Document:

Exhibit 10.7

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of December 1, 2010 (the “Effective Date”) by and between Midland States Bancorp, Inc., (the “Company”), Midland States Bank, an Illinois banking corporation (the “Bank”) (the Bank and the Company hereinafter collectively referred to as the “Employer”), and Douglas J. Tucker (“Executive”).

 

RECITALS

 

A.                                    The Bank is a wholly-owned subsidiary of the Company.

 

B.                                    Executive is currently employed as Senior Vice President Corporate Counsel of the Company and Senior Vice President Corporate Counsel of the Bank.

 

C.                                    The Company is considering various strategic initiatives, one of which may be an initial public offering (an “IPO”) of its common stock pursuant to which the Company would become a publicly-traded corporation.

 

D.                                    In anticipation of the possibility of an IPO, or other strategic initiatives, the parties desire to reconsider, amend and restate the terms and conditions of employment applicable to Executive’s employment with the Company and the Bank.

 

NOW, THEREFORE, in consideration of the premises and of the covenants and agreements hereinafter contained, it is covenanted and agreed by and between the parties hereto as follows:

 

AGREEMENTS

 

1.                                      Prior Agreement.  As of the Effective Date, this Agreement shall supersede and replace any and all prior agreements or understandings respecting Executive’s employment by, or service to, the Employer as may from time to time have been made by and between the parties, whether or not in writing; provided, however, that any vested benefits due to Executive pursuant to any pension plan, welfare benefit plan or any other employee benefit plan shall continue to be available to Executive subject to the terms and conditions of the applicable plan as may be in effect from time to time.

 

2.                                      Employment Period.  Subject to the terms and conditions of this Agreement, the Employer hereby agrees to continue to employ Executive during the Employment Period and Executive hereby agrees to continue to remain in the employ of the Employer and to provide services during the Employment Period in accordance with this Agreement.  The “Employment Period” shall be the period commencing on the Effective Date and ending two (2) years thereafter, unless sooner terminated as provided herein.  As of the first anniversary of the Effective Date, and each anniversary thereafter (each an “Extension Date”), the Employment Period shall automatically be extended for one (1) additional year, unless either the Company or the Executive notifies the other party, by written notice delivered no later than 90 days prior to such Extension Date, that the “Employment Period” shall not be extended for an additional year.  Notwithstanding anything contained herein to the contrary, if a Change of Control occurs 

 

 

during the Employment Period, this Agreement shall remain in effect for the two (2) year period following the Change of Control and shall then terminate.

 

3.                                      Duties.  Executive agrees that during the Employment Period, Executive will devote his full business time, energies and talents to serving as the Senior Vice President Corporate Counsel of the Company and Senior Vice President Corporate Counsel of the Bank, at the direction of the Chief Executive Officer of the Company the Chief Executive Officer of the Bank (collectively, the “CEO”), as the case may be.  Executive shall have such duties and responsibilities as may be assigned to Executive from time to time by the CEO, which duties and responsibilities shall be commensurate with Executive’s position, shall perform all duties assigned to Executive faithfully and efficiently, subject to the direction of the CEO, and shall have such authorities and powers as are inherent to the undertakings applicable to Executive’s position and necessary to carry out the responsibilities and duties required of Executive hereunder.  Executive will perform the duties required by this Agreement at the Company’s principal place of business unless the nature of such duties requires otherwise.  Notwithstanding the foregoing, during the Employment Period, Executive may devote reasonable time to activities other than those required under this Agreement, including activities of a charitable, educational, religious or similar nature (including professional associations) to the extent such activities do not, in the reasonable judgment of the CEO, inhibit, prohibit, interfere with or conflict with Executive’s duties under this Agreement or conflict in any material way with the business of the Employer and its Affiliates; provided, however, that Executive shall not serve on the board of directors of any business (other than the Employer or its Affiliates) or hold any other position with any business without receiving the prior written consent of the CEO.

 

4.                                      Compensation and Benefits.  Subject to the terms and conditions of this Agreement, during the Employment Period, while Executive is employed by the Employer, the Employer shall compensate Executive for Executive’s services as follows for periods following the Effective Date:

 

(a)                                 Executive shall be compensated at an annual rate of $200,000 (the “Annual Base Salary”), which shall be payable in accordance with the Employer’s normal payroll practices as are in effect from time to time.  Beginning on January 1, 2012 and on each anniversary of such date, Executive’s rate of Annual Base Salary shall be reviewed by the CEO, and following such review, the Annual Base Salary may be adjusted upward but in no event will it be decreased.

 

(b)                                 Executive shall be entitled to receive performance based annual incentive bonuses (each, the “Incentive Bonus”) from the Employer for each fiscal year ending during the Employment Period.  Any such Incentive Bonus shall be paid to Executive within thirty (30) days of the completion of the annual audit by the Company’s auditor, but in no event later than two and one-half months after the close of each such fiscal year.  Executive’s target Incentive Bonus shall be not less than thirty-five percent (35%) of the Annual Base Salary, which Incentive Bonus shall be determined by specific performance criteria established from time to time by the Compensation Committee or the CEO.

 

(c)                                  Executive shall be eligible to participate, subject to the terms and conditions thereof, in all other incentive plans and programs, including such cash and deferred 

 

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bonus programs and equity incentive plans as may be in effect from time to time with respect to senior executives employed by the Employer on as favorable a basis as provided to other similarly situated senior executives.  Executive and Executive’s dependents, as the case may be, shall be eligible to participate in all pension and similar benefit plans (qualified, non-qualified and supplemental), profit sharing, 401(k), as well as all medical and dental, disability, group and executive life, accidental death and travel accident insurance, and other similar welfare benefit plans and programs of the Employer, subject to the terms and conditions thereof, as in effect from time to time with respect to senior executives employed by the Employer on as favorable a basis as provided to other similarly situated senior executives.  In the event that Executive is granted stock option awards or similar equity-type awards during the Employment Period, such awards shall provide for an expiration period of not less than five (5) years following termination (other than for Cause) to exercise such awards, but in no event beyond the original term of such awards.

 

(d)                                 Executive shall be entitled to accrue vacation at a rate of no less than four (4) weeks paid vacation for each calendar year, subject to the Employer’s vacation programs and policies as may be in effect during the Employment Period.

 

(e)                                  Executive shall be reimbursed by the Employer, on terms and conditions that are substantially similar to those that apply to other similarly situated executives of the Employer, for reasonable out-of-pocket expenses for entertainment, travel, meals, lodging and similar items which are consistent with the Employer’s expense reimbursement policy and actually incurred by Executive in the promotion of the Employer’s business.

 

5.                                      Definitions.  As used throughout this Agreement, all of the terms defined in this Section 5 shall have the meanings given below.

 

(a)                                 “Affiliate” shall mean each company, corporation, partnership, bank, savings bank, savings and loan association, credit union or other financial institution, directly or indirectly, which is controlled by, controls, or is under common control with, the Company, where “control” means (x) the ownership of 51% or more of the voting securities or other voting interest or other equity interest of any corporation, partnership, joint venture or other business entity, or (y) the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such corporation, partnership, joint venture or other business entity.

 

(b)                                 “Base Compensation” shall mean the amount equal to the sum of (i) the greater of Executive’s then-current Annual Base Salary or Executive’s Annual Base Salary as of the date one (1) day prior to the Change of Control; and (ii) the average of the Incentive Bonus paid (or payable) for the three (3) most recently completed fiscal years of the Company.

 

(c)                                  “Change of Control” shall mean the first to occur of the following:

 

(i)                                Any Person, other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the beneficial owner (within the meaning of Rule 13d-3 of the 

 

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Exchange Act), directly or indirectly, of securities representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding Voting Securities; or

 

(ii)                             During any period of twelve (12) consecutive months, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new Director whose election by the Board of Directors or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or

 

(iii)                          Consummation of:  (i) a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which 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 entity) at least fifty percent (50%) of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (ii) a complete liquidation of the Company or the Bank or an agreement for the sale or disposition by the Company of all or substantially all the Company’s or the Bank’s assets.

 

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 purchase company or group (except for (i) passive ownership of less than two percent (2%) 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).

 

In the event that any benefit under this Agreement constitutes deferred compensation, and the settlement of, or distribution of such benefits is to be triggered by a Change in Control, then such settlement or distribution shall be subject to the event constituting the Change in Control also constituting a “change in the ownership” or “change in the effective control” of the Company, as permitted under Code Section 409A.

 

(d)                                 “Covered Period” shall mean the period beginning six (6) months prior to a Change of Control and ending twenty-four (24) months after the Change of Control.

 

(e)                                  “Disability” shall mean that Executive is (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Employer.

 

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(f)                                   “Good Reason” shall mean Executive’s voluntary Termination of employment for one or more of the following reasons:

 

(i)                                an adverse change in the nature, scope or status of Executive’s position, authorities or duties from those in effect in accordance with Section 3 immediately following the Effective Date, or if applicable and greater, immediately prior to the Covered Period;

 

(ii)                             a reduction in Executive’s Annual Base Salary, Incentive Bonus opportunity, or material reduction in Executive’s aggregate compensation and benefits from that in effect immediately following the Effective Date, or if applicable and greater, immediately prior to the Covered Period;

 

(iii)                          relocation of Executive’s primary place of employment of more than ninety (90) miles from Executive’s primary place of employment immediately following the Effective Date, or if applicable, prior to the Covered Period, or a requirement that Executive engage in travel that is materially greater than was required prior to the Covered Period;

 

(iv)                         failure by an acquirer to assume this Agreement at the time of a Change of Control; or

 

(v)                            a material breach by the Employer, or its successor, of this Agreement.

 

Notwithstanding the foregoing, prior to Executive’s Termination for Good Reason, Executive must give the Employer written notice of the existence of any condition set forth in clause (i) – (v) above within ninety (90) days of such initial existence and the Employer shall have thirty (30) days from the date of receipt of such notice in which to cure the condition giving rise to Good Reason, if curable.  If, during such thirty (30) day period, the Employer cures the condition giving rise to Good Reason, no payments or benefits shall be due under Section 6 of this Agreement with respect to such occurrence.  If, during such thirty (30) day period, the Employer fails or refuses to cure the condition giving rise to Good Reason, Executive shall be entitled to payments or benefits under Section 6 of this Agreement upon such Termination; provided such Termination occurs within 24 months of such initial existence of the applicable condition.

 

(g)                                 “Minimum Payments” shall mean, as applicable, the following amounts:

 

(i)                                Executive’s earned but unpaid Annual Base Salary for the period ending on the Termination Date;

 

(ii)                             Executive’s earned but unpaid Incentive Bonus for the previously completed fiscal year;

 

(iii)                          Executive’s accrued but unpaid vacation pay for the period ending on the Termination Date;

 

(iv)                         Executive’s unreimbursed business expenses and all other items earned and owed to Executive through the Termination Date; and

 

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(v)                            benefits, incentives and awards described in Section 6(f).

 

(h)                                 “Pro Rata Bonus” means a payment equal to the Incentive Bonus that Executive would have earned for the year of termination, based upon actual results of the Employer and pro rated on a per diem basis (by dividing the number of days employed during the applicable performance period by the total number of days in the applicable performance period).

 

(i)                                    “Release” shall mean a general release and waiver substantially in the form attached hereto as Exhibit A.

 

(j)                                    “Severance Amount” shall mean:

 

(i)                                for any Termination occurring during the Employment Period and not during a Covered Period, an amount equal to fifty percent (50%) of Executive’s Base Compensation; or

 

(ii)                             for any Termination occurring during a Covered Period, an amount equal to one hundred percent (100%) of Executive’s Base Compensation.

 

(k)                                 “Termination” shall mean termination of Executive’s employment either:

 

(i)                                by the Employer or its successor, as the case may be, other than a Termination for Cause or any termination as a result of death or Disability; or

 

(ii)                             by Executive for Good Reason.

 

(l)                                    “Termination Date” shall mean the date of employment termination, for any reason or no reason, indicated in the written notice provided by the Employer or Executive to the other.

 

(m)                             “Termination for Cause” shall mean only a termination by the Employer as a result of:

 

(i)                                Executive’s willful and continuing failure, that is not remedied within twenty (20) days after receipt of written notice of such failure from the CEO, to perform his obligations hereunder;

 

(ii)                             Executive’s willful act or acts of gross misconduct that are, alone or in the aggregate, materially and demonstrably injurious, monetarily or otherwise, to the Employer or an Affiliate, as determined in the sole discretion of the CEO; or

 

(iii)                          Executive’s breach of fiduciary responsibility or any obligation of Executive pursuant to Section 8.

 

(n)                                  “Voting Securities” shall mean any securities which ordinarily possess the power to vote in the election of directors without the happening of any pre-condition or contingency.

 

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6.                                      Rights and Payments Upon Termination.  Either party may terminate Executive’s employment under this Agreement pursuant to the terms and conditions of this Section 6.  Subject to Section 7 below, Executive’s right to benefits and payments, if any, for periods after the Termination Date shall be determined in accordance with this Section 6:

 

(a)                                 Minimum Payments.  If the Termination Date occurs during the Employment Period for any reason, Executive shall be entitled to the Minimum Payments, in addition to any payments or benefits to which Executive may be entitled under the following provisions of this Section 6 (other than this Section 6(a)) or the express terms of any employee benefit plan or as required by law.  Any payments to be made to Executive pursuant to this Section 6(a) shall be made within thirty (30) days after the Termination Date; provided that any benefits, incentives or awards payable as described in Section 6(f) shall be made in accordance with the provisions of the applicable plan, program or arrangement.  Except as may be otherwise expressly provided to the contrary in this Agreement or as otherwise provided by law, nothing in this Agreement shall be construed as requiring Executive to be treated as employed by the Employer following the Termination Date for purposes of any employee benefit plan or arrangement in which Executive may participate at such time.

 

(b)                                 Termination for Cause, Death, Disability, Voluntary Resignation and Non-Renewal.

 

(i)                                Upon a determination of a Termination for Cause by the Employer, Executive’s death or Disability, or Executive’s voluntary resignation other than for Good Reason, Executive’s employment shall immediately terminate.

 

(ii)                             If the Termination Date occurs during the Employment Period and is a result of a Termination for Cause, death, Disability, voluntary resignation other than for Good Reason or if this Agreement expires due to notice of non-renewal by either party as provided under Section 2 or at the end of a Covered Period, then, other than the Minimum Payments, Executive shall have no right to payments or benefits under this Agreement (and the Employer shall have no obligation to make any such payments or provide any such benefits) for periods after the Termination Date.

 

(c)                                  Termination Other than for Cause or Termination for Good Reason.  If Executive’s employment by the Employer, or any Affiliate or successor of the Employer, shall be subject to a Termination other than during a Covered Period, then, in addition to the Minimum Payments, the Employer shall provide Executive the following benefits:

 

(i)                                Commencing on the Termination Date, Executive shall receive the applicable Severance Amount (less any amount described in subparagraph (ii) below) paid in 12 substantially equal monthly installments, with each successive payment being due on the monthly anniversary of the Termination Date.

 

(ii)                             To the extent any portion of the applicable Severance Amount exceeds the “safe harbor” amount described in Treasury Regulation Section 1.409A-1(b)(9)(iii)(A), Executive shall receive such portion of the applicable Severance Amount that 

 

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exceeds the “safe harbor” amount in a single lump sum payment payable within five (5) days after Executive’s Termination Date.

 

(iii)                          Executive (and dependents, as may be applicable) shall be entitled to the medical benefits provided in Section 6(e) below.

 

(d)                                 Termination Upon a Change of Control.  If Executive’s employment by the Employer, or any Affiliate or successor of the Employer, shall be subject to a Termination within a Covered Period, then, in addition to Minimum Payments, the Employer shall provide Executive the following benefits:

 

(i)                                Within five (5) days after Executive’s Termination Date, the Employer shall pay Executive a lump sum payment in an amount equal to the Severance Amount.

 

(ii)                             Executive (and his dependents, as may be applicable) shall be entitled to the medical benefits provided in Section 6(e) below.

 

(iii)                          Executive shall be entitled to receive a Pro Rata Bonus, when Incentive Bonuses are paid to other senior management of Employer, consistent with Section 4(b) of this Agreement.

 

(e)                                  Medical, Dental and Life Insurance Benefits.  If Executive’s employment by the Employer or any Affiliate or successor of the Employer shall be subject to a Termination as provided in subsections  (c) or (d) above within the Employment Period, then to the extent that Executive or any of Executive’s dependents may be covered under the terms of any medical and dental plans of the Employer (or any Affiliate) for active employees immediately prior to the termination, then, for as long as Executive is eligible for and elects coverage under the health care continuation rules of the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Employer will provide Executive and those dependents with equivalent coverage, with Executive required to pay the same amount as Executive would pay if Executive continued in employment with the Employer or an Affiliate during such period, but in no event more than twelve (12) months following termination,  The coverage may be procured directly by the Employer (or any Affiliate, if appropriate) apart from, and outside of the terms of the plans themselves; provided that Executive and Executive’s dependents comply with all of the conditions of the medical or dental plans, with the cost to the Employer not to exceed the cost for continued COBRA coverage.  In the event Executive or any of Executive’s dependents become eligible for coverage under the terms of any other medical and/or dental plan of a subsequent employer which plan benefits are comparable to Employer (or any Affiliate) plan benefits, coverage under Employer (or any Affiliate) plans will cease for the eligible Executive and/or dependent.  Executive and Executive’s dependents must notify the Employer (or any Affiliate) of any subsequent employment and provide information regarding medical and/or dental coverage available.  In the event the Employer (or any Affiliate) discovers that Executive and/or dependent has become employed and not provided the above notification, all payments and benefits under this subsection (e) will cease.

 

(f)                                   Other Benefits.  Executive’s rights following a Termination with respect to any benefits, incentives or awards provided to Executive pursuant to the terms and conditions 

 

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of any plan, program or arrangement sponsored or maintained by the Employer, whether tax-qualified or not, which are not specifically addressed herein, shall be subject to the terms and conditions of such plan, program or arrangement and this Agreement shall have no effect upon such terms and conditions except as specifically provided herein.

 

7.                                      Release.  Notwithstanding anything contained in this Agreement to the contrary, no payments or benefits (including without limitation, vesting of any and all stock options, shares of restricted stock, restricted stock units and other unvested incentive awards) payable to Executive under Section 6(c), 6(d) or 6(e) (except for payments and benefits described in Section 6(a)) shall be paid or provided to Executive unless he first executes (without subsequent revocation) and delivers to the Employer a Release.  To the extent any of the payments and/or benefits due under Section 6(c), 6(d) or 6(e) are determined to be subject to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), the Release must be executed and become irrevocable on or before the 60th day following the Termination Date.  Provided that an executed, irrevocable Release has been delivered on or before the 60th day following the Termination Date, any payments and benefits that are determined to be subject to Section 409A of the Code shall become payable, or shall otherwise commence, as of the 60th day following the Termination Date.  If an executed, irrevocable Release is not delivered on or before the 60th day following the Termination Date, Executive shall forever forfeit any and all rights to any payment or benefit (to the extent such payment or benefit is determined to be subject to Section 409A of the Code) under Section 6(c), 6(d) or 6(e) or any payment or benefit in lieu thereof.

 

8.                                      Restrictive Covenants.

 

(a)                                 Confidential Information.  Executive acknowledges that, during the course of his employment with the Employer, Executive may produce and have access to confidential and/or proprietary non-public information concerning the Employer and its Affiliates, including marketing materials, financial and other information concerning customers and prospective customers, customer lists, records, data, trade secrets, proprietary business information, pricing and profitability information and policies, strategic planning, commitments, plans, procedures, litigation, pending litigation and other information not generally available to the public (collectively, “Confidential Information”).  Executive agrees not to directly or indirectly use, disclose, copy or make lists of Confidential Information for the benefit of anyone other than the Employer, either during or after his employment with the Employer, except to the extent that such information is or thereafter becomes lawfully available from public sources, or such disclosure is authorized in writing by the Employer, required by law or any competent administrative agency or judicial authority, or otherwise as reasonably necessary or appropriate in connection with performance by Executive of his duties hereunder.  Executive agrees that, if he receives a subpoena or other court order or is otherwise required by law to provide information to a governmental authority or other person concerning the activities of the Employer or any of its Affiliates, or his activities in connection with the business of the Employer or any of its Affiliates, Executive will immediately notify the Employer of such subpoena, court order or other requirement and deliver forthwith to the Employer a copy thereof and any attachments and non-privileged correspondence related thereto.  Executive shall take reasonable precautions to protect against the inadvertent disclosure of Confidential Information.  Executive agrees to abide by the Employer’s reasonable policies, as in effect from time to time, respecting avoidance of interests conflicting with those of the Employer and its Affiliates.  In this 

 

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regard, Executive shall not directly or indirectly render services to any person or entity where Executive’s service would involve the use or disclosure of Confidential Information.  Executive agrees not to use any Confidential Information to guide him in searching publications or other publicly available information, selecting a series of items of knowledge from unconnected sources and fitting them together to claim that he did not violate any agreements set forth in this Agreement.

 

(b)                                 Documents and Property.  All records, files, documents and other materials or copies thereof relating to the business of the Employer and its Affiliates, which Executive shall prepare, receive, or use, shall be and remain the sole property of the Employer and, other than in connection with performance by Executive of his duties hereunder, shall not be removed from the premises of the Employer or any of its Affiliates without the Employer’s prior written consent, and shall be promptly returned to the Employer upon Executive’s termination of employment together with all copies (including copies or recordings in electronic form), abstracts, notes or reproductions of any kind made from or about the records, files, documents or other materials.

 

(c)                                  Non-Competition and Non-Solicitation.  The Employer and Executive have agreed that the primary service area of the Employer’s lending and deposit taking functions in which Executive will actively participate extends separately to an area that encompasses the County of Effingham, Illinois (the “Restricted Area”).  Therefore, as an essential ingredient of and in consideration of this Agreement and his employment by the Employer, Executive agrees that, during his employment with the Employer and for a period of twelve (12) months immediately following the termination of his employment (the “Restricted Period”), for whatever reason, where such termination occurs during the Employment Period or thereafter, he will not, except with the express prior written consent of the Employer, directly or indirectly, do any of the following (all of which are collectively referred to in this agreement as the “Restrictive Covenant”):

 

(i)                                Engage or invest in, own, manage, operate, finance, control, or participate in the ownership, management, operation or control of, be employed by, associated with, or in any manner connected with, serve as a director, officer or consultant to, lend his name or any similar name to, lend his credit to, or render services or advice to, any person, firm, partnership, corporation or trust which owns, operates or is in the process of forming, a bank, savings and loan association, credit union or similar financial institution (a “Financial Institution”) with an office located, or to be located at an address identified in a filing with any regulatory authority, within the Restricted Area; provided however, that the ownership by Executive of shares of the capital stock of any Financial Institution which shares are listed on a securities exchange or quoted on the National Association of Securities Dealers Automated Quotation System and which do not represent more than five percent (5%) of the institution’s outstanding capital stock, shall not violate any terms of this Agreement: provided further, that nothing contained herein is intended to restrict Executive’s ability to engage in the private practice of law within the Restricted Area.

 

(ii)                             Executive will not, directly or indirectly, either for himself, or any Financial Institution: (1) induce or attempt to induce any employee of the Employer or any of its Affiliates to leave the employ of the Employer or any of its Affiliates; (2) in any way interfere 

 

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with the relationship between the Employer or any of its Affiliates and any employee of the Employer or any of its Affiliates; or (3) induce or attempt to induce any customer, supplier, licensee, or business relation of the Employer or any of its Affiliates to cease doing business with the Employer or any of its Affiliates or in any way interfere with the relationship between the Employer or any of its Affiliates and their respective customers, suppliers, licensees or business relations.

 

(iii)                          Executive will not, directly or indirectly, either for himself, or any Financial Institution, solicit the business of any person or entity known to Executive to be a customer of the Employer or any of its Affiliates, where Executive, or any person reporting to Executive, had personal contact with such person or entity, with respect to products, activities or services which compete in whole or in part with the products, activities or services of the Employer or any of its Affiliates.

 

(iv)                         Executive will not, directly or indirectly, serve as the agent, broker or representative of, or otherwise assist, any person or entity in obtaining services or products from any Financial Institution within the Restricted Area, with respect to the products, activities or services which compete in whole or in part with the products, activities or services of the Employer or any of its Affiliates.

 

(d)                                 Work for Hire Provisions.

 

(i)                                Exclusive Rights of the Employer  in Work Product.  The parties acknowledge and agree that all work performed by Executive for the Employer or any of its Affiliates shall be deemed “work for hire.”  The Employer shall at all times own and have exclusive right, title and interest in and to all Confidential Information and Inventions (as defined below), and the Employer shall retain the exclusive right to license, sell, transfer and otherwise use and dispose of the same.  Any and all enhancements of the technology of the Employer or any of its Affiliates that are developed by Executive shall be the exclusive property of the Employer.  Executive hereby assigns to the Employer any right, title and interest in and to all Inventions that he may have, by law or equity, without additional consideration of any kind whatsoever from the Employer or any of its Affiliates.  Executive agrees to execute and deliver any instruments or documents and to do all other things (including the giving of testimony) requested by the Employer (both during and after the termination of his employment with the Employer) in order to vest more fully in the Employer or any of its Affiliates all ownership rights in the Inventions (including obtaining patent, copyright or trademark protection therefore in the United States and/or foreign countries).

 

(ii)                             Definitions and Exclusions.  For purposes of this Agreement, “Inventions” means all systems, procedures, techniques, manuals, data bases, plans, lists, inventions, trade secrets, copyrights, patents, trademarks, discoveries, innovations, concepts, ideas and software conceived, compiled or developed by Executive in the course of his employment with the Employer or any of its Affiliates and/or comprised, in whole or part, of Confidential Information.  Notwithstanding the foregoing, Inventions shall not include:  (i) any inventions independently developed by Executive and not derived, in whole or part, from any Confidential Information or (ii) any invention made by Executive prior to his exposure to any Confidential Information.

 

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(e)           Remedies for Breach of Restrictive Covenants.  Executive has reviewed the provisions of this Agreement with legal counsel, or has been given adequate opportunity to seek such counsel, and Executive acknowledges and expressly agrees that the covenants contained in this Section 8 are reasonable with respect to their duration, geographical area and scope.  Executive further acknowledges that the restrictions contained in this Section 8 are reasonable and necessary for the protection of the legitimate business interests of the Employer, that they create no undue hardships, that any violation of these restrictions would cause substantial injury to the Employer and such interests, and that such restrictions were a material inducement to the Employer to enter into this Agreement.  In the event of any violation or threatened violation of these restrictions, the Employer, in addition to and not in limitation of, any other rights, remedies or damages available to the Employer under this Agreement or otherwise at law or in equity, shall be entitled to preliminary and permanent injunctive relief to prevent or restrain any such violation by Executive and any and all persons directly or indirectly acting for or with her, as the case may be.

 

(f)            In the event of the existence of any other agreement between the parties which (i) is in effect during the Restricted Period, and (ii) which contains restrictive covenants that conflict with any of the provisions of this Section 8, then the more restrictive of such provisions from the agreements shall control for the period during which the agreements would otherwise be in effect.

 

9.             No Set-Off; No Mitigation.  Except as provided herein, the Employer’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including any set-off, counterclaim, recoupment, defense or other right which the Employer may have against Executive or others.  In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement, and such amounts shall not be reduced whether or not Executive obtains other employment.

 

10.          Notices.  Notices and all other communications under this Agreement shall be in writing and shall be deemed given when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

 

If to the Company (with a copy to the Bank):

 

Midland States Bancorp, Inc.
 Attention: Chief Executive Officer
 133 W. Jefferson Street
 Effingham, Illinois 62401

 

If to the Bank (with a copy to the Company):

 

12

 

Midland States Bank
 Attention: Chief Executive Officer
 133 W. Jefferson Street
 Effingham, Illinois 62401

 

If to Executive, to such home address or other address as Executive has most recently provided to the Employer.

 

or to such other address as either party may furnish to the other in writing, except that notices of changes of address shall be effective only upon receipt.

 

11.          Applicable Law.  All questions concerning the construction, validity and interpretation of this Agreement and the performance of the obligations imposed by this Agreement shall be governed by the internal laws of the State of Illinois applicable to agreements made and wholly to be performed in such state without regard to conflicts of law provisions of any jurisdiction, and any court action commenced to enforce this Agreement shall have as its sole and exclusive venue the County of Effingham, Illinois.

 

12.          Entire Agreement; Survival.

 

(a)           This Agreement constitutes the entire agreement between Executive and the Employer concerning the subject matter hereof, and supersedes all prior negotiations, undertakings, agreements and arrangements with respect thereto, whether written or oral, specifically including the Prior Agreement.  If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any other provision of this Agreement and all other provisions shall remain in full force and effect.  The various covenants and provisions of this Agreement are intended to be severable and to constitute independent and distinct binding obligations.  Without limiting the generality of the foregoing, if the scope of any covenant contained in this Agreement is too broad to permit enforcement to its full extent, such covenant shall be enforced to the maximum extent permitted by law, and Executive hereby agrees that such scope may be judicially modified accordingly.

 

(b)           The provisions of Section 8 shall survive the termination of this Agreement.

 

13.          Withholding of Taxes.  The Employer may withhold from any benefits payable under this Agreement all federal, state, city or other taxes as may be required pursuant to any law, governmental regulation or ruling.

 

14.          No Assignment.  Executive’s rights to receive payments or benefits under this Agreement shall not be assignable or transferable whether by pledge, creation of a security interest or otherwise, other than a transfer by will or by the laws of descent or distribution.  In the event of any attempted assignment or transfer contrary to this Section, the Employer shall have no liability to pay any amount so attempted to be assigned or transferred.  This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

 

13

 

15.          Successors.  This Agreement shall be binding upon and inure to the benefit of the Employer, its successors and assigns (including, without limitation, any company into or with which the Employer may merge or consolidate).  The Employer agrees that it will not effect the sale or other disposition of all or substantially all of its assets (where such transaction would constitute a Change in Control) unless either (a) the person or entity acquiring the assets, or a substantial portion of the assets, shall expressly assume by an instrument in writing all duties and obligations of the Employer under this Agreement, or (b) the Employer shall provide, through the establishment of a separate reserve, for the payment in full of all amounts which are or may reasonably be expected to become payable to Executive under this Agreement.

 

16.          Legal Fees.  In the event that either party commences arbitration or litigation to enforce or protect his and/or its rights under this Agreement, the prevailing party in any such action shall be entitled to recover reasonable attorneys’ fees and costs (including the costs of experts, evidence and counsel) relating to such action, in addition to all other entitled relief, including but not limited to damages and injunctive relief.

 

17.          Amendment.  This Agreement may not be amended or modified except by written agreement signed by Executive and the Employer.

 

18.          Internal Revenue Code Section 409A.

 

(a)           It is intended that this Agreement comply with the provisions of Section 409A of the Code so as not to subject Executive to the payment of additional taxes and interest under Section 409A of the Code.  In furtherance of this intent, this Agreement shall be interpreted, operated and administered in a manner consistent with these intentions, and to the extent that any regulations or other guidance issued under Section 409A of the Code would result in Executive being subject to payment of additional income taxes or interest under Section 409A of the Code, the parties agree to amend this Agreement to maintain to the maximum extent practicable the original intent of the Agreement while avoiding the application of such taxes or interest under Section 409A of the Code.

 

(b)           Notwithstanding any provision in this Agreement to the contrary, if Executive is determined to be a Specified Employee as of the Termination Date, then, to the extent required pursuant to Section 409A(a)(2)(B)(i) of the Code, payments due under this Agreement which are deemed to be deferred compensation shall be subject to a six (6) month delay following the Termination Date.  For purposes of Section 409A of the Code, all installment payments of deferred compensation made hereunder, or pursuant to another plan or arrangement, shall be deemed to be separate payments and, accordingly, the aforementioned deferral shall only apply to separate payments which would occur during the six (6) month deferral period and all other payments shall be unaffected.  All delayed payments shall be accumulated and paid in a lump-sum catch-up payment as of the first day of the seventh-month following the Termination Date (or, if earlier, the date of death of Executive) with all such delayed payments being credited with interest (compounded monthly) for this period of delay equal to the prime rate in effect on the first day of such six-month period.  Any portion of the benefits hereunder that were not otherwise due to be paid during the six-month period following the Termination Date shall be paid to Executive in accordance with the payment schedule established herein.

 

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(c)           The term “Specified Employee” shall mean any person who is a “key employee” (as defined in Code Section 416(i) of the Code without regard to paragraph (5) thereof), as determined by the Employer based upon the 12-month period ending on each December 31st (such 12-month period is referred to below as the “identification period”).  If Executive is determined to be a key employee under Section 416(i) of the Code (without regard to paragraph (5) thereof), he shall be treated as a Specified Employee for purposes of this Agreement during the 12-month period that begins on the April 1 following the close of such identification period.  For purposes of determining whether Executive is a key employee under Section 416(i) of the Code, “compensation” shall mean Executive’s W-2 compensation as reported by the Employer for a particular calendar year.

 

(remainder of page intentionally left blank)

 

15

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date.

 

	
MIDLAND STATES BANCORP, INC.
    	
 
    	
DOUGLAS   J. TUCKER
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:   
    	
/s/   Leon J. Holschbach
    	
 
    	
/s/   Douglas J. Tucker
    
	
Name:
    	
Leon   J. Holschbach
    	
 
    	
 
    
	
Its:
    	
President &   CEO
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
MIDLAND STATES BANK
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/   Leon J. Holschbach
    	
 
    	
 
    
	
Name:
    	
Leon   J. Holschbach
    	
 
    	
 
    
	
Its:
    	
President &   CEO
    	
 
    	
 
    

 

 

16

 

EXHIBIT A

 

GENERAL RELEASE AND WAIVER

 

THIS GENERAL RELEASE AND WAIVER (the “Release”) is made and entered into as of this         day of                      , 20   , by and between Midland States Bancorp, Inc., (the “Company”), Midland States Bank, an Illinois banking corporation (the “Bank”) (the Bank and the Company hereinafter collectively referred to as the “Employer”), and Douglas J. Tucker (“Executive”).

 

FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

 

1.             Termination of Employment.  Executive and the Employer agree that Executive’s employment with the Employer terminated effective                                 .  Executive further agrees that without prior written consent of the Employer  he will not hereafter seek reinstatement, recall or reemployment with the Employer.

 

2.             Severance Payment.

 

(a)           A description of the payments to which Executive may be entitled upon termination of employment are contained in Section 6 of that certain Employment Agreement entered into by and between the Employer and Executive dated December 1, 2010, which is incorporated by reference herein (the “Employment Agreement”).

 

(b)           The payments described in this Section 2 are over and above that to which Executive would be otherwise entitled to upon the termination of his employment with the Employer, absent executing this Release, notwithstanding the terms of the Employment Agreement.  Executive affirms that he has agreed in the Employment Agreement, and again herein, that he is only entitled to such payments if he executes this Release.

 

3.             General Release.  In consideration of the payments and benefits to be made by the Employer to Executive in Section 2 above, Executive, with full understanding of the contents and legal effect of this Release and having the right and opportunity to consult with his counsel, releases and discharges the Employer, its shareholders, officers, directors, supervisors, managers, employees, agents, representatives, attorneys, parent companies, divisions, subsidiaries and affiliates, and all related entities of any kind or nature, and its and their predecessors, successors, heirs, executors, administrators, and assigns (collectively, the “Released Parties”) from any and all claims, actions, causes of action, grievances, suits, charges, or complaints of any kind or nature whatsoever, that he ever had or now has, whether fixed or contingent, liquidated or unliquidated, known or unknown, suspected or unsuspected, and whether arising in tort, contract, statute, or equity, before any federal, state, local, or private court, agency, arbitrator, mediator, or other entity, regardless of the relief or remedy, arising prior to the execution of this Release.  Without limiting the generality of the foregoing, it being the intention of the parties to make this Release as broad and as general as the law permits, this Release specifically includes any and all subject matters and claims arising from any alleged violation by the Released Parties under the Age Discrimination in Employment Act of 1967, as amended; Title VII of the Civil Rights Act

 

A-1

 

of 1964, as amended; the Civil Rights Act of 1866, as amended by the Civil Rights Act of 1991 (42 U.S.C. § 1981); the Rehabilitation Act of 1973, as amended; the Employee Retirement Income Security Act of 1974, as amended; the Illinois Human Rights Act, and other similar state or local laws; the Americans with Disabilities Act; the Worker Adjustment and Retraining Notification Act; the Equal Pay Act; Executive Order 11246; Executive Order 11141; and any other statutory claim, employment or other contract or implied contract claim, claim for equity in the Employer, or common law claim for wrongful discharge, breach of an implied covenant of good faith and fair dealing, defamation, or invasion of privacy arising out of or involving his employment with the Employer, the termination of his employment with the Employer, or involving any continuing effects of his employment with the Employer or termination of employment with the Employer; provided, however, that nothing herein waives or releases Executive’s rights to any payments or benefits the Employer is required to pay or provide pursuant to the terms of the Employment Agreement or this Release or to indemnification which Executive may have under the Employer’s governing documents, by any agreement, under any applicable law or otherwise.  Executive further acknowledges that he is aware that statutes exist that render null and void releases and discharges of any claims, rights, demands, liabilities, action and causes of action which are unknown to the releasing or discharging part at the time of execution of the release and discharge.  Executive hereby expressly waives, surrenders and agrees to forego any protection to which he would otherwise be entitled by virtue of the existence of any such statute in any jurisdiction including, but not limited to, the State of Illinois.

 

4.             Covenant Not to Sue.  Executive agrees not to bring, file, charge, claim, sue or cause, assist, or permit to be brought, filed, charged or claimed any action, cause of action, or proceeding regarding or in any way related to any of the claims described in Section 3 hereof, and further agrees that his Release is, will constitute and may be pleaded as, a bar to any such claim, action, cause of action or proceeding.  If any government agency or court assumes jurisdiction of any charge, complaint, or cause of action covered by this Release, Executive will not seek and will not accept any personal equitable or monetary relief in connection with such investigation, civil action, suit or legal proceeding.

 

5.             No Disparaging, Untrue Or Misleading Statements.  Executive  represents that he has not made, and agrees that he will not make, to any third party any disparaging, untrue, or misleading written or oral statements about or relating to, respectively, the Employer, its products or services (or about or relating to any officer, director, agent, employee, or other person acting on the Employer’s behalf), or Executive.

 

6.             Severability.  If any provision of this Release shall be found by a court to be invalid or unenforceable, in whole or in part, then such provision shall be construed and/or modified or restricted to the extent and in the manner necessary to render the same valid and enforceable, or shall be deemed excised from this Release, as the case may require, and this Release shall be construed and enforced to the maximum extent permitted by law, as if such provision had been originally incorporated herein as so modified or restricted, or as if such provision had not been originally incorporated herein, as the case may be.  The parties further agree to seek a lawful substitute for any provision found to be unlawful; provided, that, if the parties are unable to agree upon a lawful substitute, the parties desire and request that a court or other authority called upon to decide the enforceability of this Release modify the Release so

 

A-2

 

that, once modified, the Release will be enforceable to the maximum extent permitted by the law in existence at the time of the requested enforcement.

 

7.             Waiver.  A waiver by the Employer of a breach of any provision of this Release by Executive shall not operate or be construed as a waiver or estoppel of any subsequent breach by Executive.  No waiver shall be valid unless in writing and signed by an authorized officer of the Employer.

 

8.             Non-Disclosure.  Executive agrees that he will keep the terms and amounts set forth in this Release completely confidential and will not disclose any information concerning this Release’s terms and amounts to any person other than his attorney, accountant, tax advisor, or immediate family, until such time as the information in this Release is disclosed by the Employer as may be required by law.

 

9.             Restrictive Covenants.  Executive agrees that he will abide by the terms set forth in Section 8 of the Employment Agreement.

 

10.          Return of Employer Materials. Executive represents that he has returned all Employer property and all originals and all copies, including electronic and hard copy, of all documents, within his possession at the time of the execution of this Release, including but not limited to the laptop computer, printer, Blackberry device, telephone, and credit card, as may be applicable.

 

11.          Representation.  Executive hereby agrees that this Release is given knowingly and voluntarily and acknowledges that:

 

(a)           this Release is written in a manner understood by Executive;

 

(b)           this Release refers to and waives any and all rights or claims that he may have arising under the Age Discrimination in Employment Act, as amended;

 

(c)           Executive has not waived any rights arising after the date of this Release;

 

(d)           Executive has received valuable consideration in exchange for the Release in addition to amounts Executive is already entitled to receive; and

 

(e)           Executive has been advised to consult with an attorney prior to executing this Release.

 

12.          Consideration and Revocation.  Executive is receiving this Release on                     , 20       , and Executive shall be given twenty-one (21) days from receipt of this Release to consider whether to sign the Release.  Executive agrees that changes or modifications to this Release do not restart or otherwise extend the above twenty-one (21) day period, unless specifically agreed to in writing by the Employer.  Moreover, Executive shall have seven (7) days following execution to revoke this Release in writing to the Secretary of the Employer and the Release shall not take effect until those seven (7) days have ended.

 

A-3

 

13.          Future Cooperation.  In connection with any and all claims, disputes, negotiations, investigations, lawsuits or administrative proceedings involving the Employer  which relate to periods of time during the Employment Period (as defined in the Employment Agreement), Executive agrees to make himself reasonably  available, upon reasonable notice from the Employer and without the necessity of subpoena, to provide information or documents, provide declarations or statements to the Employer, meet with attorneys or other representatives of the Employer, prepare for and give depositions or testimony, and/or otherwise cooperate in the investigation, defense or prosecution of any or all such matters.  Executive shall be reimbursed for reasonable costs and expenses incurred by him as a result of actions taken pursuant to this Section 13.  It is expressly agreed and understood that Executive will provide only truthful testimony if required to do so, and that any payment to him is solely to reimburse his expenses and costs for cooperation with the Employer.  Nothing in this Section 13 is intended to require Executive to expend an unreasonable period of time in activities required by this Section.

 

14.          Amendment.  This Release may not be altered, amended, or modified except in writing signed by both Executive and the Employer.

 

15.          Joint Participation.  The parties hereto participated jointly in the negotiation and preparation of this Release, and each party has had the opportunity to obtain the advice of legal counsel and to review and comment upon the Release.  Accordingly, it is agreed that no rule of construction shall apply against any party or in favor of any party.  This Release shall be construed as if the parties jointly prepared this Release, and any uncertainty or ambiguity shall not be interpreted against one party and in favor of the other.

 

16.          Binding Effect; Assignment.  This Release and the various rights and obligations arising hereunder shall inure to the benefit of and be binding upon the parties and their respective successors, heirs, representatives and permitted assigns.  Neither party may assign its respective interests hereunder without the express written consent of the other party.

 

17.          Applicable Law.  All questions concerning the construction, validity and interpretation of this Release and the performance of the obligations imposed by this Release shall be governed by the internal laws of the State of Illinois applicable to agreements made and wholly to be performed in such state without regard to conflicts of law provisions of any jurisdiction and any court action commenced to enforce this Release shall have as its sole and exclusive venue the County of Effingham, Illinois.

 

18.          Execution of Release.  This Release may be executed in several counterparts, each of which shall be considered an original, but which when taken together, shall constitute one Release.

 

PLEASE READ THIS RELEASE AND CAREFULLY CONSIDER ALL OF ITS PROVISIONS BEFORE SIGNING IT.  THIS RELEASE CONTAINS A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS, INCLUDING THOSE UNDER THE FEDERAL AGE DISCRIMINATION IN EMPLOYMENT ACT, AND OTHER FEDERAL, STATE AND LOCAL LAWS PROHIBITING DISCRIMINATION IN EMPLOYMENT.

 

A-4

 

If Executive signs this Release less than 21 days after he receives it from the Employer, he confirms that he does so voluntarily and without any pressure or coercion from anyone at the Employer.

 

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

 

	
MIDLAND STATES BANCORP, INC.
    	
 
    	
DOUGLAS   J. TUCKER
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    	
[Signature]
    
	
Its:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
MIDLAND STATES BANK
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    	
 
    
	
Its:
    	
 
    	
 
    	
 
    

 

A-5Exhibit 10.8

 

MIDLAND STATES BANCORP, INC.

 

OMNIBUS STOCK OWNERSHIP AND

LONG TERM INCENTIVE PLAN

 

THIS IS THE OMNIBUS STOCK OWNERSHIP AND LONG TERM INCENTIVE PLAN (“Plan”) of Midland States Bancorp, Inc. (“the Corporation” or “Company”), a Delaware corporation with its principal office in Effingham County, Illinois, under which Incentive Stock Options and Non-Qualified Options to acquire shares of the Stock, Restricted Stock, Stock Appreciation Rights, and/or Units may be granted from time to time to Eligible Employees of the Corporation and of any of its Subsidiaries (the “Subsidiaries”), subject to the following provisions:

 

ARTICLE I

DEFINITIONS

 

The following terms shall have the meanings set forth below.  Additional terms defined in this Plan shall have the meanings ascribed to them when first used herein.

 

Board.  The Board of Directors of Midland States Bancorp, Inc.

 

Change in Control Transaction.  The dissolution or liquidation of the Corporation; a reorganization, merger or consolidation of the Corporation as a result of which the outstanding securities of the class then subject to Rights hereunder are changed into or exchanged for cash or property or securities not of the Corporation’s issue; or a sale of all or substantially all of the assets of the Corporation to, or the acquisition of stock representing more than fifty percent (50%) of the voting power of the capital stock of the Corporation then outstanding by, another corporation, bank, other entity or person.

 

Code.  The Internal Revenue Code of 1986, as amended, together with the rules and regulations promulgated thereunder.

 

Committee.  The Compensation Committee of the Board.

 

Common Stock.  The Common Stock, $2.00 par value per share, of the Corporation.

 

Death. The date of death of an Eligible Employee who has received Rights as established by the relevant death certificate.

 

Disability.  The date on which an Eligible Employee who has received Rights becomes permanently and totally disabled within the meaning of Section 22 (e) (3) of the Code, which shall be determined by the Committee on the basis of such medical or other evidence as it may reasonably require or deem appropriate.

 

Effective Date.  The date on which this Plan is effective, which shall be the date it is approved by the shareholders of the Corporation.

 

Eligible Employees.  Those individuals who meet the following eligibility requirements:

 

 

(i)                         Such individual must be a full time employee of the Corporation or a Subsidiary.  For this purpose, an individual shall be considered to be an “employee” only if there exists between the Corporation or a Subsidiary and the individual the legal and bona fide relationship of employer and employee.  In determining whether such relationship exists, the regulations of the United States Treasury Department relating to the determination of such relationship for the purpose of collection of income tax at the source on wages shall be applied.

 

(ii)                      Such individual is identified by the Committee as a key employee who is in a position to significantly influence the long-term success of the Corporation, subject to ratification of such action by the Board.

 

(iii)                   If the Registration shall not have occurred, such individual must have such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the investment involved in the receipt and/or exercise of a Right.

 

(iv)                  Such individual, being otherwise an Eligible Employee under the foregoing items, shall have been selected by the Committee as a person to whom a Right or Rights shall be granted under the Plan.

 

Fair Market Value.  With respect to the Corporation’s Common Stock, the market price per share of such Common Stock determined by the Committee, consistent with the requirements of Section 422 of the Code and to the extent consistent therewith, as follows, as of the date specified in the context within which such term is used:

 

(i)                         if the Common Stock was traded on a stock exchange on the date in question, then the Fair Market Value will be equal to the closing price reported by the applicable composite-transactions report for such date;

 

(ii)                      if the Common Stock was traded over-the-counter on the date in question and was classified as a national market issue, then the Fair Market Value will be equal to the last transaction price quoted by the National Association of Securities Dealers Automated Quotation System (“NASDAQ”), National Market System (“NMS”);

 

(iii)                   if the Common Stock was traded over-the-counter on the date in question but was not classified as a national market issue, then the Fair Market Value will be equal to the average of the last reported representative bid and asked prices quoted by the NASDAQ for such date; and

 

(iv)                  if none of the foregoing provisions is applicable, then the Fair Market Value will be determined by the Committee in good faith on such basis as it deems appropriate, subject to the approval of the Board.  In such case, the Committee shall maintain a written record of its method of determining Fair Market Value.

 

ISO.   An “incentive stock option” as defined in Section 422 of the Code.

 

Just Cause Termination.   A termination by the Corporation or a Subsidiary of an Eligible Employee’s employment by the Corporation or the Subsidiary in connection with the good faith determination of the Board or the Board of Directors of the Subsidiary, as applicable, that the Eligible Employee is incompetent or otherwise has engaged in any acts involving dishonesty or moral turpitude or in any acts

 

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that materially and adversely affect the business, affairs or reputation of the Corporation or the Subsidiary.

 

Long Term Incentive Compensation Units.   The Right of a Long Term Incentive Compensation Unit Recipient to receive cash when, as and in the amounts described in Article V.

 

Long Term Incentive Compensation Unit Agreement.  The agreement between the Corporation and Long Term Incentive Compensation Unit Recipient with respect to the award of Long Term Incentive Compensation Units to the Long Term Incentive Compensation Unit Recipient, including such terms and conditions as are necessary or appropriate under Article V.

 

Non-Qualified Option.  Any Option granted under Article III whether designated by the Committee as a Non-Qualified Option or otherwise, other than an Option designated by the Committee as an ISO, or any Option so designated but which, for any reason, fails to qualify as an ISO pursuant to Section 422 of the Code and the rules and regulations thereunder.

 

Option Agreement.  The agreement between the Corporation and an Optionee with respect to Options granted to such Optionee, including such terms and provisions as are necessary or appropriate under Article III.

 

Options.  ISOs and Non-Qualified Options are collectively referred to herein as “Options;” provided, however, whenever reference is specifically made only to ISOs or Non-Qualified Options, such reference shall be deemed to be made to the exclusion of the other.

 

Plan Pool.  A total of 100,000 shares of authorized, but unissued, and/or Treasury shares of Common Stock, as adjusted pursuant to Section 2.3(b), which shall be available as Stock under this Plan.

 

Registration.   A registration by the Corporation under the 1933 Act and applicable state “Blue Sky” and securities laws of this Plan, the offering of Rights under this Plan, the offering of Stock under this Plan, and/or the Stock acquirable under this Plan.

 

Restricted Stock.  The Stock that a Holder shall be awarded with restrictions when, as, in the amounts and with the restrictions described in Article IV.

 

Restricted Stock Grant  Agreement.  The agreement between the Corporation and a Holder with respect to Rights to Restricted Stock, including such terms and provisions as are necessary or appropriate under Article IV.

 

Restricted Stock Unit.  Any unit granted under Article IV of the Plan evidencing the right to receive a Share (or a cash payment equal to the Fair Market Value of a Share), or any combination of cash and Shares, at some future date.

 

Restricted Stock Unit Grant  Agreement.  The agreement between the Corporation and a Holder with respect to Rights to Restricted Stock Units, including such terms and provisions as are necessary or appropriate under Article IV.

 

Retirement.   “Retirement” shall mean

 

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(i)                         the termination of an Eligible Employee’s employment under conditions which would constitute “normal retirement” or “early retirement” under any tax qualified retirement plan maintained by the Corporation or a Subsidiary, or

 

(ii)                      termination of employment after attaining age 65 (except in the case of a Just Cause Termination).

 

Rights.  The rights to exercise, purchase or receive the Options, Restricted Stock, Units and SARs described herein.

 

Rights Agreement.  An Option Agreement, a Restricted Stock Grant Agreement, a Unit Agreement or an SAR Agreement.

 

SAR.  The Right of an SAR Recipient to receive cash when, as and in the amounts described in Article VI.

 

SAR Agreement.  The agreement between the Corporation and an SAR Recipient with respect to the SAR awarded to the SAR Recipient, including such terms and conditions as are necessary or appropriate under Article VI.

 

SEC.  The Securities and Exchange Commission.

 

Stock.  The shares of Common Stock in the Plan Pool available for issuance pursuant to the valid exercise of a Right or on which the cash value of a Right is to be based.

 

Tax Withholding Liability.  All federal and state income taxes, social security tax, and any other taxes applicable to the compensation income arising from the transaction required by applicable law to be withheld by the Corporation.

 

Transfer.  The sale, assignment, transfer, conveyance, pledge, hypothecation, encumbrance, loan, gift, attachment, levy upon, assignment for the benefit of creditors, by operation of law (by will or descent and distribution), transfer by a qualified domestic relations order, a property settlement or maintenance agreement, transfer by result of the bankruptcy laws or otherwise of a share of Stock or of a Right.

 

1933 Act.  The Securities Act of 1933, as amended, together with the rules and regulations promulgated thereunder.

 

1934 Act.  The Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder.

 

ARTICLE II

GENERAL

 

Section 2.1. Purpose.

 

The purposes of this Plan are to encourage and motivate selected key employees to contribute to the successful performance of the Corporation and its Subsidiaries and the growth of the market value of the Corporation’s Common Stock; to achieve a unity of purpose between such employees and shareholders by providing ownership opportunities, and, when viewed in conjunction with potential benefit plans for

 

4

 

members of the Board and the Boards of Directors of some or all of the Subsidiaries, to achieve a unity of purpose between such employees and directors in the achievement of the Corporation’s primary long term performance objectives; and to retain such employees by rewarding them with potentially tax-advantageous future compensation.  These objectives will be promoted through the granting of Rights to designated Eligible Employees pursuant to the terms of this Plan

 

Section 2.2. Administration.

 

(a)                     The Plan shall be administered by the Committee.  Subject to the provisions of SEC Rule 16b-3(d), the Committee may designate any officers or employees of the Corporation or any Subsidiary to assist in the administration of the Plan, to execute documents on behalf of the Committee and to perform such other ministerial duties as may be delegated to them by the Committee.

 

(b)         Subject to the provisions of the Plan, the determinations and the interpretation and construction of any provision of the Plan by the Committee shall be recommended to the Board for approval, and when so approved by the Board shall be final and conclusive upon persons affected thereby.  By way of illustration and not of limitation, the Committee shall have the discretion, subject to the approval by the Board,

 

(i)                               to construe and interpret the Plan and all Rights granted hereunder and to determine the terms and provisions (and amendments thereof) of the Rights granted under the Plan (which need not be identical);

 

(ii)                            to define the terms used in the Plan and in the Rights granted hereunder;

 

(iii)                         to prescribe, amend and rescind the rules and regulations relating to the Plan;

 

(iv)                        to determine the Eligible Employees to whom and the time or times at which such Rights shall be granted, the number of shares of Stock, as and when applicable, to be subject to each Right, the exercise price or, other relevant purchase price or value pertaining to a Right, and the determination of leaves of absence which may be granted to Eligible Employees without constituting a termination of their employment for the purposes of the Plan; and

 

(v)                           to make all other determinations and interpretations necessary or advisable for the administration of the Plan.

 

(c)                      Notwithstanding the foregoing, or any other provision of this Plan, the Committee will have no authority to determine any matters, or exercise any discretion, to the extent that the power to make such determinations or to exercise such discretion would cause the loss of exemption under SEC Rule 16b-3 of any grant or award hereunder.

 

(d)                     It shall be in the discretion of the Committee, subject to approval by the Board, to grant Options to purchase shares of Stock which qualify as ISOs under the Code or which will be given tax treatment as Non-Qualified Options.  Any Options granted which fail to satisfy the requirements for ISOs shall become Non-Qualified Options.

 

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(e)                      The Corporation shall make available to Eligible Employees receiving Rights and/or shares of Stock in connection therewith all disclosure documents required under applicable federal and state securities laws.  The Committee shall be responsible for supplying the recipient of a Right and/or shares of Stock in connection therewith with such information about the Corporation as is contemplated by the federal and state securities laws in connection with exemptions from the registration requirements of such laws, as well as providing the recipient of a Right with the opportunity to ask questions and receive answers concerning the Corporation and the terms and conditions of the Rights granted under this Plan.  In addition, if a Registration shall not occur, the Committee shall be responsible, subject to approval by the Board, for determining the maximum number of Eligible Employees and the suitability of particular persons to be Eligible Employees in order to comply with applicable federal and state securities statutes and regulations governing such exemptions.

 

(f)                       In determining the Eligible Employees to whom Rights may be granted and the number of shares of Stock to be covered by each Right, the Committee and the Board shall take into account the nature of the services rendered by such Eligible Employees, their present and potential contributions to the success of the Corporation and/or a Subsidiary and such other factors as the Committee and the Board shall deem relevant.  An Eligible Employee who has been granted a Right under this Plan may be granted an additional Right or Rights under this Plan if the Committee and the Board shall so determine.  If pursuant to the terms of this Plan, or otherwise in connection with this Plan, it is necessary that the percentage of stock ownership of an Eligible Employee be determined, the ownership attribution provisions set forth in Section 424(d) of the Code shall be controlling.

 

(g)                      The granting of Rights pursuant to this Plan is in the exclusive discretion of the Board, and until the Board acts, no individual shall have any rights under this Plan.  The terms of this Plan shall be interpreted in accordance with this intent.

 

Section 2.3.  Stock Available For Rights.

 

(a)                     Shares of the Stock shall be subject to, or underlying, grants of Options, Restricted Stock, Restricted Stock Units, SARs and Long Term Incentive Compensation Units under this Plan.  The total number of shares of Stock for which, or with respect to which, Rights may be granted (including the number of shares of Stock in respect of which SARs and Long Term Incentive Compensation Units may be granted) under this Plan shall be those designated in the Plan Pool.  In the event that a Right granted under this Plan to any Eligible Employee expires or is terminated unexercised as to any shares of Stock covered thereby, such shares thereafter shall be deemed available in the Plan Pool for the granting of Rights under this Plan; provided, however, if the expiration or termination date of a Right is beyond the term of existence of this Plan as described in Section 7.3, then any shares of Stock covered by unexercised or terminated Rights shall not reactivate the existence of this Plan and therefore shall not be available for additional grants of Rights under this Plan.

 

(b)                     In the event the outstanding shares of Common Stock are increased, decreased, changed into or exchanged for a different number or kind of securities as a result of a stock split, reverse stock split, stock dividend, recapitalization, merger, share exchange acquisition, combination or reclassification appropriate proportionate adjustments will be made in: (i) the aggregate number and/or kind of shares of Stock in the Plan Pool that may be issued pursuant to the exercise of, or that are underlying, Rights granted hereunder; (ii) the exercise or other purchase price or value pertaining to, and the number and/or kind of shares of Stock called for

 

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with respect to, or underlying, each outstanding Right granted hereunder; and (iii) other rights and matters determined on a per share basis under this Plan or any Rights Agreement.  Any such adjustments will be made only by the Committee, subject to approval by the Board, and when so approved will be effective, conclusive and binding for all purposes with respect to this Plan and all Rights then outstanding.  No such adjustments will be required by reason of (i) the issuance or sale by the Corporation for cash of additional shares of its Common Stock or securities convertible into or exchangeable for shares of its Common Stock, or (ii) the issuance of shares of Common Stock in exchange for shares of the capital stock of any corporation, financial institution or other organization acquired by the Corporation or any Subsidiary in connection therewith.

 

(c)                      The grant of a Right pursuant to this Plan shall not affect in any way the right or power of the Corporation to make adjustments, reclassification, reorganizations or changes of its capital or business structure or to merge or to consolidate or to dissolve, liquidate or sell, or transfer all or any part of its business or assets.

 

(d)                     No fractional shares of Stock shall be issued under this Plan for any adjustment under Section 2.3(b).

 

Section 2.4.  Severable Provisions.

 

The Corporation intends that the provisions of each of Articles III, IV, V and VI, in each case together with Articles I, II and VII, shall each be deemed to be effective on an independent basis, and that if one or more of such Articles, or the operative provisions thereof, shall be deemed invalid, void or voidable, the remainder of such Articles shall continue in full force and effect.

 

ARTICLE III

OPTIONS

 

Section 3.1.  Grant of Options.

 

(a)                     The Company may grant Options to Eligible Employees as provided in this Article III.  Options will be deemed granted pursuant to this Article III only upon (i) authorization by the Committee, (ii) the approval of such grant by the Board, and (iii) the execution and delivery of an Option Agreement by the Eligible Employee optionee (“the “Optionee”) and a duly authorized officer of the Company.  Options will not be deemed granted hereunder merely upon authorization of such grant by the Committee.  The aggregate number of shares of Stock potentially acquirable under all Options granted shall not exceed the total number of shares of Stock remaining in the Plan Pool, less all shares of Stock potentially acquired under, or underlying, all other Rights outstanding under this Plan.

 

(b)                     Subject to approval by the Board, the Committee shall designate Options at the time a grant is authorized as either ISOs or Non-Qualified Options.  In accordance with Section 422 (d) of the Code, the aggregate Fair Market Value (determined as of the date an ISO is granted) of the shares of Stock as to which an ISO may first become exercisable by an Optionee in a particular calendar year (pursuant to Article III and all other plans of the Company and/or its Subsidiaries) may not exceed $100,000 (the “$100,000 Limitation”).  If an Optionee is granted Options in excess of the $100,000 Limitation, or if such Options otherwise become exercisable with respect to a number of shares of Stock which would exceed the $100,000 Limitation, such excess Options shall be Non-Qualified Options.

 

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Section 3.2.  Exercise Price.

 

(a)                     Subject to approval by the Board, the initial exercise price of each Option granted under this Plan (the “Exercise Price”) shall be determined by the Committee in its discretion; provided, however, that the Exercise Price of an ISO shall not be less than (i) the Fair Market Value of the Common Stock on the date of grant of the Option, in the case of any Eligible Employee who does not own stock possessing more than ten percent (10%) of the total combined voting power of all classes of the capital stock of the Company (within the meaning of Section 422 (b) (6) of the Code), or (ii) one hundred ten percent (110%) of such Fair Market Value in the case of any Eligible Employee who owns stock in excess of such amount.

 

(b)                     Subject to the approval of the Board and the provisions of Section 3.2(a) (as to the establishment of the Exercise Price of an Option on the date of grant), the Committee may establish that the Exercise Price of an Option shall be adjusted upward or downward, on a quarterly basis, based upon the market value performance of the Common Stock in comparison with the aggregate market value performance of one or more indices composed of publicly-traded financial institutions and financial institution holding companies deemed by the Committee to be similar (in terms of asset size, capitalization, trading volumes and other factors deemed relevant by the Committee) to the Corporation (an “Index” and the “Indices”); provided, however, that the Exercise Price of an ISO shall not be adjustable if, under the Code, such adjustable Exercise Price would disqualify the ISO as an ISO.  The Committee may utilize Indices published by third parties and/or may construct one or more Indices meeting the characteristics described above.

 

The Indices utilized will be recalculated quarterly, including in such quarterly recalculation such adjustments for stock splits, reverse stock splits and stock dividends of the companies in the indices and of the Company as are appropriate.  Each such Index shall include no fewer than fifteen (15) publicly-traded financial institutions and financial institution holding companies.  If more than one Index is utilized by the Committee, it may give such weighting to each Index utilized as the Committee may determine in its sole discretion, consistent with the provisions of this Article III.

 

Section 3.3.  Terms and Conditions of Options.

 

(a)                     All Options must be granted within ten (10) years of the Effective Date.

 

(b)                     The Committee, subject to the approval by the Board, may grant ISOs and  Non-Qualified Options, either separately or jointly, to an Eligible Employee.

 

(c)                      Each grant of Options shall be evidenced by an Option Agreement in form and substance satisfactory to the Committee in its discretion, consistent with the provisions of this Article III.

 

(d)                     At the discretion of the Committee, an Optionee, as a condition to the granting of an Option, must execute and deliver to the Company a confidential information agreement approved by the Committee.

 

(e)                      Nothing contained in Article III, any Option Agreement or in any other agreement executed in connection with the granting of an Option under this Article III will confer upon any Optionee

 

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any right with respect to the continuation of his or her status as an employee of the Company or any of its Subsidiaries.

 

(f)                       Except as otherwise provided herein, each Option Agreement may specify the period or periods of time within which each Option or portion thereof will first become exercisable (the “Vesting Period”) with respect to the total number of shares of Stock acquirable thereunder.  Such Vesting Periods will be fixed by the Committee in its discretion, and may be accelerated or shortened by the Committee in its discretion; provided, however, that the Vesting Period for any portion of each ISO shall be at least one year (1) from the date such Option was granted.

 

(g)                      Not less than one hundred (100) shares of Stock may be purchased at any one time through the exercise of an Option unless the number purchased is the total number at that time purchasable under all Options granted to the Optionee.

 

(h)                     An Optionee shall have no rights as a shareholder of the Company with respect to any shares of Stock covered by Options granted to the Optionee until payment in full of the Exercise Price by such Optionee for the shares being purchased.  No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights for which the record date is prior to the date such Stock is fully paid for, except as provided in Sections 2.3(b) and 3.2(b).

 

(i)                         Additionally and notwithstanding any other provisions of this Article III, no shares of Stock obtained pursuant to an Option may be Transferred until at least six (6) months and one (1) day shall have elapsed since the date such Option was granted.

 

Section 3.4.  Exercise of Options.

 

(a)                     An Optionee must be an Eligible Employee at all times from the date of grant until the exercise of the Options granted, except as provided in Section 3.5(b).

 

(b)                     An Option may be exercised to the extent exercisable (i) by giving written notice of exercise to the Company, specifying the number of full shares of Stock to be purchased and, if applicable, accompanied by full payment of the Exercise Price thereof and the amount of the Tax Withholding Liability pursuant to Section 3.4(c) below; and (ii) by giving assurances satisfactory to the Company that the shares of Stock to be purchased upon such exercise are being purchased for investment and not with a view to resale in connection with any distribution of such shares in violation of the 1933 Act; provided, however, that in the event the prior occurrence of the Registration or in the event resale of such Stock without such Registration would otherwise be permissible, this second condition will be inoperative if, in the opinion of counsel for the Company, such condition is not required under the 1933 Act or any other applicable law, regulation or rule of any governmental agency.

 

(c)                      As a condition to the issuance of the shares of Stock upon full or partial exercise of a Non-Qualified Option, the Optionee will pay to the Company in cash, or in such other form as the Committee may determine in its discretion, the amount of the Company’s Tax Withholding Liability required in connection with such exercise.

 

(d)                     The Exercise Price of an Option shall be payable to the Company either (i) in United States dollars, in cash or by check, or money order payable to the order of the Company, or (ii) at the

 

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discretion of the Committee and the Board, through the delivery of shares of the Stock owned by the Optionee (including, if the Committee so permits, a portion of the shares of Stock as to which the Option is then being exercised) with a Fair Market Value as of the date of delivery equal to the Exercise Price, or (iii) at the discretion of the Committee and the Board, by a combination of (i) and (ii) above.  No shares of Stock shall be delivered until full payment has been made.

 

Section 3.5.  Term and Termination of Option.

 

(a)                     Subject to approval by the Board, the Committee shall determine, and each Option Agreement shall state, the expiration date or dates of each Option, but such expiration date shall be not later than ten (10) years after the date such Option was granted (the “Option Period”).  In the event an ISO is granted to a 10% Shareholder, the expiration date or dates of each Option Period shall be not later than five (5) years after the date such Option is granted.  Subject to approval by the Board, the Committee may extend the expiration date or dates of an Option Period of any Non-Qualified Option after such date was originally set; provided, however such expiration date may not exceed the maximum expiration date described in this Section 3.5(a).

 

(b)                     To the extent not previously exercised, each Option will terminate upon the expiration of the Option Period specified in the Option Agreement; provided, however, that, subject to the provisions of Section 3.5(a), each ISO will terminate upon the earlier of:  (i) ninety (90) days after the date that the Optionee ceases to be an Eligible Employee for any reason, other than by reason of Death, Disability, or a Just Cause Termination; (ii) twelve (12) months after the date that the Optionee ceases to be an Eligible Employee by reason of Disability or Death; or (iii) immediately as of the date that the Optionee ceases to be an Eligible Employee by reason of a Just Cause Termination.  The Committee may, subject to approval by the Board, and compliance with the Code requirements for ISOs, specify other events that will result in the termination of an ISO.  In the case of Non-Qualified Options, the Committee shall have discretion, subject to approval by the Board, to specify what, if any, events will terminate the Option prior to the expiration of the Option Period.

 

Section 3.6.  Change in Control Transaction.

 

At any time prior to the date of consummation of a Change in Control Transaction, the Committee may, in its absolute discretion, determine that all or any part of the Options theretofore granted under this Article III shall become immediately exercisable in full and may thereafter be exercised at any time before the date of consummation of the Change in Control Transaction (except as otherwise provided in Article II hereof, and except to the extent that such acceleration of exercisability would result in an “excess parachute payment” within the meaning of Section 280G of the Code).  Any Option that has not been fully exercised before the date of consummation of the Change in Control Transaction shall terminate on such date, unless a provision has been made in writing in connection with such transaction for the assumption of all Options theretofore granted, or the substitution for such Options of options to acquire the voting stock of a successor employer corporation, or a parent or a subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices, in which event the Options theretofore granted shall continue in the manner and under the terms so provided.

 

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Section 3.7.  Restrictions On Transfer.

 

An Option granted under Article III may not be Transferred except by will or the laws of descent and distribution and, during the lifetime of the Optionee to whom it was granted, may be exercised only by such Optionee.

 

Section 3.8.  Stock Certificates.

 

Certificates representing the Stock issued pursuant to the exercise of Options will bear all legends required by law and necessary to effectuate the provisions hereof.  The Company may place a “stop transfer” order against such shares of Stock until all restrictions and conditions set forth in this Article III, the applicable Option Agreement, and in the legends referred to in this Section 3.8 have been complied with.

 

Section 3.9.  Amendment and Discontinuance.

 

The Board may amend, suspend or discontinue the provisions of this Article III at any time or from time to time; provided that no action of the Board will cause ISOs granted under this Plan not to comply with Section 422 of the Code unless the Board specifically declares such action to be made for that purpose; and, provided, further, that no such action may, without the approval of the shareholders of the Company, materially increase (other than by reason of an adjustment pursuant to Section 2.3(b) hereof) the maximum aggregate number of shares of Stock in the Plan Pool, materially increase the benefits accruing to Eligible Employees or materially modify eligibility requirements for participation under this Article III.  Moreover, no such action may alter or impair any Option previously granted under this Article III without the consent of the applicable Optionee.

 

Section 3.10.  Compliance with Rule 16b-3.

 

With respect to persons subject to Section 16 of the 1934 Act, transactions under this Article III are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the 1934 Act.  To the extent any provision of this Article III or action by the Board or the Committee fails so to comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee and the Board.

 

ARTICLE IV

RESTRICTED STOCK AND RESTRICTED STOCK UNIT GRANTS

 

Section 4.1 Grants of Restricted Stock and Restricted Stock Units.

 

(a)                     The Company may issue Restricted Stock and Restricted Stock Units to Eligible Employees as provided in this Article IV.  Restricted Stock and Restricted Stock Units will be deemed issued only upon (i) authorization by the Committee, (ii) approval by the Board, and (iii) the execution and delivery of a Restricted Stock or Restricted Stock Units Grant Agreement by the Eligible Employee to whom such Restricted Stock or Restricted Stock Unit is to be issued (the “Holder”) and a duly authorized officer of the Company.   Restricted Stock and Restricted Stock Units will not be deemed to have been issued merely upon authorization by the Committee.

 

(b)                     Each issuance of Restricted Stock and Restricted Stock Units pursuant to this Article IV will be evidenced by a Restricted Stock or Restricted Stock Units Grant Agreement between the Company and the Holder in form and substance satisfactory to the Committee in its sole discretion, consistent with this Article IV.  Each Restricted Stock or Restricted Stock Units

 

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Grant Agreement will specify the purchase price per share, if any, paid by the Holder for the Restricted Stock or Restricted Stock Units, such amount to be fixed by the Committee and the Board.

 

(c)                      Without limiting the foregoing, each Restricted Stock or Restricted Stock Units Grant Agreement shall set forth the terms and conditions of any forfeiture provisions regarding the Restricted Stock or Restricted Stock Units, (including any provisions for accelerated vesting in the event of a Change in Control Transaction) as determined by the Committee and the Board.

 

(d)                     At the discretion of the Committee, the Holder, as a condition to such issuance, may be required (i) to execute and deliver to the Company a confidential information agreement approved by the Committee, and/or (ii) to pay to the Corporation in cash, or in such other form as the Committee may determine in its discretion, the amount of the Corporation’s Tax Withholding Liability required in connection with such issuance.

 

(e)                      Nothing contained in this Article IV, any Restricted Stock or Restricted Stock Units Grant Agreement or in any other agreement executed in connection with the issuance of Restricted Stock and Restricted Stock Units under this Article IV will confer upon any holder any right with respect to the continuation of his or her status as an employee of the Company or any of its Subsidiaries.

 

Section 4.2.  Restrictions on Transfer of Restricted Stock and Restricted Stock Units.

 

(a)                     Shares of Restricted Stock and Restricted Stock Units acquired by a Holder may be transferred only in accordance with the specific limitations on the Transfer of Restricted Stock and Restricted Stock Units imposed by applicable state or federal securities laws or set forth below, and subject to certain undertakings of the transferee set forth in Section 4.2(c).  All Transfers of Restricted Stock and Restricted Stock Units not meeting the conditions set forth in this Section 4.2(a) are expressly prohibited.

 

(b)                     Any prohibited Transfer of Restricted Stock or Restricted Stock Units is void and of no effect.  Should such a Transfer purport to occur, the Company may refuse to carry out the Transfer on its books, attempt to set aside the Transfer, enforce any undertaking or right under this Section 4.2(b), and/or exercise any other legal or equitable remedy.

 

(c)                      Any Transfer of Restricted Stock or Restricted Stock Units that would otherwise be permitted under the terms of this Plan is prohibited unless the transferee executes such documents as the Company may reasonably require to ensure the Company’s rights under a Restricted Stock or Restricted Stock Units Grant Agreement and this Article IV are adequately protected with respect to the Restricted Stock and Restricted Stock Units so Transferred.  Such documents may include, without limitation, an agreement by the transferee to be bound by all of the terms of this Plan applicable to Restricted Stock and Restricted Stock Units and of the applicable Restricted Stock or Restricted Stock Units Grant Agreement, as if the transferee were the original Holder of such Restricted Stock and Restricted Stock Units.

 

(d)                     To facilitate the enforcement of the restrictions on Transfer set forth in this Article IV, the Committee may, at its discretion, require the Holder of shares of Restricted Stock to deliver the certificate(s) for such shares with a stock power executed in blank by the Holder and the Holder’s spouse, to the Secretary of the Company or his or her designee, and the Company

 

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may hold said certificate(s) and stock power(s) in escrow and take all such actions as are necessary to insure that all Transfers and/or releases are made in accordance with the terms of this Plan.  The certificates may be held in escrow so long as the shares of Restricted Stock whose ownership they evidence are subject to any restriction on Transfer under this Article IV or under a Restricted Stock Grant Agreement.  Each Holder acknowledges that the Secretary of the Company (or his or her designee) is so appointed as the escrow holder with the foregoing authorities as a material inducement to the issuance of shares of Restricted Stock under this Article IV, that the appointment is coupled with an interest, and that it accordingly will be irrevocable.  The escrow holder will not be liable to any party to a Restricted Stock Grant Agreement (or to any other party) for any actions or omissions unless the escrow holder is grossly negligent relative thereto.  The escrow holder may rely upon any letter, notice or other document executed by any signature purported to be genuine.

 

Section 4.3.  Compliance with Law.

 

Notwithstanding any other provision of this Article IV, Restricted Stock and Restricted Stock Units may be issued pursuant to this Article IV only after there has been compliance with all applicable federal and state securities laws, and such issuance will be subject to this overriding condition.  The Company may include shares of Restricted Stock in a Registration, but will not be required to register or qualify Restricted Stock with the SEC or any state agency, except that the Company will register with, or as required by local law, file for and secure an exemption from such registration requirements from, the applicable securities administrator and other officials of each jurisdiction in which an Eligible Employee would be issued Restricted Stock hereunder prior to such issuance.

 

Section 4.4.  Stock Certificates.

 

Certificates representing the Restricted Stock issued pursuant to this Article IV will bear all legends required by law and necessary to effectuate the provisions hereof.  The Company may place a “stop transfer” order against shares of Restricted Stock until all restrictions and conditions set forth in this Article IV, the applicable Restricted Stock Grant Agreement and the legends referred to in this Section 4.4 have been complied with.

 

Section 4.5.  Market Standoff.

 

To the extent requested by the Company and any underwriter of securities of the Company in connection with a firm commitment underwriting, no Holder of any shares of Restricted Stock will Transfer any such shares not included in such underwriting, or not previously registered in a Registration, during the one hundred twenty (120) day period following the effective date of the registration statement filed with the SEC under the 1933 Act in connection with such offering.

 

Section 4.6.  Amendment and Discontinuance.

 

The Board may amend, suspend or discontinue this Article IV at any time or from time to time; provided, that no such action of the Board shall alter or impair any rights previously granted to Holders under this Article IV without the consent of such affected Holders; and provided, further, that no such action may, without the approval of the Company’s shareholders, materially increase (other than by reason of an adjustment pursuant to Section 2.3(b) hereof) the maximum aggregate number of shares of Stock in the Plan Pool, materially increase the benefits accruing to Eligible Employees under this Article IV or materially modify the requirements as to eligibility for participation under this Article IV.  Moreover, no

 

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such action may alter or impair any Restricted Stock and Restricted Stock Units previously granted under this Article IV without the consent of the applicable Holder.

 

Section 4.7.  Compliance with Rule 16b-3.

 

With respect to persons subject to Section 16 of the 1934 Act, transactions under this Article IV are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the 1934 Act.  To the extent any provision of this Article IV or action by the Board or the Committee fails so to comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee and the Board.

 

Section 4.8.  Dividend Equivalent Restricted Stock Units.

 

On each record date for dividends on the Common Stock, an amount equal to the dividend payable on one share of Common Stock will be determined and credited (the “Dividend Equivalent Credit”) on the payment date to each Restricted Stock Unit Holder’s account for each Unit which has been awarded to the Unit Holder and not distributed or canceled.  Such amount will be converted within the account to an additional number of Units equal to the number of shares of Common Stock that could be purchased at Fair Market Value on such dividend payment date.  These Units will be treated for purposes of this Article IV in the same manner as those Units granted pursuant to Section 4.1.

 

Section 4.9.  Other Conditions.

 

(a)                     No person shall have any claim to be granted an award of Restricted Stock Units under this Article IV and there is no obligation for uniformity of treatment of Eligible Employees or Unit Holders under this Article IV.

 

(b)                     The Company shall have the right to deduct from any distribution or payment in cash under this Article IV, and the Restricted Stock Unit Holder or other person receiving shares of Stock under this Article IV shall be required to pay to the Company, any Tax Withholding Liability.  The number of shares of Stock to be distributed to any individual Restricted Stock Unit Recipient may be reduced by the number of shares of Stock, the Fair Market Value of which on the Distribution Date (as defined in Section 4.9(d) below) is equivalent to the cash necessary to pay any Tax Withholding Liability, where the cash to be distributed is not sufficient to pay such Tax Withholding Liability, or the Unit Holder may deliver to the Company cash sufficient to pay such Tax Withholding Liability.

 

(c)                      Any distribution of shares of Stock under this Article IV may be delayed until the requirements of any applicable laws or regulations, and any stock exchange or NASDAQ-NMS requirements, are satisfied.  The shares of Stock distributed under this Article IV shall be subject to such restrictions and conditions on disposition as counsel for the Company shall determine to be desirable or necessary under applicable law.

 

(d)                     For the purpose of distribution of Restricted Stock Units in cash, the value of a Unit shall be the Fair Market Value on the Distribution Date.  Except as otherwise determined by the Committee, the “Distribution Date’’ shall be March 15th in the year of distribution (or the first business day thereafter), except that in the case of special distributions the Distribution Date shall be the first business day of the month in which the Committee and the Board determine the amount and form of the distribution.

 

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(e)                      Notwithstanding any other provision of this Article IV, no Dividend Equivalent Credits shall be made and no distributions of Restricted Stock Units shall be made if at the time a Dividend Equivalent Credit or distribution would otherwise have been made:

 

(i)                         The regular quarterly dividend on the Common Stock has been omitted and not subsequently paid or there exists any default in payment of dividends on any such outstanding shares of capital stock of the Corporation:

 

(ii)                      The rate of dividends on the Common Stock is lower than at the time the Restricted Stock Units to which the Dividend Equivalent Credit relates were awarded, adjusted for any change of the type referred to in Section 2.3(b).

 

(iii)                   Estimated consolidated net income of the Corporation for the twelve month  period preceding the month the Dividend Equivalent Credit or distribution would otherwise have been made is less than the sum of the amount of the Dividend Equivalent Credits and Restricted Stock Units eligible for distribution under this Article IV in that month plus all dividends applicable to such period on an accrual basis, either paid, declared or accrued at the most recently paid rate, on all outstanding shares of Common Stock; or

 

(iv)                  The Dividend Equivalent Credit or distribution would result in a default in any agreement by which the Corporation is bound.

 

(f)                       In the event net income available under Section 4.9(e) above for Dividend Equivalent Credits and awards eligible for distribution under this Article IV is sufficient to cover part but not all of such amounts, the following order shall be applied in making payments: (i) Dividend Equivalent Credits, and then (ii) Restricted Stock Units eligible for distribution under this Article IV.

 

ARTICLE V

LONG-TERM INCENTIVE COMPENSATION UNITS

 

Section 5.1.  Awards of Units.

 

(a)                     The Company may grant awards of Units to Eligible Employees as provided in this Article V.  Units will be deemed granted only upon (i) authorization by the Committee, (ii) approval by the Board, and (iii) the execution and delivery of a Unit Agreement by the Eligible Employee to whom Units are to be granted (a “Unit Recipient”) and an authorized officer of the Company.  Units will not be deemed granted merely upon authorization by the Committee.  Units may be granted in each of the years 2008 through 2018 in such amounts and to such Unit Recipients as the Committee may determine, subject to approval by the Board and to the limitation in Section 5.2 below.

 

(b)                     Each grant of Units pursuant to this Article V will be evidenced by a Unit Award Agreement between the Company and the Unit Recipient in form and substance satisfactory to the Committee in its sole discretion, consistent with this Article V.

 

(c)                      Except as otherwise provided herein, Units will be distributed only after the end of a performance period of two or more years (“Performance Period”) beginning with the year in which such Units were awarded.  The Performance Period shall be set by the Committee and the Board for each year’s awards.

 

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(d)                     The percentage of the Units awarded under this Section 5.1 or credited pursuant to Section 5.5 that will be distributed to Unit Recipients shall depend on the levels of financial performance and other performance objectives achieved during each year of the Performance Period; provided, however, that the Committee may, subject to approval of the Board, adopt one or more performance categories or eliminate all performance categories other than financial performance.  Financial performance shall be based on the consolidated results of the Company and its Subsidiaries prepared on the same basis as the financial statements published for financial reporting purposes and determined in accordance with Section 5.1(e) below.  Other performance categories adopted by the Committee shall be based on measurements of performance as the Committee shall deem appropriate.

 

(e)                      Distributions of Units awarded will be based on the Company’s financial performance with results from other performance categories applied as a factor, not exceeding one (1), against financial results.  The annual financial and other performance results will be averaged over the Performance Period and translated into percentage factors according to graduated criteria established by the Committee, subject to approval of the Board, for the entire Performance Period.  The resulting percentage factors shall determine the percentage of Units to be distributed.  No distributions of Units, based on financial performance and other performance, shall be made if a minimum average percentage of the applicable measurement of performance, to be established by the Committee and approved by the Board, is not achieved for the Performance Period.  The performance levels achieved for each Performance Period and percentage of Units to be distributed shall be conclusively determined by the Committee, subject to approval by the Board.

 

(f)                       The percentage of Units awarded which Unit Recipients become entitled to receive based on the levels of performance (including those Units credited under Section 5.5) will be determined as soon as practicable after each Performance Period and are called “Retained Units.”

 

(g)                      As soon as practical after determination of the number of Retained Units, such Retained Units shall be distributed in the form of cash as determined by the Committee, subject to approval by the Board.  The Units awarded, but which Unit Recipients do not become entitled to receive, shall be canceled.

 

(h)                     Notwithstanding any other provision in this Article V, the Committee, if it determines that it is necessary or advisable under the circumstances, may, subject to approval by the Board, adopt rules pursuant to which Eligible Employees by virtue of hire, or promotion or upgrade to a higher job grade classification, or special individual circumstances, may be granted the total award of Units or any portion thereof, with respect to one or more Performance Periods that began in prior years and at the time of the awards have not yet been completed.

 

Section 5.2. Limitations.

 

The aggregate number of all Units granted, including those Units credited pursuant to Section 5.5, shall not exceed the total number of shares of Stock remaining in the Plan Pool, less all shares of Stock potentially acquirable under, or underlying, all other Rights outstanding under this Plan.

 

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Section 5.3.  Terms and Conditions.

 

(a)                     All awards of Units must be made within ten (10) years of the Effective Date.

 

(b)                     The award of Units shall be evidenced by a Unit Award Agreement in form and substance satisfactory to the Committee in its discretion, consistent with the provisions of this Article V.

 

(c)                      At the discretion of the Committee and the Board, a Unit Recipient, as a condition to the award of Units, may be required to execute and deliver to the Company a confidential information agreement approved by the Committee.

 

(d)                     Nothing contained in this Article V, any Unit Award Agreement or in any other agreement executed in connection with the award of Units under this Article V will confer upon any Unit Recipient any right with respect to the continuation of his or her status as an employee of the Company or any of its Subsidiaries.

 

(e)                      A Unit Recipient shall have no rights as a shareholder of the Company with respect to any Units granted.

 

Section 5.4.  Special Distribution Rules.

 

(a)                     Except as otherwise provided in this Section 5.4, a Unit Recipient must be an Eligible Employee from the date a Unit is awarded to him or her continuously through and including the date of distribution of such Unit.

 

(b)                     In case of the Death or Disability of a Unit Recipient prior to the end of any Performance Period, the number of Units awarded to the Unit Recipient for such Performance Period shall be reduced pro rata based on the number of months remaining in the Performance Period after the month of Death or Disability.  The remaining Units, reduced in the discretion of the Committee and the Board to the percentage indicated by the levels of performance achieved prior to the date of Death or Disability, if any, shall be distributed within a reasonable time after Death or Disability.  All other Units awarded to the Unit Recipient for such Performance Period shall be canceled.

 

(c)                      If a Unit Recipient enters into Retirement prior to the end of any Performance Period, the Units awarded to such Unit Recipient under this Article V and not yet distributed shall be prorated to the end of the year in which such Retirement occurs and distributed at the end of the Performance Period based upon the Company’s performance for such period.

 

(d)                     In the event of the termination of the Unit Recipient’s status as an Eligible Employee prior to the end of any Performance Period for any reason other than Death, Disability or Retirement, all Units awarded to the Unit Recipient with respect to any such Performance Period shall be immediately forfeited and canceled.

 

(e)                      Upon a Unit Recipient’s promotion to a higher job grade classification, the Committee and the Board may award to the Unit Recipient the total Units, or any portion thereof, which are associated with the higher job grade classification for the then current Performance Period.

 

Notwithstanding any other provision of this Plan, the Committee may reduce or eliminate awards to a Unit Recipient who has been demoted, and where circumstances warrant, may permit continued participation, proration or early distribution, or a combination thereof, of awards which would otherwise be canceled.

 

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Section 5.5.  Adjustments.

 

(a)                     In addition to the provisions of Section 2.3(b), if an extraordinary change occurs during a Performance Period which significantly alters the basis upon which the performance levels were established under Section 5.1 for that Performance Period, to avoid distortion in the operation of this Article V, but subject to Section 5.2, the Committee may, subject to approval by the Board, make adjustments in such performance levels to preserve the incentive features of this Article V, whether before or after the end of the Performance Period, to the extent it deems appropriate in its sole discretion, which adjustments shall be conclusive and binding upon all parties concerned.  Such changes may include, without limitation, adoption of, or changes in, accounting practices, tax laws and regulatory or other laws or regulations; economic changes not in the ordinary course of business cycles; or compliance with judicial decrees or other legal authorities.

 

(b)                     At any time prior to the date of consummation of a Change in Control Transaction, the Committee may, subject to approval by the Board, determine that all or any part of the Units theretofore awarded under this Article V shall become immediately distributable (reduced pro rata based on the number of months remaining in the Performance Period after the consummation of the Change in Control Transaction) and may thereafter be distributed at any time before the date of consummation of the Change in Control Transaction (except as otherwise provided in Article II hereof, and except to the extent that such acceleration of distribution would result in an “excess parachute payment” within the meaning of Section 280G of the Code).  Any Units that have not been distributed before the date of consummation of a Change in Control Transaction shall terminate on such date, unless a provision has been made in writing in connection with such transaction for the assumption of all awards of Units theretofore made, or the substitution for such Units of awards of compensation units having comparable characteristics under a long term incentive award plan of a successor employer corporation, or a parent or a subsidiary thereof, with appropriate adjustments, in which event the awards of Units theretofore made shall continue in the manner and under the terms so provided.

 

Section 5.6.  Other Conditions.

 

(a)                     No person shall have any claim to be granted an award of Units under this Article V and there is no obligation for uniformity of treatment of Eligible Employees or Unit Recipients under this Article V.

 

(b)                     The Company shall have the right to deduct from any distribution or payment under this Article V, and the Unit Recipient shall be required to pay to the Company, any Tax Withholding Liability.

 

 

(c)                      For the purpose of distribution of Units, the cash value of a Unit shall be the Fair Market Value on the Distribution Date.  Except as otherwise determined by the Committee, the “Distribution Date’’ shall be March 15th in the year of distribution (or the first business day thereafter), except that in the case of special distributions the Distribution Date shall be the first business day of the month in which the Committee and the Board determine the amount and form of the distribution.

 

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Section 5.7.  Designation of Beneficiaries.

 

A Unit Recipient may designate a beneficiary or beneficiaries to receive all or part of the cash to be distributed to the Unit Recipient under this Article V in case of Death.  A designation of beneficiary may be replaced by a new designation or may be revoked by the Unit Recipient at any time.  A designation or revocation shall be on a form to be provided for that purpose and shall be signed by the Unit Recipient and delivered to the Corporation prior to the Unit Recipient’s Death.  In case of the Unit Recipient’s Death, any amounts to be distributed to the Unit Recipient under this Article V with respect to which a designation of beneficiary has been made (to the extent it is valid and enforceable under applicable law) shall be distributed in accordance with this Article V to the designated beneficiary or beneficiaries.  The amount distributable to a Unit Recipient upon Death and not subject to such a designation shall be distributed to the Unit Recipient’s Estate.  If there shall be any question as to the legal right of any beneficiary to receive a distribution under this Article V, the amount in question may be paid to the estate of the Unit Recipient, in which event the Corporation shall have no further liability to anyone with respect to such amount.

 

Section 5.8.  Restrictions On Transfer.

 

Units granted under Article V may not be Transferred, except as provided in Section 5.7, and, during the lifetime of the Unit Recipient to whom it was awarded, cash receivable with respect to Units may be received only by such Unit Recipient.

 

Section 5.10.  Amendment and Discontinuance.

 

No award of Units may be granted under this Article V after December 31, 2018.   The Board may amend, suspend or discontinue the provisions of this Article V at any time or from time to time, provided, that no such action may, without the approval of the shareholders of the Corporation, materially increase (other than by reason of an adjustment pursuant to Section 2.3(b) hereof) the maximum number of shares of Stock in the Plan Pool, materially increase the benefits accruing to Eligible Employees under this Article V or materially modify the eligibility requirements for participation under this Article V.

 

Section 5.11.  Compliance with Rule 16b-3.

 

With respect to persons subject to Section 16 of the 1934 Act, transactions under this Article V are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the 1934 Act.  To the extent any provision of this Article V or action by the Board or the Committee fails so to comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee and the Board.

 

ARTICLE VI

STOCK APPRECIATION RIGHTS

 

Section 6.1.  Grants of SARs.

 

(a)                     The Corporation may grant SARs under this Article VI.  SARs will be deemed granted only upon (i) authorization by the Committee, (ii) approval by the Board, and (iii) the execution and delivery of a SAR Agreement by the Eligible Employee to whom the SARs are to be granted (the “SAR Recipient”) and a duly authorized officer of the Corporation.  SARs will not be deemed granted merely upon authorization by the Committee.  The aggregate number of shares of Stock which shall underlie SARs granted hereunder shall not exceed the total

 

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                                    number of shares of Stock remaining in the Plan Pool, less all shares of Stock potentially acquirable under or underlying all other Rights outstanding under this Plan.

 

(b)                     Each grant of SARs pursuant to this Article VI shall be evidenced by a SAR Agreement between the Corporation and the SAR Recipient, in form and substance satisfactory to the Committee in its sole discretion, consistent with this Article VI.

 

Section 6.2.  Terms and Conditions of SARs.

 

(a)                     All SARs must be granted within ten (10) years of the Effective Date.

 

(b)                     Each SAR issued pursuant to this Article VI shall have an initial base value (the “Base Value”) equal to the Fair Market Value of a share of Common Stock on the date of issuance of the SAR.

 

(c)                      Subject to the approval of the Board and to the provisions of Section 6.2(b) (as to the establishment of the initial Base Value of a SAR), the Committee may establish that the Base Value of a SAR shall be adjusted, upward or downward, on a quarterly basis, based upon the market value performance of the Common Stock in comparison with the aggregate market value performance of the Index or Indices utilized under Section 3.2(b).

 

(d)                     At the discretion of the Committee and the Board, a SAR Recipient, as a condition to the granting of a SAR, must execute and deliver to the Corporation a confidential information agreement approved by the Committee.

 

(e)                      Nothing contained in this Article VI, any SAR Agreement or in any other agreement executed in connection with the granting of a SAR under this Article VI will confer upon any SAR Recipient any right with respect to the continuation of his or her status as an employee of the Corporation or any of its Subsidiaries.

 

(f)                       Except as otherwise provided herein, each SAR Agreement may specify the period or periods of time within which each SAR or portion thereof will first become exercisable (the “SAR Vesting Period”).  Such SAR Vesting Periods will be fixed by the Committee, subject to approval by the Board, and may be accelerated or shortened by the Committee, subject to approval by the Board.

 

(g)                      SARs relating to no less than one hundred (100) shares of Stock may be exercised at any one time unless the number exercised is the total number at that time exercisable under all SARs granted to the SAR Recipient.

 

(h)                     A SAR Recipient shall have no rights as a shareholder of the Corporation with respect to any shares of Stock underlying such SAR.  No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights for which the record date is prior to the date such Stock is fully paid for, except as provided in Sections 2.3(b) and 6.2(c).

 

Section 6.3.  Restrictions On Transfer of SARs.

 

SARs granted under this Article VI may not be Transferred, except as provided in Section 6.7, and during the lifetime of the SAR Recipient to whom it was granted, may be exercised only by such SAR Recipient.

 

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Section 6.4.  Exercise of SARs.

 

(a)                     A SAR Recipient (or his or her executors or administrators, or heirs or legatees) shall exercise a SAR by giving written notice of such exercise to the Corporation.  SARs may be exercised only upon the completion of the SAR Vesting Period, if any, applicable to such SAR (the date such notice is received by the Corporation being referred to herein as the “SAR Exercise Date”).

 

(b)                     Within ten (10) business days of the SAR Exercise Date applicable to a SAR exercised in accordance with Section 6.4(a), the SAR Recipient shall be paid in cash or shares of Stock the difference between the Base Value of such SAR (as adjusted, if applicable under Section 6.2(c), as of the most recently preceding quarterly period) and the Fair Market Value of the Common Stock as of the SAR Exercise Date, as such difference is reduced by the Company’s Tax Withholding Liability arising from such exercise.

 

Section 6.5.  Termination of SARs.

 

Subject to approval by the Board, the Committee shall determine, and each SAR Agreement shall state, the expiration date or dates of each SAR, but such expiration date shall be not later than ten (10) years after the date such SAR is granted (the “SAR Period”).  Subject to approval by the Board, the Committee may extend the expiration date or dates of a SAR Period after such date was originally set; provided, however, such expiration date may not exceed the maximum expiration date described in this Section 6.5(a).

 

Section 6.6.  Change in Control Transaction.

 

At any time prior to the date or consummation of a Change in Control Transaction, the Committee may, in its absolute discretion, determine that all or any part of the SARs theretofore granted under this Article VI shall become immediately exercisable in full and may thereafter be exercised at any time before the date of consummation of the Change in Control Transaction (except as otherwise provided in Article II hereof, and except to the extent that such acceleration of exercisability would result in an excess parachute payment within the meaning of Section 280G of the Code).  Any SAR that has not been fully exercised before the date of consummation of the Change in Control Transaction shall terminate on such date, unless a provision has been made in writing in connection with such transaction for the assumption of all SARs theretofore granted, or the substitution for such SARs of grants of stock appreciation rights having comparable characteristics under a stock appreciation rights plan of a successor employer corporation or bank, or a parent or a subsidiary thereof, with appropriate adjustments, in which event the SARs theretofore granted shall continue in the manner and under the terms so provided.

 

Section 6.7.  Designation of Beneficiaries.

 

A SAR Recipient may designate a beneficiary or beneficiaries to receive all or part of the cash to be paid to the SAR Recipient under this Article VI in case of Death.  A designation of beneficiary may be replaced by a new designation or may be revoked by the SAR Recipient at any time.  A designation or revocation shall be on a form to be provided for that purpose and shall be signed by the SAR Recipient and delivered to the Corporation prior to the SAR Recipient’s Death.  In case of the SAR Recipient’s Death, the amounts to be distributed to the SAR Recipient under this Article VI with respect to which a designation of beneficiary has been made (to the extent it is valid and enforceable under applicable law) shall be distributed in accordance with this Article VI to the designated beneficiary or beneficiaries.  The

 

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amount distributable to a SAR Recipient upon Death and not subject to such a designation shall be distributed to the SAR Recipient’s estate.  If there shall be any question as to the legal right of any beneficiary to receive a distribution under this Article VI, the amount in question may be paid to the estate of the SAR Recipient in which event the Corporation shall have no further liability to anyone with respect to such amount.

 

Section 6.8.  Amendment and Discontinuance.

 

The Board may amend, suspend or discontinue the provisions of this Article VI at any time or from time to time provided that no action of the Board may, without the approval of the shareholders of the Corporation materially increase (other than by reason of an adjustment pursuant to Section 2.3(b) hereof) the maximum aggregate number of shares of Stock in the Plan Pool, materially increase the benefits accruing to Eligible Employees or materially modify eligibility requirements for participation under this Article VI.  Moreover, no such action may alter or impair any SAR previously granted under this Article VI without the consent of the applicable SAR Recipient.

 

Section 6.9.  Compliance With Rule 16b-3.

 

With respect to persons subject to Section 16 of the 1934 Act, transactions under this Article VI are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the 1934 Act.  To the extent any provision of this Article VI or action by the Board or the Committee fails so to comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee and the Board.

 

ARTICLE VII

ADDITIONAL STOCK BASED AND OTHER RIGHTS

 

Section 7.1.  Stock Based Rights.

 

The Board shall have the right to grant additional Rights based on, or with respect to the Stock, which may include, without limitation, the grant of Shares based on certain conditions, the payment of cash based on the market performance of the Common Stock, and the grant of securities convertible into Shares.

 

Section 7.2.  Other Rights.

 

The Board shall have the right to provide other types of Rights under the Plan in addition to those specifically listed, if the Board believes that such Rights would further the purposes for which the Plan has been established.

 

ARTICLE VIII

AMENDMENT OR TERMINATION OF THE PLAN

 

The Board may at any time and from time to time alter or amend, in whole or in part, any or all of the provisions of the Plan, or may at any time suspend or terminate the Plan, provided that no change in any Rights theretofore granted to any Eligible Employee may be made which would impair or diminish the rights of the Eligible Employee without the Eligible Employee’s consent, and provided further, that no alteration or amendment may be made without the approval of the holders of a majority of the Common Stock then outstanding and entitled to vote if such stockholder approval is necessary to comply with the requirements of any Federal or state laws or regulations as may be applicable.  This authority of the

 

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Board to alter, amend, suspend or terminate the Plan is in addition to the right of the Board to amend, suspend or discontinue the various Articles of the Plan as provided herein.  By way of illustration and not limitation, of the Board’s right to amend the Plan in whole or in part, the Board shall have the authority to make such clarifying and conforming amendments to the Plan as are necessary to obtain or maintain compliance with the Code, applicable Federal and state securities laws, accounting standards and such other laws, rules and regulations as are necessary to carry out the purposes of the Plan.

 

ARTICLE IX

MISCELLANEOUS

 

Section 9.1.  Application of Funds.

 

The proceeds received by the Corporation from the sale of Stock pursuant to the exercise of Rights will be used for general corporate purposes.

 

Section 9.2.  No Obligation to Exercise Right.

 

The granting of a Right shall impose no obligation upon the recipient to exercise such Right.

 

Section  9.3.  Term of Plan.

 

Except as otherwise specifically provide herein, Rights may be  granted pursuant to this Plan from time to time within ten (10) years from the Effective Date.

 

Section 9.4.  Captions and Headings; Gender and Number.

 

Captions and paragraph headings used herein are for convenience only, do not modify or affect the meaning of any provision herein, are not a part of, and shall not serve as a basis for, interpretation or construction of this Plan.  As used herein, the masculine gender shall include the feminine and neuter, and the singular number shall include the plural, and vice versa, whenever such meanings are appropriate.

 

Section 9.5.  Expenses of Administration of Plan.

 

All costs and expenses incurred in the operation and administration of this Plan shall be borne by the Corporation or by one or more Subsidiaries.  The Corporation shall also indemnify, defend and hold each member of the Committee and the Board harmless against all claims, expenses and liabilities arising out of or related to the exercise of the powers of the Committee and the Board and the discharge of the duties of the Committee and the Board hereunder.

 

Section 9.6.  Governing Law.

 

Without regard to the principles of conflicts of laws the laws of the State of Illinois shall govern and control the validity, interpretation, performance and enforcement of this Plan.

 

Section 9.7.  Inspection of Plan.

 

A copy of this Plan, and any amendments thereto, shall be maintained by the Secretary of the Corporation and shall be shown to any proper person making inquiry about it.

 

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