Exhibit 10.1

 

Guidelines for Issuance of Fiscal 2004 Restricted Share Awards
Adopted by the Human Resources Committee of the Board of Directors
of MGP Ingredients, Inc.

 

RECITALS:

 

1.             MGP INGREDIENTS, INC., formerly MIDWEST GRAIN PRODUCTS, INC. (the
“Company”), has adopted the Stock Incentive Plan of 1996 (the “1996 Plan”) and
the 1998 Stock Incentive Plan for Salaried Employees (the “1998 Plan”),
collectively the “Plans.”

 

2.             Under the provisions of Section 5 of the Plans, the Committee may
grant Stock Incentives in the form of Stock Awards.

 

3.             Under the provisions of the Plans, the Committee may provide for
Stock Awards in the form of Restricted Shares to such eligible persons as may be
selected by the Committee in its discretion.

 

Pursuant to the authority granted to it under the provisions of Section 10(c) of
the Plans, the Committee adopts the following guidelines with respect to the
issuance in 2004 of Stock Awards in the form of Restricted Shares.

 

A.            Terms of Awards of Restricted Shares.  Restricted Shares awarded
under the Plans in 2004  are subject to the following terms and conditions.

 

(i)            Number of Shares.  The number of shares issued to an Employee
pursuant to a Stock Award in the form of Restricted Shares shall be as
determined by the Committee.

 

(ii)           Vesting.  Subject to the provisions of paragraphs C and D of
these Guidelines, Restricted Shares issued as Stock Awards under the Plans shall
vest (i.e., become owned by the Employee without a substantial risk of
forfeiture) only upon either (a) the Employee’s completion of seven (7) full
years of employment with the Company, commencing on July 1, 2003 and ending on
June 30, 2010, or (b) (1) the Employee’s completion of three (3) full years of
employment, commencing on July 1, 2003 and ending on June 30, 2006 and (2) the
satisfaction by the Company of a Performance Measure, as specified below,
established by the Committee (the “Restriction Period”).

 

(c)           Performance Measure.  The Performance Measure shall be earnings
per share on a cumulative basis over the period beginning on July 1, 2003 and
ending on June 30, 2006 in the amount established by the Committee on or prior
to the date of the 2004 Stock Awards.  The Company’s earnings per share shall be
determined by the independent accounting firm regularly engaged by the Company
and, except as follows,  shall be determined in accordance with generally
accepted accounting principles.  The Committee may determine whether

 

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

 

the calculation of earnings per share should include or exclude any
extraordinary item or be adjusted to reflect any extraordinary event, such as an
acquisition, divestiture, change in accounting principles or tax regulations.
Without limiting the foregoing, in the event of a sale by the Company of shares
of its stock, a recapitalization, stock split, stock dividend, combination or
exchange of shares, merger, consolidation, rights offering, reorganization or
liquidation, or any other change in the corporate structure or shares of the
Company, the Committee may make such equitable adjustments, designed to protect
against dilution or enlargement, as it may deem appropriate with respect to the
Performance Measure.

 

B.            Forfeiture.  Except as provided in paragraph C, if the employment
of the Employee to whom Restricted Shares has been issued terminates for any
reason prior to the end of the Restriction Period, such Restricted Shares shall
be immediately forfeited by such Employee and cancelled by the Company.

 

C.            Further Conditions on Vesting and Forfeiture.

 

(i)            In the event of an Employee’s death, Disability, Retirement or,
in the sole discretion of the Committee, involuntary termination of employment
without cause, in any such case after one year from the date of grant specified
in the agreement evidencing the Stock Award but prior to June 30, 2006,  the
Restricted Shares issued to such Employee shall vest, on the date the Committee
determines that the Performance Measure has been met, as to the number of
Restricted Shares issued to such Employee multiplied by a fraction, the
numerator of which shall equal the number of months of employment (including
fractional months as full months) that such Employee was employed by the
Company, commencing as of July 1, 2003 and ending on the date of termination of
employment, and the denominator of which shall be thirty-six.  The balance of
Restricted Shares issued to such Employee shall be forfeited by the Employee and
cancelled by the Company. Pending determination by the Committee that the
Performance Measure has been met, the provisions of paragraph E below shall
continue to apply.

 

(ii)           If the Performance Measure is not attained, then, in the event of
an Employee’s death, Disability, Retirement or, in the sole discretion of the
Committee, involuntary termination of employment without cause, in any such case
after three years from the date of grant specified in the agreement evidencing
the Stock Award but prior to June 30, 2010, the Restricted Shares issued to such
Employee shall vest on the date of termination as to the number of Restricted
Shares issued to such Employee multiplied by a fraction, the numerator of which
shall equal the number of months of employment (including fractional months as
full months) that such Employee was employed by the Company, commencing as of
July 1, 2003 and ending on the date of termination of employment, and the
denominator of which shall be eighty-four.  The balance of Restricted Shares
issued to such Employee shall be forfeited by the Employee and cancelled by the
Company.

 

2

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

 

(iii)          Solely in the case of Restricted Shares issued under the 1996
Plan, any Restricted Shares shall become fully vested in the Employee in the
event of a Change of Control, as defined in the Plan.

 

(iv)          As used herein,  the term “Disability” shall mean the inability of
an Employee to perform substantially such Employee’s duties and responsibilities
due to a physical or mental condition that would entitle such Employee to
benefits under the Company’s Long-Term Disability Plan (or any successor to the
plan in effect on the date of adoption of these Guidelines) and the term
“Retirement” means the attainment by the Employee of age 62.

 

(v)           The Committee’s determinations to permit vesting in the event of
involuntary terminations of employment without cause need not be uniform and may
be made selectively among participants, whether or not such participants are
similarly situated.

 

D.            Issuance of Restricted Shares.  A certificate or certificates
representing the number of shares awarded as a Stock Award in the form of
Restricted Shares shall be issued from the Company’s treasury shares and
registered in the Employee’s name and may bear substantially the following
legend:

 

“The shares evidenced by this Certificate have been issued pursuant to the [name
of plan] and a related agreement (the “Agreement”) between the Company and the
registered holder.  The holder’s rights are subject to the restrictions, terms
and conditions of the Plan and to the Agreement, which restricts the transfer of
the shares and subjects them to forfeiture to the Company under the
circumstances referred to in the Agreement.  This legend may be removed when the
holder’s rights to the shares vest under the Agreement.”

 

All certificates so registered in the Employee’s name shall be deposited with
the Company, together with stock powers or other instruments of assignment, each
endorsed in blank with a guarantee of signature deemed appropriate by the
Company which would permit transfer to the Company of all or a portion of the
Restricted Shares in the event such award is forfeited in whole or in part. 
Upon vesting and provision for taxes required to be withheld, such certificate
or certificates evidencing unrestricted ownership of the requisite number of
shares of Common Stock shall be delivered to the holder of such Stock Award.

 

E.             Rights with Respect to Restricted Shares.  The holder of an award
of Restricted Shares shall have the following rights of a stockholder of the
Company: voting rights and the right to receive dividends during any applicable
Restriction Period.

 

F.             Non-Assignability.  Except as may be permitted by the applicable
Plan, until they have vested, Restricted Shares may not, by operation of law or
otherwise,

 

3

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

 

be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of
by the holder thereof or be subject to execution, attachment or other legal
process.

 

G.            Provisions of Plans Apply.  Even though not set forth herein or in
any related grant agreement, the provisions of the related Plan applicable to
Stock Awards, including those relating to adjustment of Stock Awards, shall
apply to Restricted Shares.

 

H.            Taxes.    No certificates evidencing ownership of shares shall be
delivered to the holder of a Stock Award upon vesting until the holder makes
such provision as the Company deems appropriate for the payment of any taxes
which the Company may withhold in connection with the vesting of such Stock
Award.   Withholding taxes resulting from vesting of Stock Awards may be settled
with cash or shares of the Company’s Common Stock in accordance with the
following guidelines.

 

(i)            Holders may deliver to the Company a personal check satisfactory
to the Company in the amount of the tax liability.

 

(ii)           Holders may elect to pay the tax liability in shares of the
Company’s Common Stock by directing the Company to withhold from the number of
shares to be delivered upon vesting that number of shares equal to the amount of
the tax liability divided by the fair market value (as defined by the Plans) of
one share of the Company’s common stock on the date the tax to be withheld is to
be determined (the “Tax Date”); or

 

(iii)          Holders may elect to pay the tax liability in shares of the
Company’s Common Stock by delivering to the Company good and marketable title to
that number of shares of Mature Stock (as defined in the Plans) or other Stock
which was not obtained through the exercise of a stock option owned by the
holder as shall equal the amount of the tax liability divided by the fair market
value of one share of the Company’s common stock on the Tax Date.

 

(iv)          If a holder does not notify the Company on or before the Tax Date
as to the manner the holder wishes to provide for withholding taxes, the Company
may, without notice to the holder, satisfy its withholding obligations as
provided in clause (ii) above or any other manner permitted by law.

 

(v)           No fractional shares will be issued in connection with any
election to satisfy a tax liability by paying in shares.  The balance of any tax
liability representing a fraction of a share will be settled in cash.

 

(vi)          The amount of tax which may be paid pursuant to a stock payment
election under clause (ii), (iii) or (iv) above will be the Company’s minimum
required federal (including FICA and FUTA) and state withholding amounts at the
time of the election to pay the taxes with surrendered or withheld shares.

 

4

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

 

(vii)         The foregoing provisions relating to the use of stock to satisfy
obligations may be unilaterally revised by the Committee from time to time to
conform the same to any applicable laws or regulations.

 

5

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