Exhibit 10.1

 

CONFIDENTIAL

 

SETTLEMENT AGREEMENT AND MUTUAL RELEASE

 

This Settlement Agreement and Mutual Release (the “Agreement”) is entered into
on December 3, 2013 by MGP Ingredients, Inc. (“MGP” or the “Company”), Cloud
“Bud” Cray, Jr., Karen Seaberg, and Thomas M. Cray (Karen. Seaberg, Cloud “Bud”
Cray, Jr. and Thomas M. Cray, collectively, the “Cray Group”), Michael Braude,
Linda Miller, Gary Gradinger, Daryl Schaller, John Speirs, and John Byom, each
as independent members of the Board of Directors (the “Board”) of MGP, and Tim
Newkirk.  All of the above are collectively referred to as the Parties to this
Agreement.

 

RECITALS

 

WHEREAS, the Cray Group, MGP, and Newkirk are presently involved in various
lawsuits in the District Court of Atchison County, Kansas (Nos. 13CV63 and
13CV69), the District Court of Johnson County, Kansas (No. 13CV04382), and the
Kansas Court of Appeals (No.110341) (the “Lawsuits”);

 

WHEREAS, the Cray Group is also presently involved in a proxy contest (the
“Proxy Contest”) related to the 2013 Annual Meeting of Stockholders of MGP
(“Annual Meeting”) and related litigation referenced above; and

 

WHEREAS, to avoid the expense of continued and/or additional litigation, the
uncertainties of trial and the continued issues surrounding the Proxy Contest as
it pertains to the Annual Meeting, the Parties have agreed to compromise and
settle the Lawsuits as well as any issues concerning or related to the Annual
Meeting or the Proxy Contest, without admission of liability.

 

NOW, THEREFORE, in consideration of the covenants and agreements hereinafter set
forth, and for other good and valuable consideration, the receipt and
sufficiency of which is acknowledged, the Parties agree as follows.

 

1.                                      Board Composition; Executive
Termination.

 

a.                                      Tim Newkirk’s employment will be
terminated without cause by the Company (in accordance with the terms of his
Employment Agreement) immediately following the execution of this Agreement, and
coincident with this termination he will resign from the Board and any
subsidiary or affiliate boards, in accordance with the agreements contemplated
by Section 3 hereof.  The Parties will cause the Board seat he occupies to
remain vacant until filled by the new permanent Chief Executive Officer (a
“CEO”), who is to be hired as a result of a national executive search conducted
by a recognized search firm selected by the Board following the Annual Meeting.

 

b.                                      The Parties hereto acknowledge that
Cloud “Bud” Cray, Jr., Jeannine Strandjord and John Bridendall, or, if any of
them is unable to serve, their respective

 

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

 

replacements as determined by the Cray Group in its reasonable discretion (a
“Replacement”), are and will be the nominees of the Cray Group.

 

c.                                       Karen Seaberg, or her Replacement, will
continue her term on the Board.

 

d.                                      Mr. Newkirk will, pursuant to the terms
of the Company’s First Amended and Restated MGP Ingredients, Inc. Short-Term
Incentive Plan (“MEP Plan”) and his Employment Agreement with the Company, be
paid the sum of $655,218 plus (i) an amount to satisfy the COBRA subsidy
obligation, in each case pursuant to the terms of a release of the Company in
the form attached hereto as Exhibit A, and (ii) a pro-rata payment due to
Mr. Newkirk under the MEP Plan, the amount of which is not currently
determinable but is estimated to be $434,830.

 

e.                                       In connection with Mr. Newkirk’s
termination, the Company and Mr. Newkirk will enter into a Transition Services
Agreement in the form attached hereto as Exhibit B.

 

f.                                        The Company and the Cray Group will
enter into a Voting Agreement with respect to the preferred stock beneficially
owned by the Cray Group (the “Cray Group Preferred Shares”), and pursuant to
which, the Board will agree to vote in favor of the proposal to declassify the
Board and which will be voted on by shareholders at the 2014 Annual Meeting of
Stockholders of MGP, in the form attached hereto as Exhibit C.

 

2.                                      Interim Co- CEOs.

 

Immediately following the Annual Meeting, Don Tracy and Randy Schrick will be
elected to serve as Interim Co-CEOs. Mr. Tracy and Mr. Schrick shall continue as
Co-CEOs until a replacement CEO is hired pursuant to Section 1.  The Board will
approve any required amendments to Mr. Tracy’s employment agreement to reflect
his interim status as Co-CEO.

 

3.                                      Other Agreements with Mr. Newkirk.

 

The Parties hereto acknowledge that Mr. Newkirk and appropriate persons of the
Cray Group are simultaneously entering into a (a) settlement agreement,
conditioned upon execution of this Agreement, in which Mr. Newkirk agrees to
terminate the Johnson County litigation with prejudice, and not to file any
similar litigation in the future, and (b) an agreement related to the purchase
of Mr. Newkirk’s house.

 

4.                                      Committee Composition and Chairperson of
the Board.

 

a.                                      Assuming her election at the Annual
Meeting, Ms. Jeannine Strandjord will be elected by the Board to be the Chair of
the Audit Committee at the first meeting of the Board following the Annual
Meeting.

 

b.                                      Assuming his election at the Annual
Meeting, Mr. John P. Bridendall will be elected by the Board to be a member of
the Audit Committee.  Following the Annual Meeting and assuming the elections of
Ms. Strandjord and Mr. Bridendall and the re-election of Mr. Bud Cray, Mr. Bud
Cray, Ms. Strandjord, and Mr. Bridendall will be elected to be members of the

 

2

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

 

Nominating and Governance Committee (the “Governance Committee”).  Following the
Annual Meeting and assuming their election, Ms. Strandjord and Mr. Bridendall
will become members of the Human Resources and Compensation Committee (the
“Compensation Committee”).  Following the Annual Meeting, Mr. Schaller will be
reelected Chair of the Compensation Committee and Ms. Miller will be relected
Chair of the Governance Committee.

 

c.                                       The Board will cause the Special
Committee of the Board to be disbanded promptly following the Annual Meeting.

 

d.                                      Following the Annual Meeting, during
such time as the Board is unable to agree on a person to serve as Chair until
the 2014 annual meeting of stockholders, one director shall serve as the acting
Chair at each meeting of the Board and the Chair for meetings will alternate
between a member of the Cray Group, Ms. Strandjord or Mr. Bridendall (assuming
the election of Ms. Strandjord and Mr. Bridendall), on the one hand, and any
other member of the Board, on the other hand; provided, however, that such
acting Chair will not be considered the Chairperson of the Board for purposes of
the Company’s Bylaws.  No Chair shall be elected by the Board without the vote
of at least five of the members of the Board.

 

5.                                      Meeting Date and Record Date.

 

a.                                      The Company agrees to take all actions
necessary to reconvene the Annual Meeting as soon as reasonably practicable
following execution of this Agreement.

 

b.                                      The Parties acknowledge and agree that
April 3, 2013 will remain the record date for the Annual Meeting.

 

6.                                      Termination of Litigation.

 

a.                                      MGP will take all actions necessary to
cause its appeal to the Kansas Court of Appeals to be dismissed and jointly seek
with the Cray Group an order from Judge Bednar approving the reconvening of the
Annual Meeting and use of the existing record date set forth in Section 5.

 

b.                                      The Parties hereto will take all actions
necessary to cause the dismissal of any litigation brought by such Party pending
between the Parties, including any case pending in the Atchison County District
Court (for instance, litigation related to the Special Committee).

 

c.                                       MGP will take all actions necessary to
cause The Johnson County litigation to be dismissed with prejudice, and MGP
agrees not to bring similar litigation in the future.

 

7.                                      Reimbursement of Cray Group Expenses.

 

The Company shall reimburse the members of the Cray Group for all reasonable
legal fees and out-of-pocket costs and expenses up to an aggregate maximum cap
of $1,775,000, incurred in connection with the matters related to the Annual
Meeting (including the Lawsuits, any matter referenced herein and the
negotiation and execution of this Agreement and any other

 

3

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

 

agreement contemplated hereby) (the “Expenses”).  The Company shall reimburse
such Expenses within ten business days of presentment.

 

8.                                      Termination of Strategic Review and BMO
Engagement.

 

MGP will immediately take all actions to terminate its strategic review process,
including the termination of any financial institution and advisors or counsel
in connection with the same, and will publicly announce such termination.  MGP
will not sell any assets of the Company, will not make any acquisitions of other
companies or assets and will not enter into any joint venture relationships of a
material nature or outside of the ordinary course of business in the next 12
months without the approval of at least six members of the Board.

 

9.                                      Governance and Solicitation Efforts.

 

a.                                      Following the execution of this
Agreement, the Cray Group will continue to hold proxies for the election of
directors, governance proposals and the say-on-pay advisory vote reflected in
its proxy statement and proxy card.

 

b.                                      None of the Parties hereto will engage,
directly or indirectly, in further solicitation efforts in connection with the
Annual Meeting, except to the extent required by the law or other governmental
regulation or rule or NASDAQ rule.  The Parties will reasonably cooperate in
reviewing and revising supplements to their respective proxy statements to
ensure consistency with this Agreement and any other agreements contemplated
hereunder.

 

c.                                       Neither MGP nor the Cray Group will
propose or present any additional proposals at the Annual Meeting.

 

d.                                      The agenda and rules for the Annual
Meeting will be mutually agreed upon by the Parties prior to reconvening the
Annual Meeting.

 

e.                                       The Cray Group will cause the law firm
of Stinson Morrison Hecker LLP to issue a legal opinion (the “Opinion”) (with
customary limitations and qualifications) addressed to the Board regarding the
voting of the Cray Group Preferred Shares at the Annual Meeting. The Parties
hereto agree not to contest the Opinion.

 

9.                                      Non-Retaliation Policy; Acceptance of
Audit Committee Review.

 

a.                                      The Parties will reasonably cooperate to
establish a non-retaliation policy providing that no Party hereto will seek to
punish employees who sided or voted against them in the Proxy Contest or related
matters.

 

b.                                      Neither Karen Seaberg nor Bud Cray will
contest the findings and conclusions of the independent Audit Committee review
dated October 10, 2013.

 

10.                               Release of All Claims by All Parties.

 

Except as otherwise provided herein, for and in consideration of this Agreement
and in consideration of the covenants, promises, and commitments set forth in
the Agreement, and as a

 

4

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

 

settlement of disputed claims, all of the Parties hereto, individually and/or
collectively, on behalf of themselves and their respective parent, subsidiaries,
divisions, related or affiliated corporations, predecessors, or successor
corporations, limited liability companies, partnerships, limited partnerships,
and past, present and future directors, officers, shareholders, employees,
attorneys, heirs, assigns, trustees, agents, representatives, sureties, and for
all other persons or entities who claim in their right, title, interest, and/or
behalf do hereby release and forever discharge all of the other Parties hereto,
and their respective heirs, devisees, legatees, assigns, trustees, agents,
representatives, sureties, parent, subsidiaries, divisions, related or
affiliated corporations, predecessors, or successor corporations, limited
liability companies, partnerships, limited partnerships, and past, present and
future directors, officers, shareholders, employees, attorneys, and agents
(collectively, “Released Parties”) from any and all claims (filed, pled, or
otherwise), actions, causes of action, demands, tax demands, liens, tax liens,
civil lawsuits, costs, expenses (including without limitation attorneys’ or
expert/consultant fees, costs, or expenses) or encumbrances of any kind
whatsoever (legal, equitable, or otherwise), known or unknown, suspected or
unsuspected, fixed or contingent, that the Parties, individually or
collectively, have or had from the beginning of time to the entry of this
Agreement, against any Released Party, individually or collectively, relating
to, connected with, or in any way arising from or related to the claims, facts,
events, or occurrences related or unrelated to their respective roles with MGP,
the Lawsuits, the Annual Meeting, and the Proxy Contest.  The Parties
acknowledge that they are releasing claims only to the extent permitted by law.

 

The intention, understanding, and agreement of the Parties is that this
Agreement constitutes a complete and final settlement between the Parties as
described herein.  Each Party acknowledges and understands that this Agreement
is a compromise of claims and that, by entering into this Agreement, it is
agreed that the Released Parties are not making any admission or concession of
any factual or legal conclusion.  Nothing in this Agreement will limit the
ability of any Party to enforce (a) this Agreement, (b) the Employment Agreement
of Mr. Newkirk, (c) the Transition Services Agreement, (d) the Settlement
Agreement and Release between Cloud (Bud) Cray, Karen Seaberg, Tom Cray and Tim
Newkirk (including any other agreements contemplated thereunder or attached
thereto), or (e) any right to indemnification that any Party may be eligible for
as a director or officer of MGP (the “Excluded Obligations”).

 

11.                               Covenant Not to Sue on Matters Released by
this Agreement.

 

Provided that the obligations of this Agreement are otherwise satisfied, the
Parties covenant and agree that they will not, directly or indirectly, commence
or in any manner prosecute against any Released Party any legal action or other
proceeding based upon the matters released by under Section 10 of this
Agreement.  In addition to any other remedy at law or in equity, if any Party or
any other person or entity acting or purporting to act on their behalf commences
an action in violation of the terms of this Agreement, then (a) this Agreement
may be pleaded in bar of any such action, and (b) the Parties will be entitled
to injunctive relief to stop such action, and (c) the party, entity, or person
initiating such action will be liable to the other Party for all costs and
expenses, including attorneys’ fees, costs, and expenses, incurred in responding
to the action.  The terms of this Section 11 do not apply to or limit the
ability of any Party to enforce the Excluded Obligations.

 

5

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

 

12.                               Authorities; Representations.

 

Each individual who is a Party hereto represents and agrees that he or she has
the power and authority to enter into this Agreement and that this Agreement has
been duly executed and delivered by such individual. The Company hereby
represents and warrants that (i) the authorized signatory set forth on the
signature page hereto has the power and authority to execute this Agreement and
to bind the Company to this Agreement and no further actions are required to
bind the Company hereto and (ii) this Agreement has been duly authorized,
executed and delivered by the Company and the Board.

 

13.                               Press-Release.

 

Promptly following the execution of this Agreement, the Company and the Cray
Group will jointly issue a mutually agreeable press release (the “Mutual Press
Release”) announcing the terms of this Agreement, in the form attached hereto as
Exhibit D.  Prior to the issuance of the Mutual Press Release, none of the
Parties hereto will issue any press release or public announcement regarding
this Agreement or the resolution of the issues addressed herein without the
prior written consent of the other, other than any filing with the Securities
and Exchange Commission (the “SEC”) required in connection with the execution
and/or delivery of this Agreement.  None of the Parties hereto shall make any
public statement (including any filing with the SEC) inconsistent with the
Mutual Press Release without the written consent of the other Parties hereto.

 

14.                               Entire Agreement and Severability.

 

The Parties agree that this Agreement may not be modified, altered, or changed,
except by written agreement signed by the Parties.  This Agreement, and any
other agreement signed by or between some or all of the Parties hereto on the
date of this Agreement, contains the entire agreement between the Parties with
regard to the matters set forth herein and will be binding and inure to the
benefit of the Parties, the present, former and future officers, directors,
shareholders, members, employees, attorneys, representatives, subsidiaries,
affiliates, heirs, devisees, legatees, trustees, agents, sureties, executors,
administrators, predecessors, successors, and assigns of each Party.  Each of
the Parties acknowledges and represents that it has not relied on any promise,
inducement, representation, or other statement made in connection with this
Agreement that is not expressly contained in this Agreement. If any provision of
the Agreement is held to be invalid, the remaining provisions will remain in
full force and effect.

 

15.                               Joint Preparation.

 

All of the Parties have cooperated and participated in the drafting and
preparation of this Agreement.  Accordingly, the Parties agree that the
Agreement will not be construed or interpreted in favor of or against any Party
by virtue of the identity of its preparer.

 

16.                               Applicable Law.

 

The Agreement will be construed and interpreted according to the laws of the
State of Kansas.

 

6

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

 

17.                               Multiple Originals and Facsimiles Signatures.

 

This Agreement may be executed in any number of counterparts, and with facsimile
signatures, with the same effect as if all Parties had signed the same
document.  All counterparts will be construed together and will constitute one
Agreement.  Absent an original signature, it is hereby understood and agreed
that a facsimile or electronically-transmitted signature will be binding upon
the Parties and otherwise admissible.

 

18.                               Waiver.

 

No waiver by any Party of any condition of or of any breach of any term,
covenant, representation, or warranty contained in this Agreement will be deemed
or construed as a further or continuing waiver of any other condition or the
breach of any other term, covenant, representation, or warranty contained in
this Agreement.

 

19.                               Attorney Fees, Costs, and Expenses.

 

Unless otherwise specified in this Agreement, each Party will bear its own
attorney or expert/consultant fees, costs, and expenses in connection with the
Lawsuits, including without limitation all attorneys fees, costs, and expenses
associated with demands made as a result of the Lawsuits and the negotiation and
execution of this Agreement.

 

20.                               Specific Performance.

 

Each of the Parties hereto acknowledges and agrees that irreparable injury to
the other Parties hereto would occur in the event any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached and that such injury would not be adequately compensable in
damages. It is accordingly agreed that the any of the Parties hereto (the
“Moving Party”), shall each be entitled to specific enforcement of, and
injunctive relief to prevent any violation of, the terms hereof, without the
posting of any bond, and the other Parties will not take action, directly or
indirectly, in opposition to the Moving Party seeking such relief on the grounds
that any other remedy or relief is available at law or in equity. Such remedy
shall not be deemed to be the exclusive remedy for a breach of this Agreement,
but shall be in addition to all other remedies available at law or equity.

 

21.                               Further Assurances.

 

Each of the Parties hereto agrees to take such actions, adopt such resolutions
and execute such agreements, documents and instruments as reasonably necessary
to carry out the covenants and obligations under this Agreement.

 

7

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

 

IN WITNESS WHEREOF, the Parties have executed this Agreement effective as of the
date first above written.

 

 

MGP Ingredients, Inc.

 

 

 

 

 

By:

/s/ Donald P. Tracy

 

Name:

Donald P. Tracy

 

Title:

Chief Financial Officer

 

 

 

 

 

 

/s/ Michael Braude

 

Michael Braude

 

 

 

 

 

/s/ John Byom

 

John Byom

 

 

 

 

 

/s/ Cloud L. Cray, Jr.

 

Cloud L. Cray, Jr.

 

 

 

 

 

/s/ Thomas M. Cray

 

Thomas M. Cray

 

 

 

 

 

/s/ Gary Gradinger

 

Gary Gradinger

 

 

 

 

 

/s/ Linda Miller

 

Linda Miller

 

 

 

 

 

/s/ Timothy W. Newkirk

 

Timothy W. Newkirk

 

 

 

 

 

/s/ Daryl Schaller

 

Daryl Schaller

 

 

 

 

 

/s/ Karen Seaberg

 

Karen Seaberg

 

[Signature Page to Settlement Agreement and Mutual Release]

 

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

 

 

/s/ John Speirs

 

John Speirs

 

[Signature Page to Settlement Agreement and Mutual Release]

 

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