Document:

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EXHIBIT 10.2

FIRST BUSINESS FINANCIAL SERVICES, INC.

INCENTIVE STOCK OPTION AGREEMENT

          THIS AGREEMENT, made this
              day of
              , 20   , by
FIRST BUSINESS FINANCIAL SERVICES, INC., a Wisconsin corporation (the
“Company”), and
       , an employee of the Company or a
Subsidiary corporation (the “Optionee”).

	1.	 	Grant of Option. Pursuant to the First Business Financial Services, Inc.
2001 Equity Incentive Plan (the “2001 Plan”), the Board of Directors of
the Company (the “Board”) has determined to grant to the Optionee, on the
terms and conditions set forth herein, this option (the “Option”) to
purchase common stock of the Company. The Option is intended to qualify
as an “Incentive Stock Option” within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the “Code”).
	 
	2.	 	Number of Shares and Option Price. The Option is to purchase
       
       shares of the common stock of the Corporation (the “Option
Shares”) at a price of
       
       per share (the “Option Price”).
	 
	3.	 	Period of Option and Conditions of Exercise.

	a.	 	Period of Option. Unless terminated earlier pursuant to the
terms of this Agreement or the Plan, the Option shall be in effect
from the date hereof (the “Date of Grant”) through 5:00 P.M. (EST)
on    
    , 20   (the “Expiration Date”). Upon
termination or expiration of the Option, all rights of the Optionee
hereunder shall cease.
	 
	b.	 	Conditions of Exercise. The Optionee may exercise the Option
only to the extent it is vested, and only until the earlier of the
Expiration Date or the applicable date set forth in Section 4. The
Option will vest as follows:

	i.	 	25% of the Option Shares will vest on the first
anniversary of the Date of Grant;
	 
	ii.	 	an additional 25% of the Option Shares will vest
on the second anniversary of the Date of Grant;
	 
	iii.	 	an additional 25% of the Option Shares will vest
on the third anniversary of the Date of Grant; and
	 
	iv.	 	the final 25% of the Option Shares will vest on
the fourth anniversary of the Date of Grant.

 

 

	 	 	Notwithstanding the foregoing, if the Optionee terminates employment
from the Company and its Subsidiaries as a result of death, total and
permanent disability (within the meaning of Code Section 22(e)(3)) or
retirement on or after age 58, at a time when the Optionee could not
have been terminated for cause (as defined in Section 4.c. below), the
Option will become immediately and fully vested as of the date of such
termination. In addition, upon a Change in Control of the Company (as
defined in the Plan), this Option will become immediately and fully
vested as of the date of such Change in Control provided the Optionee
is an employee of the Company or Subsidiary immediately prior to the
Change in Control.
	 
	 	 	Those Option Shares that are not vested as of the date of the
Optionee’s termination of employment from the Company and its
Subsidiaries shall automatically and without notice terminate and be
cancelled effective as of the date of such termination.
	 
	 	 	The Optionee’s transfer of employment between and among the Company
and its Subsidiaries shall not be considered a termination of
employment hereunder.

	4.	 	Termination of Employment. The following paragraphs apply in the event
of the Optionee’s termination of employment from the Company and its
Subsidiaries prior to the Expiration Date. In no event, however, will the
periods described herein extend the term of the Option beyond its
Expiration Date or beyond the date the Option is otherwise cancelled
pursuant to the terms of the Plan.

	a.	 	Termination Due to Death. If the Optionee terminates
employment from the Company and its Subsidiaries by reason of death
at a time when the Optionee could not have been terminated for cause
(as defined below), the Optionee’s beneficiary or other person or
persons that acquire the Optionee’s rights under the Option by will
or by the laws of descent and distribution, may exercise the Option
until the first anniversary of the date of the Optionee’s death.
	 
	b.	 	Termination Due to Disability or Retirement. If the Optionee
terminates employment from the Company and its Subsidiaries by
reason of total and permanent disability (within the meaning of Code
Section 22(e)(3)), or retirement on or after age 58, at a time when
the Optionee could not have been terminated for cause (as defined
below), the Optionee (or his legal representative) may exercise the
Option until the first anniversary of the date of such termination.
	 
	c.	 	Termination for Cause. If the Company or a Subsidiary
terminates the Optionee’s employment for cause, the Option shall be
immediately cancelled and forfeited back to the Company without
notice to the Optionee. For purposes hereof, “cause” means: (1) if
the Optionee is subject to an employment agreement that contains a
definition of “cause”, such definition, or (2) otherwise, any of the
following as determined by the Board: (a) violation of the
provisions of any employment agreement, non-competition agreement,
confidentiality agreement, or similar agreement with the Company or
a Subsidiary, or the Company’s or Subsidiary’s code of conduct, as
then in effect, (b) conduct rising to the level of

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	 	 	gross negligence or willful misconduct in the course of employment
with the Company or Subsidiary, (c) commission of an act of
dishonesty or disloyalty involving the Company or Subsidiary, (d)
violation of any federal, state or local law in connection with the
Optionee’s employment, or (e) breach of any fiduciary duty to the
Company or Subsidiary.
	 
	d.	 	Termination for Any Other Reason. If the Optionee terminates
employment from the Company and its Subsidiaries for any reason not
described above, the Optionee may exercise the Option, to the extent
vested as of the date of such termination of employment, for a
period ending on the third (3rd)-month anniversary of the date of
such termination.
	 
	e.	 	Notice of Competition. Upon receipt by the Company or a
Subsidiary, prior to the date the Option otherwise expires under the
foregoing provisions, of notice that the Optionee has become, or
intends to become, an employee or director of, or consultant to,
any business that provides services in competition with the Company
or any of its Subsidiaries (as determined by the Board), or that the
Optionee has acquired, or intends to acquire, a proprietary interest
in any such business, this Option shall immediately terminate and
cease to be exercisable (regardless of vesting) on the date of such
notice. For purposes hereof, a proprietary interest in a business
is ownership, whether through stock holdings or otherwise, either
directly or indirectly, of one percent or more of such business.

	5.	 	Non-Transferability of Option. The Option and this Option Agreement
shall not be transferable other than by will or by the laws of descent and
distribution, or pursuant to a beneficiary designation filed in accordance
with Section 7; and the Option may be exercised, during the lifetime of
the Optionee, only by the Optionee or by his or her legal representative.

	6.	 	Exercise of Option. The Optionee may exercise the Option prior to its
termination or expiration, but only to the extent vested, by delivering
written notice to the Secretary of the Company, on the form authorized by
the Board, specifying the whole number of Option Shares which he or she
elects to purchase, together with full payment of the Option Price in the
form of:

	a.	 	Cash;
	 
	b.	 	By tendering shares of previously acquired Stock which have
been held for at least six months and which have a Fair Market Value
at the time of exercise equal to the total Option Price;
	 
	c.	 	Through a cashless exercise procedure established by the
Board, if any; or
	 
	d.	 	Any combination of (a), (b) or (c).

	 	 	Subject to the terms of this Agreement, the Company shall promptly
deliver to the Optionee the Stock for which the full Option Price has
been paid; provided, however, that the Company may, in its discretion,
require that the Optionee pay to the Company or

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	 	 	Subsidiary, at the time of exercise, any such additional amount as the
Company or Subsidiary deems necessary to satisfy its liability to
withhold Federal, state or local income or other taxes incurred by reason
of the exercise or the transfer of shares of Stock thereupon. The
Optionee will not be deemed to be a shareholder of the Company until the
date of the issuance of a stock certificate to him or her for such shares
and until the shares of Stock are paid for in full.
	 
	7.	 	Beneficiary. The Optionee may designate one or more beneficiaries who
shall be entitled to exercise the Option, to the extent it is exercisable,
after the death of Optionee. The Optionee may from time to time revoke or
change his or her beneficiary designation without the consent of any prior
beneficiary by filing a new designation with the Company. The last such
designation received by the Company shall be controlling; provided,
however, that no designation, or change or revocation thereof, shall be
effective unless received by the Company prior to the Optionee’s death,
and in no event shall any designation be effective as of a date prior to
such receipt. If no beneficiary designation is in effect at the time of
Optionee’s death, or if no designated beneficiary survives the Optionee or
if such designation conflicts with law, the Optionee’s estate will be
considered the beneficiary. In the event all beneficiary(ies) die after
the Optionee and prior to the full exercise of the Option, the Option
shall automatically and without notice terminate on the date of the last
beneficiary’s death. If the Board is in doubt as to the right of any
person to exercise the Option, the Company may refuse to recognize such
exercise, without liability for any interest or dividends on the
underlying Stock, until the Board determines the person entitled to
exercise the Option, or the Company may apply to any court of appropriate
jurisdiction and such application shall be a complete discharge of the
liability of the Company therefor.
	 
	8.	 	Restrictions on Exercise, Issuance and Transfer of Shares.

	a.	 	General. No individual may exercise the Option and no shares
of Stock will be issued under this Agreement unless and until the
Company has determined to its satisfaction that such exercise and
issuance comply with all relevant provisions of applicable law,
including the requirements of any stock exchange on which the shares
may then be traded.
	 
	b.	 	Securities Laws. Optionee acknowledges that he or she is
acquiring the Option and the Stock purchasable pursuant to the
Option for investment purposes only and not with a view to resale or
other distribution thereof to the public in violation of the
Securities Act of 1933, as amended (the “Act”). Optionee agrees and
acknowledges with respect to any shares of Stock that have not been
registered under the Act, that (i) Optionee will not sell or
otherwise dispose of such shares except pursuant to an effective
registration statement under the Act and any applicable state
securities laws, or in a transaction which in the opinion of counsel
for the Company is exempt from such registration, and (ii) a legend
will be placed on the certificates for the shares to such effect.
As further conditions to the issuance of the Stock, the Optionee
agrees for himself, his beneficiary(ies), and his heirs, legatees
and legal representatives, prior to such issuance to execute and
deliver to the Company such investment representations and
warranties, to enter

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	 	 	into a restrictive stock transfer agreement, and to take or refrain
from taking such other actions, as counsel for the Company
determines may be necessary or appropriate for compliance with the
Act and any applicable federal or state securities laws, regardless
of whether the shares of Stock have at that time been registered
under the Act or qualified under the securities laws of any state.

	9.	 	Special Provisions for Incentive Stock Options. The Optionee hereby
acknowledges and understands that in order to obtain favorable tax
treatment for this Incentive Stock Option, the following rules apply under
current tax laws:

	a.	 	The Optionee must hold the Stock acquired upon exercise for a
period of one year from the date of exercise and two years from the
Date of Grant.
	 
	b.	 	The exercise price must equal at least the Fair Market Value
of a share of Stock on the Date of Grant. While the Board has made
a good faith determination of the Fair Market Value of a Share in
this regard, neither the Board nor the Company can guarantee that
the Board’s determination will be considered Fair Market Value, nor
will the Optionee or any other individual be subject to any
indemnification for any failure of the Board to have made such a
determination.
	 
	c.	 	If Option Shares with a Fair Market Value (as determined on
the Date of Grant) in excess of $100,000 become exercisable (vested)
for the first time in any calendar year (including for this purpose
option shares granted under all other incentive stock options
granted by the Company and its subsidiaries), the number of Option
Shares with a Fair Market Value in excess of such $100,000 limit
will be considered issued under a nonqualified stock option.
	 
	d.	 	The Optionee must exercise this Option within three (3)
months after his termination of employment for any reason other than
disability or death. Accordingly, an Optionee who exercises this
Option more than three (3) months after retirement will be treated
as exercising a nonqualified stock option.
	 
	e.	 	For purposes of subsection d., if the Optionee takes an
approved leave of absence from the Company and its Subsidiaries, the
Optionee is treated as terminated from employment on the
ninety-first (91st) day of such leave, or if longer the last day on
which the Optionee’s right to reemployment is guaranteed by law or
contract.
	 
	f.	 	For purposes of subsection d., if the Optionee transfers to
the employment of a Subsidiary that is not a subsidiary within the
meaning of Code Section 422, the Optionee will be treated as
terminated from employment on the date of such transfer or the date
such Subsidiary ceases to meet the requirements of Code Section 422,
if later.
	 
	g.	 	The excess of the Fair Market Value of the Option Shares at
the time of exercise over the amount the Optionee pays for such
Stock may be an item of adjustment for alternative minimum tax (AMT)
purposes on the Optionee’s personal tax return.

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	10.	 	Failure to Enforce Not a Waiver. The failure of the Company to enforce
at any time any provision of this Option Agreement shall in no way be a
waiver of such provision or of any other provision hereof.

	11.	 	Optionee Bound by Plan. Optionee hereby acknowledges receipt of a copy
of the 2001 Plan and agrees to be bound by all the terms and provisions
thereof. The terms of the 2001 Plan to the extent not stated herein are
expressly incorporated herein by reference and in the event of any
conflict between this Agreement and the Plan, the Plan shall govern. Any
capitalized terms not defined herein will have the meanings given in the
Plan. This Agreement is subject to all of the terms, conditions and
provisions of the Plan, including, without limitation, the amendment
provisions thereof, and to such rules, regulations and interpretations
relating to the Plan or this Agreement adopted by the Board and in effect
from time to time. By signing below, the Participant agrees and accepts
on behalf of himself or herself, and his or her heirs, legatees and
beneficiary(ies), that all decisions or interpretations of the Board with
respect to the Plan or this Agreement are binding, conclusive and final.

	12.	 	Notices. Any notice hereunder to the Company shall be addressed to it at
its office, 401 Charmany Drive, Madison, WI 53711; Attention: Corporate
Secretary, and any notice hereunder to Optionee shall be addressed to him
or her at the last home address on file with the Company. Either party may
designate some other address at any time hereafter in writing.

	13.	 	Severability. In the event any provision of the Agreement is held
illegal or invalid for any reason, the illegality or invalidity will not
affect the remaining provisions of the Agreement, and the Agreement shall
be construed and enforced as if the illegal or invalid provision had not
been included.

	14.	 	Amendments. This Option Agreement may be amended or modified at any time
by an instrument in writing signed by the parties hereto, and may be
amended or terminated by the Company or the Board without the Optionee’s
consent as provided in the Plan.

          IN WITNESS WHEREOF, the parties have executed this Option Agreement on the
day and year first above written.

	 	 	 	 	 	 	 
	 	 	FIRST BUSINESS FINANCIAL SERVICES, INC.
	 
	 	 	 	 	 	 
	

	 	 	 	By
	 	

	

	 	 	 	Its:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	The undersigned hereby accepts and agrees
to all the terms and provisions of the
foregoing Option Agreement and to all the
terms and provisions of the First Business
Financial Services, Inc. 2001 Equity
Incentive Plan.
	 
	 	 	 	 	 	 
	 	 	 	 	

	 	 	 	 	(Optionee)

6exv10w3

 

EXHIBIT 10.3

AGREEMENT

      THIS AGREEMENT is made and entered into as of this 23rd day of June, 1995,
by and between First Business Bancshares, Inc., a Wisconsin corporation (the
“Corporation”), and its wholly owned subsidiary First Business Bank of Madison,
a Wisconsin state-chartered bank (the “Bank”) (herein collectively referred to
as the “Companies”) and Jerome J. Smith, President of the Companies
(hereinafter referred to as “Executive”).

W I T N E S S E T H

      WHEREAS, the Boards have approved the Companies’ entering into an
Agreement with the Executive; and

      WHEREAS, the Executive has discharged the duties as president of the
Companies in a very capable and skillful manner, resulting in substantial
benefits to the Companies; and

      WHEREAS,
 the Companies desire the Executive to remain in its service and
to continue to use his knowledge and experience on behalf of the Companies,
and is willing to offer the Executive an incentive to do so in the form of
deferred compensation; and

      WHEREAS, the Executive is willing to continue his efforts on behalf of
the Companies in exchange for such an incentive; and

      WHEREAS, should the possibility of a Change in Control of either of the
Companies arise, the Boards believe it imperative that the Companies and the
Boards should be able to rely upon the Executive to continue in his position,
and that the Companies should be able to receive and rely upon his advice, if
it requests it, as to the best interests of the Companies and their
shareholders without concern that he might be distracted by the personal
uncertainties and risks created by the possibility of a Change in Control; and

      WHEREAS, should the possibility of a Change in Control arise, in addition
to the Executive’s regular duties, he may be called upon to assist in the
assessment of such possible Change in Control, advise management and the
Boards as to whether such Change in Control would be in the best interests of
the Companies and their shareholders, and to take such other actions as the
Boards might determine to be appropriate; and

      NOW, THEREFORE, to assure the Companies that they will have the continued
dedication of the Executive and the availability of his advice and counsel
notwithstanding the possibility, threat, or occurrence of a Change in Control
of either of the Companies, and to induce the Executive to remain in the
employ of the Companies, and for other good and valuable consideration, the
Companies and the Executive agree as follows:

 

 

Article 1. DEFINITIONS

1.1 Definitions. Whenever used in this Agreement, the following terms shall
have the meanings set forth below, and, when the meaning is intended, the
initial letter of the word is capitalized:

	(a)	 	“Agreement” means this document.
	 
	(b)	 	“Beneficial Owner” shall have the meaning ascribed to
such term in Rule 13d-3 of the General Rules and
Regulations under the Exchange Act.
	 
	(c)	 	“Beneficiary” means the persons or entities designated or
deemed designated by the Executive pursuant to Section
12.2 herein.
	 
	(d)	 	“Benefit Amount” means the amount of deferred
compensation benefits under Section 2.1.
	 
	(e)	 	“Boards” mean the Boards of Directors of the Companies or
any committee formed by or appointed by the Boards to
administer this Agreement.
	 
	(f)	 	“Cause” shall be determined by the Board of Directors of
the Corporation or the Bank in exercise of good faith and
reasonable judgment, and shall mean the occurrence of the
Executive’s conviction for committing an act of fraud,
embezzlement, theft, or other act constituting a felony
substantially related to the circumstances of the
Executive’s duties; or material breach by Executive of
the banking laws of Wisconsin or the United States or any
regulation issued by a state or federal regulatory
authority having jurisdiction over the banking affairs of
the Bank, or its subsidiary banks; or an act which
disqualifies Executive from serving as an officer or
director of a bank under Wisconsin banking laws.
	 
	(h)	 	“Change in Control” shall be deemed to have occurred as of
the first day that any one or more of the following conditions
shall have been satisfied including, but not limited to, signing of
documents by all parties and approval by all regulatory agencies,
if required:

	(1)	 	Any Person becomes the Beneficial Owner,
directly or indirectly, of securities of either of the
Companies representing an additional (compared to the
securities held prior to the Effective Date of this
Agreement) thirty-five (35%) percent or more of the combined
voting power of either of the Companies’ then outstanding
securities.

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	(2)	 	The stockholders of either of the Companies approve: (A) a
plan of complete liquidation; or (B) an agreement for the sale or
disposition of all or substantially all of its assets; or (C) a
merger, consolidation, or reorganization involving any other
corporation, other than a merger, consolidation, or reorganization
that would result in the voting securities of either of the
Companies outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity), at least fifty
percent (50%) of the combined voting power of the voting securities
of either of the Companies (or such surviving entity) outstanding
immediately after or within one (1) year following such merger,
consolidation, or reorganization.

	 	 	However, in no event shall a Change in Control be deemed to have
occurred, with respect to the Executive, if the Executive is part of a
purchasing group which consummates the Change-in-Control transaction.
The Executive shall be deemed “part of a purchasing group” for purposes
of the preceding sentence if the Executive is an equity participant in
the purchasing company or group (except for: (1) passive ownership of
less than three (3%) percent of the stock of the purchasing company; or
(ii) ownership of equity participation in the purchasing company or
group which is otherwise not significant, as determined prior to the
Change in Control by a majority of the nonemployee continuing Directors
of the Boards). The Company which changed control shall be sometimes
referred to herein as the “Company which Changed Control.”
	 
	(i)	 	“Code” means the United States Internal Revenue Code of 1986, as
amended.
	 
	(j)	 	“Companies” refers collectively to the Corporation and the Bank, or any
successor thereto as provided in Article 11 herein and “Company” refers
generically to either the Corporation or the Bank.
	 
	(k)	 	“Date of Termination” means the date on which the Executive ceases to be
employed by either of the Companies.
	 
	(1)	 	“Disability” means permanent and total disability, within the meaning of
Code Section 22(e)(3), as determined by the Board of Directors of the
Corporation or the Bank in the exercise of good faith and reasonable
judgment, upon receipt of and in reliance on sufficient competent

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	 	 	medical advice from one or more individuals, selected by the Board of
Directors of the Corporation or the Bank, who are qualified to give
professional medical advice.
	 
	(m)	 	“Effective Date” means the date this Agreement is approved by the
Boards, or such other date as the Boards shall designate in its
resolution approving this Agreement.
	 
	(n)	 	“Effective Date of Qualifying Termination” means the date on which a
Qualifying Termination occurs which triggers the payment of Article 3
Severance Benefits hereunder.
	 
	(o)	 	“Exchange Act” means the United States Securities Exchange Act of 1934,
as amended.
	 
	(p)	 	“Executive” means Jerome J. Smith, President of each of the Companies.
	 
	(q)	 	“Good Reason” means, without the Executive’s express written consent,
the occurrence within three (3) years after a Change in Control of any
one or more of the following:

	(1)	 	The assignment of the Executive to duties
materially inconsistent with the Executive’s
authorities, duties, responsibilities, and status
(including offices, titles, reporting requirements,
and a material reduction in the Executive’s support
staff) as an officer of the Company which Changed
Control, or a reduction or alteration in the nature
or status of the Executive’s authorities, duties,
or responsibilities from those in effect as of
ninety (90) days prior to the Change in Control,
other than an insubstantial and inadvertent act
that is remedied by the Company which Changed
Control promptly after receipt of notice thereof
given by the Executive;
	 
	(2)	 	The Company which Changed Control requiring the
Executive to permanently relocate outside of Dane
County, Wisconsin, unless the Executive consents to
such a relocation;
	 
	(3)	 	A reduction by the Company which Changed Control of
the Executive’s Salary as in effect on the
Effective Date, or as the same shall be increased
from time to time;
	 
	(4)	 	The failure of the Company which Changed Control to
continue in effect any short-and/or long-term
incentive compensation plans, or employee benefit

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	 	 	or retirement plans, policies, practices, or arrangements in which
the Executive’s participation therein on substantially the same
basis, both in terms of the amount of benefits provided and the
level of the Executive’s participation relative to other Employees
of the Company which Changed Control participating in such plans,
policies, practices, or arrangements, as existed immediately prior
to the Change in Control.
	 
	(5)	 	The failure of the Company which Changed Control to
obtain a satisfactory agreement from its successor
to assume and agree to perform its obligations
under this Agreement, as contemplated in Article 11
herein; or
	 
	(6)	 	Any purported termination by the Company which
Changed Control of the Executive’s employment that
is not affected pursuant to a Notice of Termination
satisfying the requirements of Section 3.5 herein.

	 	 	The Executive’s right to terminate employment with either of the
Companies for Good Reason shall not be affected by the Executive’s
incapacity due to physical or mental illness.
	 
	 	 	The Executive’s continued employment shall not constitute consent to, or
a waiver of rights with respect to, any circumstance constituting Good
Reason herein.
	 
	(r)	 	“Normal or Early Retirement” means as defined under the then established
rules of each of the Companies tax-qualified retirement plan.
	 
	(s)	 	“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).
	 
	(t)	 	“Option” means an option directly or beneficially owned to purchase
shares of stock of the Corporation.
	 
	(u)	 	“Qualifying Termination” means any of the events described in Section
3.2 herein, the occurrence of which triggers the payment of Severance
Benefits hereunder.
	 
	(v)	 	“Salary” means the greater of (a) the average annual monetary
compensation not including bonuses or employee benefits paid to the
Executive, for each of the three calendar years immediately preceding the
year of termination; or (b) 100% of the monetary compensation not
including bonuses or employee benefits, paid to the

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	 	 	Executive in calendar year 1994, increased by the average increase
in salary for the officer group within either of the Companies
between 1994 and the year preceding the year of termination.
	 
	(w)	 	“Severance Benefits” means the payment of severance
compensation as provided in Section 3.3 herein.
	 
	(x)	 	“Shares” means a share of stock of the Corporation directly
or beneficially owned pursuant to the exercise of an Option.

Article 2. PAYMENT OF DEFERRED COMPENSATION

2.1 Benefit Amount. The Companies agree to pay to the Executive,
upon the Executive’s termination of employment with either of the
Companies, for any reason other than for Cause, including but not
limited to, the Executive’s resignation or permanent disability and
his designated beneficiary in the event of his death, or, if none,
his estate, deferred compensation in the amount of five (5) times
the Executive’s Salary, multiplied by the vested percentage
described in Section 2.2, less two hundred thousand and 00/100
($200,000.00) dollars. Such compensation will be paid out over a
period of five (5) years beginning with the first month following
the Date of Termination of employment. Such compensation will be
paid monthly at a rate of one-sixtieth (1/60) of the total amount
payable pursuant to the Company’s normal payroll practices.

2.2 Vesting Schedule. The vested percentage described in Section

2.1 shall be determined under the following table:

	 	 	 	 	 
	IF TERMINATION OCCURS ON OR AFTER
	 	VESTED AMOUNT

	Effective Date of Agreement
	 	 	50	%
	April 11, 2000
	 	 	60	%
	April 11, 2001
	 	 	70	%
	April 11, 2002
	 	 	80	%
	April 11, 2003
	 	 	90	%
	April 11, 2004
	 	 	100	%

See Exhibit A for an illustration of this Schedule.

2.3 Health Insurance Continuation. In the event benefits are paid
under this Article, Executive shall be eligible for the benefits
provided for in section 3.3(b).

2.4 Withholding of Taxes. Either of the Companies, as applicable,
shall withhold from any amounts payable under this Article, all
federal, state, city, local, or other taxes as may be required.

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Article 3. SEVERANCE BENEFITS

3.1 Right to Severance Benefits. The Executive shall be entitled
to receive, from the Companies, Severance Benefits as described in
Section 3.3 herein, if there has been a Qualifying Termination as
defined in section 3.2.

3.2 Qualifying Termination. The occurrence of any one or more of
the following events within thirty-six (36) calendar months after
a Change in Control shall trigger the payment of Severance Benefits
to the Executive under this Agreement:

	(a)	 	A termination of the Executive’s employment with either
of the Companies for reasons other than one of the
following: death, Disability, Normal or Early Retirement,
a voluntary termination of employment by the Executive
without Good Reason, or termination of the Executive’s
employment by either of the Companies for Cause provided
however, within six (6) months after a Change in Control
has occurred, Executive may for any reason or no reason
give written notice of his intention to terminate his
employment upon the six (6) month anniversary of the
Change in Control and shall upon his termination of
employment be eligible for Severance Benefits under this
Article 3;
	 
	(b)	 	A successor to either of the Companies fails or refuses
to assume the Companies’ obligations under this
Agreement, as required by Article 10 herein; or
	 
	(c)	 	Either of the Companies or any successor breaches any of
the provisions of this Agreement. Executive must provide
notice to the Companies of a breach and Companies shall
have thirty (30) days to remedy said breach. If said
breach is remedied, no breach will be deemed to have
occurred.

Prior to a Change in Control, if the Executive is terminated by either of the
Companies for reasons other than one of the following: death, Disability,
Normal or Early Retirement, a voluntary termination of employment by the
Executive without Good Reason, or termination of the Executive’s employment by
either of the Companies for Cause and within one (1) year of the Date of
Termination there is a Change in Control of such Company, then the Executive’s
rights shall be the same as if a Qualifying Termination had occurred within
three (3) years following a Change in Control. However, if the employment ends
due to death, Disability, Normal or Early Retirement, a voluntary termination
of employment by the Executive without Good Reason, or termination of the
Executive’s employment by either of the Companies for Cause and a Change in
Control of such Company occurs within one (1) year after the Date of
Termination, or if employment of Executive with either of the

7

 

Companies is terminated for any reason more than one (1) year prior to a Change
in Control of such Company, a Qualifying Termination shall not be deemed to
have occurred.

3.3 Description of Severance Benefits. In the event that the
Executive becomes entitled to receive Severance Benefits, as
provided in Sections 3.1 and 3.2 herein, the Companies shall
provide the Executive Severance Benefits as follows:

	(a)	 	An amount equal to five (5) times the Executive’s Salary.
Payment will be made over a period of five (5) years
beginning with the first month following the Effective
Date of Qualifying Termination of employment. Such
compensation will be paid monthly at a rate of
one-sixtieth (1/60) of the total amount payable pursuant
to the Company’s normal payroll practices;
	 
	(b)	 	Subject to the Companies ability to provide coverage, a
continuation of eligibility for all benefits pursuant to
any and all health insurance plans under which the
Executive and/or the Executive’s family is eligible to
receive benefits and/or coverage as of the effective date
of the Change in Control. These benefits shall be made
available by the Companies to the Executive immediately
upon the termination and shall continue to be made
available for a period of five (5) years from the Date of
Termination, or until the Executive reaches age sixty
(60) years, whichever represents a longer period of time.
Such benefits shall be made available to the Executive at
the same coverage level, as in effect as of the
Executive’s Date of Termination. The Executive shall
reimburse the Companies for such benefits at a rate equal
to what current employees of the Companies pay at that
time for the same benefits.

3.4 Offset for Deferred
Compensation Benefits Paid, Payments for
Restrictive Covenant and Death Benefits. The Severance Benefits
payable under Section 3.3 shall be reduced by any vested deferred
compensation benefits which are paid under this Agreement pursuant
to Article 2. Payment of vested deferred compensation benefits
shall in no way be considered to be Severance Benefits. In
addition, the Severance Benefits payable under Section 3.3 shall be
reduced by any payment made pursuant to Article 4 of this
Agreement. Finally, the Severance Benefits payable under this
Section 3.3 shall be reduced by any payments made pursuant to
Article 5 of this Agreement.

3.5 Notice of Termination. Any termination by either of the
Companies for Cause or by the Executive for Good Reason shall be
communicated by Notice of Termination to the other party. For
purposes of this Agreement, a “Notice of Termination” shall mean a
written notice which shall indicate the specific termination

8

 

provision in this Agreement relied upon, and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination
of the Executive’s employment under the provision so indicated.

3.6 Withholding of Taxes. The Companies shall withhold from any
amounts payable under this Article all federal, state, city, local,
or other taxes as may be required.

3.7 Transition Assistance. Executive agrees that following a
Change in Control, at the request of the Boards, he will continue
to serve in his current capacity at the Salary he was receiving the
month prior to the Change in Control, for a period not to exceed
six (6) months following the Change in Control in order to assist
with the transition. During this period, the Executive shall not
voluntarily terminate his employment or exercise his rights to take
Normal or Early Retirement without consent of the Boards.

Article 4. RESTRICTIVE COVENANT

4.1 Restrictive Covenant. For a period of two (2) years after
Executive begins receiving any monthly payments from either of the
Companies under this Agreement, Executive shall not, directly or
indirectly, enter into, or in any manner, including as an employee,
agent, independent contractor, officer, director, owner or
otherwise, provide services to or on behalf of any bank or
banking-related business, profession, or endeavor within a twenty

(20) mile radius of 406 science Drive, Madison, Wisconsin. The
Executive and the Companies acknowledge that each considers the
restrictions set forth in this Article 4 to be reasonable and that
the duration, geographic scope, extent and application of each of
such restrictions are no greater than is necessary for the
protection of the legitimate interests of the Companies. In the
event of a breach Of the covenants under this Article 4, the
Companies may obtain injunctive or any other equitable relief to
prevent the breach from continuing.

4.2 Consideration for Restrictive Covenant. As and for
consideration for this restrictive covenant, the Companies shall
pay the Executive the sum of three thousand three hundred
thirty-three and 33/100 ($3,333.33) dollars beginning with the
first month following the Date of Termination of employment for any
reason other than Cause, including but not limited to the
Executive’s resignation or permanent disability, to be paid monthly
for a total of sixty (60) months pursuant to the Companies’ normal
payroll practices.

4.3 Withholding of Taxes. The Companies shall withhold from any
amounts payable under this Article all federal, state, city, local,
or other taxes as may be required.

9

 

Article 5. DEATH BENEFIT

5.1 Death Benefit. In the event of the Executive’s death while in
the employ of either of the Companies, or in the event of the
Executive’s death after the termination of his employment for any
reason other than Cause, including but not limited to the
Executive’s resignation or permanent disability, the Companies
shall pay to the Executive’s designated beneficiary, and if none,
his estate, the sum of two hundred thousand and 00/100
($200,000.00) dollars. Such sum shall be paid out over a period of
five (5) year beginning with the first month following the date of
the Executive’s death at a rate of one-sixtieth (1/60) of the total
amount due under this Section; provided, however, the sum payable
under this Section 5.1 shall, be reduced for all sums paid to the
Executive under Article 4.

5.2 Withholding of Taxes. The Companies shall withhold from any
amounts payable under this Article all federal, state, city, local,
or other taxes as may be required.

Article 6. STOCK AND OPTION PURCHASE AGREEMENT

6.1 Agreement. The Corporation agrees that for a period of one
year after the Date of Termination, it will purchase each Share
owned by Executive and each Option owned by the Executive as
provided in this Article 6.

6.2 Purchase Price.

      (a) Share Purchase Price. One hundred twenty-five (125%)
percent of the per share book value of the Corporation on the last
day of the month immediately preceding the month in which the Date
of Termination occurs, as determined by the Board of the
Corporation using Generally Accepted Accounting Principles (GAAP).

      (b) Option Purchase Price. The amount by which the Share
Purchase Price determined under Section 6.2(a) exceeds the exercise
price of the Option; multiplied by the number of shares which could
be purchased under the Option.

6.3 Adjustments for Capital Changes. The Share Purchase Price
determined under Section 6.2(a), and the exercise price under each
Option shall be proportionately adjusted for cash dividends as
defined below and any increase or decrease in the total number of
outstanding shares of the Corporation’s Common Stock issued
subsequent to the Effective Date of this Agreement resulting from
a split, subdivision or consolidation of the Corporation’s Common
Stock, the payment of a stock dividend, or any other capital
adjustment. Such adjustment shall be made only if Executive did
not receive the benefit of such capital changes with respect to
such shares. The adjustment for cash dividends (“Dividend
Adjustment”) as used in this section means the amount of any cash

10

 

dividends paid by the Corporation in excess of the greater of twenty-five (25%)
percent of the consolidated net income of the Corporation and its subsidiaries
for the fiscal year in which the dividend is paid, or the cash dividend paid by
the Corporation in the preceding fiscal year. The amount of the Dividend
Adjustment shall be added back to the balance sheet of the Corporation in
determining the per share book value under Section 6.2(a) above. Determination
of the Dividend Adjustment made other than at the end of a fiscal year shall be
based upon consolidated net income through the last day of the month in which
the Date of Termination occurs, or the prorated cash dividend for the preceding
fiscal year, whichever is greater.

6.4 Notice. If the Executive desires to cause the Corporation to
purchase his Shares and/or Options under this Article 6, he shall
give written notice of intent to have the Corporation purchase
Shares or Options owned. Such notice shall be given within one (1)
year of the Date of Termination. Failure to give such notice
within such period of time shall relieve the Corporation of all its
obligations under this Article 6. The Corporation shall execute
the purchase within thirty (30) days of receipt of notice.

6.5 Title to Shares and Options. All Shares and Options
repurchased by the Corporation under this Article 6 shall have good
and marketable title, free and clear of all pledges, warrants,
calls, commitments, subscriptions, agreements, voting trusts or
agreements, proxies, unpaid taxes, claims, rights, including,
without limitation, any marital or community property rights, and
options of whatever nature.

6.6 Transfer of Rights. The rights under this Article 6 shall
inure to the benefit of and be enforceable by the Companies, the
Executive, the Executive’s personal or legal representatives,
executors, administrators, successors, heirs, beneficiaries,
distributees, devisees, and legatees.

6.7 Forfeiture of Rights. If Executive violates any provision of
Article 4 of this Agreement, all rights under this Article 6 shall
be immediately forfeited.

Article 7. RESTRICTIONS ON DISPOSITION OF SHARES AND OPTIONS

OWNED BY EXECUTIVE

7.1 Restrictions. Commencing with the Effective Date of this Agreement, the
Executive or his estate shall not sell, transfer, gift, bequest, pledge or
encumber any of his Shares or Options, other than in accordance with the
following terms of this Agreement:

	(a)	 	In the event that Executive or his estate receives a
noncontingent bona fide written offer to purchase his Shares and/or
Options, Executive or his estate shall not

11

 

	 	 	sell or transfer such Shares and/or Options without first offering them
to the Corporation and giving written notice of such offer, stating the
terms of the proposed sale, including:

	(1)	 	the name of purchaser;
	 
	(2)	 	purchase price or other consideration;
	 
	(3)	 	terms of payment, if not payable in cash;
	 
	(4)	 	interest rate on any unpaid balance, if any, and
	 
	(5)	 	security, if any, for such payment.

	(b)	 	The Corporation shall have the first right to purchase
the Shares and/or Options at a purchase price which is
equal to the price contained in said noncontingent bonafide offer. If the Corporation desires to exercise its
right, it shall do so by giving written notice within
thirty (30) days after receiving Shareholder’s written
notice. If the Corporation elects to purchase the Shares
and/or Options on the terms stated in Executive’s notice,
then the terms of payment stated in the written offer
shall control. Otherwise, the purchase price shall be
paid in full within thirty (30) days of the date the
Corporation elects to exercise this right.
	 
	(c)	 	The Corporation’s purchase of Shares and/or Options under
this Article 7 shall occur only upon the adoption of a
resolution by a majority of the Corporation’s Board
specifically authorizing such purchase. For purposes of
such resolution, Executive, if a director, shall vote in
favor of such resolution.
	 
	(d)	 	The Executive or his estate shall always have the ability
to sell the Shares and/or Options to the Corporation at
any terms which are agreeable to both the Corporation,
and the Executive or his estate.
	 
	(e)	 	Notwithstanding anything to the contrary herein
contained, nothing in this Article 7 shall prohibit
Executive from pledging or encumbering his Shares
provided that the secured party in such transaction shall
acknowledge and accept in writing the obligations of the
Executive under this Article 7 and agree in writing to
abide by terms and conditions of the Corporation’s first
right to purchase the Shares.
	 
	(f)	 	The rights under this Article 7 shall inure to the
benefit of and be enforceable by the Executive’s personal

12

 

	       or legal representatives, executors, administrators, successors,
heirs, distributees, devisees, and legatees.

Article 8. THE COMPANY’S PAYMENT OBLIGATION

8.1 Payment Obligations Absolute. The Companies’ obligations to
make the payments and the arrangements provided for under this
Agreement shall be absolute and unconditional, and shall not be
affected by any circumstances, including, without limitation, any
offset, counterclaim, recoupment, defense, or other right which the
Companies may have against the Executive or anyone else. All
amounts payable by the Companies thereunder shall be paid without
notice or demand, except as provided herein. Each and every
payment made thereunder by the Companies shall be final, and the
Companies shall not seek to recover all or any part of such payment
from the Executive or from whomsoever may be entitled thereto, for
any reasons whatsoever.

The Executive shall not be obligated to seek other employment in mitigation of
the amounts payable or arrangements made under this Agreement, and the
obtaining of any such other employment shall in no event effect any reduction
of the Companies’ obligations to make the payments and arrangements required
to be made under this Agreement, except to the extent provided in Section
3.3(b) herein.

8.2 Contractual Rights to Benefits. This Agreement establishes
and vests in the Executive a contractual right to the benefits to
which he is entitled hereunder. However, nothing herein contained
shall require or be deemed to require, or prohibit or be deemed to
prohibit, the Companies to segregate, earmark, or otherwise set
aside any funds or other assets, in trust or otherwise, to provide
for any payments to be made or required hereunder.

Article 9. TERM OF AGREEMENT

9.1 Term of Agreement. This Agreement will commence on the Effective Date and
shall continue in effect until April 12, 2009. However, in the event a Change
in Control occurs during the term, this Agreement will remain in effect for
thirty-six (36) months beyond the month in which Change in Control occurred.

The expiration of this Agreement shall in no way relieve the
Companies of their obligations under this Agreement, until all
obligations of the Companies hereunder have been fulfilled, and
until all benefits required hereunder have been paid to the
Executive.

Article 10. PAYMENT OF LEGAL FEES

10.1 Payment of Legal Fees. To the extent permitted by law, either party to
this Agreement shall pay all legal fees, costs of litigation, prejudgment
interest, and other expenses incurred in

13

 

good faith by the other party as a result of contesting the validity,
enforceability, or interpretation of this Agreement, or as a result of any
conflict between the parties pertaining to this Agreement, so long as the
ultimate resolution of such litigation is in favor of the party seeking payment
of legal fees under this Article 10.

Article 11. SUCCESSORS

11.1 Successors. The Corporation or the Bank, as applicable, will require any
successor to the Corporation or the Bank (whether direct or indirect, by
purchase, merger, consolidation, or otherwise) of all or substantially all of
its business and/or assets to expressly assume and agree to perform its
obligations under this Agreement in the same manner and to the same extent
that it would be required to perform them if no such succession had taken
place. Failure of the Corporation or the Bank to obtain such assumption and
agreement prior to the effective date of any such succession shall be a breach
of this Agreement and shall entitle the Executive to compensation from the
Companies in the same amount and on the same terms as he would be entitled to
hereunder if he had terminated his employment with either of the Companies
voluntarily for Good Reason. Except for the purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed both the Effective Date of Qualifying Termination and the Date of
Termination.

This Agreement shall inure to the benefit of and be enforceable by the
Executive’s personal or legal representatives, executors, administrators,
successors, beneficiaries, heirs, distributees, devises, and legatees. If the
Executive should die while any amount would still be payable to him hereunder
had he continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement, to the
Executive’s Beneficiary. If the Executive’s has not named a Beneficiary, then
such amounts shall be paid to the Executive’ devisee, legatee, beneficiary, or
other designee, or if there is no such designee, to the Executive’s Estate.

Article 12. MISCELLANEOUS

12.1 Employment Status. The Executive and the Companies
acknowledge that, except as provided under Section 3.7 and any
other agreement between the Executive and either of the Companies,
the employment of the Executive by each of the Companies is “at
will,” and, may be terminated by either the Executive or each of
the Companies at any time, subject to applicable law.

12.2 Beneficiaries. The Executive may designate one or more
persons or entitles as the primary and/or contingent Beneficiaries
of any Severance, Deferred Compensation or Death Benefits owing to
the Executive under this Agreement. Such designation must be in

14

 

the form of a signed writing acceptable to the Board of each of the Companies.
The Executive may make or change such designation at any time.

12.3 Entire Agreement. This Agreement contains the entire
understanding of the Companies and the Executive with respect to
the subject matter hereof.

12.4 Gender and Number. Except where otherwise indicated by the
context, any masculine term used herein also shall include the
feminine; the plural shall include the singular, and the singular
shall include the plural.

12.5 Severability. In the event any provision of this Agreement
shall be held illegal or invalid for any reason, the illegality or
invalidity shall not affect the remaining parts of the Agreement,
and the Agreement shall be construed and enforced as if the illegal
or invalid provision had not been included. Further, the captions
of this Agreement are not part of the provisions hereof and shall
have no force and effect.

12.6 Modification. No provision of this Agreement may be modified,
waived, or discharged unless such modification, waiver, or
discharge is agreed to in writing and signed by the Executive and
by an authorized member of the Board, or by the respective parties’
legal representatives and successors.

12.7 Applicable Law. To the extent not preempted by the laws of
the United States, the laws of the State of Wisconsin shall be the
controlling law in all matters relating to this Agreement.

      IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.

	 	 	 	 	 
	 	FIRST BUSINESS BANCSHARES, INC.

 	 
	 	
BY:    /s/ Kenneth P. Urso
 	 
	 	       Kenneth
P. Urso,

       Chairman of the Board 	 

	 	 	 	 	 
	 	FIRST BUSINESS BANK OF MADISON

 	 
	 	BY:  /s/ Kenneth P. Urso
 	 
	 	       Kenneth
P. Urso, 

       Chairman of the Board 	 

	 	 	 	 	 
	 	                                    /s/ Jerome J.   Smith
 	 
	 	       Jerome
J.   Smith,
 Executive 	 

15

 

	 	 	 	 	 

EXHIBIT A

The following is an illustration of the Vesting Schedule provided for in
Section 2.2.

	 	 	Assume that Executive terminates his employment July 1, 2000. Assume his
monetary compensation not including bonuses and employee benefits for
the three (3) preceding calendar years was:

	 	 	 	 	 
	1997
	 	$	120,000.00	 
	1998
	 	 	130,000.00	 
	1999
	 	 	140,000.00	 

	 	 	Under Section 2.1 Executive is entitled to deferred Compensation in the
amount of four hundred fifty-thousand and 00/100 ($450,000.00) dollars
	 
	 	 	[((($120,000.00 + $130,000 + $140,000/3) x5) — $200,000.00]. 
	 
	 	 	 That sum
would be paid out over five (5) years.
	 
	 	 	However, Section 2.2 limits the payment under Section 2.1 to the vested
amount of
	 
	 	 	[(($130,000 x 5) x 60%) — $200,000.00], or $190,000.00.
	 
	 	 	That sum would be paid out over five (5) year at the rate of three
thousand one hundred sixty-six and 67/100 ($3,166.67) dollars per month.

16

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