exv10w1



 





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




ARTICLE III 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 and
Incentive 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 such
changes in the Plan necessary to: increase the number of shares of Common Stock that may be issued
pursuant to Awards under the Plan to 2,500,000 (Article IV), add Stock Appreciation Rights (Article
VII), Restricted Stock (Article VIII), and Restricted Stock Units (Article IX), to extend the
duration of the Plan to March 23, 2015 (Section 1.3), and to allow Non-Employee Directors to
participate in the Plan (Article V). Inasmuch as the 10-year duration of the Incentive Stock Option
plan will expire on November 18, 2006 and no Incentive Stock Options have been granted under the
Plan, the Incentive Stock Option plan is terminated and a new Incentive Stock Option plan is hereby
established in this amended and restated Plan.



     1.2 Purpose of the Plan. The purpose of this Plan is to benefit the Company and its
Subsidiaries by enabling the Company to offer to certain present and future executives, key
employees, and Non-Employee Directors stock based incentives in the Company, thereby giving them a
stake in the growth and prosperity of the Company and encouraging the continuance of their services
with the Company or its Subsidiaries.



     1.3 Duration of the Plan. The Plan shall remain in effect, subject to the right of the Board
of Directors to amend or terminate the Plan at any time pursuant to Article XIII hereof, until all
Shares 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 the
date the Plan is adopted by the Board or approved by the stockholders of the Company, whichever is
earlier. 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 of
the Company, which approval shall be within twelve months before or after the date the Plan is
adopted by the Board.



ARTICLE II


DEFINITIONS




     2.1 Definitions. Whenever used in the Plan, the following terms shall have the meanings set
forth 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 Stock
Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock or Restricted Stock
Units.



     “Award Agreement” means a written agreement between the Company and a Participant setting
forth the terms, conditions, limitations and provisions applicable to Awards granted under this
Plan, as shall be determined by the Committee.



 









 





     “Beneficial Owner” or “Beneficial Ownership” shall have the meaning ascribed to such term in
Rule 13d-3 of the General Rules and Regulations under the Exchange Act, or any successor rule or
regulation 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 a
Non-Employee Director), the occurrence of any one or more of the following, as determined by the
Committee, in the exercise of good faith and reasonable judgment:




     (i) In the case where there is no employment, change in control or similar agreement in
effect between the Participant and the Company or a Subsidiary at the time of the grant of
the Award, or where there is such an agreement but the agreement does not define “cause” (or
similar words) or where a “cause” termination would not be permitted under such agreement at
that time because other conditions were not satisfied, the termination of an employment due
to the (a) willful and continued failure or refusal by the Participant to substantially
perform assigned duties (other than any such failure resulting from the Participant’s
Disability), (b) the Participant’s dishonesty or theft, (c) the Participant’s violation of
any obligations or duties under any employment agreement, (d) the Participant’s gross
negligence or willful misconduct, or (e) the Participant’s suspension or termination due to
the direction of any authorized bank regulatory agency that the Participant be relieved of
his duties and responsibilities to the Company or a Subsidiary.




     (ii) In the case where there is an employment, change in control or similar agreement
in effect between the Participant and the Company or a Subsidiary at the time of the grant
of the Award that defines “cause” (or similar words) and a “cause” termination would be
permitted under such agreement at that time, the termination of an employment arrangement
that is or would be deemed to be for “cause” (or similar words) as defined in such
agreement.




     (iii) In the case of a Non-Employee Director, the removal of the Non-Employee Director
pursuant to a vote of the stockholders of the Company or the removal of a Non-Employee
Director 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, or
omitted to be done, by the Participant not in good faith and without reasonable belief that his
action 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 another
corporation 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 other
capital interests of the surviving, resulting or acquiring corporation or other legal person
are owned in the aggregate by persons who were stockholders of the Company, directly or
indirectly, immediately prior to such merger, consolidation or reorganization, other than by
the Acquiror or any corporation or other legal person controlling, controlled by or under
common control with the Acquiror;




     (ii) The Company sells all or substantially all of its business and/ or assets to an
Acquiror, of which less than 50% of the outstanding voting securities or other capital
interests 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 or
other 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 Section
13(d)(3) or Section 14(d)(2) of the Exchange Act and the rules and regulations promulgated
thereunder) has become the Beneficial Owner of more than 50% of the issued and outstanding
shares of voting securities of Company, other than (a) a trustee or other fiduciary holding
securities under any employee benefit plan of



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the Company or any Subsidiary or (b) a
corporation owned directly or indirectly by the stockholders of the Company in substantially
the same proportion as their ownership of stock in the Company;




     (iv) Individuals who are members of the Incumbent Board cease to constitute a majority
of the Board. For this purpose, “Incumbent Board” means (a) the members of the Board of
Directors of the Company on the Effective Date and (b) any individual who becomes a member
of the Board 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; or




     (v) The stockholders of the Company approve a plan of complete liquidation or
dissolution of the Company.


The Board has final authority to determine the exact date on which a Change in Control has been
deemed 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 successor
legislation thereto, and the rules and regulations thereunder.



     “Committee” means the Committee as specified in Article III herein appointed by the Board to
administer 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 successor
to 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, a
Non-Employee Director who, with the approval of the Board or the Committee, enters into a
continuing participant agreement with the Company or a Subsidiary effective upon such person
ceasing to be a Non-Employee Director, shall continue to be a Non-Employee Director for purposes of
this Plan and shall not be deemed to incur a termination of directorship during the term of such
continuing participant agreement.



     “Disability” means the permanent and total disability of a person as defined in Section
22(e)(3) of the Code and shall be determined by the Committee upon receipt of competent medical
advice from one or more individuals selected by the Committee who are qualified to give
professional medical advice.



     “Early Retirement” means the Participant’s termination of employment with the Company and its
Subsidiaries (for reasons other than Cause) on or after attaining age 55 having completed five or
more 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 the
Company 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 or
the Committee, enters into a continuing participant agreement with the Company or a Subsidiary
effective upon such person ceasing to be a full-time salaried employee, shall continue to be an
Employee for purposes of this Plan and shall not be deemed to incur a termination of employment
during the term of such continuing participant agreement; provided, however, that for purposes of
Incentive 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 any
successor 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 as
follows:




     (i) If the Common Stock is at the time traded on the NASDAQ National Market System (or
any similar system or exchange), then the Fair Market Value shall be the average of the
highest and lowest prices of the Common Stock as reported by the consolidated tape of the
NASDAQ National Market System (or any similar system or exchange) on the date of
determination. In the event that there are no Common Stock transactions on such date, the
Fair Market Value shall be determined as of the immediately preceding date on which there
were 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 Market
Value shall be the closing sales price for the shares as quoted on such system on the date
of determination. If selling prices are not reported, the Fair Market Value of a Share shall
be the mean between the high bid and low asked prices for the Common Stock on the date of
determination (or, if no such prices were reported on that date, on the last date such
prices were reported), as reported in The Wall Street Journal or such other source as the
Committee deems reliable.




     (iii) In the absence of an established market for the Common Stock of the type
described in paragraphs (i) and (ii) above, the Fair Market Value thereof shall be
determined by the Committee after taking into account such factors as the Committee shall
deem appropriate.



     “Incentive Stock Option” or “ISO” means an option to purchase Shares granted under Article VI
hereof and which is designated as an Incentive Stock Option and which qualifies as an ISO under
Section 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 Company
other than an Incentive Stock Option described in Section 422 of the Code that satisfies the
following requirements: (1) the amount required to purchase the Common Stock under the Nonqualified
Stock Option (the exercise price) may never be less than the Fair Market Value of the underlying
Common Stock on the date the Nonqualified Stock Option is granted; (2) the receipt, transfer or
exercise 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 compensation
other than the deferral of recognition of income until the later of exercise or disposition of the
option 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 or
Restricted Stock Units is limited in some way (based on the passage of time, the achievement of
performance goals, or upon the occurrence of other events as determined by the Committee, at its
discretion).



     “Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act
and 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 is
granted in conjunction with, and to the extent exercisable, in whole or in part, in lieu of, an
Option or another right and (ii) in the case of an Option, an Option with respect to which and to
the 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 receive
either Common Stock or a cash payment equal to the Fair Market Value of a Share (or a combination
thereof) at some future date.



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     “Retirement” means the Participant’s termination of employment with the Company or its
Subsidiaries (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’s
duties as a Director due to his decision to resign or not stand for re-election or due to the Board
of 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 to
Awards granted under the Plan promulgated by the Securities and Exchange Commission under Section
16(b) of the Exchange Act.



     “Stock Appreciation Right” or “SAR” means a right to receive upon exercise an amount payable
in Shares. An SAR issued under the Plan must meeting the following requirements: (1) the value of
the Common Stock the excess over which the right provides for payment upon exercise (the SAR
exercise price) may never be less than the fair market value of the underlying Common Stock on the
date the right is granted; (2) the Common Stock subject to the right is traded on an established
securities market; (3) only such traded Common Stock may be delivered in settlement of the right
upon exercise; and (4) the right does not include any feature for the deferral of compensation
other than the deferral of recognition of income until the exercise of the right.



     “Subsidiary” means any corporation, partnership, joint venture, affiliate, or other entity in
which the Company is the direct or indirect beneficial owner of not less than 50% of all issued and
outstanding equity interests.



     2.2 Gender And Number. Except when otherwise indicated by the context, words in the masculine
gender when used in the Plan shall include the feminine gender, the singular shall include the
plural, and the plural shall include the singular.



     2.3 Severability. In the event any provision of the Plan shall be held illegal or invalid for
any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the
Plan 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 a
committee or by the Compensation Committee of the Board of Directors, or by any other Committee
appointed by the Board of Directors. The Committee administering the Plan shall consist of two or
more Directors who are (i) “non-employee directors” as the term (or any similar successor) is
defined in Rule 16b-3, and (ii) “outside directors” within the meaning of Section 162(m) of the
Code.



     3.2 Authority of the Committee. Except as limited by law or by the amended and restated
Certificate 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 majority
action (whether taken during a meeting or by written consent)) shall have full and complete
discretionary 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 be
exercised and the date on which the risk of forfeiture shall lapse, the acceleration of
any 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 be
settled, or the exercise price of an Award may be paid, in cash, Shares, other means or
a 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 of
any outstanding Award to the extent such terms and conditions are within the discretion
of the Committee as provided in the Plan; and
	 
	 	•	 	make all other determinations which may be necessary or advisable for the
administration of the Plan.





     3.3 Manner of Exercise of Committee Authority; Subcommittees. The express grant of any
specific power to the Committee, and the taking of any action by the Committee, shall not be
construed as limiting any power or authority of the Committee. The Committee may act through
subcommittees, including for purposes of perfecting exemptions under Rule 16b-3 or qualifying
Awards under Section 162(m) of the Code as performance-based compensation, in which case the
subcommittee shall be subject to and have authority granted hereunder to the Committee, and the
acts 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 the
provisions 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, the
aggregate number of Shares which may be issued or used for reference purposes over the term of the
Plan shall not exceed 3,900,000 Shares (inclusive of shares issued prior to March 23, 2005), which
may be either authorized and unissued Shares or Shares held in or reacquired for the treasury of
the Company.



          (b) All of the Shares may be issued under Awards which are Restricted Stock or Restricted
Stock Units. Such number of shares shall be subject to adjustment upon occurrence of any of the
events indicated in Section 4.4.




          (c) Of the aggregate number of Shares available for Awards set forth in paragraph (a), the
total number of Shares of Company Stock with respect to which Incentive Stock Option Awards may be
granted 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 without
having been exercised in full (including, without limitation, cancellation and re-grant), or
in the event that an Option is exercised or settled in a manner such that some or all of the
Shares related to the Option are not issued to the Participant (or beneficiary) (including
as the result of a Share-for-Share exercise or the use of Shares for withholding taxes), the
Shares subject thereto which have not become outstanding shall (unless the Plan shall have
terminated) remain available for issuance under the Plan; or




     (ii) any Awards under the Plan are forfeited for any reason, or settled in cash in lieu
of Shares or in a manner such that some or all of the Shares related to the Award are not
issued to the Participant (or beneficiary) (including as a result of the use of Shares for
tax withholding), such Shares shall (unless the Plan shall have terminated) remain available
for issuance under the Plan, except as provided in Section 7.2 which relates to the exercise
of SARs in conjunction with Options.



     4.3 Individual Participant Limitations. (a) Subject to adjustment as provided in Section
4.4 herein, the maximum aggregate number of Shares that may be granted with respect to Options or
SARs in any one fiscal year to a Participant shall be 150,000. To the extent required by Section
162(m) of the Code or the Treasury regulations thereunder, in applying the foregoing limitations
with respect to a Participant, if any Option or SAR is



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canceled, the canceled Option or SAR shall
continue to count against the maximum number of Shares with respect to which Options and SARs may
be granted to the Participant. For this purpose, the repricing of an Option shall be treated as the
cancellation 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 or
units denominated in such shares (other than any Awards consisting of Options or SARs) covering or
relating to more than 150,000 Shares, subject to adjustment pursuant to the provisions of Section
4.4 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 any
merger, consolidation, combination, separation, including a spin-off, or other distribution of
stock or property of the Company, any reorganization (whether or not such reorganization comes
within the definition of such term in Section 368 of the Code) or any partial or complete
liquidation of the Company, an adjustment shall be made in the number and class of Shares available
for Awards, the number and class of and/ or price of Shares subject to outstanding Awards granted
under the Plan and the number of Shares set forth in Sections 4.1, 4.2 and 4.3, as may be
determined to be appropriate and equitable by the Committee, in its sole discretion, to prevent
dilution or enlargement of rights; provided, however, that the number of Shares subject to any
Award 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 have
full authority to determine which eligible persons are to receive Awards and the nature and amount
of each Award.



ARTICLE VI




STOCK OPTIONS




     6.1 Grant of Options. Subject to the terms and provisions of the Plan, Options may be granted
to Employees and Non-Employee Directors at any time and from time to time as determined by the
Committee in its sole discretion; provided, however, that Non-Employee Directors shall not be
eligible to receive Incentive Stock Options. The Committee, in its sole discretion, shall determine
the number of Shares subject to each Option. The
Committee may grant Incentive Stock Options, Nonqualified Stock Options, or a combination
thereof. The Committee may grant any type of Option to purchase Stock that is permitted by law at
the time of grant.



     6.2 Award Agreement. Each Option shall be evidenced by an Award Agreement that shall specify
the exercise price, the expiration date of the Option, the number of Shares to which the Option
pertains, any conditions to exercise of the Option, and such other terms and conditions as the
Committee, in its discretion, shall determine. In the event the Award Agreement does not set forth
when each Option expires and becomes unexercisable, then the Option evidenced thereby shall expire
and become unexercisable in accordance with


the provisions of Section 6.4. The Award Agreement shall also specify whether the Option is
intended 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 for
each 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 price
shall 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 price
shall be not less than one hundred percent (100%) of the Fair Market Value of a Share on the date
of the grant; provided, however, that if on the date of the grant, the Employee (together with
persons 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 all
classes of stock of the Company or any of its Subsidiaries, the exercise price shall be not less
than one hundred and ten percent (110%) of the Fair Market Value of a Share on the date of the
grant.




          (c) Substitute Options. Notwithstanding the provisions of paragraphs (a) and (b), in the event
that 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 become
Employees on account of such transaction may be granted Options in substitution for options granted
by their former employer. If such substitute Options are granted, the Committee, in its sole
discretion and consistent with Section 424(a) of the Code, shall determine the exercise price of
such substitute Options.




     6.4 Expiration of Options. Subject to the provisions of Section 6.8 and Section 6.11, Options
granted 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 shall
terminate 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 termination
of employment (or termination as a Non-Employee Director) for a reason other than the
Participant’s death, Disability, Retirement, or for Cause; or




     (iv) The expiration of one (1) year from the date of the Participant’s termination of
employment (or termination as a Non-Employee Director) by reason of death, Disability or
Retirement; 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 by
the Participant shall become exercisable in full (without regard to any installment or other
vesting provisions thereof) and shall be exercisable thereafter until the first to occur of
the 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 Early
Retirement retires and agrees to remain retired from the industry (a “sunset arrangement”)
shall become exercisable in full (without regard to any installment or other vesting
provisions thereof) and shall be exercisable by the Participant until the earlier of the
dates 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 until
the earlier of the date such


Options 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 Plan
shall terminate upon the expiration date of the Option or three (3) months after such date
of termination, whichever first occurs; provided, however, that in the event such
termination occurs after a Change in Control, the rights under any then outstanding Option
granted 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 for
Cause, 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 and
be subject to such restrictions and conditions as the Committee shall determine in its sole
discretion and prescribe in the Award Agreement; provided that, to the extent required to comply
with Rule 16b-3, no Option shall be exercisable within the first six months of its term, unless
death or Disability of the Participant occurs during such period. Each Option which is intended to
qualify as an Incentive Stock Option under Section 422 of the Code shall comply with the applicable
provisions of the Code pertaining to such Options. In the event that the Award Agreement does not
set forth times with respect to the exercisability of Options, then each such Option granted to an
Employee or Non-Employee Director shall become exercisable on the first anniversary of the date of
the 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 anniversary
of the date of the grant to the extent of an additional one-fourth (25%) of such Shares. After an
Option is granted, the Committee, in its sole discretion, may accelerate the exercisability of the
Option. Notwithstanding the foregoing, upon a Change in Control or an event described in Section
6.4(b)(i) or (ii), any and all Options granted under this Article VI shall become immediately
exercisable 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 exercise
to the President of the Company (or his designee), setting forth the number of Shares with respect
to 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 of
Shares as to which the Option is exercised. As soon as practicable after receipt of a written
notification of exercise and full payment for the Shares purchased, the Company shall deliver to
the Participant (or the Participant’s designated broker), Share certificates (which may be in book
entry form) representing such Shares.




     6.7 Payment Upon Exercise. Upon the exercise of any Option, the Exercise Price shall be
payable to the Company in full as follows:




     (i) in cash or its equivalent (including, for this purpose, the proceeds from a
cashless exercise program as permitted under Federal Reserve Board’s regulations);




     (ii) by tendering previously acquired Shares (which, if such shares have been acquired
under this Plan, have been held at least six (6) months) having an aggregate Fair Market
Value at the time of exercise equal to the total Exercise Price;




     (iii) by any other means which the Committee, in its sole discretion, determines to
both provide legal consideration for the Shares, and to be consistent with the purposes of
the 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 exercisable
only by the Participant during his lifetime and shall not be assignable or transferable other than
by 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, in
a form satisfactory to the Company, designate a third party who, in the event of the death of the
Participant, 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 Stock
Options 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 Family
Members”),




     (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 Award
Agreement pursuant to which such Options are granted expressly provides for transferability
in a manner consistent with this Section 6.8, and (C) subsequent transfers of transferred
Options 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 and
conditions as were applicable immediately prior to transfer; provided that for purposes of Article
X hereof the term “Participant” shall be deemed to refer to the transferee. The provisions of
Article VI and Article XII relating to the period of exercisability and expiration of the Option
shall continue to be applied with respect to the original Participant, and the Options shall be
exercisable by the transferee only to the extent, and for the periods, set forth in Article VI and
Article XII.




     6.9 Restrictions on Share Transferability. The Committee may impose such restrictions on any
Shares acquired pursuant to the exercise of an Option as it may deem advisable, including, but not
limited to, restrictions related to applicable Federal securities laws, the requirements of any
national securities exchange or system upon which Shares are then listed or traded, or any blue sky
or state securities laws.



     6.10 Stockholder Rights. The holder of an Option shall have no stockholder rights with
respect to the Shares subject to the Option until such person shall have exercised the Option, paid
the exercise price and become the recordholder of the purchased Shares.



     6.11 Additional Provisions Applicable to Incentive Stock Options. Notwithstanding anything in
the Plan to the contrary, to the extent required from time to time by the Code, the following
additional provisions shall apply to the grant of Options which are intended to qualify as
Incentive Stock Options:



          (a) Annual Dollar Limitation. The aggregate Fair Market Value (determined on the date the
Option is granted) of the Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by any Employee during any calendar year (under all plans of the
Company and its Subsidiaries) shall not exceed $100,000 or such other amount as may subsequently be
specified by the Code; provided, however, that in the event the Employee holds two or more
Incentive Stock Options which become exercisable for the first time in the same calendar year, then
those Incentive Stock Options up to such $100,000 limitation (determined in the order such
Options were granted) shall continue to be Incentive Stock Options and the remainder shall be
Nonqualified Stock Options.




          (b) Termination of Continuous Service; Exercise. Notwithstanding anything in this Plan to the
contrary, no Incentive Stock Option may be exercised more than three (3) months after the
Participant’s termination of employment with the Company and all Subsidiaries for any reason other
than Disability or death (in which case the Incentive Stock Option may be exercised until the
expiration of one (1) year from the date of death or Disability). In the event the Participant dies
during the three-month period after termination of employment, the Incentive Stock Option may be
exercised by such Participant’s beneficiaries for the period ending one (1) year after the date of
the Participant’s death. In the event the Award Agreement or the Committee permits later exercise
and 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 of
ten (10) years from the date such Option is granted; provided, however, that if the Incentive
Stock Option is granted to an Employee who, together with persons whose stock ownership is
attributed to the Employee pursuant to Section 424(d) of the Code, owns stock possessing more than
10% of the total combined voting power of all classes


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of the stock of the Company or any of its
Subsidiaries, the Option may not be exercised after the expiration of five (5) years from the date
such Option is granted.




ARTICLE VII




STOCK APPRECIATION RIGHTS




     7.1 Grant of Stock Appreciation Rights. Subject to the provisions of Section 1.3 and Article
IV, Stock Appreciation Rights may be granted to Employees at any time and from time to time as
shall be determined by the Committee. An SAR may be granted at the discretion of the Committee in
any 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 Options
may be exercised for all or part of the Shares subject to the Related Option upon the surrender of
the right to exercise an equivalent number of Options. The SAR may be exercised only with respect
to the Shares for which its Related Option is then exercisable. Option Shares with respect to which
the SAR shall have been exercised may not be subject again to an Award under this Plan. SARs
granted pursuant to this Section 7.2 with respect to which the Option Shares have been exercised
will immediately lapse upon such exercise.



     7.3 Exercise of SARs in Addition to Options. SARS granted in addition to Options shall be
deemed 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 be
deemed to have been exercised upon the lapse of the Related Options as to the number of Shares
subject to the Options. Notwithstanding Section 4.2, cancelled Options in an amount equal to the
related 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 be
exercised upon whatever terms and conditions the Committee, in its sole discretion, imposes upon
the SARs.



     7.6 Payment of SAR Amount. Upon exercise of the SAR, the holder shall be entitled to receive
payment 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 the
Fair 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 be
made 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 sole
discretion, 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 any
reason, any SARs outstanding shall terminate in the same manner as specified for Options under
Section 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 of
descent and distribution. Further, all SARs granted to a Participant under the Plan shall be
exercisable only by the Participant during his lifetime.



ARTICLE
VIII




RESTRICTED STOCK




     8.1 Grant of Restricted Stock. Subject to the provisions of Section 1.3 and Article IV, the
Committee, at any time and from time to time, may grant an Award entitling the recipient to
acquire, at no cost or for a purchase price determined by the Committee, shares of Stock subject to
such restrictions and conditions as the Committee may determine at the time of the grant. Each
Restricted Stock Award shall be evidenced by an Award Agreement.



     8.2 Transferability of Restricted Stock. The Restricted Stock granted hereunder may not be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the termination
of any Period of Restriction specified in the Award Agreement, or until the earlier satisfaction of
any other conditions specified in the Award Agreement (which may include the attainment of
pre-established performance goals as defined in Section 8.8 hereof). Limitations on the
transferability 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 of
Restricted 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 Share
certificates representing the Restricted Stock to give appropriate notice of such restrictions.



     8.4 Voting Rights. Participants holding Shares of Restricted Stock granted hereunder may
exercise full voting rights with respect to such Shares of Restricted Stock.



     8.5 Dividends and Other Distributions. Participants holding Shares of Restricted Stock shall
be entitled to receive all dividends and other distributions paid with respect to such Shares of
Restricted Stock. If any
such dividends or distributions are paid in Shares, the Shares shall be subject to the same
restrictions on transferability as the Shares of Restricted Stock with respect to which they were
paid.



     8.6 Termination of Service Due to Retirement, Death or Disability. In the event a
Participant’s employment (or his status as a Non-Employee Director) terminates due to his or her
Retirement, 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 or
8.3 hereof, shall automatically terminate so that all Shares of Restricted Stock shall be free of
all restrictions and freely transferable.



     8.7 Termination of Service For Reasons Other than Retirement, Death, or Disability. In the
event a Participant’s employment (or his status as a Non-Employee Director) terminates for reasons
other than Retirement, death, or Disability, all Restricted Stock subject to restrictions shall be
forfeited and reacquired by the Company at the price paid by the Participant. Notwithstanding the
foregoing, the Committee, in its sole discretion, may waive the restrictions remaining with respect
to Shares of Restricted Stock.



     8.8 Performance Goals. One or more of the following business criteria for the Company, on a
consolidated basis, and/ or for specified subsidiaries or affiliates or other business units of the
Company 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 or
after extraordinary or special items, (3) net income per common share (basic or diluted) or
earnings per share (basis or diluted); (4) return on assets, return on investment, return on
capital, or return on equity; (5) cash flow, free cash flow, cash flow return on investment, or net
cash provided by operations; (6) efficiency ratio; (7) economic profit or value created; (8) net
interest margin; (9) stock price or total stockholder return; and (10) strategic business criteria,
consisting of one or more objectives



12









 







based on meeting specified market penetration, geographic
business expansion goals, costs targets, customer satisfaction and goals relating to acquisitions
or divestitures of subsidiaries, affiliates or joint ventures. The targeted level or levels of
performance with respect to such business criteria may be established at such levels and in such
terms as the Committee may determine, in its discretion, including in absolute terms, as a goal
relative to performance in prior periods, or as a goal compared to the performance of one or more
comparable companies or an index covering multiple companies.



     8.9 Automatic Grant of Restricted Stock to Non-Employee Directors. Each Non-Employee Director
elected or appointed to serve as a Director for the first time starting with the 2004 annual
meeting of stockholders of the Company shall automatically be granted 3,000 Shares of Restricted
Stock with the first grants being made to qualified Non-Employee Directors on the fifth business
day after the stockholders of the Company approve the Plan. The Restricted Stock shall vest as
follows: 1,000 Shares shall vest on the fifth business day after the date on which the Non-Employee
Director is first elected or appointed; and an additional 1,000 shares shall vest on each of the
two succeeding anniversaries of such Non-Employee Director’s election or, if appointed, on each of
the next two succeeding annual meetings of stockholders, provided that such Non-Employee Director
is 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 annual
meeting of stockholders, the first 1,000 shares shall vest on the fifth business day after the 2005
annual meeting of stockholders.



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 Plan
to such Employees or Non-Employee Directors as it shall determine. Each Restricted Stock Unit Award
shall be evidenced by an Award Agreement and may provide for payment to the Participant in cash or
Shares or a combination thereof upon expiration of the Period of Restriction. The Committee, in its
discretion, may permit a Participant to defer receipt of Common Stock or a cash payment beyond the
expiration of any applicable Period of Restriction or the satisfaction of other restrictions
imposed by the Committee.



     9.2 Transferability of Restricted Stock Units. Restricted Stock Units granted hereunder may
not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the
termination of any Period of Restriction specified in the Award Agreement, or until the earlier
satisfaction of any other conditions specified in the Award Agreement (which may include the
attainment of pre-established performance goals as defined in Section 8.8 hereof).



     9.3 Other Restrictions. The Committee shall impose such other restrictions on Restricted
Stock 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 with
respect 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 a
Participant’s employment (or his status as a Non-Employee Director) terminates due to his
Retirement, death or Disability, the remaining restrictions with respect to the Restricted Stock
Units, except as otherwise provided by the Committee in the Award Agreement pursuant to Sections
9.2 or 9.3 hereof, shall automatically terminate and the Participant shall be entitled to receive
Shares 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 the
event that a Participant’s his employment (or his status as a Non-Employee Director) terminates
with the Company for reasons other than Retirement, death, or Disability, all Restricted Stock
Units 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 all
Restricted Stock Units and distribute Shares or make a cash payment, or a combination thereof, as
set out in the Award Agreement.



13









 





     9.7 Application of Section 409A of the Code. Section 409A of the Code will apply to
Restricted Stock Unit Awards until otherwise provided by Treasury regulations or other guidance
issued 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 in
case of his death before he receives any or all of such benefit. Each such designation shall revoke
all prior designations by the same Participant, shall be in a form prescribed by the Committee, and
will be effective only when filed by the Participant in writing with the Committee during the
Participant’s lifetime. In the absence of any such designation, benefits remaining unpaid at the
Participant’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 the
Company or a Subsidiary to terminate any Participant’s employment (or status as a Director) at any
time, nor confer upon any Participant any right to continue in the employ (or as a Director) of the
Company or a Subsidiary.



     11.2 Participation. No Employee (or Non-Employee Director) shall have a right to be selected
as 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 in
Control as defined in Section 2.1 above, all Awards under the Plan shall vest 100% and shall be
fully exercisable, whereupon all Options and SARs shall become exercisable in full and the
restrictions applicable to Restricted Stock and Restricted Stock Units (including any Period of
Restriction) shall terminate.



ARTICLE
XIII




AMENDMENT, MODIFICATION, AND TERMINATION




     13.1 Amendment, Modification, and Termination. The Board may at any time and from time to
time, alter, amend, suspend or terminate the Plan in whole or in part for the purpose of meeting or
addressing 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 amendment
to the extent the Board deems necessary or desirable or to comply with applicable laws or the rules
of the NASDAQ National Market System or any other system or exchange on which the Shares are then
listed or quoted. Notwithstanding the foregoing, the Board shall obtain stockholder approval to
amend 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 benefits
accruing to Participants in the Plan; or (iii) materially modify the eligibility requirements for
participation in the Plan.



     13.3 Effect of Amendment or Termination. No amendment, termination, or modification of the
Plan shall adversely affect in any material way any Award previously granted under the Plan or the
rights 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, or
require a Participant to remit to the Company, an amount sufficient to satisfy Federal, state, and
local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any
taxable event arising as a result of the Plan.



     14.2 Share Withholding. With respect to withholding required upon the exercise of Options or
SARs, upon the lapse of restrictions on Restricted Stock, or upon any other taxable event arising
as a result of Awards granted hereunder, Participants may elect to satisfy the withholding
requirement, in whole or in part, by having the Company withhold Shares having a Fair Market Value
on the date the tax is to be determined equal to the minimum statutory total tax which would be
imposed on the transaction; provided, however, that in the event a deferral election is in effect
with respect to the Shares deliverable upon exercise of an Option, then the Participant may only
elect to have such withholding made from the Shares tendered to exercise such Option. All such
elections shall be irrevocable, made in writing, signed by the Participant, and shall be subject to
any 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 be
indemnified and held harmless by the Company against and from any loss, cost, liability, or expense
that may be imposed upon or reasonably incurred by him in connection with or resulting from any
claim, action, suit, or proceeding to which he may be a party or in which he may be involved by
reason of any action taken or failure to act under the Plan and against and from any and all
amounts paid by him in settlement thereof, with the Company’s approval, or paid by him in
satisfaction of any judgment in any such action, suit, or proceeding against him, provided he shall
give the Company an opportunity, at its own expense, to handle and defend the same before he
undertakes to handle and defend it on his own behalf. The foregoing right of indemnification shall
not be exclusive of any other rights of indemnification to which such persons may be entitled under
the Certificate or By-laws of the Company, as a matter of law, or otherwise, or any power that the
Company 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 shall
be binding on any successor to the Company, whether the existence of such successor is the result
of a direct or indirect merger, consolidation, purchase of all or substantially all of the business
and/ 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 Plan
shall be subject to all applicable laws, rules, and regulations, and to such approvals by any
governmental 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 Award
Agreements hereunder, shall be construed in accordance with and governed by the laws of the State
of Delaware.



* * *




15









 








     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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