Exhibit 10.1

 

MGP INGREDIENTS, INC. SHORT-TERM INCENTIVE PLAN

 

This MGP INGREDIENTS, INC. SHORT-TERM INCENTIVE PLAN (“Plan”) is a program for
measuring financial performance in terms of increases in Modified Economic
Profit (“MEP”), and providing eligible Employees with incentive compensation
based upon MEP results.  The objective of the Plan is to encourage initiative,
resourcefulness, teamwork, motivation, and efficiency on the part of all
Participants that will result in financial success for both the stockholders of
the Company and the Participants.  The Plan provides annual incentive
compensation for eligible Employees who are in a position to make substantial
contributions toward achievement of the financial performance goals established
pursuant to the Plan. The Plan replaces the Short-Term Incentive Plan which was
first effective July 1, 2007 and which is terminated, effective June 30, 2009.

 

SECTION 1

ESTABLISHMENT OF PLAN

 

1.1                               Plan Document

 

This instrument, as amended from time to time, constitutes the governing
document of the Plan.

 

1.2                               Effective Dates

 

The effective date of the Plan is July 1, 2009.  The Plan will apply for Fiscal
Year 2010 and each year thereafter, unless otherwise determined by the
Committee.

 

1.3                               Incentive Compensation Plan

 

The Plan is an annual compensation program for eligible Employees.  Because the
Plan does not provide welfare benefits and does not provide for the deferral of
compensation to termination of employment, it is established with the intent and
understanding that it is not an employee benefit plan within the meaning of the
employee Retirement Income Security Act of 1974, as amended.  It is intended
that any award under the Plan will not be subject to Section 409A of the Code.

 

SECTION 2

DEFINITIONS

 

The following terms shall have the definition stated, unless the context
requires a different meaning:

 

2.1                               Beneficiary

 

“Beneficiary” means the individual, trust, or other entity designated by the
Participant to receive any incentive compensation payable to the Participant
under the Plan in the event of the Participant’s death. A Participant may
designate or change a Beneficiary by filing a signed designation with the
Secretary of the Company in a form approved by the Committee.

 

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If a designation has not been completed properly and filed with the Company or
is ineffective for any other reason, the Beneficiary shall be the Participant’s
Surviving Spouse. If there is no effective designation and the Participant does
not have a Surviving Spouse, the remaining benefits, if any, shall be paid to
the Participant’s estate.

 

2.2                               Board of Directors

 

“Board” or “Board of Directors” means the Board of Directors of the Company.

 

2.3                               CODE

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

2.4                               CHANGE IN CONTROL

 

A Change in Control shall mean:

 

(I)                                     THE ACQUISITION (OTHER THAN FROM THE
COMPANY) BY ANY PERSON, ENTITY OR “GROUP,” WITHIN THE MEANING OF
SECTION 13(D)(3) OR 14(D)(2) OF THE EXCHANGE ACT (EXCLUDING, FOR THIS PURPOSE,
THE COMPANY OR ITS SUBSIDIARIES, ANY EMPLOYEE BENEFIT PLAN OF THE COMPANY OR ITS
SUBSIDIARIES, TRUSTEES OF THE MGP INGREDIENTS, INC. VOTING TRUST OR OF THE CRAY
FAMILY TRUST, OR ANY PERSON WHO ACQUIRES COMMON OR PREFERRED STOCK FROM CLOUD L.
CRAY, JR. OR FROM ANY TRUST CONTROLLED BY OR FOR THE BENEFIT OF CLOUD L.
CRAY, JR. PRIOR TO OR AS A RESULT OF HIS DEATH) OF BENEFICIAL OWNERSHIP (WITHIN
THE MEANING OF RULE 13D-3 PROMULGATED UNDER THE EXCHANGE ACT) OF AT LEAST 30% OF
THE THEN OUTSTANDING SHARES OF COMMON STOCK AND 50% OF THE THEN OUTSTANDING
SHARES OF PREFERRED STOCK, PAR VALUE $10 PER SHARE,  OR 30% OF THE COMBINED
VOTING POWER OF THE COMPANY’S THEN OUTSTANDING VOTING SECURITIES ENTITLED TO
VOTE GENERALLY IN THE ELECTION OF DIRECTORS; OR

 

(II)                                  INDIVIDUALS WHO, AS OF THE DATE HEREOF,
CONSTITUTE THE BOARD (AS OF THE DATE HEREOF THE “INCUMBENT BOARD”) CEASE FOR ANY
REASON TO CONSTITUTE AT LEAST A MAJORITY OF THE BOARD, PROVIDED THAT ANY PERSON
BECOMING A DIRECTOR SUBSEQUENT TO THE DATE HEREOF WHOSE ELECTION, OR NOMINATION
FOR ELECTION BY THE COMPANY’S STOCKHOLDERS, WAS APPROVED BY A VOTE OF AT LEAST A
MAJORITY OF THE DIRECTORS THEN COMPRISING THE INCUMBENT BOARD (OTHER THAN AN
ELECTION OR NOMINATION OF AN INDIVIDUAL WHOSE INITIAL ASSUMPTION OF OFFICE IS IN
CONNECTION WITH AN ACTUAL OR THREATENED ELECTION CONTEST RELATING TO THE
ELECTION OF THE DIRECTORS OF THE COMPANY) SHALL BE, FOR PURPOSES OF THIS PLAN,
CONSIDERED AS THOUGH SUCH PERSON WERE A MEMBER OF THE INCUMBENT BOARD; OR

 

(III)                               APPROVAL BY THE STOCKHOLDERS OF THE COMPANY
OF A REORGANIZATION, MERGER, CONSOLIDATION, IN EACH CASE, WITH RESPECT TO WHICH
PERSONS WHO WERE THE STOCKHOLDERS OF THE COMPANY IMMEDIATELY PRIOR TO SUCH
REORGANIZATION, MERGER OR CONSOLIDATION DO NOT, IMMEDIATELY THEREAFTER, OWN
COLLECTIVELY AS A GROUP MORE THAN 50% OF THE COMBINED VOTING POWER ENTITLED TO
VOTE GENERALLY IN THE ELECTION OF DIRECTORS OF THE REORGANIZED,  MERGED OR
CONSOLIDATED COMPANY’S THEN OUTSTANDING VOTING SECURITIES, OR A LIQUIDATION OR
DISSOLUTION OF THE COMPANY OR OF THE SALE OF ALL OR SUBSTANTIALLY ALL OF THE
ASSETS OF THE COMPANY.

 

If any of the events enumerated in clauses (i) through (iii) occur, the Board
shall

 

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determine the effective date of the Change in Control resulting therefrom for
purposes of the Plan.

 

2.5                               COMMITTEE

 

“Committee” means the Human Resources and Compensation Committee of the Board of
Directors and shall be comprised entirely of Directors who are considered
“outside directors” under Section 162(m) of the Code.

 

2.6                               COMPANY

 

“Company” means MGP Ingredients, Inc., a Kansas corporation.

 

2.7                               DIRECTOR

 

“Director” means any individual who is a member of the Board.

 

2.8                               EMPLOYEE

 

“Employee” means a salaried, full-time Employee of the Company.

 

2.9                               FISCAL YEAR

 

“Fiscal Year” means the financial reporting and taxable year of MGP
Ingredients, Inc.

 

2.10                        MEP

 

“MEP” refers to Modified Economic Profit and means adjusted net income from
operations (net income from operations, plus depreciation less capital
expenditures), net of  taxes paid during the specified Fiscal Year (“Adjusted
NOPAT”), minus a charge representing the weighted economic cost of capital
(“C”)  to the Company multiplied by the sum of average monthly total funded
indebtedness plus average monthly total equity (“TC”).  The formula for
determining MEP is: MEP = Adjusted NOPAT – (C x TC).  MEP for a Fiscal Year
shall be based upon the audited financial statements of the Company for the
Fiscal Year; provided, the Committee may determine in its sole discretion
whether the calculation of MEP should include or exclude, in whole or in part,
any unusual or non-recurring item or adjusted to reflect any unusual or
non-recurring item.

 

2.11                        PARTICIPANT

 

“Participant” means an Employee designated to participate in this Plan for a
Plan Year pursuant to Section 4.

 

2.12                        PLAN YEAR

 

“Plan Year” means the Fiscal Year of the Company, as in effect at the time.

 

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2.13                        SURVIVING SPOUSE

 

“Surviving Spouse” means the spouse of the Participant at the time of the
Participant’s death who survives the Participant. If the Participant and spouse
die under circumstances that make the order of their deaths uncertain, it shall
be presumed for purposes of this Plan that the Participant survived the spouse.

 

SECTION 3

ADMINISTRATION OF PLAN

 

3.1                               ADMINISTRATION OF PLAN BY COMMITTEE

 

The Plan shall be administered by the Committee. The Committee shall have full
discretionary authority in the operation and administration of the Plan. The
Committee must approve any award under the Plan and, subject to the limitations
set forth below, may modify any award prior to its payment. The Committee shall
act by vote or consent of a majority of its members. To the extent necessary or
appropriate, the Committee will adopt rules, policies, and forms for the
administration, interpretation, and implementation of the Plan. The Committee
may delegate administrative authority and responsibility from time to time to
and among other committees approved by the Committee and individual Employees of
the Company, but all actions taken pursuant to delegated authority and
responsibility shall be subject to review and change by the Committee.

 

A member of the Committee or individual or group to whom authority is delegated
shall not participate in any action of the Committee directly affecting that
member, individual or group.

 

3.2                               RESPONSIBILITY; INDEMNIFICATION

 

The Committee and each member thereof, and any person acting pursuant to
authority delegated by the Committee, shall be entitled, in good faith, to rely
or act upon any report or other information furnished by any executive officer,
other officer or employee of the Company or a subsidiary or affiliate, the
Company’s independent auditors, consultants or any other agents assisting in the
administration of the Plan. Members of the Committee, any person acting pursuant
to authority delegated by the Committee, and any officer or employee of the
Company or a subsidiary or affiliate acting at the direction or on behalf of the
Committee or a delegee shall not be personally liable for any action or
determination taken or made in good faith with respect to the Plan, and shall,
to the extent permitted by law, be fully indemnified, held harmless  and
protected by the Company with respect to any such action or determination.

 

SECTION 4

ELIGIBILITY

 

4.1                               Participation

 

An Employee shall be a Participant in the Plan for a Plan Year upon designation
as a Participant for that year by the Committee. When deemed appropriate by the
Committee, the Committee may designate an effective date for the commencement of
participation by an Employee that is subsequent to the first day of the Plan
Year.

 

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Designated Participants shall be notified in writing and provided either a copy
of the Plan or a written summary of the Plan.

 

4.2                               CONTINUING PARTICIPATION

 

Designation as a Participant for a Plan Year will continue in effect for each
succeeding Plan Year that the Plan is in effect until participation is
terminated by the Committee. The Committee may terminate participation by an
Employee at any time with or without cause.

 

SECTION 5

MEASUREMENT OF COMPANY PERFORMANCE

 

5.1                               MEP PERFORMANCE

 

For purposes of the Plan, financial performance of the Company shall be measured
by MEP. In general, the Plan shall be administered so that the incentive
compensation provided to a Participant under the Plan for each Plan Year is
based on improved MEP performance relative to prior MEP performance, initially
measured for the Fourth Quarter of Fiscal 2009 ( adjusted to eliminate assets
held for sale and determined on an annualized basis).

 

5.2                               DETERMINATION OF MEP

 

MEP shall be determined for each Fiscal Year by the Committee, subject to
Section 5.4.

 

5.3                               MEP Growth Target

 

The MEP growth performance targets for each Plan Year shall be determined by the
Committee and communicated to Participants.

 

5.4                               ADJUSTMENTS

 

The Committee may determine, in its sole discretion, whether the calculation of
MEP should include or exclude, in whole or in part, any unusual or non-recurring
item or adjusted to reflect any unusual or non-recurring item and may make such
other adjustments as permitted by Section 9.

 

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SECTION 6

INCENTIVE COMPENSATION TARGETS

 

6.1                               TARGET INCENTIVE COMPENSATION

 

The target annual incentive compensation for each Participant for each Plan Year
shall be determined by the Committee for each Plan Year in accordance with
Section 7.2(a).

 

SECTION 7

DETERMINATION AND PAYMENT OF INCENTIVE AMOUNTS

 

7.1                               PLAN YEAR MEP

 

MEP and MEP growth performance, including any necessary or appropriate
adjustments required or permitted hereunder, shall be determined as soon as
administratively practicable following the availability of financial results for
the Plan Year.

 

7.2                               DETERMINATION OF INCENTIVE COMPENSATION

 

Under rules established by the Committee, the incentive compensation for each
Participant for each Plan Year shall be calculated by the following steps:

 

(A)                                  TARGETED ANNUAL INCENTIVE COMPENSATION FOR
EACH PARTICIPANT FOR THE PLAN YEAR SHALL BE DETERMINED BASED UPON A POINT SYSTEM
OR A PERCENTAGE OF BASE PAY, AS DETERMINED BY THE COMMITTEE.  IF A PARTICIPANT’S
BASE PAY CHANGES DURING A PLAN YEAR, PROPORTIONATE ANNUAL COMPENSATION SHALL BE
CALCULATED, UNDER THE RULES ESTABLISHED BY THE COMMITTEE, FOR EACH PERIOD OF THE
PLAN YEAR THAT EACH LEVEL OF BASE PAY WAS IN EFFECT. THE PROPORTIONATE TARGETED
INCENTIVE COMPENSATION FOR EACH LEVEL OF BASE PAY SHALL BE CALCULATED BY
ANNUALIZING THAT LEVEL OF BASE PAY, MULTIPLYING BY THE APPLICABLE ANNUAL
INCENTIVE PERCENTAGE FOR THAT LEVEL OF BASE PAY, AND THEN MULTIPLYING THE
RESULTING AMOUNT BY A FRACTION, THE NUMERATOR OF WHICH IS THE NUMBER OF DAYS
DURING THE PLAN YEAR THAT THE LEVEL OF BASE PAY WAS IN EFFECT AND THE
DENOMINATOR OF WHICH IS THE NUMBER OF DAYS IN THE PLAN YEAR.

 

(B)                                 GROWTH IN MEP SHALL INITIALLY BE MEASURED
FROM MEP FOR THE FOURTH QUARTER OF FISCAL YEAR ENDING JUNE 30, 2009, AS PROVIDED
IN SECTION 5.1.  THE AMOUNT OF ACTUAL INCENTIVE COMPENSATION PAYABLE TO
PARTICIPANTS WITH RESPECT TO FISCAL YEAR 2010 AND SUBSEQUENT FISCAL YEARS THAT
THE PLAN IS IN EFFECT  WILL BE DETERMINED AS FOLLOWS.

 

·                  IF GROWTH IN MEP IS LESS THAN 80% OF THE GROWTH TARGET, NO
INCENTIVE COMPENSATION WILL BE PAID.

 

·                  IF GROWTH IN MEP IS EQUAL TO OR GREATER THAN 80% AND LESS
THAN OR EQUAL TO 90% OF THE GROWTH TARGET, 75% OF TARGETED INCENTIVE
COMPENSATION WILL BE PAID.

 

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·                  IF GROWTH IN MEP IS GREATER THAN 90% AND  LESS THAN OR EQUAL
TO 98% OF THE GROWTH TARGET, 85% OF TARGETED INCENTIVE COMPENSATION WILL BE
PAID.

 

·                  IF GROWTH IN MEP IS GREATER THAN 98% AND LESS THAN OR EQUAL
TO 102% OF GROWTH TARGET, 100% OF TARGETED INCENTIVE COMPENSATION WILL BE PAID.

 

·                  IF GROWTH IN MEP IS GREATER THAN 102% AND LESS THAN OR EQUAL
TO 110% OF THE GROWTH TARGET, 115% OF TARGETED INCENTIVE COMPENSATION WILL BE
PAID.

 

·                  IF GROWTH IN MEP EXCEEDS 110% OF THE GROWTH TARGET, 125% OF
TARGETED INCENTIVE COMPENSATION WILL BE PAID.

 

7.3                               PAYMENT OF INCENTIVE AMOUNTS

 

THE DOLLAR AMOUNT OF THE ANNUAL INCENTIVE COMPENSATION FOR A PLAN YEAR SHALL BE
PAID IN A LUMP SUM TO THE PARTICIPANT AS SOON AS FEASIBLE FOLLOWING THE
COMPLETION OF THE INCENTIVE COMPENSATION CALCULATIONS FOR THE PLAN YEAR, BUT IN
NO EVENT LATER THAN TWO AND ONE-HALF MONTHS FOLLOWING THE END OF THE CALENDAR
YEAR IN WHICH OCCURS THE END OF THE COMPANY’S APPLICABLE FISCAL YEAR.

 

7.4                               PARTIAL YEAR PARTICIPATION, EMPLOYMENT CHANGES
AND FORFEITURES

 

(A)           PARTIAL YEAR PARTICIPATION.  IF AN EMPLOYEE IS DESIGNATED TO
BECOME A PARTICIPANT IN A PLAN YEAR AS OF A DATE OTHER THAN THE FIRST DAY OF THE
PLAN YEAR, THE PARTICIPANT’S INCENTIVE COMPENSATION FOR THE PLAN YEAR SHALL BE
DETERMINED ON THE BASIS OF THE PARTICIPANT’S TIME OF PARTICIPATION DURING THE
PLAN YEAR.

 

(B)           EMPLOYMENT CHANGES.  TARGET INCENTIVE PERCENTAGES AND INCENTIVE
AWARDS FOR A PARTICIPANT FOR A PLAN YEAR WILL BE PRORATED IN THE EVENT OF ANY
CHANGE IN COMPENSATION OR EMPLOYMENT STATUS OR LOCATION, OR ANY OTHER CHANGE
THAT WOULD EFFECT THE DETERMINATION FOR THE PLAN YEAR, IN PROPORTION TO THE
DURATION OF EACH APPLICABLE FACTOR DURING THE PLAN YEAR.

 

(C)           TERMINATION OF EMPLOYMENT.  UPON TERMINATION OF A PARTICIPANT’S
EMPLOYMENT DURING A PLAN YEAR FOR ANY REASON, THE PARTICIPANT SHALL NOT BE
ENTITLED TO THE PAYMENT OF INCENTIVE COMPENSATION FOR THE PLAN YEAR. 
NOTWITHSTANDING THE PRECEDING SENTENCE, THE COMMITTEE SHALL HAVE FULL DISCRETION
TO DETERMINE THAT PAYMENT OF A PRORATED ANNUAL COMPONENT MAY BE MADE WHEN
TERMINATION OF THE PARTICIPANT’S EMPLOYMENT RESULTS FROM JOB ELIMINATION,
REDUCTION IN WORK FORCE OR OTHER SIMILAR COMPANY INITIATIVE OR IS OTHERWISE
WITHOUT CAUSE, OR IS ENCOURAGED OR INDUCED BY INCENTIVES OFFERED BY THE COMPANY.

 

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SECTION 8

CHANGE IN CONTROL

 

UPON A CHANGE IN CONTROL, THE PLAN SHALL TERMINATE.  THE COMMITTEE WILL
DETERMINE MEP ON AN ANNUALIZED BASIS, BASED ON THE COMPANY’S PERFORMANCE THROUGH
THE MOST RECENTLY COMPLETED FISCAL QUARTER FOR WHICH FINANCIAL RESULTS ARE
AVAILABLE.  INCENTIVE COMPENSATION WILL BE PAID ON A PRO RATA BASIS (MEASURED
THROUGH THE END OF SUCH FISCAL QUARTER)  IN ACCORDANCE WITH THE GUIDELINES SET
FORTH IN SECTION 7.2(B).

 

SECTION 9

COMMITTEE DISCRETION

 

The Committee shall exercise all of its power and duties as the Committee deems
appropriate in its sole and absolute discretion. All decisions of the Committee
shall be final and binding on all Participants and their respective heirs and
representatives. In the event it is determined, in the judgment and discretion
of the Committee, that any factor applicable in the ultimate determination of
incentive compensation under the Plan for a Plan Year is not appropriate with
respect to one or more Participants due to unusual events, unforeseen
circumstances, or other factors deemed material and relevant, the applicable
factor or the amount of the resulting incentive compensation may be adjusted or
modified in any manner deemed appropriate by the Committee.

 

SECTION 10

AMENDMENT AND TERMINATION

 

The Plan may be amended in any manner or terminated at any time by action of the
Board of Directors.

 

SECTION 11

GENERAL PROVISIONS

 

11.1                        BENEFITS NOT GUARANTEED

 

Neither the establishment nor maintenance of the Plan nor participation in the
Plan shall provide any guarantee or other assurance that incentive compensation
will be payable under the Plan. The success of MGP Ingredients, Inc., as
determined hereunder, and adjusted as provided herein, and application of the
administrative rules and determinations by the Committee shall determine the
extent to which Participants are entitled to receive incentive compensation
payments hereunder.

 

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11.2                        NO RIGHT TO PARTICIPATE

 

Nothing in this Plan shall be deemed or interpreted to provide a Participant or
any non-participating Employee with any contractual right to participate in or
receive benefits of the Plan. No designation of an Employee as a Participant for
all or any part of a Plan Year shall create a right to incentive compensation or
other benefits of the Plan for any other Plan Year.

 

11.3                        NO EMPLOYMENT RIGHT

 

Participation in this Plan shall not be construed as constituting a commitment,
guarantee, agreement, or understanding of any kind that the Company will
continue to employ an individual, and this Plan shall not be construed or
applied as any type of employment contract or obligation. Nothing herein shall
abridge or diminish the rights of the Company to determine the terms and
conditions of employment of any Participant or other employee or to terminate
the employment of any Participant or other Employee with or without cause at any
time.

 

11.4                        NO ASSIGNMENT OR TRANSFER

 

Neither a Participant nor any beneficiary or other representative of a
Participant shall have any right to assign, transfer, attach, or hypothecate any
incentive compensation amount or credit, potential payment, or right to future
payments of any incentive compensation amount or credit, or any other benefit
provided under this Plan. Payment of any amount due or to become due under this
Plan shall not be subject to the claims of creditors of the Participant or to
execution by attachment or garnishment or any other legal or equitable
proceeding or process.

 

11.5                        WITHHOLDING AND PAYROLL TAXES

 

The Company shall deduct from any payment made under this Plan all amounts
required by federal, state, and local tax laws to be withheld and shall subject
any payments made under the Plan to all applicable payroll taxes and
assessments.

 

11.6                        INCOMPETENT PAYEE

 

If the Committee determined that a person entitled to a payment hereunder is
incompetent, it may cause benefits to be paid to another person for the use or
benefit of the Participant or the Participant’s Beneficiary at the time or times
otherwise payable hereunder, in total discharge of the Plan’s obligations to the
Participant or Beneficiary.

 

11.7                        SECTION 409A

 

It is intended that the Plan and awards issued hereunder will be exempt from
Section 409A of the Code (and any regulations and guidelines issued thereunder)
because the Plan and the awards do not provide for the deferral of compensation,
and the Plan and such awards shall be interpreted on a basis consistent with
such intent. The Plan and any award agreements issued thereunder may be amended
in any respect deemed by the Board or the Committee to be necessary in order to
preserve exemption with Section 409A of the Code.

 

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11.                               GOVERNING LAW

 

The provisions of the Plan shall be construed and governed under the laws of the
State of Kansas.

 

11.9                        CONSTRUCTION

 

THE SINGULAR INCLUDES THE PLURAL, AND THE PLURAL INCLUDES THE SINGULAR, AND
TERMS CONNOTING GENDER INCLUDE BOTH THE MASCULINE AND FEMININE, UNLESS THE
CONTEXT CLEARLY INDICATES THE CONTRARY. CAPITALIZED TERMS, EXCEPT THOSE AT THE
BEGINNING OF A SENTENCE OR PART OF A HEADING, HAVE THE MEANING DEFINED IN THE
PLAN.

 

SECTION 11

EXECUTION

 

IN WITNESS WHEREOF, MGP Ingredients, Inc. has caused this Plan to be executed by
its duly authorized officer this 10th of December, 2009.

 

 

MGP INGREDIENTS, INC.

 

 

 

/s/ Timothy W. Newkirk

 

By: Timothy W. Newkirk

 

Title: President and CEO

 

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