Document:

Exhibit 10.1

 

CAESARS ENTERTAINMENT, INC.

2004 LONG TERM INCENTIVE PLAN

 

	
    Section

  	
   

  
	
  1. Purpose; Types of Awards; Construction

  	
   

  
	
  2.
  Definitions

  	
   

  
	
  3.
  Administration

  	
   

  
	
  4.
  Eligibility

  	
   

  
	
  5. Stock Subject to the Plan

  	
   

  
	
  6. Specific Terms of Awards

  	
   

  
	
  7. Change in Control Provisions

  	
   

  
	
  8. General Provisions

  	
   

  

 

 

CAESARS ENTERTAINMENT, INC.

 

2004 LONG TERM INCENTIVE PLAN

 

1.             Purpose; Types of Awards;
Construction.

 

The purposes of the Caesars Entertainment, Inc. 2004 Long Term
Incentive Plan (the “Plan”) are to afford an incentive to directors, officers,
employees and consultants of Caesars Entertainment, Inc. (the “Company”),
or any Subsidiary of the Company or Related Entity that now exists or hereafter
is organized or acquired, to continue as directors, officers, employees or
consultants, as the case may be, to increase their efforts on behalf of the
Company and its Subsidiaries and Related Entities and to promote the success of
the Company’s business. The Plan provides for the grant of stock options
(including “incentive stock options” and “nonqualified stock options”), stock
appreciation rights, restricted stock, restricted stock units and other stock-based
awards. The Plan is designed so that Awards granted hereunder intended to
comply with the requirements for “performance-based compensation” under
Section 162(m) of the Code may comply with such requirements, and the Plan
and Awards shall be interpreted in a manner consistent with such requirements.

 

2.             Definitions.

 

For purposes of the Plan, the following terms shall be defined as set
forth below:

 

(a)           “Award”
means any Option, SAR, Restricted Stock, Restricted Stock Unit or Other Stock-Based
Award granted under the Plan.

 

(b)           “Award
Agreement” means any written agreement, contract, or other instrument or
document evidencing an Award.

 

(c)           “Board”
means the Board of Directors of the Company.

 

(d)           “Change
in Control” means:

 

(i)            An
acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14 (d)(2) of the Exchange Act) (a “Person”) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 20% or more of either (1) the then outstanding shares
of common stock of the Company (the “Outstanding Company Common Stock”) or
(2) the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors (the “Outstanding
Company Voting Securities”) (a “Control Purchase”); excluding, however, the
following: (1) any acquisition directly from the Company, other than an
acquisition by virtue of the exercise of a conversion privilege unless the
security [conversion privilege] being so converted was itself acquired directly
from the Company, (2) any acquisition by the Company, (3) any
acquisition by any employee benefit plan (or related trust) sponsored or maintained
by the Company or any corporation controlled by the Company, (4) any
acquisition by any corporation pursuant to a transaction which complies with
clauses (1), (2) and (3) of subsection (iii) of this
Section 2(d), or (5) any acquisition by Barron Hilton, the Charitable
Remainder Unitrust created by Barron Hilton to receive shares from the Estate
of Conrad N. Hilton, or the Conrad N. Hilton Fund (the “Hilton Acquirors”); or

 

(ii)           A change in the
composition of the Board such that the individuals who, as of the effective
date of the Plan, constitute the Board (such Board shall be hereinafter
referred to as the “Incumbent Board”) cease for any reason to constitute at
least a majority of the Board; provided, however, for purposes of this
Section 2(d), that any individual who becomes a member of the Board
subsequent to the effective date of the Plan, whose election, or nomination for
election by the Company’s stockholders, was approved by a vote of at least a
majority of those individuals who are members of the Board and who were also
members of

 

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the Incumbent Board (or deemed to be such pursuant to this proviso)
shall be considered as though such individual were a member of the Incumbent
Board; but, provided further, that any such individual whose initial assumption
of office occurs as a result of either an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board shall not be so
considered as a member of the Incumbent Board (any change described in this
Section 2(d)(ii), “Board Change”); or

 

(iii)          The
consummation of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the Company (“Corporate
Transaction”); excluding however, such a Corporate Transaction pursuant to
which (1) all or substantially all of the individuals and entities who are
the beneficial owners, respectively, of the Outstanding Company Common Stock
and Outstanding Company Voting Securities immediately prior to such Corporate
Transaction will beneficially own, directly or indirectly, more than 60% of,
respectively, the outstanding shares of common stock, and the combined voting
power of the then outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the corporation resulting
from such Corporate Transaction (including, without limitation, a corporation
which as a result of such transaction owns the Company or all or substantially
all of the Company’s assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Corporate Transaction, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may be,
(2) no Person (other than the Company, any employee benefit plan (or related
trust) of the Company, the Hilton Acquirors or such corporation resulting from
such Corporate Transaction) will beneficially own, directly or indirectly, 20%
or more of, respectively, the outstanding shares of common stock, and the
combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the
corporation resulting from such Corporate Transaction (including, without
limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company’s assets either directly or
through one or more subsidiaries) except to the extent that such ownership
existed prior to the Corporate Transaction and (3) individuals who were
members of the Incumbent Board will constitute at least a majority of the
members of the board of directors of the corporation resulting from such
Corporate Transaction; or

 

(iv)          The
approval by the stockholders of the Company of a complete liquidation or
dissolution of the Company.

 

(e)           “Code”
means the Internal Revenue Code of 1986, as amended from time to time.

 

(f)            “Committee”
means the Compensation Committee of the Board, unless a committee is
established by the Board to administer the Plan, the composition of which shall
at all times satisfy the provisions of Rule 16b-3 and Section 162(m)
of the Code.

 

(g)           “Company”
means Caesars Entertainment, Inc., a corporation organized under the laws
of the State of Delaware, or any successor corporation.

 

(h)           “Covered
Employee” shall have the meaning set forth in Section 162(m)(3) of the
Code.

 

(i)            “Effective
Date” means the date upon which the Plan is approved by the stockholders of the
Company.

 

(j)            “Exchange
Act” means the Securities Exchange Act of 1934, as amended from time to time,
and as now or hereafter construed, interpreted and applied by regulations,
rulings and cases.

 

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(k)           “Fair
Market Value” means, as of any given date, the mean between the highest and
lowest reported sales price of the Stock on the New York Stock Exchange
Composite Tape or, if not listed on such exchange, on any other national
securities exchange on which the Stock is listed or on NASDAQ. If there is no
regular public trading market for such Stock, the Fair Market Value of the
Stock shall be determined by the Committee in good faith.

 

(l)            “Grantee”
means a person who, as a director, officer, employee or consultant of the
Company, a Subsidiary of the Company or a Related Entity, has been granted an Award
under the Plan.

 

(m)          “ISO”
means any Option intended to be and designated as an incentive stock option
within the meaning of Section 422 of the Code.

 

(n)           “NQSO”
means any Option that is not designated as an ISO.

 

(o)           “Option”
means a right, granted to a Grantee under Section 6(b)(i), to purchase
shares of Stock. An Option may be either an ISO or an NQSO, provided that ISOs
may be granted only to employees of the Company or a Subsidiary of the Company.

 

(p)           “Other
Stock-Based Award” means a right or other interest granted to a Grantee under
the Plan that may be denominated or payable in, valued in whole or in part by
reference to, or otherwise based on, or related to, Stock, including but not
limited to (i) unrestricted Stock awarded as a bonus or upon the
attainment of Performance Goals or otherwise as permitted under the Plan, and
(ii) a right granted to a Grantee to acquire Stock from the Company
containing terms and conditions prescribed by the Committee.

 

(q)           “Performance
Goals” means performance goals based upon one or more of the following business
criteria for the Company as a whole, or any of its Subsidiaries or Related
Entities on an absolute or relative basis: (i) earnings including
operating income, earnings before or after taxes, earnings before or after
interest, depreciation, amortization, or extraordinary or special items;
(ii) earnings per common share (basic or diluted); (iii) return on
assets (gross or net), return on investment, return on capital, or return on
equity; (iv) return on revenues; (v) cash flow, free cash flow, cash
flow return on investment (discounted or otherwise), net cash provided by
operations, or cash flow in excess of cost of capital; (vi) economic value
created; (vii) operating margin or profit margin; (viii) stock price
or total stockholder return; (ix) cost targets, reductions and savings,
productivity and efficiencies; and (x) strategic business criteria,
consisting of one or more objectives based on meeting specified market
penetration or market share, geographic business expansion, customer
satisfaction, employee satisfaction, human resources management, supervision of
litigation, information technology, and goals relating to acquisitions,
divestitures, joint ventures and similar transactions. In addition, and provided
such is consistent with the goal of providing for deductibility under the Code,
performance goals for incentive awards to Covered Employees may be based upon a
participant’s attainment of personal professional objectives. Such objectives
may include any of the foregoing performance goals, the implementation of
policies and plans, the negotiation of transactions, and the development of
long-term business goals. Measuring the performance of the Company or a
participant’s against these performance goals established by the Committee will
be objectively determinable. In addition, unless otherwise determined by the
Committee at the time the performance goals are established, performance will
be determined (to the extent applicable) according to generally accepted
accounting principles in existence on the date on which the performance goals
are established and without regard to any changes in such principles after such
date. Performance Goals may relate to all or any portion of a Performance
Period.

 

(r)            “Performance
Period” means a period of time determined by the Committee that is no less than
twelve months.

 

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(s)           “Plan”
means this Caesars Entertainment, Inc. 2004 Long Term Incentive Plan, as
amended from time to time.

 

(t)            “Plan
Year” means a calendar year.

 

(u)           “Prior
Plans” means, collectively, the Park Place Entertainment Corporation 1998 Stock
Incentive Plan, Park Place Entertainment Corporation 1998 Independent Director
Stock Option Plan and the Park Place Entertainment Corporation Supplemental
Retention Plan.

 

(v)           “Related
Entity” means any business, corporation, limited liability Company or other
entity in which the Company, or a Subsidiary of the Company, holds at least 25%
ownership interest, directly or indirectly.

 

(w)          “Restricted
Stock” means an Award of shares of Stock to a Grantee under Section 6(d)
that may be subject to certain restrictions and to a risk of forfeiture.

 

(x)            “Restricted
Stock Unit” means a right granted to a Grantee under Section 6(e) to
receive Stock or cash at the end of a specified deferral period, which right
may be conditioned on the satisfaction of specified performance or other
criteria.

 

(y)           “Rule 16b-3”
means Rule 16b-3, as from time to time in effect promulgated by the Securities
and Exchange Commission under Section 16 of the Exchange Act, including
any successor to such Rule.

 

(z)            “Securities
Act” means the Securities Act of 1933, as amended from time to time, and as now
or hereafter construed, interpreted and applied by regulations, rulings and
cases.

 

(aa)         “Stock”
means shares of the common stock, par value $0.01 per share, of the Company.

 

(bb)         “Stock
Appreciation Right” or “SAR” means the right, granted to a Grantee under
Section 6(c), to be paid an amount measured by the appreciation in the
Fair Market Value of Stock from the date of grant to the date of exercise of
the right.

 

(cc)         “Subsidiary”
means a “subsidiary corporation,” whether now or hereafter existing, as defined
in Section 424(f) of the Code.

 

3.             Administration.

 

The Plan shall be administered by the Committee. The Committee shall
have the authority in its discretion, subject to and not inconsistent with the
express provisions of the Plan, to administer the Plan and to exercise all the
powers and authorities either specifically granted to it under the Plan or
necessary or advisable in the administration of the Plan, including, without
limitation, the authority to grant Awards; to determine the persons to whom and
the time or times at which Awards shall be granted; to determine the type and
number of Awards to be granted, the number of shares of Stock to which an Award
may relate and the terms, conditions, restrictions and performance criteria
relating to any Award; to determine Performance Goals no later than such time
as required to ensure that an underlying Award which is intended to comply with
the requirements of Section 162(m) of the Code so complies; to determine
whether, to what extent, and under what circumstances an Award may be settled,
cancelled, forfeited, exchanged, or surrendered; to make adjustments in the
terms and conditions of, and the Performance Goals (if any) included in,
Awards; to designate Related Entities; to construe and interpret the Plan and
any Award; to prescribe, amend and rescind rules and regulations relating to
the Plan; to determine the terms and provisions of the Award Agreements (which
need not be identical for each Grantee); and to make all other determinations
deemed necessary or advisable for the administration of the Plan. The Committee
may delegate its authority to grant awards under the Plan to individuals who
are not executive officers of the Company, subject to such conditions
determined by the Committee to such person(s) as the Committee shall determine.
Notwithstanding the foregoing, neither the Board, the Committee nor their
respective delegates shall have the authority to

 

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reprice (or cancel and regrant) any Option or, if applicable, other
Award at a lower exercise, base or purchase price without first obtaining the
approval of the Company’s stockholders.

 

The Committee may appoint a chairperson and a secretary and may make
such rules and regulations for the conduct of its business as it shall deem
advisable, and shall keep minutes of its meetings. The Committee may delegate
to one or more of its members or to one or more agents such administrative
duties as it may deem advisable, and the Committee or any person to whom it has
delegated duties as aforesaid may employ one or more persons to render advice
with respect to any responsibility the Committee or such person may have under
the Plan. All decisions, determinations and interpretations of the Committee
shall be final and binding on all persons, including the Company, any
Subsidiary of the Company, any Related Entity or Grantee (or any person
claiming any rights under the Plan from or through any Grantee) and any
stockholder.

 

No member of the Board, the Committee or any of respective delegates
shall be liable for any action taken or determination made in good faith with
respect to the Plan or any Award granted hereunder.

 

4.             Eligibility.

 

Awards may be granted to selected directors, officers, employees or
consultants of the Company, any Subsidiary of the Company or any Related
Entity, in the discretion of the Committee. In determining the persons to whom
Awards shall be granted and the type of any Award (including the number of
shares to be covered by such Award), the Committee shall take into account such
factors as the Committee shall deem relevant in connection with accomplishing
the purposes of the Plan.

 

5.             Stock Subject to the Plan.

 

The maximum number of shares of Stock reserved for the grant of Awards
under the Plan shall, subject to adjustment as provided herein, be
20 million shares. If, subsequent to the Effective Date, any shares of
Stock subject to an Award are forfeited, cancelled, exchanged or surrendered or
if an Award otherwise terminates or expires without a distribution of shares to
the Grantee, the shares of stock with respect to such Award shall, to the
extent of any such forfeiture, cancellation, exchange, surrender, termination
or expiration, be available for Awards under the Plan. No more than
5 million shares of Stock may be made subject to Options to a single
individual in a single Plan Year, subject to adjustment as provided herein, and
no more than 10 million shares of Stock may be made subject to stock-based
awards other than Options (including non-tandem SARs, Restricted Stock and
Restricted Stock Units or Other Stock-Based Awards denominated in shares of
Stock) to a single individual in a single Plan Year, in either case, subject to
adjustment as provided herein. Shares available under the Plan may, in whole or
in part, be authorized but unissued shares or shares that shall have been or
may be reacquired by the Company in the open market, in private transactions or
otherwise. Upon the exercise of any Award granted in tandem with any Awards,
such related Awards shall be cancelled to the extent of the number of shares of
Stock as to which the Award is exercised and, notwithstanding the foregoing,
such number of shares shall no longer be available for Awards under the Plan.

 

In the event that the Committee shall determine that any dividend or other
distribution (whether in the form of cash, Stock, or other property),
recapitalization, Stock split, reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects the Stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of Grantees under the Plan, then the Committee shall make such equitable
changes or adjustments as it deems necessary or appropriate to any or all of
(i) the maximum number and kind of shares of Stock or other property
(including cash) that may thereafter be issued in connection with Awards under
the Plan or to any particular Grantee, (ii) the number and kind of shares
of Stock or other property (including cash) issued or issuable in respect of
outstanding Awards, (iii) the exercise price, grant price, or purchase
price relating to any Award; provided, that, with respect

 

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to ISOs, such adjustment shall be made in accordance with
Section 424(h) of the Code; and (iv) the Performance Goals applicable
to outstanding Awards.

 

6.             Specific Terms of Awards.

 

(a)           General. The term of each
Award shall be for such period as may be determined by the Committee. Subject
to the terms of the Plan and any applicable Award Agreement, payments to be
made by the Company, a Subsidiary of the Company or Related Entity upon the
grant, maturation, or exercise of an Award may be made in such forms as the
Committee shall determine at the date of grant or thereafter, including,
without limitation, cash, Stock, or other property, and may be made in a single
payment or transfer, in installments, or on a deferred basis. The Committee may
make rules relating to installment or deferred payments with respect to Awards,
including the rate of interest to be credited with respect to such payments. In
addition to the foregoing, the Committee may impose on any Award or the
exercise thereof, at the date of grant or thereafter, such additional terms and
conditions, not inconsistent with the provisions of the Plan, as the Committee
shall determine.

 

(b)           Options. The Committee is
authorized to grant Options to Grantees on the following terms and conditions:

 

(i)            Type of Award. The Award
Agreement evidencing the grant of an Option under the Plan shall designate the
Option as an ISO or an NQSO.

 

(ii)           Exercise Price. The
exercise price per share of Stock purchasable under an Option shall be
determined by the Committee, but in no event shall the exercise price per share
of any Option be less than the Fair Market Value of a share of Stock on the
date of grant of such Option. The exercise price for Stock subject to an Option
may be paid in cash or by an exchange of Stock previously owned by the Grantee
for at least six months, through a “broker cashless exercise” procedure
approved by the Committee (to the extent permitted by law), or a combination of
the above, in any case in an amount having a combined value equal to such
exercise price.

 

(iii)          Term and Exercisability of Options.
Options shall be exercisable over the exercise period (which shall not exceed
ten years from the date of grant), at such times and upon such conditions as
the Committee may determine, as reflected in the Award Agreement; provided
that, the Committee shall have the authority to accelerate the exercisability
of any outstanding Option at such time and under such circumstances as it, in
its sole discretion, deems appropriate. An Option may be exercised to the
extent of any or all full shares of Stock as to which the Option has become
exercisable, by giving written notice of such exercise to the Committee or its
designated agent.

 

(iv)          Termination of Employment, etc.
An Option may not be exercised unless the Grantee is then a director of, in the
employ of, or then maintains a consulting relationship with, the Company, a
Subsidiary of the Company or a Related Entity, and unless the Grantee has
remained continuously so employed, or continuously maintained such relationship,
since the date of grant of the Option; provided that, the Award Agreement may
contain provisions extending the exercisability of Options, in the event of
specified terminations of employment or service, to a date not later than the
expiration date of such Option.

 

(v)           Other Provisions. Options
may be subject to such other conditions including, but not limited to,
restrictions on transferability of the shares acquired upon exercise of such
Options, as the Committee may prescribe in its discretion or as may be required
by applicable law.

 

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(c)           SARs. The Committee is
authorized to grant SARs to Grantees on the following terms and conditions:

 

(i)            In General. SARs may be
granted independently or in tandem with an Option. Unless the Committee
determines otherwise, an SAR (1) granted in tandem with an NQSO may be
granted at the time of grant of the related NQSO or at any time thereafter or
(2) granted in tandem with an ISO may only be granted at the time of grant
of the related ISO. An SAR granted in tandem with an Option shall be
exercisable only to the extent the underlying Option is exercisable. Payment of
an SAR may be made in cash, Stock, or property as specified in the Award or
determined by the Committee.

 

(ii)           SARs. An SAR shall confer
on the Grantee a right to receive an amount with respect to each share subject
thereto, upon exercise thereof, equal to the excess of (1) the Fair Market
Value of one share of Stock on the date of exercise over (2) the grant price
of the SAR (which in the case of an SAR granted in tandem with an Option shall
be equal to the exercise price of the underlying Option, and which in the case
of any other SAR shall be such price as the Committee may determine).

 

(d)           Restricted Stock. The
Committee is authorized to grant Restricted Stock to Grantees on the following
terms and conditions:

 

(i)            Issuance and Restrictions.
Restricted Stock shall be subject to such restrictions on transferability and
other restrictions, if any, as the Committee may impose at the date of grant or
thereafter, which restrictions may lapse separately or in combination at such
times, under such circumstances, in such installments, or otherwise, as the
Committee may determine. The Committee may place restrictions on Restricted
Stock that shall lapse, in whole or in part, only upon the attainment of
Performance Goals. Except to the extent restricted under the Award Agreement
relating to the Restricted Stock, a Grantee granted Restricted Stock shall have
all of the rights of a stockholder including, without limitation, the right to
vote Restricted Stock and the right to receive dividends thereon.

 

(ii)           Forfeiture. Upon
termination of employment with or service to the Company, a Subsidiary of the
Company or a Related Entity, or upon termination of the consulting or director
relationship, as the case may be, during the applicable restriction period,
Restricted Stock and any accrued but unpaid dividends that are then subject to
restrictions shall be forfeited; provided that, the Committee may provide, by
rule or regulation or in any Award Agreement, or may determine in any
individual case, that restrictions or forfeiture conditions relating to
Restricted Stock will be waived in whole or in part in the event of terminations
resulting from specified causes, and the Committee may in other cases waive in
whole or in part the forfeiture of Restricted Stock.

 

(iii)          Certificates for Stock.
Restricted Stock granted under the Plan may be evidenced in such manner as the
Committee shall determine. If certificates representing Restricted Stock are
registered in the name of the Grantee, such certificates shall bear an
appropriate legend referring to the terms, conditions, and restrictions
applicable to such Restricted Stock, and the Company shall retain physical
possession of the certificate.

 

(iv)          Dividends. Dividends paid
on Restricted Stock shall be either paid at the dividend payment date, or
deferred for payment to such date as determined by the Committee, in cash or in
shares of unrestricted Stock having a Fair Market Value equal to the amount of
such dividends. Stock distributed in connection with a stock split or stock
dividend, and other property distributed as a dividend, shall be subject to
restrictions and a risk of forfeiture to the same extent as the Restricted
Stock with respect to which such Stock or other property has been distributed.

 

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(e)           Restricted Stock Units.
The Committee is authorized to grant Restricted Stock Units to Grantees,
subject to the following terms and conditions:

 

(i)            Award and Restrictions.
Delivery of Stock or cash, as determined by the Committee, will occur upon
expiration of the deferral period specified for Restricted Stock Units by the
Committee. The Committee may place restrictions on Restricted Stock that shall
lapse, in whole or in part, only upon the attainment of Performance Goals.

 

(ii)           Forfeiture. Upon
termination of employment with the Company, a Subsidiary of the Company or a
Related Entity, or termination of the director or consulting relationship
during the applicable deferral period or portion thereof to which forfeiture
conditions apply, or upon failure to satisfy any other conditions precedent to
the delivery of Stock or cash to which such Restricted Stock Units relate, all
Restricted Stock Units and any accrued but unpaid dividend equivalents that are
then subject to deferral or restriction shall be forfeited; provided that, the
Committee may provide, by rule or regulation or in any Award Agreement, or may
determine in any individual case, that restrictions or forfeiture conditions
relating to Restricted Stock Units will be waived in whole or in part in the
event of termination resulting from specified causes, and the Committee may in other
cases waive in whole or in part the forfeiture of Restricted Stock Units.

 

(f)            Other Stock-Based Awards.
The Committee is authorized to grant Awards to Grantees in the form of Other
Stock-Based Awards, as deemed by the Committee to be consistent with the
purposes of the Plan. Awards granted pursuant to this paragraph may be granted
with value and payment contingent upon Performance Goals. The Committee shall
determine the terms and conditions of such Awards at the date of grant or
thereafter. Payments earned hereunder may be decreased or, with respect to any
Grantee who is not a Covered Employee, increased in the sole discretion of the
Committee based on such factors as it deems appropriate. No payment shall be
made prior to the certification by the Committee that the Performance Goals
have been attained. The Committee may establish such other rules applicable to
the Other Stock-Based Awards to the extent not inconsistent with
Section 162(m) of the Code.

 

7.             Change in Control Provisions.

 

Unless otherwise determined by the Committee and evidenced in an Award
Agreement, in the event of a Change in Control:

 

(a)           any
Award carrying a right to exercise that was not previously vested and
exercisable shall become fully vested and exercisable; and

 

(b)           the
restrictions, deferral limitations, payment conditions, and forfeiture
conditions applicable to any other Award granted under the Plan shall lapse and
such Awards shall be deemed fully vested, and any performance conditions
imposed with respect to Awards shall be deemed to be fully achieved.

 

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8.             General
Provisions.

 

(a)           Nontransferability. Unless
otherwise provided in an Award Agreement, Awards shall not be transferable by a
Grantee except by will or the laws of descent and distribution and shall be
exercisable during the lifetime of a Grantee only by such Grantee or his
guardian or legal representative.

 

(b)           No Right to Continued Employment,
etc. Nothing in the Plan or in any Award, any Award Agreement or
other agreement entered into pursuant hereto shall confer upon any Grantee the
right to continue in the employ of or to continue as consultant or director of
the Company, any Subsidiary of the Company or any Related Entity or to be
entitled to any remuneration or benefits not set forth in the Plan or such
Award Agreement or other agreement or to interfere with or limit in any way the
right of the Company, Subsidiary of the Company or Related Entity to terminate
such Grantee’s employment, or consulting or director relationship.

 

(c)           Taxes. The Company, any
Subsidiary of the Company or any Related Entity is authorized to withhold from
any Award granted, any payment relating to an Award under the Plan, including
from a distribution of Stock, or any other payment to a Grantee, amounts of
withholding and other taxes due in connection with any transaction involving an
Award, and to take such other action as the Committee may deem advisable to
enable the Company and Grantees to satisfy obligations for the payment of withholding
taxes and other tax obligations relating to any Award. This authority shall
include authority to withhold or receive Stock or other property and to make
cash payments in respect thereof in satisfaction of a Grantee’s tax
obligations. The Committee may provide in the Award Agreement that in the event
that a Grantee is required to pay any amount to be withheld in connection with
the issuance of shares of Stock in settlement or exercise of an Award, the
Grantee may satisfy such obligation (in whole or in part) by electing to have a
portion of the shares of Stock to be received upon settlement or exercise of
such Award equal to the minimum amount required to be withheld.

 

(d)           Stockholder Approval; Amendment and
Termination.

 

(i)            The
Plan shall take effect upon its approval by the stockholders of the Company at
a meeting of such stockholders at which such issue is considered and voted
upon. In the event that the stockholders of the Company do not approve the
Plan, then upon such event the Plan and all rights hereunder shall immediately
terminate, no Grantee (or any permitted transferee thereof) shall have any
rights under the Plan or any Award Agreement, and all shares reserved under
Prior Plans shall remain available under such Prior Plans in accordance with
the terms of such Prior Plans.

 

(ii)           The
Board may at any time and from time to time alter, amend, suspend, or terminate
the Plan in whole or in part; provided, however, that an amendment that
requires stockholder approval in order for the Plan to continue to comply with
Section 162(m) or any other law, regulation or stock exchange requirement
shall not be effective unless approved by the requisite vote of stockholders.
Notwithstanding the foregoing, no amendment to or termination of the Plan shall
affect adversely any of the rights of any Grantee, without such Grantee’s
consent, under any Award theretofore granted under the Plan.

 

(e)           Expiration of Plan. Unless
earlier terminated by the Board pursuant to the provisions of the Plan, the
Plan shall expire on the tenth anniversary of the Effective Date. No Awards
shall be granted under the Plan after such expiration date. The expiration of
the Plan shall not affect adversely any of the rights of any Grantee, without
such Grantee’s consent, under any Award theretofore granted.

 

A-9

 

(f)            Deferrals. The Committee
shall have the authority to establish such procedures and programs that it
deems appropriate to provide Grantees with the ability to defer receipt of cash,
Stock or other property payable with respect to Awards granted under the Plan.

 

(g)           No Rights to Awards; No Stockholder
Rights. No Grantee shall have any claim to be granted any Award
under the Plan, and there is no obligation for uniformity of treatment of
Grantees. Except as provided specifically herein, a Grantee or a transferee of
an Award shall have no rights as a stockholder with respect to any shares
covered by the Award until the date of the issuance of a stock certificate to
him for such shares.

 

(h)           Unfunded Status of Awards.
The Plan is intended to constitute an “unfunded” plan for incentive and
deferred compensation. With respect to any payments not yet made to a Grantee
pursuant to an Award, nothing contained in the Plan or any Award shall give any
such Grantee any rights that are greater than those of a general creditor of
the Company.

 

(i)            No Fractional Shares. No
fractional shares of Stock shall be issued or delivered pursuant to the Plan or
any Award. The Committee shall determine whether cash, other Awards, or other
property shall be issued or paid in lieu of such fractional shares or whether
such fractional shares or any rights thereto shall be forfeited or otherwise
eliminated.

 

(j)            Regulations and Other Approvals.

 

(i)            The
obligation of the Company to sell or deliver Stock with respect to any Award
granted under the Plan shall be subject to all applicable laws, rules and
regulations, including all applicable federal and state securities laws, and
the obtaining of all such approvals by governmental agencies as may be deemed
necessary or appropriate by the Committee.

 

(ii)           Each
Award is subject to the requirement that, if at any time the Committee
determines, in its absolute discretion, that the listing, registration or
qualification of Stock issuable pursuant to the Plan is required by any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the grant of an Award or the issuance of
Stock, no such Award shall be granted or payment made or Stock issued, in whole
or in part, unless listing, registration, qualification, consent or approval
has been effected or obtained free of any conditions not acceptable to the Committee.

 

(iii)          In
the event that the disposition of Stock acquired pursuant to the Plan is not
covered by a then current registration statement under the Securities Act and
is not otherwise exempt from such registration, such Stock shall be restricted
against transfer to the extent required by the Securities Act or regulations
thereunder, and the Committee may require a Grantee receiving Stock pursuant to
the Plan, as a condition precedent to receipt of such Stock, to represent to
the Company in writing that the Stock acquired by such Grantee is acquired for
investment only and not with a view to distribution.

 

(iv)          The
Committee may require a Grantee receiving Stock pursuant to the Plan, as a
condition precedent to receipt of such Stock, to enter into a stockholder
agreement or “lock-up” agreement in such form as the Committee shall determine
is necessary or desirable to further the Company’s interests.

 

(k)           Governing Law. The Plan
and all determinations made and actions taken pursuant hereto shall be governed
by the laws of the State of Delaware without giving effect to the conflict of
laws principles thereof.

 

A-10Exhibit 4.3

SECOND AMENDMENT

TO

LINE OF CREDIT LOAN AGREEMENT

THIS SECOND AMENDMENT TO
LINE OF CREDIT LOAN AGREEMENT (“Second Amendment”) is made effective as of November
30, 2004, by and between MGP INGREDIENTS, INC. (“Company”) and COMMERCE BANK,
N.A. (“Bank”).

WHEREAS, Company and Bank
entered into that certain Line of Credit Loan Agreement dated November 25,
2003, as amended pursuant to that certain First Amendment to Line of Credit
Loan Agreement dated September 17, 2004 (as previously amended, the “Loan
Agreement”);

WHEREAS, pursuant to the
terms of the Loan Agreement, the Line of Credit matures on November 30, 2004,
and all sums outstanding on such date shall become due and payable in full; and

WHEREAS, Company desires to
increase the maximum principal amount available under, and extend the maturity
of and amend, the Line of Credit, as hereinafter set forth.

NOW, THEREFORE, Company and
Bank agree as follows:

1.             Terms used herein, which are defined in the Loan
Agreement, shall have the meanings given to them in the Loan Agreement.

2.             Section 1.1 of the Loan Agreement is hereby amended to
read in its entirety as follows:

Subject
to the terms of this Agreement, Bank will lend Borrower, from time to time
until the termination hereof, such sums as Borrower may request, in minimum
increments of $100,000, which shall not exceed in the aggregate principal
amount at any one time outstanding the sum of Twenty Million Dollars
($20,000,000).

3.             The first sentence to Section 1.3 of the Loan Agreement
is hereby amended to read in its entirety as follows:

The
Line of Credit shall be evidenced by the Second Amended and Restated Line of Credit
Note in form and substance acceptable to Bank (the “Line of Credit Note”).

4.             Section 1.4 of the Loan Agreement is hereby amended to
read in its entirety as follows:

Upon
the occurrence of an Event of Default as defined in Section 4.1, or on November
30, 2005, the outstanding principal balance of

 

the
Line of Credit Note together with all accrued interest shall become immediately
due and payable in full.

5.             Section 3.1 of the Loan Agreement is hereby amended to
read in its entirety as follows:

                Section 3.1. Financial Covenants.

(a)           Except as provided in subparagraph
(b) below, comply with all Company Covenants as defined and contained in
Section 5 of the Note Agreement dated as of August 1, 1993, between Borrower
and the Principal Mutual Life Insurance Company (the “Principal Agreement”)
including, but not limited to, the following:

(1)                                  Current Ratio.  Maintain a Current Ratio of not less than 1.50
to 1.00.

(2)                                  Consolidated
Tangible Net Worth.  Maintain
Consolidated Tangible Net Worth at an amount not less than THE GREATER OF (i)
$86,000,000, or (ii) the sum of $86,000,000 plus 50% of Consolidated Net Income
for the period from and after September 30, 2001, to the date of determination
thereof (considered as a single accounting period).

(3)                                  Funded Debt.  Not permit Consolidated Funded Debt to exceed
60% of total capitalization.

(4)                                  Debt/Worth.  Maintain a ratio of Debt to Tangible Net Worth
of not more than 2.50 to 1.00.

(5)                                  Fixed Charges
Coverage Ratio.  Maintain at
the end of each fiscal quarter a ratio of Net Income Available for Fixed
Charges to Fixed Charges for the 4 consecutive quarters then ending of not less
than 1.50 to 1.00.

(b)           Notwithstanding subparagraph (a) of this Section 3.1 and
the provisions of Section 5.11 of the Principal Agreement, the Borrower may
grant GE Capital Public Finance, Inc. (together with its successors and assigns,
if any “Secured Party”) a security interest in all of Borrower’s equipment (as
defined in the applicable Uniform Commercial Code), whether now owned or
hereafter acquired, that is at any time located at the facility commonly known
as 16 Kansas Avenue, Wyandotte County, Kansas 66105, together with all
additions, attachments and accessories and any and all substitutions,
replacements or exchanges therefor, and all insurance and/or other proceeds
thereof, in each case whether now owned or hereafter acquired, to secure the
Indebtedness of Borrower (as defined in that certain Master Security Agreement
between Borrower and Secured Party dated September 24, 2004, as amended),
including without limitation that certain Promissory Note dated September 24,
2004, in the original 

 

2

 

principal amount of
$9,794,500. Borrower has provided Bank a copy of said Promissory Note and
Master Security Agreement, as amended.

The Company Covenants shall
survive any amendment, modification or termination of the Principal Agreement.

6.             Subsection 4.1(c) of the Loan Agreement is hereby
amended to read in its entirety as follows:

If
Borrower shall default in the due performance or observance of any covenant
undertaken by it under this Agreement and such default shall continue for a
period of thirty (30) days after written notice from Bank; or

7.             Subsection 4.1(d) of the Loan Agreement is hereby
amended to read in its entirety as follows:

Default
in the performance of the obligations of Borrower pursuant to any other note or
agreement binding on Borrower, including, but not limited to, the Principal
Agreement, resulting in the acceleration of payment obligations under any such
note or agreement in an amount in excess of $1,000,000; or

8.             Subsection 4.1(e) of the Loan Agreement is hereby
amended to read in its entirety as follows:

Default
in the performance of the obligations of Borrower pursuant to the industrial
revenue bonds issued in the amount of $6,500,000 on August 22, 2001, as amended
as of July 1, 2003, by the Unified Government of Wyandotte/Kansas City, Kansas,
resulting in the acceleration of Borrower’s obligations with respect to such
bonds; or

9.             Subsection 4.1(f) of the Loan Agreement is hereby
amended to read in its entirety as follows:

Borrower shall be
adjudicated a bankrupt, or make a general assignment for the benefit of its
creditors, or there are instituted by or against Borrower any type of
bankruptcy proceedings or any proceeding for the liquidation or the termination
of Borrower’s affairs, or the appointment of a receiver or trustee for Borrower
or for any of Borrower’s assets, which, in the case of proceedings instituted
against the Borrower, are consented to by the Borrower or are not dismissed
within 60 days after institution, or a properly filed petition for Borrower’s
reorganization under the Bankruptcy Code or otherwise is approved, or Borrower
files a petition for arrangement under Chapter 11 of the Bankruptcy Code or any
similar statute; or

 

3

 

10.           Except to the extent specifically amended by this Second
Amendment, the Loan Agreement shall remain in full force and effect.

11.           ORAL AGREEMENTS OR
COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT
OF A DEBT, INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT, ARE NOT
ENFORCEABLE. TO PROTECT YOU (BORROWER) AND US (CREDITOR) FROM MISUNDERSTANDINGS
OR DISAPPOINTMENTS, ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED
IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT
BETWEEN US EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.

BY SIGNING BELOW, YOU AND
WE AGREE THAT THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN US.

12.           This Second Amendment shall be
governed by, and construed in accordance with, the laws of the State of
Missouri.

	
   

  
	
  THE REMAINDER OF
  THIS PAGE INTENTIONALLY LEFT BLANK

  

 

4

 

IN WITNESS WHEREOF, the
parties hereto have caused this Second Amendment to be executed by their
respective officers as of the date written above.

	
  MGP INGREDIENTS, INC.

  
	
   

  
	
  By: 

  	
  Ladd M. Seaberg

  
	
  Title: President & CEO

  
	
   

  
	
  By: 

  	
  Briant T. Cahill

  
	
  Title: CFO

  
	
   

  
	
  COMMERCE BANK, N.A.

  
	
   

  
	
  By: 

  	
  /s/ Lance Holden

  
	
  Title: Senior Vice
  President

  
			

 

5

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