           $15.25                   5.50               86,500
                                                    79,500           $13.75                   6.50               59,625
                                                    96,500           $12.50                   7.50               48,250
                                                    86,000           $ 8.00                   8.50               21,500
                                                    34,000           $ 9.31                   9.50
                                                    69,000           $ 9.31                  10.00

      Directors Plan                                 7,000           $16.25                   5.25                7,000
                                                     7,000           $14.25                   6.25                7,000
                                                     7,000           $11.75                   7.25                7,000
                                                     6,000          $  9.00                   8.25                6,000
                                                     6,000          $  9.63                   8.25                6,000

      Salaried Plan                                171,360           $13.50                   6.67               85,680
                                                    92,500          $  8.00                   8.50               23,125
                                                    24,460          $  9.31                   9.50
      ----------------------------------------------------------------------------------------------------------------------------
                                                   793,820                                                      378,680
      ============================================================================================================================
</TABLE>
     The fair value of each option  grant is  estimated on the date of the grant
using the  Black-Scholes  option pricing model.  The following  weighted-average
assumptions  were used for the year ended June 30, 2001: Risk free interest rate
of 4.98%;  expected  dividend yield of 0%; expected  volatility of 35%, expected
life of ten years.
<PAGE>

NOTE 11:  OPERATING LEASES

     The Company has several  noncancelable  operating  leases for  railcars and
other  equipment,  which expire from October 2001  through  November  2004.  The
leases  generally  require the Company to pay all service costs  associated with
the railcars.  Rental payments  include minimum rentals plus contingent  amounts
based on mileage.

     Future minimum lease payments at June 30, 2001 are as follows:

      (in thousands)
      2002                                                           $1,260
      2003                                                              645
      2004                                                              151
      2005                                                                2
      ----------------------------------------------------------------------
      Future minimum lease payments                                  $4,094
      ======================================================================

     Rental  expense for all  operating  leases with terms longer than one month
totaled $2,385,777, $2,458,096 and $2,305,235 for the years ended June 30, 2001,
2000 and 1999, respectively.

NOTE 12: SIGNIFICANT ESTIMATES AND CONCENTRATIONS

     Generally  accepted  accounting  principles  require  disclosure of certain
significant  estimates and current  vulnerabilities  due to certain  significant
concentrations. Those matters include the following:

     A majority of the Company's labor force is covered by collective bargaining
agreements which expire August 31, 2002 at the Atchison plant and on October 31,
2003 at the Pekin plant.


                                      -34-

     Under its self-insurance plan, the Company accrues the estimated expense of
health  care and  workers'  compensation  claims  costs  based on  claims  filed
subsequent  to  year-end  and an  additional  amount  for  incurred  but not yet
reported claims based on prior experience.  An accrual for such costs of $20,000
is included in the accompanying 2001 financial statements. Claims payments based
on actual claims ultimately filed could differ materially from these estimates.

     During the years ended June 30, 2001,  2000 and 1999, the Company had sales
to  one  customer   accounting  for   approximately   8.7%,   13.3%  and  12.0%,
respectively, of consolidated sales.

<PAGE>

NOTE 13:  OPERATING INFORMATION

     The Company is comprised of one segment:  the  processing  and marketing of
products  derived  from  wheat,  corn  and  milo  through  a  single  integrated
production  process.  Product  group  sales for the  years  ended  June 30,  are
summarized as follows:
<TABLE>
<CAPTION>
<S>                                                   <C>              <C>               <C>
                                                      2001             2000              1999
      ------------------------------------------------------------------------------------------------
      Wheat gluten products                       $ 49,762         $ 70,912          $ 56,153
      Premium wheat starch                          27,907           29,186            27,173
      Alcohol products                             149,538          129,023           129,729
      Flour and other
           mill products                             2,034            2,759             3,046
      ------------------------------------------------------------------------------------------------
                                                  $229,241         $231,880          $216,101
      ================================================================================================
</TABLE>
NOTE 14:  FAIR VALUE OF FINANCIAL INVESTMENTS

     The  following  table  presents  estimated  fair  values  of the  Company's
financial  instruments.  The fair  values of certain of these  instruments  were
calculated by discounting expected cash flows, which method involves significant
judgments by management and uncertainties. Fair value is the estimated amount at
which  financial  assets  or  liabilities   could  be  exchanged  in  a  current
transaction between willing parties, other than in a forced or liquidation sale.
Because no market exists for certain of these financial  instruments and because
management does not intend to sell these financial instruments, the Company does
not know  whether the fair  values  shown  below  represent  values at which the
respective financial instruments could be sold individually or in the aggregate.
<TABLE>
<CAPTION>
<S>                                                <C>                <C>             <C>              <C>
                                                                                June 30,
                                                                      2001                               2000
      ----------------------------------------------------------------------------------------------------------
                                                  Carrying             Fair          Carrying             Fair
                                                    Amount            Value            Amount            Value
      ----------------------------------------------------------------------------------------------------------
      Financial assets:
         Cash and cash equivalents                 $33,454          $33,454          $  7,728         $  7,728
         Accounts receivable                        26,109           26,109            30,272           30,272
         Futures contracts                              15               15
      Financial liabilities:
         Long-term debt                             26,693           25,374            20,454           19,000
      ==========================================================================================================
</TABLE>
                                      -35-
                Midwest Grain Products, Inc., Annual Report 2001
<PAGE>
NOTE 15:  ADDITIONAL CASH FLOWS INFORMATION

<TABLE>
<CAPTION>
<S>                                                                    <C>               <C>              <C>
      Years Ended June 30,                                             2001              2000             1999
      ----------------------------------------------------------------------------------------------------------
      (in thousands)
      Investing and Non-cash Financing Activities
         Purchase of property and
              equipment in accounts payable                         $   343           $   255          $  136
         Purchase of treasury stock in accounts
              payable                                                                                  $  155
      Additional Cash Payment Information:
         Interest paid                                               $1,388            $1,542        $  2,013
         Income taxes paid (refunded)                                $1,825           $   704        $ (1,001)
      ==========================================================================================================
</TABLE>

NOTE 16:  CONTINGENCIES

     There  are  various  legal  proceedings   involving  the  Company  and  its
subsidiaries.  Management  considers  that the  aggregate  liabilities,  if any,
arising  from such  actions  would  not have a  material  adverse  effect on the
consolidated financial position or operations of the Company.

     The Company recently advised customers and the Food and Drug Administration
that certain products in one of its specialty protein lines required  relabeling
because they contain sulfites,  a potential allergen.  The products  represented
less than 1% of the  Company's  total wheat  protein  product sales during 2001.
Certain  customers  have  advised  the Company  that they will expect  indemnity
against  resulting  losses  allegedly  incurred as a result of the  mislabeling.
Although  the Company is unable to estimate the costs that it might incur if any
claims are brought against it, after taking into account  anticipated  insurance
coverage  the  Company  does not expect  such  costs  would be  material  to its
financial condition or results of operations.

NOTE 17:  USDA GRANT

     During the fourth quarter of fiscal 2001,  the United States  Department of
Agriculture  developed  a grant  program  for the gluten  industry in place of a
two-year  extension of a wheat  gluten  import quota that took effect on June 1,
1998. Over the life of the program,  which is scheduled to end May 31, 2003, the
Company is  eligible to receive  nearly $26 million of the program  total of $40
million. For the first year of the program, approximately $17.3 million has been
allocated to the Company with the  remainder  available in the second year.  The
funds are to be used for  research,  marketing,  promotional  and capital  costs
related to value-added gluten and starch products.  Funds allocated on the basis
of  current  operating  costs  will be  considered  revenue  as those  costs are
incurred.  Funds  allocated based on capital  expenditures  will reduce the cost
basis of the related  capital  assets.  Approximately  $1,350,000 is included in
other income for the year ended June 30,2001, related to this program.

NOTE 18:  FUTURE CHANGES IN ACCOUNTING PRINCIPLES

     In June 2001, the Financial Accounting Standards Board issued Statements of
Financial  Accounting  Standards No. 141,  Business  Combinations,  and No. 142,
Goodwill and Other Intangible Assets, effective for fiscal years beginning after
December 15, 2001. Under the new rules,  goodwill (and intangible  assets deemed
to have  indefinite  lives) will no longer be  amortized  but will be subject to
annual  impairment  tests in accordance  with the Statements.  Other  intangible
assets will  continue  to be  amortized  over their  useful  lives.  Because the
Company does not currently  have any recorded  intangible  assets deemed to have
indefinite  lives,  the  adoption of this  statement  is not  expected to have a
material impact on the financial statements.


                                      -36-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>4
<FILENAME>x23.txt
<TEXT>
                                                                      Exhibit 23

BKD, LLP
Certified Public Accountants
Twelve Wyandotte Plaza
120 West 12th Street, Suite 1200
Kansas City, MO 64105-1936
--------------------------------------------------------------------------------


               CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors
Midwest Grain Products, Inc.
Atchison, Kansas

     We consent to the incorporation by reference in Registration  Statement No.
333-51849 on Form S-8 and the related  Prospectus  dated May 5, 1998, of Midwest
Grain  Products,  Inc.  of our  report  dated  August 1, 2001,  relating  to the
consolidated balance sheets of Midwest Grain Products,  Inc. as of June 30, 2001
and 2000,  and the  related  consolidated  statements  of income,  stockholders'
equity and cash flows for each of the three  years in the period  ended June 30,
2001,  which report is  incorporated  by reference in the Annual  Report on Form
10-K of Midwest  Grain  Products,  Inc. for the fiscal year ended June 30, 2001,
and of our report dated August 1, 2001,  with regard to the financial  statement
schedule that is included in such Form 10-K for the year ended June 30, 2001. We
also  consent to the  reference  to our firm under the heading  "Experts" in the
Prospectus to the Registration Statement.



                                                /s/ BKD, LLP


Kansas City, Missouri
September 10, 2000


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>7
<FILENAME>x10a.txt
<DESCRIPTION>SUMMARY OF INFORMAL CASH BONUS PLAN
<TEXT>
                                                                   Exhibit 10(a)


     The  Company has an  informal  cash bonus plan  pursuant to which the Human
Resources  Committee  authorized  a $50,000  bonus  pool that may be paid at the
discretion of the Chief Executive Officer to reward superior  performance during
the Fiscal 2001 by any  employee of the Company  other than the Chief  Executive
Officer.


</TEXT>
</DOCUMENT>
</SUBMISSION>
