Document:

exv10w3

 

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

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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

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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.

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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

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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

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	 	 	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

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	       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

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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

 

AMENDMENT TO AGREEMENT

      This
Amendment to Agreement is made and entered into this 1st day of
March, 2000 by and between First Business Bancshares, Inc., a Wisconsin
corporation (the “Corporation”), and its wholly owned subsidiary, First
Business Bank, a Wisconsin-chartered state bank (the “Bank”)(herein
collectively referred to as the “Companies”) and Jerome J. Smith, Director of
the Bank and President and Chief Executive Officer and Director of the
Corporation (hereinafter referred to as “Executive”).

WITNESSETH

      WHEREAS, the Companies and Executive entered into an Agreement dated June
23, 1995 relating to Smith’s services to the Companies (the “1995 Agreement”);
and

      WHEREAS, the parties wish to amend certain of the provisions of 1995
Agreement with respect to the repurchase of “Shares” (as such term is defined
in the 1995 Agreement) of the Corporation from the Executive.

      NOW, THEREFORE, the parties amend the 1995 Agreement, effective as of the
original effective date of the 1995 Agreement, as follows.

AGREEMENT

      1. Article 6 of the 1995 Agreement is amended in its entirety
to read as follows:

      “Article 6. STOCK AND OPTION PURCHASE AGREEMENT

      6.1 Agreement. The Corporation agrees that for a period of eighteen (18)
months after the Date of Termination, it will purchase each Share owned by
Executive as provided in this Article 6.

      6.2 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 (or, if later, the last day of the
month immediately preceding the month which is the 6th month after the Executive acquires
the Share through the exercise of an Option), as determined by the Board of the Corporation
using Generally Accepted Accounting Principles (GAAP).

      6.3 Adjustments for Capital Changes. The Share Purchase Price determined
under Section 6.2, 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 dividend (“Dividend Adjustment”) as used
in this section means

 

 

the amount of any cash 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 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
under this Article 6, he shall give written notice of intent to have the
Corporation purchase
Shares owned. Such notice shall be given within eighteen (18) months 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. All Shares 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 of 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.”

      2. Section 7.1(g) is added to Section 7.1 of the 1995 Agreement to read
as follows:

      “(g) Notwithstanding anything to the contrary in this Agreement, Shares
acquired by the Executive through the exercise of an Option must be held for a
period of at least 6 months before they may be transferred, pledged,
encumbered or resold to the Corporation (or its subsidiaries).”

      3. All of the remaining provisions of the 1995 Agreement shall remain in
full force and effect.

2

 

      IN WITNESS WHEREOF the parties have executed this Amendment to the 1995
Agreement as of the date and year first above written and agree that this
Amendment to the 1995 Agreement shall be effective as of June 23, 1995.

	 	 	 	 	 
	 	FIRST BUSINESS BANCSHARES, INC.

 	 
	 	BY: /s/
Kenneth P. Urso

Kenneth P. Urso, Chairman of the Board
	 

	 	 	 	 	 
	 	FIRST BUSINESS BANK

 	 
	 	BY: /s/ Corey Chambas

Corey Chambas, President 
	 

	 	 	 	 	 
	 	BY: /s/ Jerome J. Smith

Jerome J. Smith, Executive
	 

3

 

	 	 	 	 	 

SECOND AMENDMENT TO AGREEMENT

THIS SECOND AMENDMENT TO AGREEMENT is made and entered into among First
Business Financial Services, Inc. (formerly known as First Business Bancshares,
Inc.) and its wholly owned subsidiary First Business Bank, (sometimes referred
to collectively as “The Companies”), and Jerome J. Smith (hereinafter sometimes
referred to as “Executive”).

WHEREAS, The Companies
and Smith are parties to an AGREEMENT dated June 23rd
1995, and an AMENDMENT TO AGREEMENT dated March 1st 2000; and

WHEREAS, parties wish to enter into this SECOND AMENDMENT TO AGREEMENT;

NOW THEREFORE, The parties agree as follows, effective June 9, 2003.

      1. Subject to paragraph 3 of this SECOND AMENDMENT TO
AGREEMENT, the definition of Salary (as defined by Section 1.1 (v.)
of the AGREEMENT is changed to read:

      “Salary” means the greater of (a) the average annual monetary compensation
including bonuses but not including 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 including bonuses but not
including employee benefits, paid to the 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.

      2. In consideration of paragraph 1 of this SECOND AMENDMENT TO
AGREEMENT, Executive agrees:

           A. Executive will continue his present employment duties for the
benefit of The Companies until at least July 1, 2005.

           B. In addition, if Executive wishes to cease his present employment
duties for the benefit of The Companies, Executive will give notice in
writing to First Business Financial Services, Inc. at least one year before he ceases such
employment.
Such notice shall be effective only on July 1, 2005, or a subsequent
anniversary of July 1,
2005, except that Executive may designate an effective date more than one
year following the notice date, which effective date may be other than July 1.

      3. If Executive breaches the promise made in paragraph 2 A or 2 B of this
SECOND AMENDMENT TO AGREEMENT, the definition of “Salary” shall revert to
the definition contained in the 1995 AGREEMENT, and there shall be no
other remedy or compensation to The Companies or either of them on account of such
breach.

 

 

      4. Executive is excused from the promises made in paragraphs 2 A and 2 B
of this SECOND AMENDMENT TO AGREEMENT in the event his employment is terminated
by The Companies, by his death while employed by The Companies, or by his
medically verifiable incapacity: if Executive’s termination of employment is
for one of the foregoing three reasons, the definition of “Salary” shall be the
definition stated in paragraph 1 of this SECOND AMENDMENT TO AGREEMENT.

IN WITNESS WHEREOF, the parties have executed this Agreement this 9th day of
June, 2003.

	 
	First Business Financial Services, Inc.

	 

	By:
/s/ Chuck Thompson

Chuck Thompson, Chairman of the Board

	 

	First Business Bank

	 

	By:
/s/ Corey Chambas

Corey Chambas, President

	 

	/s/ Jerome J. Smith

Jerome J. Smith, Executive

 

 

THIRD AMENDMENT TO AGREEMENT

THIS THIRD AMENDMENT TO AGREEMENT is made and entered into among First Business
Financial Services, Inc. (formerly known as First Business Bancshares, Inc.)
and its wholly owned subsidiary First Business Bank, (sometimes referred to
collectively as “The Companies”), and Jerome J. Smith (hereinafter sometimes
referred to as “Executive”).

WHEREAS, The Companies and Smith are parties to an AGREEMENT dated June 23rd
1995, and an AMENDMENT TO AGREEMENT dated March 1st 2000; and a SECOND
AMENDMENT TO AGREEMENT dated June 9, 2003;

WHEREAS, parties wish to enter into this THIRD AMENDMENT TO AGREEMENT;

NOW
THEREFORE, The parties agree as follows, effective October 20, 2003:

      In consideration of one dollar, and of Executive’s continued employment
by the Companies, Executive’s past superior performance, and Executive’s
morale towards his employment by The Companies and for other good and valuable
consideration, Article 7 entitled, “RESTRICTIONS ON DISPOSITION OF SHARES AND
OPTIONS OWNED BY EXECUTIVE” of the AGREEMENT is of no force or effect, except
that Section 7.1(g) as added by the AMENDMENT TO AGREEMENT dated March 1st
2000 remains in effect as a separate Article 7, and is agreed to be entitled,
“RESTRICTION ON SALE TO COMPANIES OF SHARES ACQUIRED BY OPTION.” All other
provisions of the AGREEMENT, the AMENDMENT TO AGREEMENT, and the SECOND
AMENDMENT TO AGREEMENT remain in effect.

IN WITNESS WHEREOF, the parties have executed this Agreement this 3rd day of
November, 2003.

	 
	First Business Financial Services, Inc.

	 

	By:
/s/ Chuck Thompson

Chuck Thompson, Chairman of the Board

	 

	First Business Bank

	 

	By:
/s/ Corey Chambas

Corey Chambas, President

	 

	/s/ Jerome J. Smith

Jerome J. Smith, Executive

 

 

FOURTH AMENDMENT TO AGREEMENT

THIS FOURTH AMENDMENT TO AGREEMENT is made and entered into among First
Business Financial Services, Inc. (formerly known as First Business Bancshares,
Inc.) and its wholly owned subsidiary First Business Bank, (sometimes referred
to collectively as “The Companies”), and Jerome J. Smith (hereinafter sometimes
referred to as “Executive”).

WHEREAS, the Companies and Smith are parties to an AGREEMENT dated June 23rd
1995, and an AMENDMENT TO AGREEMENT dated March 1st 2000; a SECOND AMENDMENT
TO AGREEMENT dated June 9, 2003; and a THIRD AMENDMENT TO AGREEMENT dated
November 3, 2003;

WHEREAS, the parties wish to enter into this FOURTH AMENDMENT TO AGREEMENT;

NOW THEREFORE, the parties agree as follows, effective June 25, 2004:

      1. Subject to paragraph 2 of this FOURTH AMENDMENT TO AGREEMENT,
the definition of Salary (as defined by Section 1.1 (v.) of the AGREEMENT
is changed to
read as follows, if Smith complies with paragraphs 2, 3, and 4 of this
FOURTH

AMENDMENT TO AGREEMENT:

“Salary”
means the greater of (a) or (b).

(a) The average annual monetary compensation including
bonuses but
not including employee benefits paid to the Executive for
three of the
five calendar years immediately preceding the year of
termination.
The three calendar years used to determine the average shall
be the last
calendar year preceding the year of termination, and the
Executive’s
choice of two of the remaining four calendar years
immediately
preceding the year of termination.

(b) 100% of the monetary compensation including bonuses but
not
including employee benefits, paid to the Executive in
calendar year
1994, increased by the average increase in monetary
compensation for
the officer group within either of the Companies between
1994 and the
year preceding the year of termination.

      2. In consideration of paragraph 1 of this FOURTH AMENDMENT TO
AGREEMENT, Executive Agrees:

            A. Executive will continue his present employment duties for the benefit
of The Companies until at least July 1, 2006.

            B. In addition, if Executive wishes to cease his present employment
duties for the benefit of The Companies, Executive will give notice in
writing to First
Business Financial Services, Inc. at least one year before he ceases such
employment. Such
notice shall be effective only on July 1, 2006, or a subsequent
anniversary of July 1, 2006,

 

 

except that Executive may designate an effective date more than one year
following the notice date, which effective date may be other than July 1.

            C. If Executive breaches the promise made in paragraph 2 A or 2 B of
this FOURTH AMENDMENT TO AGREEMENT, the definition of “Salary” shall
revert to
the definition contained in the 1995 AGREEMENT, or as applicable the
definition contained
in the SECOND AMENDMENT TO AGREEMENT and there shall be no other remedy or
compensation to The Companies or either of them on account of such breach.

            D. Executive is excused from the promises made in paragraphs 2 A and 2
B of this FOURTH AMENDMENT TO AGREEMENT in the event his employment is
terminated by The Companies, by his death while employed by The Companies,
or by his
medically verifiable incapacity: if Executive’s termination of employment
is for one of the
foregoing three reasons, the definition of “Salary” shall be the
definition stated in paragraph
1 of this FOURTH AMENDMENT TO AGREEMENT.

            E. The parties agree that the definition of “Salary” will be at least as
favorable to Executive as the definition contained in paragraph 1 of
the SECOND
AMENDMENT TO AGREEMENT, if Executive remains employed through July 1,
2005, even if Executive does not remain employed through July 1, 2006, and even
if Executive
does not give the notice required by paragraph 2 B of the SECOND or the
FOURTH AMENDMENT TO AGREEMENT.

      3. The definition clarifications contained in the letter from Attorney
Jack D. Walker to Vice-President Jodi Chandler dated January 14, 2004 (copy
attached) apply also to the definition of “Salary” in this FOURTH AMENDMENT TO
AGREEMENT.

IN WITNESS WHEREOF, the parties have executed this Agreement this 25th day of
June, 2004.

	 
	First Business Financial Services, Inc.

	 

	By:
/s/ Chuck Thompson

Chuck Thompson, Chairman of the Board

	 

	First Business Bank

	 

	By:
/s/ Corey Chambas

Corey Chambas, President

	 

	/s/ Jerome J. Smith

Jerome J. Smith, Executiveexv10w4

 

Exhibit 10.4

AGREEMENT BY AND BETWEEN

FIRST BUSINESS BANK AND

COREY CHAMBAS

(AMENDED AND RESTATED SEPTEMBER 21, 2004)

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page

	Article 1. DEFINITIONS
	 	 	2	 
	1.1 Definitions
	 	 	2	 
	Article 2 . RETIREMENT BENEFIT
	 	 	4	 
	2.1 Normal Retirement Benefit
	 	 	4	 
	2.2 Early Retirement Benefit
	 	 	4	 
	2.3 Withholding of Taxes
	 	 	5	 
	Article 3. DEATH BENEFIT
	 	 	5	 
	3.1 Death Benefit
	 	 	5	 
	3.2 Alternative Death Benefit
	 	 	5	 
	3.3 Life Insurance
	 	 	5	 
	3.4 Withholding of Taxes
	 	 	5	 
	Article 4. DISABILITY
	 	 	5	 
	4.1 Treatment of Disability
	 	 	5	 
	4.2 Retirement Benefits
	 	 	5	 
	4.3 Inflation Protection
	 	 	6	 
	4.4 Death Benefits
	 	 	6	 
	Article 5. TERMINATION OF EMPLOYMENT BY THE COMPANY
	 	 	6	 
	5.1 Termination for Cause
	 	 	6	 
	5.2 Termination for Other Than Cause
	 	 	6	 
	Article 6. CHANGE IN CONTROL BENEFIT
	 	 	6	 
	6.1 Change in Control Benefit
	 	 	6	 
	6.2 Withholding of Taxes
	 	 	8	 
	Article 7. COVENANTS NOT TO COMPETE
	 	 	8	 
	7.1 Covenant Not to Compete
	 	 	8	 
	7.2 Solicitation
	 	 	8	 
	7.3 Receipt of Benefits
	 	 	9	 
	Article 8. TERM OF AGREEMENT
	 	 	9	 
	8.1 Term of Agreement
	 	 	9	 
	8.2 Survival of Obligation
	 	 	9	 
	Article 9. SUCCESSORS
	 	 	9	 
	9.1 Successors
	 	 	9	 
	9.2 Binding Effect
	 	 	9	 
	Article 10. MISCELLANEOUS
	 	 	9	 
	10.1 Employment Status
	 	 	9	 
	10.2 Beneficiaries
	 	 	10	 
	10.3 Entire Agreement
	 	 	10	 
	10.4 Gender and Number
	 	 	10	 
	10.5
Severability
	 	 	10	 
	10.6 Modification
	 	 	10	 
	10.7 Applicable Law
	 	 	10	 
	10.8 Full Time Employment
	 	 	10	 
	10.9 One Benefit Payable
	 	 	10	 
	10.10 Attorneys’ Fees
	 	 	10	 

i

 

AGREEMENT

     THIS AMENDED AND RESTATED AGREEMENT is made and entered into as of this
21st day of September, 2004, by and between First Business Bank, a Wisconsin
corporation (“the Company”) and Corey Chambas, President of First Business Bank
(“the Executive”). The parties agree that the agreement between them dated
December 16, 2003 is superseded by this Agreement and is no longer in effect.

WITNESSETH:

     WHEREAS, in exchange for the Executive’s agreement to remain an employee
of the Company, the Company agrees that it shall provide to the Executive
and/or his beneficiaries the death and retirement benefits set forth in this
Agreement, subject to the terms and conditions of this Agreement, and it
further agrees that said benefits shall be in addition to Executive’s regular
compensation, bonus and employee benefits; and

     WHEREAS, the Board of Directors of the Company has approved the Company
entering into this Agreement with the Executive; and

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

     WHEREAS, the Company desires the Executive to remain in its service and to
continue to use his knowledge and experience on behalf of the Company, and is
willing to offer the Executive an incentive to do so in the form of death and
retirement benefits; and

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

     WHEREAS, should the possibility of a Change in Control of the Company
arise, the Board believes it imperative that the Company and the Board should
be able to rely upon the Executive to continue in his position, and that the
Company should be able to receive and rely upon his advice, if it requests it,
as to the best interests of the Company and its 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 Board
as to whether such Change in Control would be in the best interests of the
Company and its shareholders, and to take such other actions as the Board might
determine to be appropriate.

     NOW, THEREFORE, to assure the Company that it 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 the Company, and to induce the Executive to remain in the employ of the
Company, and for other good and valuable consideration, the receipt

1

 

and sufficiency of which is hereby acknowledged, the Company 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)	 	“Beneficiary” means the persons or entities designated or
deemed designated by the Executive pursuant to Section 10.2 herein.
	 
	 	(c)	 	“Board” means the Board of Directors of the Company or any
committee formed by or appointed by the Board to administer this
Agreement.
	 
	 	(d)	 	“Cause” shall be determined by the Board, in the exercise of
good faith and reasonable judgment, and shall mean any of the
following:

(1) The willful, intentional, and continued failure by the
Executive to substantially perform the Executive’s duties to the
best of Executive’s ability after a written demand for performance
is delivered by the Board to the Executive that identifies the
failure to perform such duties if such failure is not remedied
within ninety (90) calendar days after receipt of the written
demand by the Executive.

(2) 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 First Business Bank, or any of its
subsidiary, parent, or affiliated organizations; or an act which
disqualifies Executive from serving as an officer or director of a
bank under Wisconsin or Federal banking Laws.

	 	(e)	 	“Change in Control” of the Company 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:

	 	 	 	The stockholders of the Company approve: (A) a plan of
complete liquidation of the Company; or (B) an agreement for
the sale or disposition of all or substantially all the
Company’s assets; or (C) a merger, consolidation, or
reorganization of the Company with or involving any other
corporation, other than a merger, consolidation, or
reorganization that would result in the voting securities of
the Company outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into voting securities of
the surviving

2

 

	 	 	 	entity), at least fifty percent (50%) of the
combined voting power of the voting securities of the Company
(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: (i) 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 non-employee continuing Directors).

	 	(f)	 	“Company” means First Business Bank, a Wisconsin corporation
(including any and all of its subsidiaries), or any successor
thereto as provided in Article 9 herein.
	 
	 	(g)	 	“Date of Termination” means the date on which the Executive
ceases to be employed by the Company.
	 
	 	(h)	 	“Effective Date” means the date written, December 16, 2003.
	 
	 	(i)	 	“Executive” means Corey Chambas, who is presently the
President of First Business Bank in Madison, Wisconsin.
	 
	 	(j)	 	“Normal Retirement Age” means the first day of the month
following the month in which the Executive reaches age sixty-five
(65).
	 
	 	(k)	 	“Parachute Payment” means a “parachute payment” as defined in
Section 280G of the Internal Revenue Code of 1986, as amended, and
any regulations thereunder.
	 
	 	(l)	 	“Salary” means the average annual monetary compensation
reportable in box 1 of the 2002 federal form W-2, and its equivalent
in subsequent years including monetary bonuses, but not including
employee benefits paid to the Executive, for the five calendar years
immediately preceding the year of termination. The Executive’s
Salary shall be calculated based on the date of actual termination
or retirement, even if the Executive is deemed to remain employed
after termination under Article 4, and even if the payment of the
retirement benefit does not begin for a year or years after Early
Retirement, as defined in Article 2 below; provided, however,
notwithstanding anything in this Subsection 1.1(l) to the contrary,
for purposes of Sections 6.1 A, B, C, and D, the Executive’s Salary
shall be calculated based on the five (5) calendar years immediately
preceding the year in which the Change in Control occurs.
	 
	 	(m)	 	“Total Disability” means the Executive must be unable to
engage in any Senior Executive financial services work activity,
including but not limited to consulting,

3

 

	 	 	 	because of a medically
verified physical or mental impairment which can be expected to
result in death or which has lasted or can be expected to last for a
continuous period of not less than twelve (12) months. If, at any
time between the time the Executive’s employment is terminated due
to total disability and the time the Executive begins to receive
benefits under this Agreement, the Executive engages in any Senior
Executive financial services work activity, including by not limited
to consulting, the Executive shall cease to be treated as if he was
under a Total Disability, for the purposes of this Agreement.

ARTICLE 2 . RETIREMENT BENEFIT

     2.1 Normal Retirement Benefit. Upon Executive’s retirement at or after
Normal Retirement Age, the Company shall become obligated to pay to the
Executive a retirement benefit equal to sixty percent (60%) of Executive’s
Salary, payable yearly for 10 years, beginning on the 15th day following the
date of the Executive’s retirement, and on the next nine (9) anniversaries of
the first payment. In the event of the Executive’s death before the total
amount due under this Section has been paid, the Company shall pay to the
Executive’s designated Beneficiary, and if none, his estate, the remaining
annual payments on the schedule established at the Executive’s retirement.

     2.2 Early Retirement Benefit.

          A. Executive may retire at any time after Executive has been employed by
the Company for twenty (20) consecutive years. Executive’s date of initial
employment with the Company is December 1, 1993, and therefore if there is no
interruption in consecutive years of employment, Executive may retire at any
time after December 1, 2013. In that case, the Company shall become obligated
to pay to the Executive a retirement benefit equal to sixty percent (60%) of
Executive’s Salary, multiplied by a vesting percentage described below, payable
for ten (10) years, beginning on the 15th day following the date of the
Executive’s retirement, or the date Executive attains age 55, whichever is
later, and on the next nine (9) anniversaries of the first payment. In the
event of the Executive’s death before the total amount due under this Section
has been paid, the Company shall pay to the Executive’s designated Beneficiary,
and if none, his estate, the remaining annual payments on the schedule
established at the Executive’s retirement.

          B. When Executive has completed twenty (20) years of consecutive
employment with the Company, the vesting percentage shall be 20/34, or 58.83
percent (.5883). The numerator 20 (twenty) used to determine the vesting
percentage shall increase by 1 (one) for each subsequent year of consecutive
service above twenty (20), through thirty-four (34). Therefore, for example,
if Executive Retires after twenty-seven (27) years of consecutive service the
vesting percentage shall be 27/34, or 79.41 percent (.7941). For another
example, if Executive Retires after thirty-four (34) years of service, the
vesting percentage shall be 34/34 or one hundred percent (100%), and Executive
shall be entitled to the Normal Retirement benefit, rather than an Early
Retirement Benefit. In the event of the Executive’s death prior to receipt of
all early retirement benefits, the Company shall pay to the Executive’s
designated Beneficiary, and if none, his estate, the remaining annual payments
on the schedule established at the Executive’s early retirement.

4

 

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

     2.4 Notice of Retirement. Executive shall give the Company at least one
year’s notice of his intent to retire, in writing. Executive cannot draw any
benefit under this Article 2 until the Bank has been given the notice required
by this Section 2.4, and the Executive has worked, or offered to work, for the
notice period of one year. Provided, no notice of intent to retire is required
if Executive chooses to retire as a result of a Change in Control and the
occurrence of an event described in Section 6.1 A, B, C, or D.

ARTICLE 3 . DEATH BENEFIT

     3.1 Death Benefit. In the event of the Executive’s death while in the
employ of the Company, the Company shall pay to Executive’s designated
Beneficiary, and if none, his estate, the sum of one million five hundred
thousand and 00/100 ($1,500,000.00) dollars. Such sum shall be paid over a
period of ten (10) years beginning with the fifteenth (15th) day of the first
calendar month following the date of the Executive’s death and on the next
following nine (9) anniversaries of the first payment.

     3.2 Alternative Death Benefit. If the Early or Normal Retirement Benefit
which Executive was entitled to exercise on the day preceding the date of
Executive’s death exceeds the Death Benefit payable under Section 3.1,
Executive shall be entitled to an amount equal to such Early or Normal
Retirement Benefit paid as a replacement for the Death Benefit.

     3.3 Life Insurance. If the Company purchases any life insurance policy on
Executive’s life and the Company is the beneficiary of such life insurance
policy, the Death Benefit payable under Section 3.1 will not be payable if the
circumstances of Executive’s death because of suicide within the applicable
contestable period are such that the Company is not entitled to the policy
benefit.

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

ARTICLE 4 . DISABILITY

     4.1 Treatment of Disability. In the event the Executive’s employment with
the Company is terminated prior to his Normal Retirement Age due to Total
Disability, the Executive shall be considered, notwithstanding such termination
of employment, to continue to be employed by the Company for purposes of his
eligibility for benefits under this Agreement.

     4.2 Retirement Benefits. In the event the Executive reached Early
Retirement Age after termination of continuous employment due to Total
Disability, the Executive shall have the right to receive the Early Retirement
Benefit under Section 2.2. In the event the Executive reaches Normal
Retirement Age after termination of employment due to Total Disability, the
Executive shall receive the Normal Retirement Benefit described in Section 2.1,
provided Executive has not elected to receive or received the Early Retirement
Benefit under Section 2.2.

5

 

     4.3 Inflation Protection. If Executive receives a retirement benefit
under Article 2 as the result of reaching Early Retirement Age or Normal
Retirement Age after the termination of Executive’s employment due to Total
Disability, Executive’s Salary (for purposes of calculating a retirement
benefit) shall be increased by an amount equal to the average annual
performance increase approved for Company personnel Company-wide between the
date of Executive’s termination of employment due to total disability, and the
date of the first payment. For example, if Executive’s Salary is $200,000
(determined by averaging 2001, 2002, 2003, 2004, and 2005), and if Executive’s
employment terminates due to Total Disability on December 31, 2005, and if
Executive receives the first payment on December 15, 2010, and the average
Company-wide annual performance increases were 4% in 2006, zero percent in
2007, 3% in 2008, 3% in 2009, and 2% in 2010, Executive’s Salary shall be
deemed to be $225,080.54.

     4.4 Death Benefits. In the event of the Executive’s death while Totally
Disabled prior to reaching Normal Retirement Age and prior to commencement of
payment of benefits under Article 2 or Section 4.2, the Executive’s
Beneficiary, and if none, his estate, shall receive the benefit described in
Article 3.

ARTICLE 5 . TERMINATION OF EMPLOYMENT BY THE COMPANY

     5.1 Termination for Cause. If the Company terminates the Executive’s
employment with the Company for Cause, all benefits under this Agreement shall
immediately become null and void.

     5.2 Termination for Other Than Cause.

     If the Company terminates the Executive’s employment with the Company for
any reason other than Cause, the Company will pay the Executive as wages the
greater of an amount equal to two times the annual average of Executive’s
Earned Compensation or the amount to which executive would be entitled under
Article 2 of this agreement had the Executive given notice of retirement one
year before the date on which the Company terminated the Executive’s
employment. “Earned Compensation” means Salary plus the average of the
Executive’s deferred compensation designated under any Company deferred
compensation plan for the five calendar years immediately preceding the year of
termination. If the greater amount is two times the annual average of
Executive’s Earned Compensation, then payment shall be made on the 15th day
following the date of the Executive’s termination. If the greater amount is
defined in Article 2 of this Agreement, then payment shall be made according to
the terms stated in Article 2.

ARTICLE 6. CHANGE IN CONTROL BENEFIT

     6.1 Change in Control Benefit.

          A. In the event of a Change in Control of the Company followed by an
involuntary termination of the Executive’s employment without Cause within
three (3) years of the Change in Control, the Executive shall be entitled to a
payment of the aggregate of the following:

          (1) an amount equal to the fair value of the Executive’s
unvested stock options issued by the Company or by First Business
Financial Services, Inc.

6

 

calculated as of the date of the
Executive’s termination from employment and based upon an
independent appraisal, and

          (2) such additional amount as will, when added to (i) the
amount described in Section 6.1.A(1) and (ii) any other Parachute
Payment to the Executive contingent upon the Change in Control,
equal 2.99 times the Executive’s Salary.

Payment
shall be made on the 15th day following the date of the Executive’s
termination.

          B. In the event of a Change in Control of the Company followed by an
involuntary assignment of the Executive to a position of lesser responsibility
than that of President of the Company or an involuntary reduction of more than
ten percent (10%) in the amount of the Executive’s Salary as in effect
immediately prior to the Change in Control, within three (3) years of the
Change in Control, the Executive shall be entitled, if he resigns employment
within three (3) months after the involuntary assignment or salary reduction,
to a payment of the aggregate of the following:

          (1) an amount equal to the fair value of the Executive’s
unvested stock options issued by the Company or by First Business
Financial Services, Inc. calculated as of the date of the
Executive’s termination from employment and based upon an
independent appraisal, and

          (2) such additional amount as will, when added to (i) the
amount described in Section 6.1.B(1) and (ii) any other Parachute
Payment to the Executive contingent upon the Change in Control,
equal 2.99 times the Executive’s Salary.

Payment
shall be made on the 15th day following the date of the Executive’s
termination.

          C. In the event of a Change in Control of the Company followed by an
involuntary assignment of the Executive to a position not located within
Milwaukee, Ozaukee, Waukesha, or Dane counties within three (3) years of the
Change in Control, the Executive shall be entitled, if he resigns employment
within three (3) months after the involuntary assignment, to a payment of the
aggregate of the following:

          (1) an amount equal to the fair value of the Executive’s
unvested stock options issued by the Company or by First Business
Financial Services, Inc. calculated as of the date of the
Executive’s termination from employment and based upon an
independent appraisal, and

          (2) such additional amount as will, when added to (i) the
amount described in Section 6.1.C(1) and (ii) any other Parachute
Payment to the Executive contingent upon the Change in Control,
equal 2.99 times the Executive’s Salary.

Payment
shall be made on the 15th day following the date of the Executive’s
termination.

7

 

          D. 1) In the event of a Change in Control of the Company followed by a
voluntary termination of the Executive’s employment within three (3) months of
the Change in Control, and in consideration of the Executive’s agreement which
is hereby expressed, to the Covenants not to Compete under Article 7, Sections
7.1 and 7.2, the Executive shall be entitled to a payment of an amount equal to
two (2) times “Earned Compensation.” “Earned Compensation” means Salary plus
the average of the Executive’s deferred compensation designated under any
Company deferred compensation plan for the five calendar years immediately
preceding the year of termination. Payment shall be made in four installments,
the first installment six months after termination, the second installment
twelve (12) months after termination, the third installment eighteen (18)
months after termination, and the fourth installment twenty four (24) months
after termination.

               2) In the event of a Change in Control of the Company followed by a
voluntary termination of the Executive’s employment within three (3) months of
the Change in Control, under circumstances where the Executive elects in
writing not to be bound by the Covenants not to Compete under Sections 7.1 and
7.2, the Executive shall be entitled to a payment of an amount equal to one
half (1/2) times “Earned Compensation.” “Earned Compensation” means Salary
plus the average of the Executive’s deferred compensation designated under any
Company deferred compensation plan for the five calendar years immediately
preceding the year of termination. Payment under this subsection 2) shall be
made on the 15th day following the date of the Executive’s termination.

          E. Executive cannot be entitled to more than one benefit under this
Article 6. The benefit under this Article 6 will not exceed 2.99 times the
Executive’s Salary less any Parachute Payment made other than pursuant to this
Article 6, no matter what the value of the Executive’s unvested stock options
issued by the Company or by First Business Financial Services, Inc.

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

ARTICLE 7 . COVENANTS NOT TO COMPETE

     7.1 Covenant Not to Compete. In the event the Executive’s employment with
the Company and any of its subsidiaries is terminated under the circumstances
described in section 6.1 D 1) of this Agreement then in such event and in
further consideration of this Agreement, the Executive agrees that he shall
not, either directly or indirectly (and whether or not in the employ of, or
action as an agent for, any other person or entity, or as an owner,
shareholder, partner, consultant, independent contractor or otherwise), engage
in the financial services business for a period of two (2) years after such
termination of employment within Milwaukee, Ozaukee, Waukesha, or Dane counties
in Wisconsin.

     7.2 Solicitation. In the event the Executive’s employment with the
Company and any of its subsidiaries is terminated under the circumstances
described in section 6.1 D 1) of this Agreement then as a separate promise and
in further consideration of this Agreement, Executive agrees not to solicit
employees of First Business Financial Services, Inc. or any of its subsidiary
entities, to compete with the Company within Milwaukee, Ozaukee, Waukesha, or
Dane counties

8

 

in Wisconsin during the period of Executive’s employment with
Company and for a period of two years after Executive’s termination of
employment.

     7.3 Receipt of Benefits. As a separate promise, and in further
consideration of this Agreement, Executive also agrees not to compete against
the Company in the financial services business at any time while receiving
benefits under this Agreement, whether as an employee, director, contractor or
consultant to any financial services institution within Milwaukee, Ozaukee,
Waukesha, or Dane counties in Wisconsin. This agreement not to compete is
independent of the Covenants not to Compete in Sections 7.1 and 7.2.

     Any applicable obligations of Executive under Article 7 also survive the
expiration of this Agreement.

ARTICLE 8. TERM OF AGREEMENT

     8.1 Term of Agreement. This Agreement will commence on the Effective Date
and shall continue until the earlier of the Executive’s death, the termination
of employment for reasons other than Normal or Early Retirement or mutual
agreement of the parties.

     8.2 Survival of Obligation. The expiration of this Agreement shall in no
way relieve the Company of its obligations under this Agreement, until all
obligations of the Company hereunder have been fulfilled, and until all
benefits required hereunder have been paid to the Executive.

ARTICLE 9. SUCCESSORS

     9.1 Successors. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, or otherwise) of all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform the Company’s obligations under this Agreement in
the same manner and to the same extent that the Company would be required to
perform them if no such succession had taken place. Failure of the Company 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 Company in the same amount and on the same terms as he
would be entitled to as if Article 6 applied here.

     9.2 Binding Effect. This Agreement shall inure to the benefit of and be
enforceable by the Executive’s personal or legal representatives, executors,
administrators, successors, 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 has not named a Beneficiary, then
such amounts shall be paid to the Executive’s devisee, legatee, or other
designee, or if there is no such designee, to the Executive’s estate.

ARTICLE 10. MISCELLANEOUS

     10.1 Employment Status. The Executive and the Company acknowledge that,
except as provided in this or any other agreement between the Executive and the
Company, the

9

 

employment of the Executive by the Company is “at will”, and, may
be terminated by either the Executive or the Company at any time, subject to
applicable law.

     10.2 Beneficiaries.
The Executive may designate one or more persons or entities as the primary
and/or contingent Beneficiaries of any Death Benefits or Retirement Benefits
owing to the Executive under this Agreement. Such designation must be signed
by the Executive, and in a form acceptable to the Board. The Executive may
make or change such designation at any time.

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

     10.4 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.

     10.5
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.

     10.6 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.

     10.7 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.

     10.8 Full Time Employment. This Company’s obligations under this
Agreement are premised upon and conditioned upon the Executive being employed
full time in a senior executive management position, that is to say a work week
of at least 40 hours.

     10.9 One Benefit Payable. Only one benefit will be payable under this
Agreement. There may be a benefit on termination of employment without cause
under Section 5.2, there may be a Change in Control Benefit under Article 6,
there may be a Normal Retirement Benefit or an Early Retirement Benefit under
Article 2, or there may be a Death Benefit under Article 3, but there
will never be more than one benefit payable. If, as of the date of
Executive’s termination from employment, Executive is eligible to receive more
than one benefit under this Agreement, Executive may choose the benefit most
valuable to him by providing the Company with notice of that choice within ten
(10) days after the date of Executive’s termination.

     10.10 Attorneys’ Fees. If after a Change in Control, and as a result of a
position taken by the Company or its successors after a Change in Control, the
Executive takes nonfrivolous legal actions against the Company or its
successors to defend his rights under this Agreement, the Company or its
successors will reimburse Executive for reasonable attorneys’ fees actually
incurred in such legal actions.

10

 

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

	 	 	 	 	 
	 	 	FIRST BUSINESS BANK
	 
	 	 	 	 
	September 30, 2004

	 	By:
	 	/s/
James T. Wiedenbeck
	Date

	 	 	 	James T. Wiedenbeck
	 
	 	 	 	 
	September 30, 2004	 	/s/
Corey Chambas
	Date

	 	Corey Chambas

11

 

Schedule A

CHANGE IN CONTROL BENEFITS

EXAMPLES

The following examples are intended to illustrate the operation of Sections
6.1.A, B, C and E of the Agreement dated September 21, 2004, between First
Business Bank and Corey Chambas (the “Agreement”) with respect to the
calculation of the amount of benefits, if any, payable to the Executive
following a Change in Control.

The capitalized terms in this Schedule A shall have the same meanings as such
terms have in the Agreement.

Example 1:

     Assumptions:

	 	•	 	There is a Change in Control, and the Executive terminates
his employment in accordance with Section 6.1.A, B or C of the
Agreement.
	 
	 	•	 	The aggregate fair market value of the Executive’s unvested
stock options is $50,000.
	 
	 	•	 	The Executive’s Salary is $200,000.
	 
	 	•	 	The Executive receives another Parachute Payment in the amount of $25,000.

     Calculations:

	 	•	 	First, pursuant to Section 6.1.A(1), B(1) or C(1), the
Executive will receive a payment of $50,000 for his unvested stock
options.
	 
	 	•	 	Second, pursuant to Section 6.1.A(2), B(2) or C(2), the
Executive will receive an additional payment of $523,000, which is
the amount which, when added to the option payment of $50,000 and
the other Parachute Payment of $25,000, will equal $598,000 (i.e.,
2.99 x $200,000).
	 
	 	•	 	Thus, the total payment to the Executive in connection with
the Change in Control will be $598,000 (i.e., $50,000 + $25,000 +
$523,000).

12

 

Example 2:

     Assumptions:

	 	•	 	There is a Change in Control, and the Executive terminates
his employment in accordance with Section 6.1.A, B or C of the
Agreement.
	 
	 	•	 	The aggregate fair market value of the Executive’s unvested
stock options is $600,000.
	 
	 	•	 	The Executive’s Salary is $200,000.
	 
	 	•	 	The Executive receives another Parachute Payment in the amount of $25,000.

     Calculations:

	 	•	 	Pursuant to Section 6.1.A(1), B(1) or C(1) and Section 6.1.E,
the Executive will receive a payment of $573,000 for his unvested
stock options.
	 
	 	•	 	The Executive will not receive any additional payments in
connection with the Change in Control due to the limit imposed by
Section 6.1.E (i.e., $598,000 — $25,000).

13

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