**Exhibit 10.1****MIDWEST BANC HOLDINGS, INC.****STOCK AND INCENTIVE PLAN****ADOPTED BY THE BOARD OF DIRECTORS MARCH 23, 2005****APPROVED BY STOCKHOLDERS MAY 18, 2005****AMENDED BY STOCKHOLDERS AS OF MAY 3, 2006****ARTICLE I****ESTABLISHMENT, PURPOSE, DURATION AND EFFECTIVE DATE**     1.1 **Establishment of the Plan.**Midwest Banc Holdings, Inc., a Delaware corporation(hereinafter referred to as the “Company”), adopted the Midwest Banc Holdings, Inc. Stock andIncentive Option Plan, f/k/a Midwest Banc Holdings, Inc. 1996 Stock Option Plan (the “Plan”),effective November 19, 1996. The Company now wishes to amend and restate the Plan to make suchchanges in the Plan necessary to: increase the number of shares of Common Stock that may be issuedpursuant to Awards under the Plan to 3,900,000 (Article IV), add Stock Appreciation Rights (ArticleVII), Restricted Stock (Article VIII), and Restricted Stock Units (Article IX), to extend theduration of the Plan to March 23, 2015 (Section 1.3), and to allow Non-Employee Directors toparticipate in the Plan (Article V). Inasmuch as the 10-year duration of the Incentive Stock Optionplan will expire on November 18, 2006 and no Incentive Stock Options have been granted under thePlan, the Incentive Stock Option plan is terminated and a new Incentive Stock Option plan is herebyestablished in this amended and restated Plan.     1.2 **Purpose of the Plan.**The purpose of this Plan is to benefit the Company and itsSubsidiaries by enabling the Company to offer to certain present and future executives, keyemployees, and Non-Employee Directors stock based incentives in the Company, thereby giving them astake in the growth and prosperity of the Company and encouraging the continuance of their serviceswith the Company or its Subsidiaries.     1.3 **Duration of the Plan.**The Plan shall remain in effect, subject to the right of the Boardof Directors to amend or terminate the Plan at any time pursuant to Article XIII hereof, until allShares subject to it shall have been purchased or acquired according to the Plan’s provisions.Unless sooner terminated, the Plan shall terminate on the date before the tenth anniversary of thedate the Plan is adopted by the Board or approved by the stockholders of the Company, whichever isearlier. No Awards may be granted under the Plan after the Plan is terminated.     1.4 **Effective Date.**The Plan as amended and restated shall become effective on March 23, 2005,but no Awards shall be granted unless and until the Plan has been approved by the stockholders ofthe Company, which approval shall be within twelve months before or after the date the Plan isadopted by the Board.**ARTICLE II****DEFINITIONS**     2.1 **Definitions.**Whenever used in the Plan, the following terms shall have the meanings setforth below, and when the meaning is intended, the initial letter of the word shall be capitalized:     **“Award”**means, individually or collectively, a grant under this Plan of Nonqualified StockOptions, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock or Restricted StockUnits.     **“Award Agreement”**means a written agreement between the Company and a Participant settingforth the terms, conditions, limitations and provisions applicable to Awards granted under thisPlan, as shall be determined by the Committee.
 

 
     **“Beneficial Owner”**or **“Beneficial Ownership”**shall have the meaning ascribed to such term inRule 13d-3 of the General Rules and Regulations under the Exchange Act, or any successor rule orregulation promulgated under the Exchange Act.     **“Board”**means the Board of Directors of the Company.     **“Cause”**means, with respect to termination of a Participant’s employment (or status as aNon-Employee Director), the occurrence of any one or more of the following, as determined by theCommittee, in the exercise of good faith and reasonable judgment:     (i) In the case where there is no employment, change in control or similar agreement ineffect between the Participant and the Company or a Subsidiary at the time of the grant ofthe Award, or where there is such an agreement but the agreement does not define “cause” (orsimilar words) or where a “cause” termination would not be permitted under such agreement atthat time because other conditions were not satisfied, the termination of an employment dueto the (a) willful and continued failure or refusal by the Participant to substantiallyperform assigned duties (other than any such failure resulting from the Participant’sDisability), (b) the Participant’s dishonesty or theft, (c) the Participant’s violation ofany obligations or duties under any employment agreement, (d) the Participant’s grossnegligence or willful misconduct, or (e) the Participant’s suspension or termination due tothe direction of any authorized bank regulatory agency that the Participant be relieved ofhis duties and responsibilities to the Company or a Subsidiary.     (ii) In the case where there is an employment, change in control or similar agreementin effect between the Participant and the Company or a Subsidiary at the time of the grantof the Award that defines “cause” (or similar words) and a “cause” termination would bepermitted under such agreement at that time, the termination of an employment arrangementthat is or would be deemed to be for “cause” (or similar words) as defined in suchagreement.     (iii) In the case of a Non-Employee Director, the removal of the Non-Employee Directorpursuant to a vote of the stockholders of the Company or the removal of a Non-EmployeeDirector pursuant to a direction received from any authorized bank regulatory agency.     No act or failure to act on a Participant’s part shall be considered willful unless done, oromitted to be done, by the Participant not in good faith and without reasonable belief that hisaction or omission was in the best interest of the Company.**“Change Of Control”**means the occurrence of any one or more of the following events:     (i) The Company is merged or consolidated or reorganized into or with anothercorporation or other legal person (an “Acquiror”) and as a result of such merger,consolidation or reorganization less than 50% of the outstanding voting securities or othercapital interests of the surviving, resulting or acquiring corporation or other legal personare owned in the aggregate by persons who were stockholders of the Company, directly orindirectly, immediately prior to such merger, consolidation or reorganization, other than bythe Acquiror or any corporation or other legal person controlling, controlled by or undercommon control with the Acquiror;     (ii) The Company sells all or substantially all of its business and/ or assets to anAcquiror, of which less than 50% of the outstanding voting securities or other capitalinterests are owned in the aggregate by persons who were stockholders of the Company,directly or indirectly, immediately prior to such sale, other than by any corporation orother legal person controlling, controlled by or under common control with the Acquiror;     (iii) Any person or group (as the terms “person” and “group” are used in Section13(d)(3) or Section 14(d)(2) of the Exchange Act and the rules and regulations promulgatedthereunder) has become the Beneficial Owner of more than 50% of the issued and outstandingshares of voting securities of Company, other than (a) a trustee or other fiduciary holdingsecurities under any employee benefit plan of
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the Company or any Subsidiary or (b) acorporation owned directly or indirectly by the stockholders of the Company in substantiallythe same proportion as their ownership of stock in the Company;     (iv) Individuals who are members of the Incumbent Board cease to constitute a majorityof the Board. For this purpose, “Incumbent Board” means (a) the members of the Board ofDirectors of the Company on the Effective Date and (b) any individual who becomes a memberof the Board after the Effective Date, if such individual’s election or nomination forelection as a Director was approved by the affirmative vote of the then Incumbent Board; or     (v) The stockholders of the Company approve a plan of complete liquidation ordissolution of the Company.The Board has final authority to determine the exact date on which a Change in Control has beendeemed to have occurred under paragraphs (i), (ii), (iii), (iv) and (v) above.     **“Code”**means the Internal Revenue Code of 1986, as amended from time to time, or any successorlegislation thereto, and the rules and regulations thereunder.     **“Committee”**means the Committee as specified in Article III herein appointed by the Board toadminister the Plan with respect to grants of Awards.     **“Common Stock”**or **“Shares”**means the common stock, $0.01 par value per share, of the Company.     **“Company”**means Midwest Banc Holdings, Inc., a Delaware corporation, as well as any successorto the Company which shall maintain this Plan as provided in Article XVI herein.     **“Director”**means any individual who is a member of the Board. Notwithstanding the foregoing, aNon-Employee Director who, with the approval of the Board or the Committee, enters into acontinuing participant agreement with the Company or a Subsidiary effective upon such personceasing to be a Non-Employee Director, shall continue to be a Non-Employee Director for purposes ofthis Plan and shall not be deemed to incur a termination of directorship during the term of suchcontinuing participant agreement.     **“Disability”**means the permanent and total disability of a person as defined in Section22(e)(3) of the Code and shall be determined by the Committee upon receipt of competent medicaladvice from one or more individuals selected by the Committee who are qualified to giveprofessional medical advice.     **“Early Retirement”**means the Participant’s termination of employment with the Company and itsSubsidiaries (for reasons other than Cause) on or after attaining age 55 having completed five ormore years of employment with the Company or its Subsidiaries.     **“Effective Date”**means March 23, 2005, except as otherwise provided herein.     **“Employee”**means any full-time salaried employee (including officers and directors) of theCompany and its Subsidiaries, including Subsidiaries which become such after adoption of the Plan.Mere service as a Director or payment of a Director’s fee by the Company or a Subsidiary, however,shall not be sufficient to qualify such Director as an “Employee” of the Company or a Subsidiary.Notwithstanding the foregoing, a full-time salaried employee who, with the approval of the Board orthe Committee, enters into a continuing participant agreement with the Company or a Subsidiaryeffective upon such person ceasing to be a full-time salaried employee, shall continue to be anEmployee for purposes of this Plan and shall not be deemed to incur a termination of employmentduring the term of such continuing participant agreement; provided, however, that for purposes ofIncentive Stock Options, the term “Employee” does not include any person who is not an “employee”within the meaning of Section 422 of the Code.     **“Exchange Act”**means the Securities Exchange Act of 1934, as amended from time to time, or anysuccessor act thereto, and the rules and regulations thereunder.
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     **“Fair Market Value”**means, as of any date, the value of the Common Stock determined asfollows:     (i) If the Common Stock is at the time traded on the NASDAQ National Market System (orany similar system or exchange), then the Fair Market Value shall be the average of thehighest and lowest prices of the Common Stock as reported by the consolidated tape of theNASDAQ National Market System (or any similar system or exchange) on the date ofdetermination. In the event that there are no Common Stock transactions on such date, theFair Market Value shall be determined as of the immediately preceding date on which therewere Common Stock transactions.     (ii) If the Common Stock is regularly quoted on an automated quotation system(including OTB Bulletin Board) or by a recognized securities dealer, then the Fair MarketValue shall be the closing sales price for the shares as quoted on such system on the dateof determination. If selling prices are not reported, the Fair Market Value of a Share shallbe the mean between the high bid and low asked prices for the Common Stock on the date ofdetermination (or, if no such prices were reported on that date, on the last date suchprices were reported), as reported in The Wall Street Journal or such other source as theCommittee deems reliable.     (iii) In the absence of an established market for the Common Stock of the typedescribed in paragraphs (i) and (ii) above, the Fair Market Value thereof shall bedetermined by the Committee after taking into account such factors as the Committee shalldeem appropriate.     **“Incentive Stock Option”**or **“ISO”**means an option to purchase Shares granted under Article VIhereof and which is designated as an Incentive Stock Option and which qualifies as an ISO underSection 422 of the Code and the regulations promulgated thereunder.     **“Non-Employee Director”**means a Director who is not also a current Employee.     **“Nonqualified Stock Option”**or **“NQSO”**means an option to purchase Common Stock of the Companyother than an Incentive Stock Option described in Section 422 of the Code that satisfies thefollowing requirements: (1) the amount required to purchase the Common Stock under the NonqualifiedStock Option (the exercise price) may never be less than the Fair Market Value of the underlyingCommon Stock on the date the Nonqualified Stock Option is granted; (2) the receipt, transfer orexercise of the Nonqualified Stock Option is subject to taxation under Section 83 of the Code; and(3) the Nonqualified Stock Option does not include any feature for the deferral of compensationother than the deferral of recognition of income until the later of exercise or disposition of theoption under Section 1.83-7 of the Treasury regulations.     **“Option”**means an ISO or a NQSO granted pursuant to the Plan.     **“Participant”**means a holder of an outstanding Award granted under the Plan.     **“Period of Restriction”**means the period during which the transfer of Restricted Stock orRestricted Stock Units is limited in some way (based on the passage of time, the achievement ofperformance goals, or upon the occurrence of other events as determined by the Committee, at itsdiscretion).     **“Person”**shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Actand used in Sections 13(d) and 14(d) thereof, including a group as defined in Section 13(d)thereof.     **“Related”**means (i) in the case of an SAR or other right, an SAR or other right which isgranted in conjunction with, and to the extent exercisable, in whole or in part, in lieu of, anOption or another right and (ii) in the case of an Option, an Option with respect to which and tothe extent an SAR or other right is exercisable, in whole or in part, in lieu thereof.     **“Restricted Stock”**means Shares granted under Article VIII herein.     **“Restricted Stock Unit”**means a unit granted under Article IX evidencing the right to receiveeither Common Stock or a cash payment equal to the Fair Market Value of a Share (or a combinationthereof) at some future date.
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     **“Retirement”**means the Participant’s termination of employment with the Company or itsSubsidiaries (for reasons other than Cause) on or after the date the Participant attains age 65 or,in the case of a Non-Employee Director, it means the cessation of the Non-Employee Director’sduties as a Director due to his decision to resign or not stand for re-election or due to the Boardof Directors decision not to reslate him for election as a Director (other than for Cause).     **“Rule 16b-3**” means Rule 16b-3 or any successor or comparable rule or rules applicable toAwards granted under the Plan promulgated by the Securities and Exchange Commission under Section16(b) of the Exchange Act.     **“Stock Appreciation Right”**or **“SAR”**means a right to receive upon exercise an amount payablein Shares. An SAR issued under the Plan must meeting the following requirements: (1) the value ofthe Common Stock the excess over which the right provides for payment upon exercise (the SARexercise price) may never be less than the fair market value of the underlying Common Stock on thedate the right is granted; (2) the Common Stock subject to the right is traded on an establishedsecurities market; (3) only such traded Common Stock may be delivered in settlement of the rightupon exercise; and (4) the right does not include any feature for the deferral of compensationother than the deferral of recognition of income until the exercise of the right.     **“Subsidiary”**means any corporation, partnership, joint venture, affiliate, or other entity inwhich the Company is the direct or indirect beneficial owner of not less than 50% of all issued andoutstanding equity interests.     2.2 **Gender And Number.**Except when otherwise indicated by the context, words in the masculinegender when used in the Plan shall include the feminine gender, the singular shall include theplural, and the plural shall include the singular.     2.3 **Severability.**In the event any provision of the Plan shall be held illegal or invalid forany reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and thePlan shall be construed and enforced as if the illegal or invalid provision had not been included.**ARTICLE III****ADMINISTRATION**     3.1 **The Committee.**The Plan shall be administered by the Board of Directors acting as acommittee or by the Compensation Committee of the Board of Directors, or by any other Committeeappointed by the Board of Directors. The Committee administering the Plan shall consist of two ormore Directors who are (i) “non-employee directors” as the term (or any similar successor) isdefined in Rule 16b-3, and (ii) “outside directors” within the meaning of Section 162(m) of theCode.     3.2 **Authority of the Committee.**Except as limited by law or by the amended and restatedCertificate of Incorporation (the “Certificate”) or the amended and restated By-laws (the“By-laws”) of the Company, and subject to the provisions herein, the Committee (acting by majorityaction (whether taken during a meeting or by written consent)) shall have full and completediscretionary power to: **•** select Employees and Non-Employee Directors to whom Awards will be provided;  **•** determine the number, sizes and types of Awards, the date the Awards may beexercised and the date on which the risk of forfeiture shall lapse, the acceleration ofany such dates and the expiration date of an Award;  **•** determine the terms and conditions of Awards in a manner consistent with the Plan;  **•** determine whether, to what extent and under what circumstances an Award may besettled, or the exercise price of an Award may be paid, in cash, Shares, other means ora combination thereof;  **•** construe and interpret the Plan and any agreement or instrument entered into under the Plan;
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 **•** establish, amend, or waive rules and regulations for the Plan’s administration;  **•** (subject to the provisions of Article XIII herein) amend the terms and conditions ofany outstanding Award to the extent such terms and conditions are within the discretionof the Committee as provided in the Plan; and  **•** make all other determinations which may be necessary or advisable for theadministration of the Plan.     3.3 **Manner of Exercise of Committee Authority; Subcommittees**. The express grant of anyspecific power to the Committee, and the taking of any action by the Committee, shall not beconstrued as limiting any power or authority of the Committee. The Committee may act throughsubcommittees, including for purposes of perfecting exemptions under Rule 16b-3 or qualifyingAwards under Section 162(m) of the Code as performance-based compensation, in which case thesubcommittee shall be subject to and have authority granted hereunder to the Committee, and theacts of the subcommittee shall be deemed to be acts of the Committee hereunder.     3.4 **Decisions Binding.**All determinations and decisions made by the Committee pursuant to theprovisions of the Plan and all related orders and resolutions of the Board shall be final,conclusive and binding on all persons, including the Company, its stockholders, Employees,Participants, and their estates and beneficiaries.**ARTICLE IV****SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS**     4.1 **Shares Available For Awards.**(a) Subject to adjustment as provided in Section 4.4, theaggregate number of Shares which may be issued or used for reference purposes over the term of thePlan shall not exceed 3,900,000 Shares (inclusive of shares issued prior to March 23, 2005), whichmay be either authorized and unissued Shares or Shares held in or reacquired for the treasury ofthe Company.          (b) All of the Shares may be issued under Awards which are Restricted Stock or RestrictedStock Units. Such number of shares shall be subject to adjustment upon occurrence of any of theevents indicated in Section 4.4.          (c) Of the aggregate number of Shares available for Awards set forth in paragraph (a), thetotal number of Shares of Company Stock with respect to which Incentive Stock Option Awards may begranted shall not exceed 1,037,846 Shares.     4.2 **Reuse.**If, and to the extent:     (i) an Option shall expire, terminate, lapse or be cancelled for any reason withouthaving been exercised in full (including, without limitation, cancellation and re-grant), orin the event that an Option is exercised or settled in a manner such that some or all of theShares related to the Option are not issued to the Participant (or beneficiary) (includingas the result of a Share-for-Share exercise or the use of Shares for withholding taxes), theShares subject thereto which have not become outstanding shall (unless the Plan shall haveterminated) remain available for issuance under the Plan; or     (ii) any Awards under the Plan are forfeited for any reason, or settled in cash in lieuof Shares or in a manner such that some or all of the Shares related to the Award are notissued to the Participant (or beneficiary) (including as a result of the use of Shares fortax withholding), such Shares shall (unless the Plan shall have terminated) remain availablefor issuance under the Plan, except as provided in Section 7.2 which relates to the exerciseof SARs in conjunction with Options.     4.3 **Individual Participant Limitations.**(a) Subject to adjustment as provided in Section4.4 herein, the maximum aggregate number of Shares that may be granted with respect to Options orSARs in any one fiscal year to a Participant shall be 150,000. To the extent required by Section162(m) of the Code or the Treasury regulations thereunder, in applying the foregoing limitationswith respect to a Participant, if any Option or SAR is
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canceled, the canceled Option or SAR shallcontinue to count against the maximum number of Shares with respect to which Options and SARs maybe granted to the Participant. For this purpose, the repricing of an Option shall be treated as thecancellation of the existing Option and the grant of a new Option.          (b) No Participant may be granted, during any fiscal year, Awards consisting of Shares orunits denominated in such shares (other than any Awards consisting of Options or SARs) covering orrelating to more than 150,000 Shares, subject to adjustment pursuant to the provisions of Section4.4 hereof.     4.4 **Adjustments in Authorized Shares.**In the event of any change in corporate capitalization,such as a stock split, stock dividend, recapitalization, or a corporate transaction, such as anymerger, consolidation, combination, separation, including a spin-off, or other distribution ofstock or property of the Company, any reorganization (whether or not such reorganization comeswithin the definition of such term in Section 368 of the Code) or any partial or completeliquidation of the Company, an adjustment shall be made in the number and class of Shares availablefor Awards, the number and class of and/ or price of Shares subject to outstanding Awards grantedunder the Plan and the number of Shares set forth in Sections 4.1, 4.2 and 4.3, as may bedetermined to be appropriate and equitable by the Committee, in its sole discretion, to preventdilution or enlargement of rights; provided, however, that the number of Shares subject to anyAward shall always be a whole number.**ARTICLE V****ELIGIBILITY AND PARTICIPATION**     5.1 **Eligibility.**The persons eligible to participate in this Plan are as follows:          (i) Employees; and          (ii) Non-Employee Directors.     Notwithstanding the foregoing, only Employees are eligible to receive Incentive Stock Options.     5.2 **Actual Participation.**Subject to the provisions of the Plan, the Committee shall havefull authority to determine which eligible persons are to receive Awards and the nature and amountof each Award.**ARTICLE VI****STOCK OPTIONS**     6.1 **Grant of Options.**Subject to the terms and provisions of the Plan, Options may be grantedto Employees and Non-Employee Directors at any time and from time to time as determined by theCommittee in its sole discretion; provided, however, that Non-Employee Directors shall not beeligible to receive Incentive Stock Options. The Committee, in its sole discretion, shall determinethe number of Shares subject to each Option. TheCommittee may grant Incentive Stock Options, Nonqualified Stock Options, or a combinationthereof. The Committee may grant any type of Option to purchase Stock that is permitted by law atthe time of grant.     6.2 **Award Agreement.**Each Option shall be evidenced by an Award Agreement that shall specifythe exercise price, the expiration date of the Option, the number of Shares to which the Optionpertains, any conditions to exercise of the Option, and such other terms and conditions as theCommittee, in its discretion, shall determine. In the event the Award Agreement does not set forthwhen each Option expires and becomes unexercisable, then the Option evidenced thereby shall expireand become unexercisable in accordance withthe provisions of Section 6.4. The Award Agreement shall also specify whether the Option isintended to be an Incentive Stock Option or a Nonqualified Stock Option.     6.3 **Exercise Price.**Subject to the provisions of this Section 6.3, the exercise price foreach Option shall be determined by the Committee in its sole discretion.
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          (a) ***Nonqualified Stock Options.***In the case of a Nonqualified Stock Option, the exercise priceshall be not less than the Fair Market Value of a Share on the date of the grant.          (b) ***Incentive Stock Options.***In the case of an Incentive Stock Option, the exercise priceshall be not less than one hundred percent (100%) of the Fair Market Value of a Share on the dateof the grant; provided, however, that if on the date of the grant, the Employee (together withpersons whose stock ownership is attributed to the Employee pursuant to Section 424(d) of the Code)owns stock representing more than ten percent (10%) of the total combined voting power of allclasses of stock of the Company or any of its Subsidiaries, the exercise price shall be not lessthan one hundred and ten percent (110%) of the Fair Market Value of a Share on the date of thegrant.          (c) ***Substitute Options.***Notwithstanding the provisions of paragraphs (a) and (b), in the eventthat the Company or a Subsidiary consummates a transaction described in Section 424(a) of the Code(e.g., the acquisition of property or stock from an unrelated corporation), persons who becomeEmployees on account of such transaction may be granted Options in substitution for options grantedby their former employer. If such substitute Options are granted, the Committee, in its solediscretion and consistent with Section 424(a) of the Code, shall determine the exercise price ofsuch substitute Options.     6.4 **Expiration of Options.**Subject to the provisions of Section 6.8 and Section 6.11, Optionsgranted pursuant to this Article VI shall expire in accordance with this Section 6.4.          (a) ***Expiration Dates in General.***Each Option granted pursuant to this Article VI shallterminate no later than the first to occur of the following events:     (i) The date for termination of the Option set forth in the written Award Agreement; or     (ii) The expiration of ten (10) years measured from the date of the grant; or     (iii) The expiration of three (3) months from the date of the Participant’s terminationof employment (or termination as a Non-Employee Director) for a reason other than theParticipant’s death, Disability, Retirement, or for Cause; or     (iv) The expiration of one (1) year from the date of the Participant’s termination ofemployment (or termination as a Non-Employee Director) by reason of death, Disability orRetirement; or     (v) The date of termination of employment (or termination as a Non-Employee Director)in the event of a termination for Cause.          (b) ***Effect of Termination of Service.***Notwithstanding Section 6.4(a) or 6.5:     (i) Upon the death, Disability or Retirement of the Participant, each Option held bythe Participant shall become exercisable in full (without regard to any installment or othervesting provisions thereof) and shall be exercisable thereafter until the first to occur ofthe dates set forth in Section 6.4(a)(i), (ii) or (iv).     (ii) Upon Early Retirement, each Option held by a Participant who from such EarlyRetirement retires and agrees to remain retired from the industry (a “sunset arrangement”)shall become exercisable in full (without regard to any installment or other vestingprovisions thereof) and shall be exercisable by the Participant until the earlier of thedates set forth in Section 6.4(a)(i), (ii) or (iii).     (iii) In the event of the death of the Participant after his termination of employment(or his termination as a Non-Employee Director), but prior to the expiration of his Options,then his then exercisable Options shall be exercisable in full by his beneficiaries untilthe earlier of the date suchOptions would have expired had the Participant survived until such date or the expiration of one(1) year from the date of the Participant’s termination.
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     (iv) If the employment of the Participant (or his status as a Non-Employee Director)shall terminate for any reason other then death, Disability, Retirement, Early Retirement,or for Cause, the rights under any then outstanding Option granted pursuant to the Planshall terminate upon the expiration date of the Option or three (3) months after such dateof termination, whichever first occurs; provided, however, that in the event suchtermination occurs after a Change in Control, the rights under any then outstanding Optiongranted pursuant to the Plan shall terminate upon the expiration date of the Option or one(1) year after such date of termination of service, whichever first occurs.     (v) Where termination of employment (or termination as a Non-Employee Director) is forCause, rights under all Options shall terminate immediately upon such termination.     6.5 **Terms of Exercise.**Options granted under the Plan shall be exercisable at such times andbe subject to such restrictions and conditions as the Committee shall determine in its solediscretion and prescribe in the Award Agreement; provided that, to the extent required to complywith Rule 16b-3, no Option shall be exercisable within the first six months of its term, unlessdeath or Disability of the Participant occurs during such period. Each Option which is intended toqualify as an Incentive Stock Option under Section 422 of the Code shall comply with the applicableprovisions of the Code pertaining to such Options. In the event that the Award Agreement does notset forth times with respect to the exercisability of Options, then each such Option granted to anEmployee or Non-Employee Director shall become exercisable on the first anniversary of the date ofthe grant at the rate of one-fourth (25%) of the Shares which may be purchased under the Option(rounded down to the nearest whole number), and on each of the second, third and fourth anniversaryof the date of the grant to the extent of an additional one-fourth (25%) of such Shares. After anOption is granted, the Committee, in its sole discretion, may accelerate the exercisability of theOption. Notwithstanding the foregoing, upon a Change in Control or an event described in Section6.4(b)(i) or (ii), any and all Options granted under this Article VI shall become immediatelyexercisable in full.     6.6 **Method of Exercise; Cancellation of Related SAR.**          (a) Options shall be exercised by the Participant’s delivery of a written notice of exerciseto the President of the Company (or his designee), setting forth the number of Shares with respectto which the Option is to be exercised, accompanied by full payment for the Shares.          (b) The exercise of an Option shall cancel any Related SAR to the extent of the number ofShares as to which the Option is exercised. As soon as practicable after receipt of a writtennotification of exercise and full payment for the Shares purchased, the Company shall deliver tothe Participant (or the Participant’s designated broker), Share certificates (which may be in bookentry form) representing such Shares.     6.7 **Payment Upon Exercise.**Upon the exercise of any Option, the Exercise Price shall bepayable to the Company in full as follows:     (i) in cash or its equivalent (including, for this purpose, the proceeds from acashless exercise program as permitted under Federal Reserve Board’s regulations);     (ii) by tendering previously acquired Shares (which, if such shares have been acquiredunder this Plan, have been held at least six (6) months) having an aggregate Fair MarketValue at the time of exercise equal to the total Exercise Price;     (iii) by any other means which the Committee, in its sole discretion, determines toboth provide legal consideration for the Shares, and to be consistent with the purposes ofthe Plan; or     (iv) by a combination of (i), (ii) and (iii), as the Committee, in its sole discretion,may permit.     6.8 **Limited Transferability of Options.**(a) An Incentive Stock Option shall be exercisableonly by the Participant during his lifetime and shall not be assignable or transferable other thanby will or by the laws of descent and distribution following the Participant’s death.Notwithstanding the foregoing, the Participant may, by delivering written notice to the Company, ina form satisfactory to the Company, designate a third party who, in the event of the death of theParticipant, shall thereafter be entitled to exercise the Option.
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          (b) The Committee may, in its discretion, authorize all or a portion of the Nonqualified StockOptions granted to a Participant to be on terms which permit transfer by such Participant to:     (i) the spouse, children or grandchildren of the Participant (“Immediate FamilyMembers”),     (ii) a trust or trusts for the exclusive benefit of such Immediate Family Members, or     (iii) a partnership in which such Immediate Family Members are the only partners,provided that (A) there may be no consideration for any such transfer, (B) the AwardAgreement pursuant to which such Options are granted expressly provides for transferabilityin a manner consistent with this Section 6.8, and (C) subsequent transfers of transferredOptions shall be prohibited except those in accordance with Article X.          (c) Following transfer, any such Options shall continue to be subject to the same terms andconditions as were applicable immediately prior to transfer; provided that for purposes of ArticleX hereof the term “Participant” shall be deemed to refer to the transferee. The provisions ofArticle VI and Article XII relating to the period of exercisability and expiration of the Optionshall continue to be applied with respect to the original Participant, and the Options shall beexercisable by the transferee only to the extent, and for the periods, set forth in Article VI andArticle XII.     6.9 **Restrictions on Share Transferability.**The Committee may impose such restrictions on anyShares acquired pursuant to the exercise of an Option as it may deem advisable, including, but notlimited to, restrictions related to applicable Federal securities laws, the requirements of anynational securities exchange or system upon which Shares are then listed or traded, or any blue skyor state securities laws.     6.10 **Stockholder Rights.**The holder of an Option shall have no stockholder rights withrespect to the Shares subject to the Option until such person shall have exercised the Option, paidthe exercise price and become the recordholder of the purchased Shares.     6.11 **Additional Provisions Applicable to Incentive Stock Options**. Notwithstanding anything inthe Plan to the contrary, to the extent required from time to time by the Code, the followingadditional provisions shall apply to the grant of Options which are intended to qualify asIncentive Stock Options:          (a) ***Annual Dollar Limitation.***The aggregate Fair Market Value (determined on the date theOption is granted) of the Common Stock with respect to which Incentive Stock Options areexercisable for the first time by any Employee during any calendar year (under all plans of theCompany and its Subsidiaries) shall not exceed $100,000 or such other amount as may subsequently bespecified by the Code; provided, however, that in the event the Employee holds two or moreIncentive Stock Options which become exercisable for the first time in the same calendar year, thenthose Incentive Stock Options up to such $100,000 limitation (determined in the order suchOptions were granted) shall continue to be Incentive Stock Options and the remainder shall beNonqualified Stock Options.          (b) ***Termination of Continuous Service; Exercise.***Notwithstanding anything in this Plan to thecontrary, no Incentive Stock Option may be exercised more than three (3) months after theParticipant’s termination of employment with the Company and all Subsidiaries for any reason otherthan Disability or death (in which case the Incentive Stock Option may be exercised until theexpiration of one (1) year from the date of death or Disability). In the event the Participant diesduring the three-month period after termination of employment, the Incentive Stock Option may beexercised by such Participant’s beneficiaries for the period ending one (1) year after the date ofthe Participant’s death. In the event the Award Agreement or the Committee permits later exerciseand the Incentive Stock Option is not exercised within such three (3) month or one (1) year period,whichever is applicable, then such Incentive Stock Option shall become a Nonqualified Stock Option.          (c) ***Option Term.***The term of each Incentive Stock Option shall be fixed by the Committee.Notwithstanding the foregoing, no Incentive Stock Option may be exercised after the expiration often (10) years from the date such Option is granted; provided, however, that if the IncentiveStock Option is granted to an Employee who, together with persons whose stock ownership isattributed to the Employee pursuant to Section 424(d) of the Code, owns stock possessing more than10% of the total combined voting power of all classes
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of the stock of the Company or any of itsSubsidiaries, the Option may not be exercised after the expiration of five (5) years from the datesuch Option is granted.**ARTICLE VII****STOCK APPRECIATION RIGHTS**     7.1 **Grant of Stock Appreciation Rights.**Subject to the provisions of Section 1.3 and ArticleIV, Stock Appreciation Rights may be granted to Employees at any time and from time to time asshall be determined by the Committee. An SAR may be granted at the discretion of the Committee inany of the following forms: **•** In conjunction with Options;  **•** In addition to Options;  **•** Upon lapse of Options;  **•** Independent of Options; or  **•** Each of the above in connection with previously awarded Options.     7.2 **Exercise of SARs In Conjunction With Options.**SARs granted in conjunction with Optionsmay be exercised for all or part of the Shares subject to the Related Option upon the surrender ofthe right to exercise an equivalent number of Options. The SAR may be exercised only with respectto the Shares for which its Related Option is then exercisable. Option Shares with respect to whichthe SAR shall have been exercised may not be subject again to an Award under this Plan. SARsgranted pursuant to this Section 7.2 with respect to which the Option Shares have been exercisedwill immediately lapse upon such exercise.     7.3 **Exercise of SARs in Addition to Options.**SARS granted in addition to Options shall bedeemed to be exercised upon the exercise of the Related Options.     7.4 **Exercise of SARs Upon Lapse of Options.**SARs granted upon lapse of Options shall bedeemed to have been exercised upon the lapse of the Related Options as to the number of Sharessubject to the Options. Notwithstanding Section 4.2, cancelled Options in an amount equal to therelated SARs shall not be available again for Awards under the Plan.     7.5 **Exercise of SARs Independent of Options.**SARs granted independent of Options may beexercised upon whatever terms and conditions the Committee, in its sole discretion, imposes uponthe SARs.     7.6 **Payment of SAR Amount.**Upon exercise of the SAR, the holder shall be entitled to receivepayment of an amount (subject to Section 7.7 below) determined by multiplying:          (a) The difference between the Fair Market Value of a Share at the date of exercise over theFair Market Value of a Share on the date the right is granted, by          (b) The number of Shares with respect to which the Stock Appreciation Right is exercised.     7.7 **Form and Timing of Payment.**At the discretion of the Committee, payment for SARs may bemade in cash or Shares, or in a combination thereof.     7.8 **Limit of Appreciation.**At the time of grant, the Committee may establish in its solediscretion, a maximum amount per Share which will be payable upon exercise of an SAR.     7.9 **Term of SAR.**The term of an SAR granted under the Plan shall not exceed ten (10) years.
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     7.10 **Termination of Service.**In the event the termination of a Participant’s service for anyreason, any SARs outstanding shall terminate in the same manner as specified for Options underSection 6.4(b) hereof.     7.11 **Nontransferability of SARs.**No SAR granted under the Plan may be sold, transferred,pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws ofdescent and distribution. Further, all SARs granted to a Participant under the Plan shall beexercisable only by the Participant during his lifetime.**ARTICLEVIII****RESTRICTED STOCK**     8.1 **Grant of Restricted Stock.**Subject to the provisions of Section 1.3 and Article IV, theCommittee, at any time and from time to time, may grant an Award entitling the recipient toacquire, at no cost or for a purchase price determined by the Committee, shares of Stock subject tosuch restrictions and conditions as the Committee may determine at the time of the grant. EachRestricted Stock Award shall be evidenced by an Award Agreement.     8.2 **Transferability of Restricted Stock.**The Restricted Stock granted hereunder may not besold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the terminationof any Period of Restriction specified in the Award Agreement, or until the earlier satisfaction ofany other conditions specified in the Award Agreement (which may include the attainment ofpre-established performance goals as defined in Section 8.8 hereof). Limitations on thetransferability of Restricted Stock shall be set forth in the Award Agreement.     8.3 **Other Restrictions.**The Committee shall impose such other restrictions on any shares ofRestricted Stock granted under the Plan as it may deem advisable including, without limitation,restrictions under applicable Federal or state securities laws, and shall legend the Sharecertificates representing the Restricted Stock to give appropriate notice of such restrictions.     8.4 **Voting Rights.**Participants holding Shares of Restricted Stock granted hereunder mayexercise full voting rights with respect to such Shares of Restricted Stock.     8.5 **Dividends and Other Distributions.**Participants holding Shares of Restricted Stock shallbe entitled to receive all dividends and other distributions paid with respect to such Shares ofRestricted Stock. If anysuch dividends or distributions are paid in Shares, the Shares shall be subject to the samerestrictions on transferability as the Shares of Restricted Stock with respect to which they werepaid.     8.6 **Termination of Service Due to Retirement, Death or Disability**. In the event aParticipant’s employment (or his status as a Non-Employee Director) terminates due to his or herRetirement, death or Disability, the remaining restrictions with respect to the Restricted Stock,except as otherwise provided by the Committee in the Award Agreement pursuant to Sections 8.2 or8.3 hereof, shall automatically terminate so that all Shares of Restricted Stock shall be free ofall restrictions and freely transferable.     8.7 **Termination of Service For Reasons Other than Retirement, Death, or Disability**. In theevent a Participant’s employment (or his status as a Non-Employee Director) terminates for reasonsother than Retirement, death, or Disability, all Restricted Stock subject to restrictions shall beforfeited and reacquired by the Company at the price paid by the Participant. Notwithstanding theforegoing, the Committee, in its sole discretion, may waive the restrictions remaining with respectto Shares of Restricted Stock.     8.8 **Performance Goals.**One or more of the following business criteria for the Company, on aconsolidated basis, and/ or for specified subsidiaries or affiliates or other business units of theCompany shall be used by the Committee in establishing performance goals: (1) revenue measures; (2)operating income, earnings form operations, earnings before or after taxes, or earnings before orafter extraordinary or special items, (3) net income per common share (basic or diluted) orearnings per share (basis or diluted); (4) return on assets, return on investment, return oncapital, or return on equity; (5) cash flow, free cash flow, cash flow return on investment, or netcash provided by operations; (6) efficiency ratio; (7) economic profit or value created; (8) netinterest margin; (9) stock price or total stockholder return; and (10) strategic business criteria,consisting of one or more objectives
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based on meeting specified market penetration, geographicbusiness expansion goals, costs targets, customer satisfaction and goals relating to acquisitionsor divestitures of subsidiaries, affiliates or joint ventures. The targeted level or levels ofperformance with respect to such business criteria may be established at such levels and in suchterms as the Committee may determine, in its discretion, including in absolute terms, as a goalrelative to performance in prior periods, or as a goal compared to the performance of one or morecomparable companies or an index covering multiple companies.     8.9 **Automatic Grant of Restricted Stock to Non-Employee Directors**. Each Non-Employee Directorelected or appointed to serve as a Director for the first time starting with the 2004 annualmeeting of stockholders of the Company shall automatically be granted 3,000 Shares of RestrictedStock with the first grants being made to qualified Non-Employee Directors on the fifth businessday after the stockholders of the Company approve the Plan. The Restricted Stock shall vest asfollows: 1,000 Shares shall vest on the fifth business day after the date on which the Non-EmployeeDirector is first elected or appointed; and an additional 1,000 shares shall vest on each of thetwo succeeding anniversaries of such Non-Employee Director’s election or, if appointed, on each ofthe next two succeeding annual meetings of stockholders, provided that such Non-Employee Directoris still serving as a Director of the Company on each such anniversary date; provided, further,that with respect to any Non-Employee Director elected for the first time at the 2004 annualmeeting of stockholders, the first 1,000 shares shall vest on the fifth business day after the 2005annual meeting of stockholders. The foregoing award shall not be made to any Non-Employee Director who is elected or appointed to the Board pursuant to an agreement between the Company and an entity being acquired by the Company.**ARTICLE IX****RESTRICTED STOCK UNITS**     9.1 **Grant of Restricted Stock Units.**Subject to the provisions of Section 1.3 and Article IV,the Committee, at any time and from time to time, may grant Restricted Stock Units under the Planto such Employees or Non-Employee Directors as it shall determine. Each Restricted Stock Unit Awardshall be evidenced by an Award Agreement and may provide for payment to the Participant in cash orShares or a combination thereof upon expiration of the Period of Restriction. The Committee, in itsdiscretion, may permit a Participant to defer receipt of Common Stock or a cash payment beyond theexpiration of any applicable Period of Restriction or the satisfaction of other restrictionsimposed by the Committee.     9.2 **Transferability of Restricted Stock Units.**Restricted Stock Units granted hereunder maynot be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until thetermination of any Period of Restriction specified in the Award Agreement, or until the earliersatisfaction of any other conditions specified in the Award Agreement (which may include theattainment of pre-established performance goals as defined in Section 8.8 hereof).     9.3 **Other Restrictions.**The Committee shall impose such other restrictions on RestrictedStock Units granted pursuant to the Plan as it may deem advisable including, without limitation,restrictions under applicable Federal or state securities laws.     9.4 **Rights as a Stockholder.**No voting or dividend rights as a stockholder shall exist withrespect to Restricted Stock Units prior to the issuance of Shares in the name of the Participant.An Award Agreement may provide for dividend equivalent units.     9.5 **Termination of Service Due to Retirement, Death, or Disability**. In the event aParticipant’s employment (or his status as a Non-Employee Director) terminates due to hisRetirement, death or Disability, the remaining restrictions with respect to the Restricted StockUnits, except as otherwise provided by the Committee in the Award Agreement pursuant to Sections9.2 or 9.3 hereof, shall automatically terminate and the Participant shall be entitled to receiveShares or a cash payment, or a combination thereof, provided in the Award Agreement.     9.6 **Termination of Service For Reasons Other Than Retirement, Death, or Disability**. In theevent that a Participant’s his employment (or his status as a Non-Employee Director) terminateswith the Company for reasons other than Retirement, death, or Disability, all Restricted StockUnits subject to restrictions shall be forfeited and returned to the Company; provided, however,that, the Committee in its sole discretion may waive restrictions remaining on any or allRestricted Stock Units and distribute Shares or make a cash payment, or a combination thereof, asset out in the Award Agreement.
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     9.7 **Application of Section 409A of the Code.**Section 409A of the Code will apply toRestricted Stock Unit Awards until otherwise provided by Treasury regulations or other guidanceissued by the U.S. Department of Treasury.**ARTICLE X****BENEFICIARY DESIGNATION**     Each Participant under the Plan may, from time to time, name any beneficiary or beneficiaries(who may be named contingently or successively) to whom any benefit under the Plan is to be paid incase of his death before he receives any or all of such benefit. Each such designation shall revokeall prior designations by the same Participant, shall be in a form prescribed by the Committee, andwill be effective only when filed by the Participant in writing with the Committee during theParticipant’s lifetime. In the absence of any such designation, benefits remaining unpaid at theParticipant’s death shall be paid to the Participant’s estate.**ARTICLE XI****RIGHTS OF PARTICIPANTS**     11.1 **Service.**Nothing in the Plan shall interfere with or limit in any way the right of theCompany or a Subsidiary to terminate any Participant’s employment (or status as a Director) at anytime, nor confer upon any Participant any right to continue in the employ (or as a Director) of theCompany or a Subsidiary.     11.2 **Participation.**No Employee (or Non-Employee Director) shall have a right to be selectedas a Participant, or, having been so selected, to be selected again as a Participant.**ARTICLE XII****CHANGE IN CONTROL**     Except as expressly provided otherwise in an Award Agreement, in the event of a Change inControl as defined in Section 2.1 above, all Awards under the Plan shall vest 100% and shall befully exercisable, whereupon all Options and SARs shall become exercisable in full and therestrictions applicable to Restricted Stock and Restricted Stock Units (including any Period ofRestriction) shall terminate.**ARTICLEXIII****AMENDMENT, MODIFICATION, AND TERMINATION**     13.1 **Amendment, Modification, and Termination.**The Board may at any time and from time totime, alter, amend, suspend or terminate the Plan in whole or in part for the purpose of meeting oraddressing any changes in legal requirements or for any other purpose permitted by law.     13.2 **Stockholder Approval.**The Board shall obtain stockholder approval of any Plan amendmentto the extent the Board deems necessary or desirable or to comply with applicable laws or the rulesof the NASDAQ National Market System or any other system or exchange on which the Shares are thenlisted or quoted. Notwithstanding the foregoing, the Board shall obtain stockholder approval toamend the Plan to (i) materially increase the maximum number of Shares issuable under the Plan(except for permissible adjustments under Section 4.4); (ii) materially increase the benefitsaccruing to Participants in the Plan; or (iii) materially modify the eligibility requirements forparticipation in the Plan.     13.3 **Effect of Amendment or Termination.**No amendment, termination, or modification of thePlan shall adversely affect in any material way any Award previously granted under the Plan or therights of any Participant without the written consent of the Participant holding such Award.
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**ARTICLE XIV****WITHHOLDING**     14.1 **Tax Withholding.**The Company shall have the power and the right to deduct or withhold, orrequire a Participant to remit to the Company, an amount sufficient to satisfy Federal, state, andlocal taxes, domestic or foreign, required by law or regulation to be withheld with respect to anytaxable event arising as a result of the Plan.     14.2 **Share Withholding.**With respect to withholding required upon the exercise of Options orSARs, upon the lapse of restrictions on Restricted Stock, or upon any other taxable event arisingas a result of Awards granted hereunder, Participants may elect to satisfy the withholdingrequirement, in whole or in part, by having the Company withhold Shares having a Fair Market Valueon the date the tax is to be determined equal to the minimum statutory total tax which would beimposed on the transaction; provided, however, that in the event a deferral election is in effectwith respect to the Shares deliverable upon exercise of an Option, then the Participant may onlyelect to have such withholding made from the Shares tendered to exercise such Option. All suchelections shall be irrevocable, made in writing, signed by the Participant, and shall be subject toany restrictions or limitations that the Committee, in its sole discretion, deems appropriate.**ARTICLE XV****INDEMNIFICATION**     Each Person who is or shall have been a member of the Committee or of the Board shall beindemnified and held harmless by the Company against and from any loss, cost, liability, or expensethat may be imposed upon or reasonably incurred by him in connection with or resulting from anyclaim, action, suit, or proceeding to which he may be a party or in which he may be involved byreason of any action taken or failure to act under the Plan and against and from any and allamounts paid by him in settlement thereof, with the Company’s approval, or paid by him insatisfaction of any judgment in any such action, suit, or proceeding against him, provided he shallgive the Company an opportunity, at its own expense, to handle and defend the same before heundertakes to handle and defend it on his own behalf. The foregoing right of indemnification shallnot be exclusive of any other rights of indemnification to which such persons may be entitled underthe Certificate or By-laws of the Company, as a matter of law, or otherwise, or any power that theCompany may have to indemnify them or hold them harmless.**ARTICLE XVI****SUCCESSORS**     All obligations of the Company under the Plan with respect to Awards granted hereunder shallbe binding on any successor to the Company, whether the existence of such successor is the resultof a direct or indirect merger, consolidation, purchase of all or substantially all of the businessand/ or assets of the Company or otherwise.**ARTICLE XVII****LEGAL CONSTRUCTION**     17.1 **Requirements of Law.**The granting of Awards and the issuance of Shares under the Planshall be subject to all applicable laws, rules, and regulations, and to such approvals by anygovernmental agencies or national securities exchanges as may be required.     17.2 **Governing Law.**To the extent not preempted by Federal law, the Plan and all AwardAgreements hereunder, shall be construed in accordance with and governed by the laws of the Stateof Delaware.*** * ***
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     IN WITNESS WHEREOF, Midwest Banc Holdings, Inc. by its appropriate officers duly authorized,has executed this instrument this 3rd day of May, 2006.       **MIDWEST BANC HOLDINGS, INC.**       By:      /s/James J. Giancola            As its:    President and Chief Executive Officer     
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