Exhibit 10.3


 


 


EMPLOYMENT AGREEMENT


 


This Employment Agreement (the "Agreement")
is made and entered into this 21st day of December, 2022, by and between First Mid Bancshares, Inc. ("the Company"),
a corporation with its principal place of business located in Mattoon, Illinois, and Eric S. McRae (“Manager”).


 


In consideration of the promises and mutual covenants
and agreements contained herein, the parties hereto acknowledge and agree as follows:


 


ARTICLE ONE


 


TERM AND NATURE OF AGREEMENT


 


1.01       Term
of Agreement.  The term of this Agreement shall commence as of December 31, 2022 and shall continue until December 31, 2023.  Thereafter,
unless Manager’s employment with the Company has been previously terminated, the Agreement shall renew automatically for 1-year
periods.


 


1.02       Employment.  The
Company agrees to employ Manager and Manager accepts such employment by the Company on the terms and conditions herein set forth. The
duties of Manager shall be determined by the Company’s Chief Executive Officer and shall adhere to the policies and procedures of
the Company and shall follow the supervision and direction of the Chief Executive Officer or his designee in the performance of such duties.  During
the term of Manager’s employment, Manager agrees to devote Manager’s full working time, attention, and energies to the diligent
and satisfactory performance of Manager’s duties hereunder.  Manager shall not, while Manager is employed by the Company,
engage in any activity which would (a) interfere with, or have an adverse effect on, the reputation, goodwill, or any business relationship
of the Company or any of its subsidiaries; (b) result in economic harm to the Company or any of its subsidiaries; or (c) result
in a breach of Section Six of the Agreement.


 


ARTICLE TWO


 


COMPENSATION AND BENEFITS


 


While Manager is employed with the Company during the
term of this Agreement, the Company shall provide Manager with the following compensation and benefits:


 


2.01       Base
Salary.  The Company shall pay Manager an annual base salary of $290,000 per fiscal year, payable in accordance with the
Company’s customary payroll practices for management employees.  The Chief Executive Officer or his designee may review
and adjust Manager's base salary from year to year; provided, however, that during the term of Manager's employment, the Company shall
not decrease Manager's base salary.


 


2.02       Incentive
Compensation Plan.  Manager shall participate in the First Mid Bancshares, Inc. Incentive Compensation Plan in accordance
with the terms and conditions of such Plan.  Pursuant to the Plan, Manager shall have an opportunity to receive incentive compensation
with a target value of 40% of Manager's annual base salary.  The plan does not have a maximum limit, or cap, for overachievement
based on performance. The Chief Executive Office or his designee may review and adjust the target percentage from year to year, provided,
however, that during the term of manager’s employment, the Company shall not decrease this percentage.  The incentive
compensation payable for a particular fiscal year will be based upon the attainment of the performance goals in effect under the Plan
for such year and will be paid in accordance with the terms of the Plan and at the sole discretion of the Board.


 






     


     


    

2.03       Deferred
Compensation Plan.  Manager shall be eligible to participate in the First Mid Bancshares, Inc. Deferred Compensation Plan
in accordance with the terms and conditions of such Plan.


 


2.04       Vacation.  Manager
shall be entitled five weeks of paid vacation each year during the term of this Agreement.


 


2.05       Fringe
Benefits. The Company shall provide the following additional fringe benefits to Manager:


 


a) Car allowance of $1,000 per month, pursuant
to policy.


 


b) An amount equal to the annual dues for full
membership at the Decatur Country Club.


 


c) Full electronic device allowance, pursuant
to policy.


 


2.06       Long
Term Incentive Plan. Manager shall be eligible to participate in the First Mid Bancshares, Inc. Long Term Incentive Plan (LTIP) in
accordance with the terms and conditions of such Plan under which equity-based compensation awards may be made as determined in the sole
discretion of the Compensation Committee of the Board of Directors.


 


2.07       Other
Benefits.  Manager shall be eligible (to the extent Manager qualifies) to participate in any other retirement, health, accident
and disability insurance, or similar employee benefit plans as may be maintained from time to time by the Company for its other management
employees subject to and on a consistent basis with the terms, conditions, and overall administration of such plans.


 


2.08       Business
Expenses.  Manager shall be entitled to reimbursement by the Company for all reasonable expenses actually and necessarily
incurred by Manager on its behalf during Manager’s employment hereunder and in accordance with expense reimbursement plans and policies
of the Company from time to time in effect for management employees.


 


2.09       Withholding.  All
salary, incentive compensation and other benefits provided to Manager pursuant to this Agreement shall be subject to withholding for federal,
state, or local taxes, amounts withheld under applicable employee benefit plans, policies or programs, and any other amounts that may
be required to be withheld by law, judicial order or otherwise or by agreement with, or consent of, Manager.


 


ARTICLE THREE


 


DEATH OF MANAGER


 


This Agreement shall terminate prior to the end of
the term described in Section 1.01 upon Manager’s termination of employment with the Company due to Manager’s death.  Upon
Manager’s termination due to death, the Company shall pay Manager’s estate the amount of Manager’s base salary plus
Manager’s accrued but unused vacation time earned through the date of such death and any incentive compensation earned for the preceding
fiscal year that is not yet paid as of the date of such death.


 






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ARTICLE FOUR


 


TERMINATION OF EMPLOYMENT


 


Manager’s employment with the Company may be
terminated by Manager or by the Company at any time for any reason.  Upon Manager’s termination of employment prior to
the end of the term of the Agreement, the Company shall pay Manager as follows:


 


4.01       Termination
by the Company Prior to a Change in Control for Other than Cause.  If the Company terminates Manager’s employment
prior to a Change in Control for any reason other than Cause, the Company shall pay Manager the following:


 


(a)       An amount
equal to Manager’s monthly base salary in effect at the time of such termination of employment for a period of twelve months thereafter.  Such
amount shall be paid to Manager periodically in accordance with the Company’s customary payroll practices for management employees.


 


(b)       The base
salary and accrued but unused paid vacation time earned through the date of termination and any incentive compensation earned for the
preceding fiscal year that is not yet paid.


 


(c)       Continued
coverage for Manager and/or Manager’s family under the Company’s health plan pursuant to Title I, Part 6 of the Employee Retirement
Income Security Act of 1974 (“COBRA”) and for such purpose the date of Manager’s termination of employment shall be
considered the date of the “qualifying event” as such term is defined by COBRA.  During the period beginning on
the date of such termination and ending at the end of the period described in Section 4.01(a), Manager shall be charged for such coverage
in the amount that Manager would have paid for such coverage had Manager remained employed by the Company, and for the duration of the
COBRA period, Manager shall be charged for such coverage in accordance with the provisions of COBRA.


 


For purposes of this Agreement, “Cause”
shall mean Manager’s (i) conviction in a court of law of (or entering a plea of guilty or no contest to) any crime or offense
involving fraud, dishonesty or breach of trust or involving a felony; (ii) performance of any act which, if known to the customers,
clients, stockholders or regulators of the Company, would materially and adversely impact the business of the Company; (iii) act
or omission that causes a regulatory body with jurisdiction over the Company to demand, request, or recommend that Manager be suspended
or removed from any position in which Manager serves with the Company; (iv) substantial nonperformance of any of Manager’s
obligations under this Agreement; (v) material misappropriation of or intentional material damage to the property or business of
the Company or any affiliate; or (vi) breach of Article Five or Six of this Agreement.


 


4.02       Termination
Following a Change in Control.


 


(a)       Notwithstanding
Section 4.01, if, following a Change in Control, and prior to the end of the term of this Agreement, Manager’s employment is terminated
by the Company (or any successor thereto) for any reason other than Cause, or Manager terminates Manager’s employment for Good Reason,
the Company (or any successor thereto) shall pay Manager the following:


 






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(i)       An amount
equal to Manager’s monthly base salary in effect at the time of such termination for a period of twenty-four months thereafter.  Such
amount shall be paid in accordance with the Company’s customary payroll practices for management employees.


 


(ii)       An amount
equal to the incentive compensation earned by or paid to Manager for the fiscal year immediately preceding the year in which Manager’s
termination of employment occurs.  Such amount shall be paid to Manager in a lump sum as soon as practicable after the date
of Manager’s termination.


 


(iii)       The
base salary and accrued but unused paid vacation time earned through the date of termination and any incentive compensation earned for
the preceding fiscal year that is not yet paid.


 


(iv)       Continued
coverage for Manager and/or Manager’s family under the Company’s health plan pursuant to Title I, Part 6 of the Employee Retirement
Income Security Act of 1974 (“COBRA”) and for such purpose the date of Manager’s termination of employment shall be
considered the date of the “qualifying event” as such term is defined by COBRA.  During the period beginning on
the date of such termination and ending at the end of the period described in Section 4.02(a)(i) above, Manager shall be charged for such
coverage in the amount that Manager would have paid for such coverage had Manager remained employed by the Company, and for the duration
of the COBRA period, Manager shall be charged for such coverage in accordance with the provisions of COBRA.


 


(b)       For purposes
of this Agreement:


 


(i)       “Change
in Control” shall have the meaning as set forth in the First Mid Bancshares, Inc. 2017 Stock Incentive Plan (or successor stock
incentive plan maintained by the Company).


 


(ii)       “Good
Reason” shall be deemed to exist if, without Manager’s written consent: (A) there is a material diminution in Manager’s
position, authority, or responsibility; (B) there is a material reduction in Employee’s total compensation (including benefits
and annual and long-term incentive opportunity) from then-current levels; (C) there is a relocation of Manager’s primary place
of employment of at least 30 miles; or (D) the Company materially breaches this Agreement.


 


A termination of Manager’s employment by Manager
shall not be deemed to be for Good Reason unless (x) Manager gives notice to the Company of the existence of the event or condition
constituting Good Reason within 30 days after such event or condition initially occurs or exists, (y) the Company fails to cure such
event or condition within 30 days after receiving such notice, and (z) Manager’s termination occurs not later than 90 days
after such event or condition initially occurs or exists (or, if earlier, the last of the term of this Agreement).


 


4.03       Other
Termination of Employment.  If, prior to the end of the term of this Agreement, the Company terminates Manager’s employment
for Cause, or if Manager terminates Manager’s employment for any reason other than as described in Section 4.02 above, the Company
shall pay Manager the base salary and accrued but unused paid vacation time earned through the date of such termination and any incentive
compensation earned for the preceding fiscal year that is not yet paid.


 






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4.04       Section
409A Compliance.  If at the time of such termination of employment Manager is a “Key Employee” as defined in
Section 416(i) of the Internal Revenue Code (without reference to paragraph 5 thereof), and the amounts payable to Manager pursuant to
Article Four are subject to Section 409A of the Internal Revenue Code, payment of such amounts shall not commence until six months following
Manager’s termination of employment, with the first payment to include the payments that otherwise would have been made during such
six-month period. Each payment made pursuant to Sections 4.01and 4.02 shall be considered a separate payment for purposes of Section 409A.


 


ARTICLE FIVE


 


CONFIDENTIAL INFORMATION


 


5.01       Non-Disclosure
of Confidential Information. During Manager’s employment with the Company, and after Manager’s termination of such employment
with the Company, Manager shall not, in any form or manner, directly or indirectly, use, divulge, disclose or communicate to any person,
entity, firm, corporation or any other third party, any Confidential Information, except as required in the performance of Manager’s
duties hereunder, as required by law or as necessary in conjunction with legal proceedings.


 


5.02       Definition
of Confidential Information.  For the purposes of this Agreement, the term "Confidential Information" shall mean
any and all information either developed by Manager during Manager’s employment with the Company and used by the Company or its
affiliates or developed by or for the Company or its affiliates of which Manager gained knowledge by reason of Manager’s employment
with the Company that is not readily available in or known to the general public or the industry in which the Company or any affiliate
is or becomes engaged.  Such Confidential Information shall include, but shall not be limited to, any technical or non-technical
data, formulae, compilations, programs, devices, methods, techniques, procedures, manuals, financial data, business plans, lists of actual
or potential customers, lists of employees and any information regarding the Company's or any affiliate’s products, marketing, or
database.  The Company and Manager acknowledge and agree that such Confidential Information is extremely valuable to the Company
and may constitute trade secret information under applicable law.  If any part of the Confidential Information becomes generally
known to the public through legitimate origins (other than by the breach of this Agreement by Manager or by other misappropriation of
the Confidential Information), that part of the Confidential Information shall no longer be deemed Confidential Information for the purposes
of this Agreement, but Manager shall continue to be bound by the terms of this Agreement as to all other Confidential Information.


 


5.03       Exception.
Nothing herein shall prohibit Manager from reporting a suspected violation of law to any governmental or regulatory agency and cooperating
with such agency, or from receiving a monetary recovery for information provided to such agency; from testifying truthfully under oath
pursuant to subpoena or other legal process; or from making disclosures that are otherwise protected under applicable law or regulation.
However, if Manager is required by subpoena or other legal process to disclose Confidential Information, Manager first shall notify the
Company promptly upon receipt of the subpoena or other notice, unless otherwise required by law.


 






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5.04       Delivery
upon Termination.  Upon termination of Manager's employment with the Company for any reason, Manager shall promptly deliver
to the Company all correspondence, files, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents,
and any other documents or data concerning the Company's or any affiliate’s customers, database, business plan, marketing strategies,
processes or other materials which contain Confidential Information, together with all other property of the Company or any affiliate
in Manager's possession, custody or control.


 


ARTICLE SIX


 


NON-COMPETE AND NON-SOLICITATION
COVENANTS


 


6.01       Covenant
Not to Compete.  During the term of this Agreement and for a period of twelve months following the termination of Manager's
employment for any reason, Manager shall not, on behalf of Manager or on behalf of another person, corporation, partnership, trust, or
other entity, within 50 miles of Manager’s primary place of employment.


 


(a)       Directly
or indirectly own, manage, operate, control, participate in the ownership, management, operation, or control of, be connected with or
have any financial interest in, or serve as an officer, employee, advisor, consultant, agent or otherwise to any person, firm, partnership,
corporation, trust or other entity which owns or operates a business similar to that of the Company or its affiliates.


 


(b)       Solicit
for sale, represent, and/or sell Competing Products to any person or entity who or which was the Company’s customer or client during
the last year of Manager's employment. "Competing Products," for purposes of this Agreement, means products or services which
are similar to, compete with, or can be used for the same purposes as products or services sold or offered for sale by the Company or
any affiliate or which were in development by the Company or any affiliate within the last year of Manager's employment.


 


6.02       Covenant
Not to Solicit.  For a period of twelve months following the termination of Manager’s employment for any reason, Manager
shall not:


 


(a)       Attempt
in any manner to solicit from any client or customer business of the type performed by the Company or any affiliate or persuade any client
or customer of the Company or any affiliate to cease to do such business or to reduce the amount of such business which any such client
or customer has customarily done or contemplates doing with the Company or any affiliate, whether or not the relationship between the
Company or affiliate and such client or customer was originally established in whole or in part through Manager’s efforts.


 


(b)       Render
any services of the type rendered by the Company or any affiliate for any client or customer of the Company.


 


(c)       Solicit
or encourage, or assist any other person to solicit or encourage, any employees, agents or representatives of the Company or an affiliate
to terminate or alter their relationship with the Company or any affiliate.


 


(d)       Do or
cause to be done, directly or indirectly, any acts which may impair the relationship between the Company or any affiliate with their respective
clients, customers, or employees.


 






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ARTICLE SEVEN


 


REMEDIES


 


Manager acknowledges that compliance with the provisions
of Articles Five and Six herein is necessary to protect the business, goodwill, and proprietary information of the Company and that a
breach of these covenants will irreparably and continually damage the Company for which money damages may be inadequate.  Consequently,
Manager agrees that, if Manager breaches or threatens to breach any of these provisions, the Company shall be entitled to both (a) a
temporary, preliminary, or permanent injunction to prevent the continuation of such harm; and (b) money damages insofar as they can
be determined.  In addition, the Company will cease payment of all compensation and benefits under Articles Three and Four hereof.  In
the event that any of the provisions, covenants, warranties or agreements in this Agreement are held to be in any respect an unreasonable
restriction upon  Manager or are otherwise invalid, for whatsoever cause, then the court so holding shall reduce, and is so
authorized to reduce, the territory to which it pertains and/or the period of time in which it operates, or the scope of activity to which
it pertains or effect any other change to the extent necessary to render any of the restrictions of this Agreement enforceable.


 


ARTICLE EIGHT


 


MISCELLANEOUS


 


8.01       Successors
and Assignability.


 


(a)       No rights
or obligations of the Company under this Agreement may be assigned or transferred except that the Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required
to perform it if no such succession had taken place.


 


(b)       No rights
or obligations of Manager under this Agreement may be assigned or transferred by Manager other than Manager’s rights to payments
or benefits hereunder which may be transferred only by Will or the laws of descent and distribution.


 


8.02       Payment
Recoupment and Restrictions. Manager agrees and acknowledges that this Agreement and any incentive payments made or to be made hereunder
are subject to the terms of any Company claw back or recoupment policy. Notwithstanding anything in this Agreement to the contrary, in
no event shall any payment or benefit under this Agreement be paid, provided, or accrued if such payment, provision or accrual would be
in violation of applicable law, rule, regulation or court or agency order.


 


8.03       Entire
Agreement.  This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and
may not be modified except in writing by the parties hereto.  Furthermore, the parties hereto specifically agree that all prior
agreements, whether written or oral, relating to Manager's employment by the Company shall be of no further force or effect from and after
the date hereof.


 


8.04       Severability.  If
any phrase, clause, or provision of this Agreement is deemed invalid or unenforceable, such phrase, clause or provision shall be deemed
severed from this Agreement but will not affect any other provisions of this Agreement, which shall otherwise remain in full force and
effect.  If any restriction or limitation in this Agreement is deemed to be unreasonable, onerous, or unduly restrictive, it
shall not be stricken in its entirety and held totally void and unenforceable but shall be deemed rewritten and shall remain effective
to the maximum extent permissible within reasonable bounds.


 






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8.05       Controlling
Law and Jurisdiction.  This Agreement shall be governed by and interpreted and construed according to the laws of the State
of Illinois.  The parties hereby consent to the jurisdiction of the state and federal courts in the State of Illinois if any
disputes arise under this Agreement.


 


8.06       Notices.  All
notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given
(a) on the date of service if served personally on the party to whom notice is to be given; (b) on the day after delivery to an overnight
courier service; (c) on the day of transmission if sent via facsimile to the facsimile number given below; or (d) on the third day after
mailing, if mailed to the party to whom notice is to be given, by first class mail, registered or certified, postage prepaid and properly
addressed, to the party as follows:


 


	If to Manager:	 	Eric S. McRae
	 	 	262 South Moreland Place
	 	 	Decatur, IL 62521
	 	 	 
	If to the Company:	 	First Mid Bancshares, Inc.
	 	 	1515 Charleston Avenue
	 	 	Mattoon, Illinois 61938
	 	 	Facsimile: 217-258-0485
	 	 	Attention: Chairman and Chief Executive Officer




 


Any party may change its address for the purpose of
this Section by giving the other party written notice of its new address in the manner set forth above.


 


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


 


	 	
    FIRST MID BANCSHARES, INC.

     

     

     

    By: /s/ Joseph R. Dively

    Title: Chairman of the Board, Joseph R. Dively

     

	 	
    By MANAGER:

     

    /s/ Eric S. McRae



 


 


 


 


 


 


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