TRANSITIONAL EMPLOYMENT AGREEMENT
(EXECUTIVE OFFICER GROUP)
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This Transitional Employment Agreement ("Agreement") is made as of this
_20th__ day of June 2000, by and between Midwest Banc Holdings, Inc. (the
"Employer") and the undersigned executive officer (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive has been employed for some years by the Employer;
and
WHEREAS, the Employer wishes to assure both itself and the Executive of
continuity of management in the event of any actual Change in Control (as
defined in Paragraph 2) of the Employer on the terms and conditions set forth
herein; and
WHEREAS, the Executive desires to provide such services and continuity; and
WHEREAS, to achieve this purpose, the Board of Directors of the Employer
considered and approved this Agreement to be entered into with the Executive as
being in the best interests of the Employer and its stockholders;
NOW, THEREFORE, in consideration of the premises and mutual covenants set
forth herein, the parties hereto agree as follows:
1. OPERATION OF AGREEMENT. The "Effective Date of this Agreement" shall
be the date on which a Change in Control occurs, and this Agreement shall not
have any force or effect whatsoever prior to that date.
2. CHANGE IN CONTROL. For the purposes of this Agreement, a "Change in
Control" shall be deemed to occur when and only when:
(a) The Employer is merged or consolidated or reorganized into or
with another corporation or other legal person (an "Acquirer") and as a result
of such merger, consolidation or reorganization less than 50% of the outstanding
voting securities or other capital interests of the surviving, resulting or
acquiring corporation or other legal person are owned in the aggregate directly
or indirectly by the stockholders of the Employer, in substantially the same
proportion of their ownership of stock in the Employer immediately prior to such
merger, consolidation or reorganization;
(b) The Employer sells all or substantially all of its business
and/or assets to an Acquirer, of which less than 50% of the outstanding voting
securities or other capital interests are owned in the aggregate directly or
indirectly by the stockholders of the Employer, in substantially the same
proportion of their ownership of stock in the Employer immediately prior to such
sale;
(c) Any person or group (as the terms "person" and "group" are used
in Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934,
("Exchange Act") and the rules and regulations promulgated thereunder) has
become the beneficial owner (as the
term "beneficial owner" is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of more than 50% of the issued
and outstanding shares of voting securities of Employer, other than (i) a
trustee or other fiduciary holding securities under any employee benefit plan of
the Employer or any subsidiary or (ii) a corporation owned directly or
indirectly by the stockholders of the Employer in substantially the same
proportion as their ownership of stock in the Employer; or
(d) Individuals who are members of the Incumbent Board cease to
constitute a majority of the Board of Directors of the Employer. For this
purpose, "Incumbent Board" means (i) the members of the Board of Directors of
the Employer on the Effective Date and (ii) any individual who becomes a member
of the Board of Directors of the Employer after the Effective Date, if such
individual's election or nomination for election as a Director was approved by
the affirmative vote of the then Incumbent Board.
3. EMPLOYMENT. The Employer hereby agrees to continue the Executive in
its employ for a period of twenty-four (24) months commencing on the Effective
Date of this Agreement (the "Employment Period"), with the same director and
officer titles, duties and responsibilities as in effect immediately prior to
the Effective Date of this Agreement. The Executive agrees that during the
Employment Period he or she shall continue to devote such time to his or her
executive duties as devoted prior to the Effective Date of the Agreement and
shall perform such duties faithfully; provided, however, that Executive's
continued service for other corporations and entities, and on any other
corporate, civic, charity or foundation board shall not be deemed to breach
Executive's obligations hereunder.
4. COMPENSATION, COMPENSATION PLANS, BENEFITS AND PERQUISITES. During the
Employment Period, the Executive shall:
(a) Receive an annual salary and director's fees at a rate which is
not less than his or her rate of annual salary and director's fees immediately
prior to the Effective Date of this Agreement, with the opportunity for
increases from time to time thereafter which are in accordance with the regular
practices of the Employer or its affiliates (which for purposes of this
Agreement, shall mean any corporation or enterprise which, as of a given date,
is a member of the same controlled group of entities, the same group of trades
or businesses under common control or the same affiliated service group,
determined in accordance with Section 414(b), (c), (m) or (o) of the Code (as
defined in Paragraph 7 hereof), as is the Employer) with respect to executives
with comparable duties;
(b) Be eligible to participate on a comparable basis, in each
calendar year during which the Employment Period runs, in an annual bonus
program maintained by the Employer or its affiliates in which executives with
comparable duties are eligible to participate;
(c) Be eligible to participate on a comparable basis in the stock
option or other equity incentive plans and any other bonus incentive
compensation plans (collectively, the "Incentive Plans"), maintained from time
to time by the Employer or its affiliates during the Employment Period and in
which executives with comparable duties are eligible to participate, and the
Executive's benefits, if any, in any Incentive Plans existing on the date hereof
shall not be reduced or eliminated;
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(d) Be entitled to participate (i) in any group or executive medical,
dental, disability, life insurance, retirement, profit sharing, thrift and other
plans and programs, including nonqualified and deferred compensation plans and
programs, maintained from time to time by the Employer or its affiliates during
the Employment Period and in which similarly situated executives (with
comparable duties) are eligible to participate and (ii) in special medical or
life insurance arrangements, and profit sharing contributions to any deferred
compensation plan maintained by the Employer to the same extent the Executive
participated in such benefits before the Effective Date of the Agreement; and
(e) Be entitled to receive vacation and perquisites which are
provided by the Employer or its affiliates from time to time during the
Employment Period to executives with comparable duties, but in no event less
favorable than the vacation and perquisites to which he or she was entitled
immediately prior to the Effective Date of this Agreement (including, but not
limited to, company car and allowances, club memberships and dues, subscriptions
and travel).
(f) Be entitled to receive benefits under any supplemental executive
retirement agreement, if one is in place prior to the Effective Date, between
the Employer and the Executive according to its terms.
5. TERMINATION DURING EMPLOYMENT PERIOD.
(a) For purposes of this Agreement, the term "termination" shall mean
(i) termination by the Employer of the employment of the Executive with the
Employer and all of its subsidiaries during the Employment Period for any reason
other than death, disability or "cause" (as defined below), or (ii) resignation
of the Executive for "constructive discharge" (as defined below).
(b) The term "constructive discharge" shall mean the Executive's
resignation from the Employer and all of its subsidiaries upon any one of the
following:
(i) the failure of the Employer to pay or provide the
compensation, benefits and perquisites contemplated by Paragraph 4;
(ii) there shall have occurred a material diminution in the
Executive's title, duties or responsibilities from those in effect prior to
the Effective Date of this Agreement;
(iii) the Employer changes the Executive's (A) primary employment
location to a place that is more than 35 miles from Executive's primary
employment location as of the Effective Date of the Agreement and/or (B)
regularly scheduled work hours significantly from such hours as of the
Effective Date of the Agreement; and/or
(iv) at any time for any reason prior to the first anniversary of
the Effective Date of the Agreement.
(c) The term "cause" means (i) felony indictment or conviction, other
than a felony predicated upon the Executive's vicarious liability or (ii) the
Executive's continued and willful failure to substantially perform his or her
duties under this Agreement. For purposes of
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this Paragraph, no act or failure to act on the Executive's part will be
considered "willful" unless done, or omitted to be done, by him or her not in
good faith and without reasonable belief that his or her action or omission was
in the interests of the Employer or its affiliates or not opposed to the
interests of the Employer or its affiliates.
6. TERMINATION BENEFITS. In the event of a termination of the Executive
during the Employment Period, the Employer shall provide and the Executive shall
be entitled to receive the following benefits (the "Termination Benefits") upon
execution by Executive of a release, in substantially the form attached hereto
as Exhibit A, of all claims (other than claims for benefits granted under this
Agreement) against Employer, the Resulting Entity and their affiliates and
successors:
(a) The Executive shall, notwithstanding his or her termination, be
entitled to receive salary payments and director's fees from the date of his
termination and continuing until the second anniversary of said termination date
(the "Salary Continuation Period"); which period shall be treated hereunder as a
continuation of the Employment Period. These sums shall be paid at the greater
of the rate required by Paragraph 4(a) and that in effect immediately prior to
termination.
(b) In addition to the payments under (a) above, the Executive shall
receive a bonus payment with respect to each calendar year ending during Salary
Continuation Period equal to the annual cash bonus paid (including, for this
purpose, bonus amounts declared but deferred pursuant to the Executive's
election) during the year immediately preceding the Effective Date of the
Agreement, or if greater, the date of termination, plus a pro rata payment for
the calendar year in which such Salary Continuation Period ends based on such
average annual cash bonus. The bonus payments for each calendar year shall be
made at such times and in such manner as they would have been paid had the
Executive's employment not been terminated.
(c) Upon the expiration of the Employment Period, including, without
limitation the Salary Continuation Period, the Executive (and, if applicable,
his or her dependents) shall be entitled to maintain group medical and dental
coverage under the continuation coverage provisions of such plans ("COBRA
Coverage"), which entitlement shall, notwithstanding any other provisions of the
group plan to the contrary, be subject to termination only in the event of the
failure of the Executive or the dependent to timely pay the appropriate premium
for such coverage (which, in this case, shall be the premium that would be paid
on the same cost-sharing basis as if the Executive continued to be actively
employed by the Employer), provided that such coverage shall be secondary to any
group coverage (including Medicare or any government-sponsored or mandated
program) subsequently obtained or covering the Executive or dependent.
7. ADJUSTMENT DUE TO EXCISE TAX.
(a) If it is determined (in the reasonable opinion of independent
public accountants then regularly retained by the Employer), that any amount
payable to Executive by Employer under this Agreement or any other plan, program
or agreement under which Executive participates or is a party would constitute
an "Excess Parachute Payment" within the meaning of
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Section 280G (or any similar provision) of the Internal Revenue Code of 1986, as
amended from time to time (the "Code"), subject to the excise tax imposed by
Section 4999 of the Code, as amended from time to time (the "Excise Tax"), then
the Termination Benefits payable to the Executive shall be reduced to the extent
necessary so that no portion of the amounts payable to the Executive is subject
to the Excise Tax. Executive shall be responsible for any and all Excise Tax (or
similar taxes imposed upon such payments).
(b) The determination of the amount of reduction, if any, in the
amounts payable to the Executive shall be made in good faith by the Employer's
chief financial officer after consultation with the advisors then regularly
retained by the Employer, and a written statement setting forth the calculation
thereof shall be provided to the Executive. If amounts payable to the Executive
are to be reduced pursuant to this Paragraph 7, the Executive, in consultation
with the chief financial officer, shall determine the compensation and benefits
to be so reduced.
(c) The Employer and the Employee hereby recognize that the
restrictive non compete provisions of paragraph 15 have value and that value
shall be recognized in the Section 280 G calculations by an allocation of the
termination benefits between the non compete provision and the other Termination
Benefits based on the value of the fair market value of the non compete
provisions. The Employer shall make the determination of the fair value to be
assigned.
8. NO OBLIGATION TO MITIGATE DAMAGES. The Executive shall not be
obligated to seek other employment in mitigation of amounts payable or
arrangements made under the provisions of this Agreement and the obtaining of
any such other employment shall in no event effect any reduction of the
Employer's obligations under this Agreement.
9. ENFORCEMENT; ARBITRATION.
(a) Both the Employer and the Executive (or any successor) shall have
the right and option to elect to have any dispute or controversy arising under
or in connection with this Agreement, or any plan, program or arrangement
referred to herein, or any breach thereof, settled exclusively by arbitration,
conducted before an arbitrator in accordance with rules of the American
Arbitration Association then in effect. Judgment may be entered on the award of
the arbitrator in any court having jurisdiction. Any such arbitration shall be
held in Chicago, Illinois.
(b) The Employer shall pay all reasonable legal fees, costs of
litigation, and other reasonable expenses incurred by the Executive or any
successor who is successful pursuant to legal judgment, arbitration or
settlement in a challenge resulting from the Employer's refusal to pay any
amounts due under this Agreement or any plan, program or arrangement referred to
herein to which it is determined that the Executive or successor is entitled, or
as a result of the Employer's contesting the validity, enforceability or
interpretation of this Agreement or any such plan, program or arrangement.
(c) Each of the Employer or the Executive or any successor shall
provide written notice ("initial notice") at least fifteen (15) business days
prior to the commencement of any legal action or claim under this Agreement or
any plan, program or arrangement referred to
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herein, which initial notice shall indicate whether such party is invoking
arbitration pursuant to Paragraph 9(a) above. If such party is not electing to
invoke arbitration, then the other party may by written notice within ten (10)
business days following receipt of the initial notice elect to invoke
arbitration pursuant to said Paragraph 9(a).
10. INDEMNIFICATION. In the event that legal action is instituted against
the Executive during or after the term of his or her employment by a third party
(or parties) based on the performance or nonperformance by Executive of his or
her duties as an officer or director of the Employer or any of its affiliates or
a fiduciary of any benefit plan maintained by the Employer or any of its
affiliates during his or her employment with the Employer, the Resulting Entity,
their successors (collectively, the "Indemnifying Party") or their affiliates,
the Indemnifying Party will assume the defense of such action by its attorney or
attorneys selected by the Indemnifying Party and will advance the costs and
expenses thereof (including reasonable attorneys' fees) and will indemnify the
Executive against any judgment or amounts paid in settlement of said actions in
accordance with its charter, by-laws, insurance and applicable law, without
prejudice to or waiver by the Indemnifying Party of its rights and remedies
against Executive. In the event that there is a settlement or final judgment
entered against Executive in any such litigation, and the Indemnifying Party's
Board of Directors determines that Executive should, in accordance with the
Indemnifying Party's charter, by-laws, insurance and applicable law, reimburse
the Indemnifying Party, Executive shall be liable to the Indemnifying Party for
all such costs, expenses, damages and other amounts paid or incurred by the
Indemnifying Party in the defense, settlement or other resolution of any such
litigation (the "Reimbursement Amount"). The Reimbursement Amount shall be paid
by Executive within thirty (30) days after rendition of the final judgment. The
Indemnifying Party shall be entitled to set off the reimbursement amount against
all sums which may be owed or payable by the Indemnifying Party to Executive
hereunder or otherwise. The parties shall cooperate in the defense of any
asserted claim, demand or liability against Executive or the Indemnifying Party
or its subsidiaries or affiliates. The term "final judgment" as used herein
shall be defined to mean the decision of a court of competent jurisdiction, and
in the event of an appeal, then the decision of the appellate court, after
petition for rehearing has been denied, or the time for filing the same (or the
filing of further appeal) has expired.
The rights to indemnification under this Paragraph 10 shall be in addition
to any rights which Executive may now or hereafter have under the charter or
By-Laws of the Indemnifying Party or any of its affiliates, under any insurance
contract maintained by the Indemnifying Party or any of its affiliates or any
agreement between Executive and the Indemnifying Party or any of its affiliates.
11. PAYMENT IN THE EVENT OF DEATH. Upon the death of the Executive prior
to a termination, any payment due and owing by the Employer to Executive under
this Agreement shall be made to such beneficiary as Executive may designate in
writing, or failing such designation, the executor of his or her estate. Upon
the death of the Executive after a termination has occurred, then the
beneficiary designated by the Executive or, if no beneficiary has been
designated, his or her executor shall be entitled to a lump sum death benefit
equal to the present value of the payments that were remaining to be paid under
Paragraph 6(a) as of the date of death. Such lump sum present value payment
shall be determined using an interest rate per annum equal to the prime rate of
interest as published in The Wall Street Journal (Midwest
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Edition) on the first business day of the month in which the Executive's death
occurred and shall be paid within 30 days of the date of death. Such payments
shall be in addition to the amount of the bonus payment, if any, which may
thereafter be due under Paragraph 6(b), any other death benefits provided by the
Employer or under any plan, program or arrangement maintained by the Employer.
12. NOTICES. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and if sent by
registered or certified mail to the Executive at the last address he or she has
filed in writing with the Employer or, in the case of the Employer, at its
principal executive offices.
13. CONFIDENTIAL INFORMATION. Executive acknowledges that during the
course of his or her employment he or she has learned or will learn or develop
Confidential Information (as that term is defined in this Paragraph 13).
Executive further acknowledges that unauthorized disclosure or use of such
Confidential Information, other than in discharge of Executive's duties, will
cause Employer or its affiliates irreparable harm.
For purposes of this Paragraph, Confidential Information means trade
secrets (such as technical and non-technical data, a program, method, technique
or process) and other proprietary information concerning the products, processes
or services of Employer or its affiliates, including but not limited to:
computer programs; marketing, or organizational research and development;
business plans; revenue forecasts; personnel information, including the identity
of other employees of Employer, its successors or their affiliates, their
responsibilities, competence, abilities, and compensation; pricing and financial
information; current and prospective customer lists and information on customers
or their employees; information concerning planned or pending acquisitions or
divestitures; and information concerning purchases of major equipment or
property, which information: (a) has not been made generally available to the
public in violation of a confidentiality agreement, fiduciary duty or similar
obligation; and (b) is useful or of value to the current or anticipated
business, or research or development activities of Employer or its affiliates;
or (c) has been identified as confidential by: (i) Executive, or (ii) to
Executive's knowledge, by Employer, its successors or their affiliates, either
orally or in writing.
Except in the course of his or her employment and in the pursuit of the
business of Employer, its successor or their affiliates, Executive shall not,
during the course of his or her employment, including, without limitation the
Salary Continuation Period, for any reason, directly or indirectly, disclose,
publish, communicate or use on his or her behalf or another's behalf, any
confidential information, proprietary information or other data of Employer, its
successors or their affiliates.
14. RETURN OF EMPLOYER'S PROPERTY. All notes, reports, plans, memoranda or
other documents created, developed, generated or held by Executive during his or
her employment concerning or related to Employer's, its successors or their
affiliates' business, and whether containing or relating to Confidential
Information or not, are the property of Employer, its successors or their
affiliates, as applicable, and will be promptly delivered to Employer, its
successors or their affiliates upon termination of Executive's employment for
any reason whatsoever.
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15. RESTRICTIVE COVENANTS. The Employer has agreed to provide benefits
under this Agreement in return for the Executive's acceptance of restrictive
covenants set forth in this Paragraph 15. The Executive hereby acknowledges that
the Termination Benefits provided hereunder constitute adequate consideration
for Executive's obligations under this Paragraph 15.
The Employer shall not pay any Termination Benefit under this Agreement,
and the Executive shall be obligated to repay any Termination Benefits received
under this Agreement if, at any time during his or her employment or the Salary
Continuation Period (collectively, the "Non-Solicitation Period"), without the
prior written consent of the Employer, Executive:
(a) either as an individual, on his or her own account, or as an
agent, employee, director, shareholder or otherwise, directly or indirectly,
solicit, induce or encourage, or attempt to solicit, induce or encourage any
customer of the Employer, the Resulting Entity, their affiliates or their
successors not to do business with the Employer, the Resulting Entity, their
affiliates or their successors. For purposes of this paragraph, such customers
and such affiliates shall be limited to those persons or entities which are
customers or affiliates as of the date immediately preceding the date of the
Executive's termination of employment; or
(b) directly or indirectly solicits, induces or encourages any person
who, as of the date immediately preceding the date of the termination of
employment, is an employee of the Employer, the Resulting Entity, their
affiliates or their successors to terminate his or her relationship with the
Employer, the Resulting Entity, their affiliates or their successors.
16. REMEDIES. Executive warrants and represents that: (i) Executive has
read and understands this Agreement; (ii) Executive has had an opportunity to
consult with legal counsel in connection herewith; (iii) the restraints and
agreements herein provided are fair and reasonable; (iv) enforcement of the
provisions of Paragraphs 13, 14 and 15 will not cause him undue hardship; and
(v) that the above restrictions are reasonable in scope and duration and are the
least restrictive means to protect the Employer's, the Resulting Entity's, their
affiliates' and their successors' legitimate and proprietary business interests
and property from irreparable harm.
Executive acknowledges that failure to comply with the terms of this
Agreement will cause irreparable damage to Employer or its affiliates.
Therefore, Executive agrees that, notwithstanding Paragraph 9 (Enforcement;
Arbitration) above, Employer, the Resulting Entity and their successors shall
have the right to seek specific performance, injunctive relief (without bond)
and other equitable relief, as well as maintain an action for damages in any
court of competent jurisdiction (in addition to any other remedies available at
law or in equity) for Executive's breach or threatened breach of the
restrictions contained in Paragraphs 13, 14 and 15 and the existence of any
claim or cause of action Executive may have against Employer will not constitute
a defense thereto. Executive further agrees to pay reasonable attorney fees and
costs of litigation incurred by Employer, the Resulting Entity, their affiliates
or their successors in any proceeding relating to the enforcement of said
provisions or to any alleged breach thereof in which Employer, the Resulting
Entity, their affiliates or their successors prevail.
In the event of a breach or a violation by Executive of any of the
covenants and provisions of this Agreement, the running of the Non-Solicitation
Period (but not of Executive's
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obligation thereunder), shall be tolled during the period of the continuance of
any actual breach or violation.
17. NON-ALIENATION. The Executive shall not have any right to pledge,
hypothecate, anticipate or in any way create a lien upon any amounts provided
under this Agreement, and no benefits payable hereunder shall be assignable in
anticipation of payment either by voluntary or involuntary acts, or by operation
of law, except by will or the laws of descent and distribution.
18. GOVERNING LAW. The provisions of this Agreement shall be construed in
accordance with the laws of the State of Illinois.
19. AMENDMENT. This Agreement may be amended or canceled by mutual
agreement of the parties in writing (which, with respect to the Employer in the
case of an amendment prior to the Effective Date of the Agreement, shall have
been approved by resolution of a majority of the non-employee members of the
Board of Directors of the Employer) without the consent of any other person and,
so long as the Executive lives, no person, other than the parties hereto, shall
have any rights under or interest in this Agreement or the subject matter
hereof.
20. BINDING EFFECT; SUCCESSORS. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the Employer and any
successors of the Employer or the Resulting Entity and to the benefit of
Executive's executors, administrators, legal representatives, heirs and
legatees. The Employer shall require any successor or assignee, whether direct
or indirect, by purchase, merger, consolidation or otherwise, expressly and
unconditionally to assume and agree to perform the Employer's obligations under
this Agreement, whereupon such successor or assignee shall become the Employer
hereunder.
21. SEVERABILITY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, it
is the intent of the parties that this Agreement be construed or reformed to the
fullest extent possible so as to be enforceable and be in conformance with the
manner in which it was originally intended to operate, including, without
limitation, the deletion or modification of any invalid or unenforceable
provision.
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IN WITNESS WHEREOF, the Executive has hereunto set his or her hand and,
pursuant to the authorization from its Board of Directors, the Employer has
caused this Agreement to be executed in its name on its behalf all as of the day
and year first above written.
The Executive agrees that this Agreement replaces (supersedes) all other
previous Transitional Employment Agreements as of June 2000.
EXECUTIVE:
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EMPLOYER:
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MIDWEST BANC HOLDINGS, INC.
By:
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Its:
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President & CEO
WITNESS:
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A Director of Midwest Banc Holdings, Inc.
