Document:

Exhibit 10.23

 

FINAL VERSION

 

SHAREHOLDERS’ AGREEMENT

 

THIS SHAREHOLDERS’ AGREEMENT (this “Agreement”) is entered into as of April 7, 2014, among MIDLAND STATES BANCORP, INC., an Illinois corporation (“Midland”), and those shareholders of LSHC whose names appear on the signature page of this Agreement (individually, a “Shareholder,” and collectively, the “Shareholders”); provided, however, that this Agreement shall become effective only upon the date of consummation of the Merger (as defined below).

 

RECITALS

 

A.                                    Contemporaneously with this Agreement, Midland has agreed to acquire LSHC by means of a merger (the “Merger”) of LSHC with and into Merger Sub, all pursuant to an Agreement and Plan of Merger dated as of April 7, 2014 (the “Merger Agreement”).

 

B.                                    Upon the consummation of the Merger (the “Closing”) and as a result thereof, each Shareholder is expected to acquire shares of Midland’s common stock, par value $0.01 per share (“Common Stock”), determined pursuant to Article 3 of the Merger Agreement.

 

C.                                    Set forth as Exhibit A is a list of the number of shares of Common Stock that each Shareholder is expected to own after the Closing, which Exhibit A shall be updated to reflect the actual number of shares of Common Stock owned by each Shareholder after the Closing.

 

D.                                    To induce Midland to enter into the Merger Agreement and complete the Merger and issue shares of its Common Stock to the Shareholders, each Shareholder is willing to enter into this Agreement and be bound by its terms, and Midland and the Shareholders have agreed that it is in their mutual interests to enter into this Agreement.

 

AGREEMENTS

 

In consideration of the foregoing premises, which are incorporated herein by this reference, and the covenants and agreements of the parties herein contained, the parties hereto, intending to be legally bound, hereby agree as follows:

 

Section 1.                                          Definitions.  All terms that are capitalized and used herein (and are not otherwise specifically defined herein) shall be used in this Agreement as defined in the Merger Agreement.

 

Section 2.                                          Update of Ownership.  The parties to this Agreement mutually agree to take all necessary actions within two (2) Business Day after the Closing to revise and update Exhibit A to this Agreement to set forth the actual number of shares of Common Stock owned by each Shareholder (collectively, the “Original Shares”).

 

Section 3.                                          Representations and Warranties.  Each of the Shareholders represents and warrants for himself to Midland that:

 

 

(a)                     the Shareholder has full power and authority to enter into and perform his respective obligations under this Agreement, and the execution and delivery of this Agreement by him has been duly authorized by all necessary action, and this Agreement constitutes a valid and binding obligation of him;

 

(b)                     he beneficially owns no shares of Common Stock and, immediately following the Closing, will own no shares of Common Stock other than the Original Shares;

 

(c)                      none of the execution and delivery of this Agreement by the Shareholder, or compliance by the Shareholder with any of the provisions hereof, will conflict with or result in a breach, or constitute a default (with or without notice of lapse of time or both) under any provision of, any charter, bylaws, note, bond, mortgage, indenture, lease or other agreement, instrument or law applicable to the Shareholder; and

 

(d)                     no consent, approval or authorization of, or designation, declaration or filing with, any governmental entity or other person on the part of the Shareholder is required in connection with the valid execution and delivery of this Agreement, and no consent of the Shareholder’s spouse is necessary under any “community property” or other laws in order for the Shareholder to enter into and perform his obligations under this Agreement.

 

Section 4.                                          Certain Prohibited Actions.

 

(a)                     Unless approved in advance in writing by the board of directors of Midland (the “Board”), each Shareholder agrees that neither he nor any of his Representatives acting on behalf of or in concert with the Shareholder (or any of his Representatives) will, until the Expiration Date, as defined below, directly or indirectly:

 

(i)                         make any proposal to the Board, any of Midland’s Representatives or any of Midland’s shareholders regarding, or make any public announcement, proposal or offer (including any “solicitation” of “proxies” as such terms are defined or used in Regulation 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) with respect to, or otherwise solicit, seek or offer to effect (including, for the avoidance of doubt, indirectly by means of communication with the press or media):  (A) any business combination, merger, tender offer, exchange offer or similar transaction involving Midland or any of its Subsidiaries; (B) any restructuring, recapitalization, liquidation or similar transaction involving Midland or any of its Subsidiaries; (C) any acquisition of any of Midland’s loans, debt securities, equity securities or assets, or rights or options to acquire interests in any of Midland’s loans, debt securities, equity securities or assets; (D) except with respect to the representation described in the Merger Agreement, any proposal to seek representation on the Board or otherwise seek to control or influence the management, board of directors or policies of any of Midland or its Subsidiaries; (E) any request or proposal to waive, terminate or amend the provisions of this Agreement; or (F) any proposal, arrangement or other statement that is inconsistent with the terms of this Agreement, including this Section 4;

 

(ii)                      instigate, encourage or assist any third party (including forming a “group,” as defined under the Exchange Act (a “Group”), with any such third party) to do, or 

 

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enter into any discussions or agreements with any third party with respect to, any of the actions set forth in this Section 4;

 

(iii)                   take any action which would reasonably be expected to require Midland or any of its Affiliates or Representatives to make a public announcement regarding any of the actions set forth in this Section 4; or

 

(iv)                  acquire (or propose or agree to acquire), of record or beneficially, by purchase or otherwise, any loans, debt securities, equity securities or assets of Midland or any of its Subsidiaries, or rights or options to acquire interests in any of Midland’s loans, debt securities, equity securities or assets.

 

(b)                     Notwithstanding the foregoing provisions of this Section 4, the restrictions set forth in this Section 4 shall terminate and be of no further force and effect if Midland enters into a definitive agreement with respect to, or publicly announces that it plans to enter into, a transaction involving all or a controlling portion of Midland’s equity securities or all or substantially all of Midland’s assets (whether by merger, consolidation, business combination, tender or exchange offer, recapitalization, restructuring, sale, equity issuance or otherwise).

 

(c)                      For purposes of this Agreement, the “Expiration Date” with respect to the obligations of the Shareholders under this Agreement shall be that first date when the Shareholders, in the aggregate, beneficially own (within the meaning of Rule 13d-3 promulgated under the Exchange Act) less than ten percent (10%) of the outstanding voting securities of Midland, provided, however, that for purposes of determining the number of outstanding voting securities of Midland, all shares of Midland Common Stock then issuable upon conversion of Midland’s Series C 9% Non-Cumulative Perpetual Convertible Preferred Stock, Series D 9% Non-Cumulative Perpetual Convertible Preferred Stock, Series E 9% Non-Cumulative Perpetual Convertible Preferred Stock, and Series F 9% Non-Cumulative Perpetual Convertible Preferred Stock outstanding on the date hereof (and any convertible securities issued in respect thereof pursuant to any stock dividend, stock split, recapitalization or the like of any such shares of preferred stock), shall be assumed to be outstanding even if such preferred stock has not yet been converted.

 

Section 5.                                          Acquisition of Additional Common Stock and Voting of Shares.

 

(a)                     From the date of this Agreement through the Expiration Date, without the prior approval of Midland or except as provided in the Merger Agreement, each Shareholder covenants and agrees not to, and shall cause each of their Affiliates not to, directly or indirectly, alone or in concert with any other Affiliate, Group or other person acquire, offer or propose to acquire or agree to acquire, directly or indirectly, the beneficial ownership of, or the right to vote, any voting securities of Midland in addition to the shares of Common Stock shown on Exhibit A.

 

(b)                     For purposes of this Section 5, the following shall not be deemed acquisitions by a Shareholder of beneficial ownership of Common Stock causing it or him to violate the provisions of Section 5(a):

 

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(i)                         any acquisition approved in advance by, or caused by the action of, Midland’s board of directors (e.g., a stock dividend or a stock split);

 

(ii)                      any increase in percentage ownership of Common Stock due to a redemption or repurchase by Midland of any of its outstanding Common Stock; or

 

(iii)                   acquisitions permitted by the Agreement.

 

(c)                      Each shareholder agrees for a period of three (3) years from the date of this Agreement to cause its or his shares of voting Common Stock to be represented either in person or by proxy at all meetings of Midland’s shareholders so that all shares may be counted for purposes of determining the presence of a quorum at such meeting and to vote the shares of voting Common Stock owned by him, and to cause any holder of record of shares of voting Common Stock under his control, to vote, or execute a written consent or consents if any class of shareholders of Midland is requested to vote their shares of voting Common Stock through the execution of an action by written consent in lieu of any such annual or special meeting of such class of shareholders of Midland:

 

(i)                         in favor of all of the nominees to, and proposals of, the Board as approved by the Board, provided, however, that the nominees to the Board shall include those persons required to be appointed to the Board pursuant to Section 7.8 of the Merger Agreement, and provided, further, that no Shareholder shall be obligated to vote in favor of any proposal if such proposal adversely affects the interests such Shareholder in particular (as distinct from the interests of the shareholders of Midland, as a whole); and

 

(ii)                      against any shareholder proposal not approved or recommended by the Board.

 

Section 6.                                          Additional Shares.  Each Shareholder agrees that all shares of Common Stock that such Shareholder purchases, acquires the right to vote or otherwise acquires beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) after the Closing and prior to the Expiration Date shall be subject to the terms of this Agreement.

 

Section 7.                                          Sale of Shares.  The Shareholders agree that, if at any time prior to an initial public offering by Midland of Common Stock, they sell any shares of Common Stock to a single purchaser or a Group that will own ten percent (10%) or more of the Common Stock after such sale (in either case, a “Block Purchaser”), the Shareholders will require as a condition to that sale that the Block Purchaser become a party to this Agreement and the Block Purchaser shall thereafter be treated under this Agreement the same as the Shareholders.

 

Section 8.                                          Specific Performance.  Each party hereto acknowledges that it will be impossible to measure in money the damage to the other party if a party hereto fails to comply with any of the obligations imposed by this Agreement, that every such obligation is material and that, in the event of any such failure, the other party will not have an adequate remedy at law or damages.  Accordingly, each party hereto agrees that injunctive relief or other equitable remedy, in addition to remedies at law or damages, is the appropriate remedy for any such failure and will not oppose the seeking of such relief on the basis that the other party has an adequate remedy at law.  Each party hereto agrees that it will not seek, and agrees to waive any requirement for, the 

 

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securing or posting of a bond in connection with the other party’s seeking or obtaining such equitable relief.

 

Section 9.                                          Entire Agreement.  This Agreement, together with the Merger Agreement and any other agreements entered into pursuant thereto, supersedes all prior agreements, written or oral, between the parties hereto with respect to the subject matter hereof and contains the entire agreement between the parties with respect to the subject matter hereof.  This Agreement may not be amended or supplemented, and no provisions hereof may be modified or waived, except by an instrument in writing signed by all of the parties hereto.  No waiver of any provisions hereof by any party shall be deemed a waiver of any other provisions hereof by such party, nor shall any such waiver be deemed a continuing waiver of any provision hereof by such party.

 

Section 10.                                   Notices.  All notices, requests, claims, demands, and other communications hereunder shall be in writing and shall be deemed to have been given:  (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a portable data file (pdf) of the document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next business day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 10):

 

If to Midland, to:

 

Midland States Bancorp, Inc.

1201 Network Centre Drive

Effingham, Illinois  62401

Telephone:                       (217) 342-7331

E-mail:                                            jludwig@midlandstatesbank.com

Facsimile:                             (217) 342-9462

Attention:                             Jeffrey G. Ludwig

Executive Vice President and Chief Financial Officer

 

with copies to:

 

Barack Ferrazzano Kirschbaum & Nagelberg LLP

200 West Madison Street, Suite 3900

Chicago, Illinois  60606

Telephone:                       (312) 984-3100

E-mail:                                            dennis.wendte@bfkn.com

Facsimile:                             (312) 984-3150

Attention:                             Dennis R. Wendte, Esq.

 

If to any Shareholder, to the address, facsimile number or e-mail address set forth for the Shareholder on the signature page hereof.

 

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Section 11.                                   Miscellaneous.

 

(a)                     This Agreement shall be governed by and construed in accordance with the internal laws of the State of Missouri without giving effect to any choice or conflict of law provision that would cause the application of laws of any jurisdiction other than those of the State of Missouri, except to the extent that the federal laws of the United States apply.  Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby shall be instituted in the courts of the State of Missouri located in the County of St. Louis, or, if it has or can acquire jurisdiction, in the United States District Court for the Eastern District of Missouri, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding.  Service of process, summons, notice or other document by mail to such party’s address set forth herein shall be effective service of process for any suit, action or other proceeding brought in any such court.  The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or any proceeding in such courts and irrevocably waive and agree not to plead or claim in any such court that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

 

(b)                     EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.  EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT:  (i) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION; (ii) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER; (iii) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY; AND (iv) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS AGREEMENT.

 

(c)                      If any term or provision of this Agreement is held by a final and unappealable order or judgment of a court of competent jurisdiction to be invalid, illegal or unenforceable, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement.  Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

 

(d)                     This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  This Agreement may be executed and accepted by facsimile or portable data file (pdf) signature and any such signature shall be of the same force and effect as an original signature.

 

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(e)                      All words used in this Agreement will be construed to be of such gender or number as the circumstances require, all references to sections, are to sections of this Agreement unless otherwise specified, and “including” means “including, but not limited to.”

 

(f)                       Each party hereto shall execute and deliver such additional documents as may be necessary or desirable to effect the transactions contemplated by this Agreement.

 

(g)                      All section headings herein are for convenience of reference only and are not part of this Agreement, and no construction or reference shall be derived therefrom.

 

(h)                     Each Shareholder acknowledges that he has had an opportunity to be advised by counsel of his choosing with regard to this Agreement and the transactions and consequences contemplated hereby.

 

(i)                         This Agreement shall be binding upon and inure to the benefit of Midland, and its successors and permitted assigns, and the Shareholders and their respective spouses, executors, personal representatives, administrators, heirs, legatees, guardians and other legal representatives.  This Agreement shall survive the death or incapacity of any Shareholder.  This Agreement may be assigned only by Midland, and then only to an Affiliate of Midland.

 

(j)                        This Agreement shall terminate and be of no further force or effect upon the termination of the Merger Agreement prior to the Closing.

 

[THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK]

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement individually, or have caused this Agreement to be executed by their respective officers, on the day and year first written above.

 

	
MIDLAND STATES   BANCORP, INC.
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:  
    	
/s/ Leon J. Holschbach
    	
 
    	
 
    
	
 
    	
Name: 
    	
Leon J. Holschbach
    	
 
    	
 
    
	
 
    	
Title: 
    	
President & CEO
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
SHAREHOLDERS:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
JAMES S. MCDONNELL III
    	
 
    	
/s/ James S. McDonnell   III
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
JOHN F. MCDONNELL
    	
 
    	
/s/ John F. McDonnell
    

 

[SIGNATURE PAGE TO SHAREHOLDERS’ AGREEMENT]

 

 

EXHIBIT A

 

SHARE OWNERSHIP

 

	
SHAREHOLDER
    	
 
    	
MAILING ADDRESS, 
   FACSIMILE, EMAIL 
   ADDRESS
    	
 
    	
NUMBER OF SHARES OF 
   MIDLAND COMMON STOCK
    
	
James S. McDonnell III
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
John F. McDonnellExhibit 10.24

 

Execution Copy

 

SUPPLEMENTAL RETIREMENT BENEFIT AGREEMENT

 

This Supplemental Retirement Benefit Agreement (the “Agreement”) by and between Midland States Bancorp, Inc., located in Effingham, Illinois (the “Employer”), and Leon J. Holschbach (“Executive”), effective as of the 16th day of November 2015, formalizes the agreements and understanding between the Employer and Executive.

 

RECITALS

 

A.                                          Executive is employed by the Employer pursuant to that certain Transitional Employment Agreement, dated November 16, 2015 (the “Employment Agreement”).

 

B.                                          The Employment Agreement provides that the Employer shall provide certain additional retirement benefits to Executive in consideration for entering into the Employment Agreement.

 

C.                                          The Employer recognizes the valuable services Executive has performed for the Employer and wishes to encourage Executive’s continued employment through the Retirement Date (as defined in the Employment Agreement).

 

D.                                          The Employer wishes to provide the terms and conditions upon which the Employer shall pay additional retirement benefits to Executive.

 

E.                                          The Employer and Executive intend this Agreement shall at all times be administered and interpreted in compliance with Code Section 409A.

 

F.                                           The Employer intends this Agreement shall at all times be administered and interpreted in such a manner as to constitute an unfunded nonqualified deferred compensation arrangement, maintained primarily to provide supplemental retirement benefits for Executive, a member of a select group of management or highly compensated employee of the Employer.

 

AGREEMENT

 

In consideration of the foregoing and the mutual promises and covenants of the Parties set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby expressly covenant and agree as follows:

 

1.                                      Definitions.  For the purpose of this Agreement, the following phrases or terms shall have the indicated meanings and unless otherwise defined herein, all capitalized terms shall have the meaning ascribed to them in the Employment Agreement.

 

(a)                                 “Administrator” means the Board or its designee.

 

(b)                                 “Final Base Salary” means the Annual Base Salary (as defined in Employment Agreement) as in effect immediately prior to the Retirement Date.

 

 

(c)                                  “Beneficiary” means the person or persons designated in writing by Executive to receive benefits hereunder in the event of Executive’s death.

 

(d)                                 “Code” means the Internal Revenue Code of 1986, as amended.

 

(e)                                  “Effective Date” means November 16, 2015.

 

(f)                                   “Employment Agreement” means the Transitional Employment Agreement between Executive and the Employer, dated November 16, 2015.

 

(g)                                 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

(h)                                 “Separation from Service” means a termination of Executive’s employment with the Employer and its Affiliates for reasons other than death or Disability.  A Separation from Service may occur as of a specified date for purposes of the Agreement even if Executive continues to provide some services for the Employer or its Affiliates after that date, provided that the facts and circumstances indicate that the Employer and Executive reasonably anticipated at that date that either no further services would be performed after that date, or that the level of bona fide services Executive would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to less than 50 percent (50%) of the average level of bona fide services performed over the immediately preceding thirty-six (36) month period (or the full period during which Executive performed services for the Employer, if that is less than thirty-six (36) months).  A Separation from Service will not be deemed to have occurred while Executive is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six (6) months or, if longer, the period for which a statute or contract provides Executive with the right to reemployment with the Employer.  If Executive’s leave exceeds six (6) months but Executive is not entitled to reemployment under a statute or contract, Executive incurs a Separation of Service on the next day following the expiration of such six (6) month period.  In determining whether a Separation of Service occurs the Administrator shall take into account, among other things, the definition of “service recipient” and “employer” set forth in Treasury regulation §1.409A-1(h)(3).  The Administrator shall have full and final authority, to determine conclusively whether a Separation from Service occurs, and the date of such Separation from Service.

 

2.                                      Payment of Benefits.

 

(a)                                 Normal Retirement Benefit.  The Employer shall pay Executive an annual benefit in the amounts set forth in the table below with the annual benefit paid in equal monthly installments commencing on the first day of the month of each applicable year, with such payments commencing regardless of Executive’s employment status.

 

	
Year
    	
 
    	
Normal Retirement Benefit Amount
    
	
2019
    	
 
    	
50% of Final Base   Salary
    
	
2020
    	
 
    	
40% of Final Base   Salary
    
	
2021
    	
 
    	
30% of Final Base   Salary
    

 

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(b)                                 Early Termination Benefit.  If a Termination occurs during the Employment Period, the Employer shall pay Executive the full Normal Retirement Benefit in the same manner and the same times as provided for the Normal Retirement Benefits.

 

(c)                                  Voluntary Resignation.  In the event that Executive voluntarily resigns without Good Reason during the Employment Period, the Employer shall pay Executive the vested portion of the Normal Retirement Benefit based upon the vesting schedule below, and all unvested amounts shall be forfeited.

 

	
Vesting Date
    	
 
    	
Percent Vested
    	
 
    	
Aggregate Vested
    	
 
    
	
December 31, 2016
    	
 
    	
33
    	
%
    	
33
    	
%
    
	
December 31, 2017
    	
 
    	
33
    	
%
    	
66
    	
%
    
	
December 31, 2018
    	
 
    	
34
    	
%
    	
100
    	
%
    

 

(d)                                 Disability Benefit.  In the event Executive suffers a Disability prior to the Retirement Date, the Employer shall pay Executive the full Normal Retirement Benefit in the same manner and the same times as provided for the Normal Retirement Benefits.

 

(e)                                  Change of Control Benefit.  If a Termination occurs during a Covered Period, the Employer shall pay Executive the full Normal Retirement Benefit in a single lump sum within five (5) business days of such Termination, without reduction or discounting.

 

(f)                                   Death Prior to Commencement of Benefit Payments.  In the event Executive dies prior to the Retirement Date, the Employer shall pay the Beneficiary the full Normal Retirement Benefit in a single lump sum within five (5) business days of such Termination, without reduction or discounting.

 

(g)                                 Death Subsequent to Commencement of Benefit Payments.  In the event Executive dies while receiving payments, but prior to receiving all payments due and owing hereunder, the Employer shall pay the Beneficiary the same amounts at the same times as the Employer would have paid Executive had Executive survived.

 

(h)                                 Termination for Cause.  If the Employer terminates Executive’s employment in a termination for Cause, then Executive shall not be entitled to any benefits under the terms of this Agreement.

 

(i)                                    Restriction on Commencement of Distributions.  Notwithstanding any provision of this Agreement to the contrary, if Executive is considered a Specified Employee at the time of Separation from Service, the provisions of this Section shall govern all distributions hereunder.  Distributions which would otherwise be made to Executive due to Separation from Service shall not be made during the first six (6) months following Separation from Service.  Rather, any distribution which would otherwise be paid to Executive during such period shall be accumulated and paid to Executive in a lump sum on the first day of the seventh month following Separation from Service, or if earlier, upon Executive’s death.  All subsequent distributions shall be paid as they would have had this Section not applied.

 

(j)                                    Acceleration of Payments.  Except as specifically permitted herein, no acceleration of the time or schedule of any payment may be made hereunder.  Notwithstanding

 

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the foregoing, payments may be accelerated, in accordance with the provisions of Treasury Regulation §1.409A-3(j)(4) in the following circumstances: (i) as a result of certain domestic relations orders; (ii) in compliance with ethics agreements with the federal government; (iii) in compliance with the ethics laws or conflicts of interest laws; (iv) in limited cashouts (but not in excess of the limit under Code §402(g)(1)(B)); (v) to pay employment-related taxes; or (vi) to pay any taxes that may become due at any time that the Agreement fails to meet the requirements of Code Section 409A.

 

(k)                                 Treatment of Payment as Made on Designated Payment Date.  Solely for purposes of determining compliance with Code Section 409A, any payment under this Agreement made after the required payment date shall be deemed made on the required payment date provided that such payment is made by the latest of: (i) the end of the calendar year in which the payment is due; (ii) the 15th day of the third calendar month following the payment due date; (iii) if Employer cannot calculate the payment amount on account of administrative impracticality which is beyond Executive’s control, the end of the first calendar year which payment calculation is practicable; and (iv) if Employer does not have sufficient funds to make the payment without jeopardizing the Employer’s solvency, in the first calendar year in which the Employer’s funds are sufficient to make the payment.

 

(l)                                    Facility of Payment.  If a distribution is to be made to a minor, or to a person who is otherwise incompetent, then the Administrator may make such distribution: (i) to the legal guardian, or if none, to a parent of a minor payee with whom the payee maintains his or her residence; or (ii) to the conservator or administrator or, if none, to the person having custody of an incompetent payee.  Any such distribution shall fully discharge the Employer and the Administrator from further liability on account thereof.

 

(m)                             Changes in Form of Timing of Benefit Payments.  The Employer and Executive may, subject to the terms hereof, amend this Agreement to delay the timing or change the form of payments.  Any such amendment:

 

(i)                                     must take effect not less than twelve (12) months after the amendment is made;

 

(ii)                                  must, for benefits distributable due solely to the arrival of a specified date, or on account of Separation from Service or Change of Control, delay the commencement of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made;

 

(iii)                               must, for benefits distributable due solely to the arrival of a specified date, be made not less than twelve (12) months before distribution is scheduled to begin; and

 

(iv)                              may not accelerate the time or schedule of any distribution.

 

3.                                      Beneficiaries.

 

(a)                                 Designation of Beneficiaries.  Executive may designate any person to receive any benefits payable under the Agreement upon Executive’s death, and the designation

 

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may be changed from time to time by Executive by filing a new designation.  Each designation will revoke all prior designations by Executive, shall be in the form prescribed by the Administrator, and shall be effective only when filed in writing with the Administrator during Executive’s lifetime.  If Executive names someone other than Executive’s spouse as a Beneficiary, the Administrator may, in its sole discretion, determine that spousal consent is required to be provided in a form designated by the Administrator, executed by Executive’s spouse and returned to the Administrator.  Executive’s Beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases Executive or if Executive names a spouse as Beneficiary and the marriage is subsequently dissolved.

 

(b)                                 Absence of Beneficiary Designation.  In the absence of a valid Beneficiary designation, or if, at the time any benefit payment is due to a Beneficiary, there is no living Beneficiary validly named by Executive, the Employer shall pay the benefit payment to Executive’s spouse.  If the spouse is not living then the Employer shall pay the benefit payment to Executive’s living descendants per stirpes, and if there no living descendants, to Executive’s estate.  In determining the existence or identity of anyone entitled to a benefit payment, the Employer may rely conclusively upon information supplied by Executive’s personal representative, executor, or administrator.

 

4.                                      Administration.

 

(a)                                 Administrator Duties.  The Administrator shall be responsible for the management, operation, and administration of the Agreement.  When making a determination or calculation, the Administrator shall be entitled to rely on information furnished by the Employer, Executive or Beneficiary.  No provision of this Agreement shall be construed as imposing on the Administrator any fiduciary duty under ERISA or other law, or any duty similar to any fiduciary duty under ERISA or other law.

 

(b)                                 Administrator Authority.  The Administrator shall enforce this Agreement in accordance with its terms, shall be charged with the general administration of this Agreement, and shall have all powers necessary to accomplish its purposes.

 

(c)                                  Compensation, Expenses and Indemnity.  The Administrator shall serve without compensation for services rendered hereunder.  The Administrator is authorized at the expense of the Employer to employ such legal counsel and/or recordkeeper as it may deem advisable to assist in the performance of its duties hereunder.  Expense and fees in connection with the administration of this Agreement shall be paid by the Employer.

 

(d)                                 Employer Information.  The Employer shall supply full and timely information to the Administrator on all matters relating to Executive’s compensation, death, Disability or Separation from Service, and such other information as the Administrator reasonably requires.

 

(e)                                  Compliance with Code Section 409A.  The Employer and Executive intend that the Agreement comply with the provisions of Code Section 409A to prevent the inclusion in gross income of any amounts deferred hereunder in a taxable year prior to the year in which amounts are actually paid to Executive or Beneficiary.  This Agreement shall be

 

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construed, administered and governed in a manner that effects such intent, and the Administrator shall not take any action that would be inconsistent therewith.

 

5.                                      Amendment and Termination.

 

(a)                                 Agreement Amendment Generally.  Except as provided in Section 5(b), this Agreement may be amended only by a written agreement signed by both the Employer and Executive.

 

(b)                                 Amendment to Insure Proper Characterization of Agreement.  Notwithstanding anything in this Agreement to the contrary, the Agreement may be amended by the Employer at any time, if found necessary in the opinion of the Employer, (i) to ensure that the Agreement is characterized as plan of deferred compensation maintained for a select group of management or highly compensated employees as described under ERISA, (ii) to conform the Agreement to the requirements of any applicable law or iii) to comply with the written instructions of the Employer’s auditors or banking regulators.

 

(c)                                  Agreement Termination Generally.  Except as provided in Section 5(d), this Agreement may be terminated only by a written agreement signed by the Employer and Executive.  Such termination shall not cause a distribution of benefits under this Agreement.  Rather, upon such termination benefit distributions shall be made at the earliest distribution event permitted under Section 2.

 

(d)                                 Effect of Complete Termination.  Notwithstanding anything to the contrary in Section 5(c), and subject to the requirements of Code Section 409A and Treasury Regulations §1.409A-3(j)(4)(ix), at certain times the Employer may completely terminate and liquidate the Agreement.  In the event of such a complete termination, the Employer shall pay the full Normal Retirement Benefit to Executive in a single lump sum within five (5) business days of such termination.  Such complete termination of the Agreement shall occur only under the following circumstances and conditions.

 

(i)                                     Change of Control.  The Employer may terminate and liquidate this Agreement by taking irrevocable action to terminate and liquidate within the thirty (30) days preceding or the twelve (12) months following a Change of Control.  This Agreement will then be treated as terminated only if all substantially similar arrangements sponsored by the Employer which are treated as deferred under a single plan under Treasury Regulations §1.409A-1(c)(2) are terminated and liquidated with respect to each employee who experienced the Change of Control so that Executive and any employees in any such similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the date the Employer takes the irrevocable action to terminate the arrangements.

 

(ii)                                  Discretionary Termination.  The Employer may terminate and liquidate this Agreement provided that: (A) the termination does not occur proximate to a downturn in the financial health of the Employer; (B) all arrangements sponsored by the Employer and Affiliates that would be aggregated with any terminated arrangements under Treasury Regulations §1.409A-1(c) are terminated; (C) no payments, other than payments that would be payable under the terms of this Agreement if the termination had not occurred, are

 

6

 

made within twelve (12) months of the date the Employer takes the irrevocable action to terminate this Agreement; (D) all payments are made within twenty-four (24) months following the date the Employer takes the irrevocable action to terminate and liquidate this Agreement; and (E) neither the Employer nor any of its Affiliates adopt a new arrangement that would be aggregated with any terminated arrangement under Treasury Regulations §1.409A-1(c) if Executive participated in both arrangements, at any time within three (3) years following the date the Employer takes the irrevocable action to terminate this Agreement.

 

6.                                      Miscellaneous.

 

(a)                                 No Effect on Other Rights.  This Agreement constitutes the entire agreement between the Employer and Executive as to the subject matter hereof.  No rights are granted to Executive by virtue of this Agreement other than those specifically set forth herein.  Nothing contained herein will confer upon Executive the right to be retained in the service of the Employer nor limit the right of the Employer to discharge or otherwise deal with Executive without regard to the existence hereof.

 

(b)                                 Governing Law.  To the extent not governed by ERISA, the provisions of this Agreement shall be construed and interpreted according to the internal law of the State of Illinois without regard to its conflicts of laws principles.  All questions concerning the construction, validity and interpretation of this Agreement and the performance of the obligations imposed by this Agreement shall be governed by the internal laws of the State of Illinois applicable to agreements made and wholly to be performed in such state without regard to conflicts of law provisions of any jurisdiction, and any court action commenced to enforce this Agreement shall have as its sole and exclusive venue the County of Effingham, Illinois.

 

(c)                                  Validity.  In case any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal or invalid provision had never been inserted herein.

 

(d)                                 Nonassignability.  Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.

 

(e)                                  Unsecured General Creditor Status.  Payment to Executive or any Beneficiary hereunder shall be made from assets which shall continue, for all purposes, to be part of the general, unrestricted assets of the Employer and no person shall have any interest in any such asset by virtue of any provision of this Agreement.  The Employer’s obligation hereunder shall be an unfunded and unsecured promise to pay money in the future.  In the event that the Employer purchases an insurance policy insuring the life of Executive to recover the cost of providing benefits hereunder, neither Executive nor the Beneficiary shall have any rights whatsoever in said policy or the proceeds therefrom.

 

(f)                                   Life Insurance.  If the Employer chooses to obtain insurance on the life of Executive in connection with its obligations under this Agreement, Executive hereby agrees to take such physical examinations and to truthfully and completely supply such information as may be required by the Employer or the insurance company designated by the Employer.

 

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(g)                                 Suicide.  No benefit shall be distributed hereunder if Executive commits suicide.

 

(h)                                 Removal.  Notwithstanding anything in this Agreement to the contrary, the Employer shall not distribute any benefit under this Agreement if Executive is subject to a final removal or prohibition order issued pursuant to Section 8(e) of the Federal Deposit Insurance Act.  Furthermore, any payments made to Executive pursuant to this Agreement shall, if required, comply with 12 U.S.C. 1828, FDIC Regulation 12 CFR Part 359 and any other regulations or guidance promulgated thereunder.

 

(i)                                    Notice.  Any notice, consent or demand required or permitted to be given to the Employer or Administrator under this Agreement shall be sufficient if in writing and hand-delivered or sent by registered or certified mail to the Employer’s principal business office.  Any notice or filing required or permitted to be given to Executive or Beneficiary under this Agreement shall be sufficient if in writing and hand-delivered or sent by mail to the last known address of Executive or Beneficiary, as appropriate.  Any notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or on the receipt for registration or certification.

 

(j)                                    Headings and Interpretation.  Headings and sub-headings in this Agreement are inserted for reference and convenience only and shall not be deemed part of this Agreement.  Wherever the fulfillment of the intent and purpose of this Agreement requires and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural.

 

(k)                                 Alternative Action.  In the event it becomes impossible for the Employer or the Administrator to perform any act required by this Agreement due to regulatory or other constraints, the Employer or Administrator may perform such alternative act as most nearly carries out the intent and purpose of this Agreement and is in the best interests of the Employer, provided that such alternative act does not violate Code Section 409A.

 

(l)                                    Coordination with Other Benefits.  The benefits provided for Executive or the Beneficiary under this Agreement are in addition to any other benefits available to Executive under any other plan or program for employees of the Employer.  This Agreement shall supplement and shall not supersede, modify, or amend any other such plan or program except as may otherwise be expressly provided herein.

 

(m)                             Inurement.  This Agreement shall be binding upon and shall inure to the benefit of the Employer, its successors and assigns, and Executive, Executive’s successors, heirs, executors, administrators, and the Beneficiary.

 

(n)                                 Tax Withholding.  The Employer may make such provisions and take such action as it deems necessary or appropriate for the withholding of any taxes which the Employer is required by any law or regulation to withhold in connection with any benefits under the Agreement.  Executive shall be responsible for the payment of all individual tax liabilities relating to any benefits paid hereunder.

 

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(o)                                 Aggregation of Agreement.  If the Employer offers other non-qualified deferred compensation plans, this Agreement and those plans shall be treated as a single plan to the extent required under Code Section 409A.

 

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

 

	
MIDLAND STATES   BANCORP, INC.
    	
LEON J. HOLSCHBACH
    
	
 
    	
 
    
	
By: 
    	
/s/ John M. Schultz
    	
 
    	
/s/ Leon J. Holschbach
    
	
Name: 
    	
John M. Schultz
    	
 
    	
 
    	
[Signature]
    
	
Its: 
    	
Chairman
    	
 
    	
 
    

 

9

 

SUPPLEMENTAL RETIREMENT BENEFIT AGREEMENT

 

Beneficiary Designation

 

I, Leon J. Holschbach, designate the following as Beneficiary under this Agreement:

 

	
Primary
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
%
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
%
    
	
Contingent
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
%
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
%
    

 

I understand that I may change this Beneficiary designation by delivering a new written designation to the Administrator, which shall be effective only upon receipt by the Administrator prior to my death.  I further understand that the designation shall be automatically revoked if the Beneficiary predeceases me or if I have named my spouse as Beneficiary and our marriage is subsequently dissolved.

 

	
Signature:
    	
 
    	
 
    	
Date:
    	
 
    

 

SPOUSAL CONSENT (Required only if Administrator requests and someone other than spouse is named as Primary Beneficiary)

 

I consent to the Beneficiary designation above.  I also acknowledge that if I am named Beneficiary and my marriage is subsequently dissolved, the Beneficiary designation shall be automatically revoked.

 

	
Spouse Name:
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Signature:
    	
 
    	
 
    	
Date:
    	
 
    

 

Received by the Administrator this       day of                    , 20

 

	
By:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Title:

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