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EXHIBIT 10.1

EMPLOYMENT AGREEMENT

     This Employment Agreement (the “Agreement”) is made by and between WINTRUST FINANCIAL
CORPORATION (“Employer” or “Wintrust” ), a bank holding company, and THOMAS P. ZIDAR, an
individual resident in the State of Illinois (“Executive”) as of June 6, 2006.

WITNESSETH THAT:

     WHEREAS, Employer is engaged in the business of general banking;

     WHEREAS, Executive has particular expertise and knowledge concerning the business of Employer
and its operations and is a valued member of Employer’s senior management;

     WHEREAS, by virtue of Executive’s employment with Employer, Executive will become acquainted
with certain confidential information regarding the services, customers, methods of doing business,
strategic plans, marketing, and other aspects of the business of Employer, Wintrust or its
Affiliates;

     WHEREAS, Employer and Executive desire to state and set forth in this Agreement the terms,
conditions and obligations of the parties with respect to such employment effective as of the date
first written above (the “Effective Date”) and this Agreement is intended by the parties to
supersede all previous agreements and understanding, whether written or oral, concerning such
employment.

     NOW THEREFORE, in consideration of the covenants and agreements contained herein, of
Executive’s employment, of the compensation to be paid by Employer for Executive’s services, and of
Employer’s other undertakings in this Agreement, the parties hereto do hereby agree as follows:

     1. Scope of Employment. Executive will be employed as Executive Vice President/Market
Head-Wealth Management of Employer and shall perform such duties as may be assigned to Executive by
the Chief Executive Officer of and the Board of Directors of Employer in such position. Executive
agrees that during Executive’s employment Executive will be subject to and abide by the written
policies and practices of Employer and Wintrust. Executive also agrees to assume such new or
additional positions and responsibilities as Executive may from time to time be assigned for or on
behalf of Employer, Wintrust, or any Affiliate of Wintrust. Notwithstanding the foregoing, during
the Term (as defined in Section 8 herein) of this Agreement, Executive will not be required without
Executive’s consent to move Executive’s principal business location to another location more than a
35 mile radius from Executive’s principal business location. For purposes of this Agreement, the
term “Affiliate” shall include but not be limited to the entities listed in Exhibit A to this
Agreement and any subsidiary of any of such entities and shall further include any present or
future affiliate of any of them as defined by the rules and regulations of the Federal Reserve
Board. In the event Executive shall perform services for Wintrust or any Affiliate in addition to
serving as Executive Vice President/Market
Head-Wealth Management of Employer, the provisions of this Agreement

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shall also apply to the performance of such services by Executive on behalf of Wintrust or any Affiliate.

     2. Compensation and Benefits. Executive will be paid such base salary as may from
time to time be agreed upon between Executive and Employer. Executive will be entitled to coverage
under such compensation plans, insurance plans and other fringe benefit plans and programs as may
from time to time be established for employees of Wintrust and its Affiliates in accordance with
the terms and conditions of such plans and programs. Executive shall also be eligible to
participate in the Wintrust 1997 Stock Incentive Plan or any successor Plan thereto.

     3. Extent of Service. Executive shall devote Executive’s entire time, attention and
energies to the business of Employer during the Term of this Agreement; but this shall not be
construed as preventing Executive from (a) investing Executive’s personal assets in such form or
manner as will not require any services on the part of Executive in the operation or the affairs of
the corporations, partnerships and other entities in which such investments are made and in which
Executive’s participation is solely that of an investor (subject to any and all rules and
regulations of applicable banking regulators or policies of the Employer governing transactions
with affiliates and ownership interests in customers); (b) engaging (whether or not during normal
business hours) in any other business, professional or civic activities provided that the Board of
Directors of Employer approves of such activities and Executive’s engagement does not result in a
violation of Executive’s covenants under this Section or Sections 4 or 5 hereof; or (c) accepting
appointments to the boards of directors of other companies provided that the Board of Directors of
Employer approves of such appointments and Executive’s performance of Executive’s duties on such
boards does not result in a violation of Executive’s covenants under this Section or Sections 4 and
5 hereof.

     4. Competition. Other than in connection with Executive’s performance of Executive’s
duties hereunder, (i) during the period in which Executive performs services for Employer and (ii)
for a period of six months after termination of the Agreement as a result of either Wintrust or the
Executive not extending the contract as provided in Section 8 or (iii) for a period of two years
after termination of Executive’s employment with Employer, regardless of the reason other than for
termination in conjunction with a Change-of-Control as outlined in Section 9(f) or non-extension of
this Agreement by either Wintrust or the Executive, Executive shall not directly or indirectly,
either alone or in conjunction with any other person, firm, association, company or corporation:

          (a) serve as an owner, principal, senior manager, or in a position comparable to that held by
Executive at any time during Executive’s employment with Employer, for a bank or other financial
institution (or any branch or affiliate thereof) which offers to its customers commercial and
community banking and/or trust and investment services, and which is located within ten miles of
the principal office or any branch office of the Employer;

          (b) solicit or conduct business which involves commercial and community banking and/or trust
and investment services with any person, corporation or other entity which was (i) a customer of
the Employer, Wintrust or any other Affiliate of Wintrust with whom Executive had direct or
indirect contact while employed by Employer or about whom Executive
obtained Confidential Information during the fifteen months prior to the termination of

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Executive’s employment with Employer, or (ii) a potential customer with whom Employer, Wintrust, or
any Affiliate has, at the time of Executive’s termination of employment with Employer, an
outstanding oral or written proposal to provide commercial and community banking and/or trust and
investment services and with whom Executive had direct or indirect contact while employed by
Employer;

          (c) request, advise or directly or indirectly invite any of the existing customers, suppliers
or service providers of Employer, Wintrust or any other Affiliate of Wintrust to withdraw, curtail
or cancel its business with Employer, Wintrust or any other Affiliate of Wintrust, other than
through mass mailings or general advertisements not specifically directed at customers of Employer,
Wintrust or any Affiliate;

          (d) hire, solicit, induce or attempt to solicit or induce any employee, consultant, or agent
of Employer, Wintrust or any other Affiliate of Wintrust (i) to terminate his employment or
association with Employer or (ii) to become employed by or serve in any capacity by a bank or other
financial institution which operates or is planned to operate at any facility which is located
within a ten mile radius of the principal office or any branch office of the Employer; or

          (e) in any way participate in planning or opening a bank or other financial institution which
is located or will be located within a ten mile radius of the principal office or any branch office
of the Employer. For the purposes of this Agreement, in the event Executive’s geographic area of
responsibility as specified herein shall change during employment with Employer, or as the result
of performing services for Wintrust or any Affiliate of Wintrust, the Executive’s obligation stated
in Sections 4(a), 4(d)(ii) and 4(e) shall apply to a ten mile radius of Executive’s revised
geographic area of responsibility.

     Notwithstanding the foregoing, (a) Executive shall not be prevented from: (i) investing or
owning shares of stock of any corporation engaged in any business provided that such shares are
regularly traded on a national securities exchange or any over-the-counter market; (ii) retaining
any shares of stock in any corporation which Executive owned prior to the date of Executive’s
employment with Employer (subject to any and all rules and regulations of applicable banking
regulators or policies of the Employer governing transactions with affiliates and ownership
interests in customers); or (iii) investing as a limited partner (without decision-making
authority) in any private equity fund, provided that Executive’s involvement in such investment is
solely that of a passive investor (subject to any and all rules and regulations of applicable
banking regulators or policies of the Employer governing transactions with affiliates and ownership
interests in customers), and (b) Executive shall not be in violation of Sections 4(a) or 4(e) of
this Agreement if, during the two-year period following termination of employment Executive accepts
employment or invests in a bank or other financial institution which is within a 10 mile radius of
the principal offices or any branch office of Wintrust or any Affiliate of Wintrust (other than
Employer) as long as such facility is not within a ten mile radius of the principal office or any
branch office of the Employer.

     5. Confidential Information. Executive acknowledges that, during Executive’s
employment with Employer, Executive has and will obtain access to Confidential Information of and
for Employer, Wintrust or its Affiliates. For purposes of this Agreement, “Confidential

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Information” shall mean information not generally known or available without restriction to the
trade or industry, including, without limitation, the following categories of information and
documentation: (a) documentation and information relating to lending customers of Employer,
Wintrust or any Affiliate, including, but not limited to, lists of lending clients with their
addresses and account numbers, credit analysis reports and other credit files, outstanding loan
amounts, repayment dates and instructions, information regarding the use of the loan proceeds, and
loan maturity and renewal dates; (b) documentation and information relating to depositors of
Employer, Wintrust or any Affiliate, including, but not limited to, lists of depositors with their
addresses and account numbers, amounts held on deposit, types of depository products used and the
number of accounts per customer; (c) documentation and information relating to trust customers of
Employer, Wintrust or any Affiliate, including, but not limited to, lists of trust customers with
their addresses and account numbers, trust investment management contracts, identity of investment
managers, trust corpus amounts, and grantor and beneficiary information; (d) documentation and
information relating to investment management clients of Employer, Wintrust or any Affiliate,
including, but not limited to, lists of investors with their addresses, account numbers and
beneficiary information, investment management contracts, amount of assets held for management, and
the nature of the investment products used; (e) the identity of actual or potential customers of
Employer, Wintrust or any Affiliate, including lists of the same; (f) the identity of suppliers and
service providers of Employer, Wintrust or any Affiliate, including lists of the same and the
material terms of any supply or service contracts; (g) marketing materials and information
regarding the products and services offered by Employer, Wintrust or any Affiliate and the nature
and scope of use of such marketing materials and product information; (h) policy and procedure
manuals and other materials used by Employer, Wintrust or any Affiliate in the training and
development of its employees; (i) identity and contents of all computer systems, programs and
software utilized by Employer, Wintrust or any Affiliate to conduct its operations and manuals or
other instructions for their use; (j) minutes or other summaries of Board of Directors or other
department or committee meetings held by Employer, Wintrust or any Affiliate; (k) the business and
strategic growth plans of Employer, Wintrust or any Affiliate; and (l) confidential communication
materials provided for shareholders of Employer, Wintrust or any Affiliate. Absent prior
authorization by Employer or as required in Executive’s duties for Employer, Executive will not at
any time, directly or indirectly, use, permit the use of, disclose or permit the disclosure to any
third party of any such Confidential Information to which Executive will be provided access. These
obligations apply both during Executive’s employment with Employer and shall continue beyond the
termination of Executive’s employment and this Agreement.

     6. Inventions. All discoveries, designs, improvements, ideas, and inventions, whether
patentable or not, relating to (or suggested by or resulting from) products, services, or other
technology of Employer, Wintrust or any Affiliate or relating to (or suggested by or resulting
from) methods or processes used or usable in connection with the business of Employer, Wintrust or
any Affiliate that may be conceived, developed, or made by Executive during employment with
Employer (hereinafter “Inventions”), either solely or jointly with others, shall automatically
become the sole property of Employer, Wintrust or an Affiliate. Executive shall immediately
disclose to Employer all such Inventions and shall, without additional compensation, execute
all assignments and other documents deemed necessary to perfect the property rights of Employer,
Wintrust or any Affiliate therein. These obligations shall continue beyond the termination of
Executive’s employment with respect to Inventions

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conceived, developed, or made by Executive during
employment with Employer. The provisions of this Section 6 shall not apply to any Invention for
which no equipment, supplies, facility, or trade secret information of Employer, Wintrust or any
Affiliate is used by Executive and which is developed entirely on Executive’s own time, unless (a)
such Invention relates (i) to the business of Employer, Wintrust or an Affiliate or (ii) to the
actual or demonstrably anticipated research or development of Employer, Wintrust or an Affiliate,
or (b) such Invention results from work performed by Executive for Employer.

     7. Remedies. Executive acknowledges that compliance with the terms of this Agreement
is necessary to protect the Confidential Information and goodwill of Employer, Wintrust and its
Affiliates and that any breach by Executive of this Agreement will cause continuing and irreparable
injury to Employer, Wintrust and its Affiliates for which money damages would not be an adequate
remedy. Executive acknowledges that Wintrust and all other Affiliates are and are intended to be
third party beneficiaries of this Agreement. Executive acknowledges that Employer, Wintrust and
any Affiliate shall, in addition to any other rights or remedies they may have, be entitled to
injunctive relief for any breach by Executive of any part of this Agreement. This Agreement shall
not in any way limit the remedies in law or equity otherwise available to Employer, Wintrust and
its Affiliates.

     8. Term of Agreement. Unless terminated sooner as provided in Section 9, the initial
term of Executive’s employment pursuant to this Agreement (“Initial Term”) shall be three years,
commencing on the date of this Agreement. After such Initial Term, this Agreement shall be
extended automatically for successive one-year terms, unless either Executive or Employer gives
contrary written notice not less than 60 days in advance of the expiration of the Initial Term or
any succeeding term of this Agreement or unless terminated sooner as provided in Section 9.
Notwithstanding the foregoing, if at any time during the Initial Term or any successive one-year
term there is a Change in Control of Employer (as defined in Section 9(f)), then upon the first
occurrence of such a Change in Control, the Initial Term or the successive one-year term of this
Agreement (whichever is in effect as of the date of the Change in Control) shall automatically
extend for the greater of: (a) the amount of time remaining on Executive’s Initial Term of
employment if such first occurrence of a Change in Control occurs during the Initial Term, or (b)
two years from the date of such first occurrence of a Change in Control. In the event that
Executive’s Initial Term or successive one-year term is extended due to such a Change in Control,
such extension shall further be extended automatically for successive one-year terms unless either
Executive or Employer gives contrary written notice not less than 60 days in advance of the
expiration of the extension of this Agreement or unless terminated sooner as provided in Section 9.
The Initial Term, together with any extension thereof in accordance with this Section 8, shall be
referred to herein as the “Term.”

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     9. Termination of Employment.

          (a) General Provisions. Executive’s employment may be terminated by Employer at any
time for any reason, with or without cause, and, except as otherwise provided in this Section 9,
any and all of Employer’s obligations under this Agreement shall terminate, other than Employer’s
obligation to pay Executive, within 30 days of Executive’s termination of employment, the full
amount of any earned but unpaid base salary and accrued but unpaid vacation pay earned by Executive
pursuant to this Agreement through and including the date of termination and to observe the terms
and conditions of any plan or benefit arrangement which, by its terms, survives such termination of
Executive’s employment. The payments to be made under this Section 9(a) shall be made to
Executive, or in the event of Executive’s death, to such beneficiary as Executive may designate in
writing to Employer for that purpose, or if Executive has not so designated, then to the spouse of
Executive, or if none is surviving, then to the estate of Executive. Notwithstanding the
foregoing, termination of employment shall not affect the obligations of Executive that, pursuant
to the express provisions of this Agreement, continue in effect.

          (b) Termination Due to Death.

               (i) Payment. If Executive should die during the Term of this Agreement, which event
shall result in the termination of Executive’s employment, Employer shall pay Executive an amount
equal to two times (2x) the sum of (A) Executive’s base annual salary in effect at the time of
Executive’s death plus (B) an amount equal to any Cash Bonus amounts paid to Executive during the
twelve-month period prior to Executive’s death and any Stock Bonus amounts awarded or granted to
Executive during the twelve-month period prior to Executive’s death, in a lump sum within 30 days
following the date of Executive’s death. For the purposes of this Agreement, “Cash Bonus” shall
mean any cash bonus amounts that are included in Executive’s annual bonus plan, as approved in
writing by Employer’s Board of Directors or the Compensation Committee or any successor committee
of Employer’s Board of Directors. For the purposes of this Agreement, “Stock Bonus” shall mean any
restricted shares that are included in Executive’s annual bonus plan, as approved in writing by the
Employer’s Board of Directors or the Compensation Committee or any successor committee of
Employer’s Board of Directors. Any bonuses (whether in cash or in the form of restricted shares)
that are not included in such annual bonus plan shall not be considered to be Cash Bonus amounts or
Stock Bonus awards for purposes of this Agreement. The value of the Stock Bonus amounts shall be
determined as of the date they are awarded or granted to Executive.

               (ii) Reduction of Payment Due To Life Insurance Benefits. The amount to be paid to
Executive pursuant to this Section 9(b) shall be reduced by the amount of any life insurance
benefit payments paid or payable to Executive from policies of insurance maintained and/or paid for
by Employer or Wintrust; provided that in the event the life insurance benefits exceed the amount
to be paid to Executive pursuant to this Section 9(b), Executive shall remain entitled to receive
the excess life insurance payments. The Executive will cooperate with the Employer or Wintrust in
order to enable the Employer or Wintrust to pay for a policy or policies of life insurance on the
life of the Executive. To the extent that the Executive is not
insurable or a life insurance policy is not reasonably obtainable, then the payments due under
this Section 9(b) shall be reduced by 50%.

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               (iii) Beneficiary. The payments to be made under this Section 9(b) shall be made to
such beneficiary as Executive may designate in writing to Employer for that purpose, or if
Executive has not so designated, then to the spouse of Executive, or if none is surviving, then to
the estate of Executive.

          (c) Termination Due to Permanent Disability.

               (i) Payment. If Executive should suffer a permanent disability during the Term of
this Agreement, Employer shall have the right to terminate Executive’s employment. In such event,
Employer shall pay Executive an amount equal to two times (2x) the sum of (A) Executive’s base
annual salary in effect at the time of Executive’s permanent disability plus (B) an amount equal to
any Cash Bonus amounts paid to Executive during the twelve-month period prior to Executive’s
permanent disability and any Stock Bonus amounts awarded or granted to Executive during the
twelve-month period prior to Executive’s permanent disability. Such amount shall be paid to
Executive ratably over a 24-month period beginning on the first payroll period following such
termination and on each payroll period thereafter during the 24-month period. For the purposes of
this Agreement, “permanent disability” means any mental or physical illness, disability or
incapacity that renders Executive unable to perform Executive’s duties hereunder where (x) such
permanent disability has been determined to exist by a physician selected by Employer or (y)
Employer has reasonably determined, based on such physician’s advice, that such disability will
continue for 180 days or more within any 365-day period, of which at least 90 days are consecutive.
Executive shall cooperate in all respects with Employer if a question arises as to whether he has
become disabled (including, without limitation, submitting to an examination by a physician or
other health care specialist selected by Employer and authorizing such physician or other health
care specialist to discuss Executive’s condition with Employer).

               (ii) Reduction of Payment Due To Long Term Disability Insurance Benefits. The amount
to be paid to Executive pursuant to this Section 9(c) shall be reduced by the amount of any
long-term disability benefit payments paid or payable to Executive during such payment period from
policies of insurance maintained and/or paid for by Employer or Wintrust; provided that in the
event the long-term disability benefits exceed the amount to be paid to Executive pursuant to this
Section 9(c), Executive shall remain entitled to receive the excess long-term disability insurance
payments.

               (iii) Reduction of Payment Due To Earned Income. The amount to be paid to Executive
under this Section 9(c) shall also be reduced by any income earned by Executive, whether paid to
Executive immediately or deferred until a later date, during the applicable Severance Pay period
from employment of any sort, including without limitation full, part time or temporary employment
or work as an independent contractor or as a consultant; provided that, if Executive was a member
of the board of directors of another company at the time of Executive’s termination, the amount of
Severance Pay under this Section 9(c) shall not be reduced by any income earned by Executive during
the applicable Severance Pay period due to
Executive’s continued service in such capacity. Notwithstanding the foregoing, Executive’s
Severance Pay to be paid under this Section 9(c) shall be not less than an amount to provide
Executive with a gross monthly payment of $8,333.34 during the 24-month Severance Pay

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period. Executive agrees to promptly notify Employer if Executive obtains employment of any sort during the
applicable Severance Pay period and to provide Employer with a copy of any W-2 or 1099 forms or
other payroll or income records and a summary of contributions received under any deferred
compensation arrangement.

               (iv) Continued Participation In Benefit Plans. In the event of termination due to a
permanent disability, Executive’s or Executive’s dependents’ participation in any medical, health,
accident, disability, death, life insurance or similar plan in which Executive was participating
immediately prior to termination shall continue (to the extent Executive and Executive’s dependents
are eligible to participate in such plans pursuant to the terms of such plans) for the period in
which payments are being made under this Section 9(c) at Employer’s or Wintrust’s expense (subject
to any normal employee contributions, if any), although any continuation of health coverage shall
count toward the “COBRA” continuation of coverage period.

          (d) Termination Without Cause.

               (i) Payment. In the event Executive’s employment is terminated without Cause (as such
term is defined in Section 9(h) hereof) by Employer during the Term of this Agreement, other than
upon the expiration of the Term of this Agreement, Employer shall pay Severance Pay to Executive in
the amount equal to two times (2x) the sum of (A) Executive’s base annual salary in effect at the
time of Executive’s termination plus (B) an amount equal to any Cash Bonus amounts paid to
Executive during the twelve-month period prior to termination and any Stock Bonus amounts awarded
or granted to Executive during the twelve-month period prior to termination. Severance Pay under
this Section 9(d) shall be paid ratably over a 24-month period beginning on the first payroll
period following such termination and on each payroll period thereafter during such Severance Pay
period. In addition to the payment due to the Executive as outlined in the prior sentences of this
Section 9(d), the Executive will be entitled to a payment of his annual performance bonus on a
prorated basis for the period of the fiscal year for which the Executive performed services prior
to termination with such payment to be made in a lump sum within 30 days following the date of
Executive’s termination; however, notwithstanding any other provisions of this Agreement, this
prorated bonus will not be included in the Cash Bonus or Stock Bonus calculation for purposes of
the payment outlined elsewhere in this Section 9(d).

               (ii) Reduction of Payment Due To Earned Income. The amount of Severance Pay under
this Section 9(d) shall also be reduced by any income earned by Executive, whether paid to
Executive immediately or deferred until a later date, during the applicable Severance Pay period
from employment of any sort, including without limitation full, part time or temporary employment
or work as an independent contractor or as a consultant; provided that, if Executive was a member
of the board of directors of another company at the time of Executive’s termination, the amount of
Severance Pay under this Section 9(d) shall not be reduced by any income earned by Executive during
the applicable Severance Pay period due to Executive’s continued service in such capacity.
Notwithstanding the foregoing, Executive’s Severance Pay to
be paid under this Section 9(d) shall not be less than an amount to provide Executive with a
gross monthly payment of $8,333.34 during the 24-month Severance Pay period. Executive agrees to
promptly notify Employer if Executive obtains employment of any

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sort during the applicable
Severance Pay period and to provide Employer with a copy of any W-2 or 1099 forms or other payroll
or income records and a summary of any contributions received under any deferred compensation
arrangement.

               (iii) Company-Paid Health Insurance. In the event of Executive’s termination pursuant
to this Section 9(d), from the termination date through the earliest of (A) the expiration of the
maximum period of COBRA coverage, (B) the date on which Executive becomes eligible for coverage
under another group health insurance plan with no pre-existing condition limitation or exclusion,
or (C) the date on which Executive becomes entitled to benefits under Medicare, Executive (and any
qualified dependents) shall be entitled to group health insurance coverage under the Employer’s
group health insurance plan for employees (as such plan is then in effect and as it may be amended
at any time and from time to time during the period of coverage) in which Executive was
participating immediately prior to termination, at Employer’s expense, subject to any normal
employee contributions, if any. The period during which Executive is being provided with health
insurance under this Agreement shall be credited against Executive’s period of COBRA coverage, if
any. Executive shall promptly notify Employer if, prior to the expiration of the maximum period of
COBRA coverage, Executive becomes eligible for coverage under another group health plan with no
pre-existing condition limitation or exclusion or Executive becomes entitled to benefits under
Medicare.

          (e) Constructive Termination.

               (i) Payment. If Executive suffers a Constructive Termination during the Term of this
Agreement, other than upon the expiration of the Term of this Agreement, Employer shall pay
Severance Pay to Executive in the amounts and at the times described in Section 9(d) hereof. For
the purposes of this Agreement, “Constructive Termination” means (A) a material reduction by
Employer in the duties and responsibilities of Executive or (B) a reduction by Employer of
Executive’s “Adjusted Total Compensation” (as hereinafter defined), to (1) less than seventy-five
percent (75%) of the Adjusted Total Compensation of Executive for the twelve-month period ending as
of the last day of the month immediately preceding the month in which the Constructive Termination
occurs; or (2) less than seventy-five percent (75%) of the Executive’s Adjusted Total Compensation
for the twelve-month period ending as of the last day of the month preceding the Effective Date,
whichever is greater. A Constructive Termination does not include termination for Cause as defined
in Section 9(h), termination without Cause as defined in Section 9(d), or termination due to a
permanent disability as defined in Section 9(c). In addition to the payment due to the Executive
as outlined in the prior sentences of this Section 9(e), the Executive will be entitled to a
payment of his annual performance bonus on a prorated basis for the period of the fiscal year for
which the Executive performed services prior to termination with such payment to be made in a lump
sum within 30 days following the date of Executive’s termination; however, notwithstanding any
other provisions of this Agreement, this prorated bonus will not be included in the Cash Bonus or
Stock Bonus calculation for purposes of the payment outlined elsewhere in this Section 9(e).

               (ii) Reduction of Payment Due To Earned Income. The amount of Severance Pay under
this Section 9(e) shall be reduced by any income earned by Executive, whether paid to Executive
immediately or deferred until a later date, during such Severance Pay period from employment of any
sort, including without limitation full, part time or temporary

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employment or work as an
independent contractor or as a consultant; provided that, if Executive was a member of the board of
directors of another company at the time of Executive’s termination, the amount of Severance Pay
under this Section 9(e) shall not be reduced by any income earned by Executive during the
applicable Severance Pay period due to Executive’s continued service in such capacity.
Notwithstanding the foregoing, Executive’s Severance Pay to be paid under this Section 9(e) shall
not be less than an amount to provide Executive with a gross monthly payment of $ 8,333.34 during
the 24-month Severance Pay period. Executive agrees to promptly notify Employer if Executive
obtains employment of any sort during the applicable Severance Pay period and to provide Employer
with a copy of any W-2 or 1099 forms or other payroll or income records and a summary of any
contributions received under any deferred compensation arrangement.

               (iii) Company-Paid Health Insurance. In the event of Executive’s termination pursuant
to this Section 9(e), from the termination date through the earliest of (A) the expiration of the
maximum period of COBRA coverage, (B) the date on which Executive becomes eligible for coverage
under another group health insurance plan with no pre-existing condition limitation or exclusion,
or (C) the date on which Executive becomes entitled to benefits under Medicare, Executive (and any
qualified dependents) shall be entitled to group health insurance coverage under the Employer’s
group health insurance plan for employees (as such plan is then in effect and as it may be amended
at any time and from time to time during the period of coverage) in which Executive was
participating immediately prior to termination, at Employer’s expense, subject to any normal
employee contributions, if any. The period during which Executive is being provided with health
insurance under this Agreement shall be credited against Executive’s period of COBRA coverage, if
any. Executive shall promptly notify Employer if, prior to the expiration of the maximum period of
COBRA coverage, Executive becomes eligible for coverage under another group health plan with no
pre-existing condition limitation or exclusion or Executive becomes entitled to benefits under
Medicare.

               (iv) Definitions.

                    (A) For the purposes of this Agreement, “Adjusted Total Compensation” means the aggregate base
salary earned by the Executive plus the dollar value of all perquisites (i.e. Employer provided
car, club dues and supplemental life insurance) as estimated by Employer in respect of the
Executive for the relevant twelve-month period. Adjusted Total Compensation shall exclude any Cash
Bonus, Stock Bonus, or other bonus payments paid or earned by the Executive.

                    (B) For the purposes of this Section 9(e), the Executive will not be deemed to have incurred a
reduction by Employer of Executive’s Adjusted Total Compensation if there is a general reduction in
base salaries and/or perquisites applicable to the President, Chief Executive Officer and all Vice
Presidents of Employer.

          (f) Termination Upon Change In Control. 

               (i) Payment. In the event that within eighteen months after a Change in Control (as
defined below) of Employer or Wintrust (A) Executive’s employment is terminated without Cause (as
such term is defined in Section 9(h) hereof) prior to the expiration

10

 

of the Term of this Agreement
or (B) Executive suffers a Constructive Termination prior to the expiration of the Term of this
Agreement, Employer (or the successor thereto) shall pay Severance Pay to Executive in the amount
that is equivalent to the amount described in Section 9(d) hereof in a lump sum within 30 days
following the date of Executive’s termination or Constructive Termination. In addition to the
payment due to the Executive as outlined in the prior sentences of this Section 9(f), the Executive
will be entitled to a payment of his annual performance bonus on a prorated basis for the period of
the fiscal year for which the Executive performed services prior to termination with such payment
to be made in a lump sum within 30 days following the date of Executive’s termination; however,
notwithstanding any other provisions of this Agreement, this prorated bonus will not be included in
the Cash Bonus or Stock Bonus calculation for purposes of the payment outlined elsewhere in this
Section 9(f).

               (ii) Change In Control. For the purposes of this Agreement, a “Change in Control” of
Employer means (A) the acquisition by any person of 50% or more of Employer’s then outstanding
capital stock; or (B) approval by the stockholders of Employer of a merger or consolidation
effecting a change in ownership of 50% or more of the voting power of the outstanding capital stock
of Employer or a sale for cash of all or substantially all of the assets of Employer; in each case,
the acquiring persons in such merger, consolidation or sale shall be persons other than the
stockholders of Employer, Wintrust or any Affiliate immediately prior to such transaction. For the
purposes of this Agreement, a “Change in Control” of Wintrust shall have the same meaning as
provided in Section 12(b) of the Wintrust 1997 Stock Incentive Plan.

               (iii) Section 280G. Notwithstanding the foregoing, if the payment required to be paid
under this Section 9(f), when considered either alone or with other payments paid or imputed to the
Executive from Wintrust or an Affiliate that would be deemed “excess parachute payments” under
Section 280G(b)(1) of the Internal Revenue Code of 1986, as amended (the “Code”), is deemed by
Wintrust to be a “parachute payment” under Section 280G(b)(2) of Code, then the amount of Severance
Pay required to be paid under this Section 9(f) shall be automatically reduced to an amount equal
to $1.00 less than three times (3x) the “base amount” (as defined in Section 280G(3) of the Code)
(the “Reduced Amount”). Provided, however, the preceding sentence shall not apply
if the sum of (A) the amount of Severance Pay described in this Section 9(f) less (B) the amount
of excise tax payable by the Executive under Section 4999 of the Code with respect to the amount of
such Severance Pay and any other payments paid or imputed to the Executive from Wintrust or an
Affiliate that would be deemed to be “excess parachute payments” under Section 280G(b)(1) of the
Code, is greater than the Reduced Amount. The decision of Wintrust (based upon the recommendations
of its tax counsel and accountants) as to the characterization of payments as parachute payments,
the value of parachute payments, the amount of excess parachute payments, and the payment of the
Reduced Amount shall be final.

               (iv) Company-Paid Health Insurance. In the event Executive becomes
entitled to payments under this Section 9(f), from the termination date through the earliest of (A)
the expiration of the maximum period of COBRA coverage, (B) the date on which Executive becomes
eligible for coverage under another group health insurance plan with no pre-existing condition
limitation or exclusion, or (C) the date on which Executive becomes entitled to benefits under
Medicare, Executive (and any qualified dependents) shall be entitled to group health insurance
coverage under the Employer’s group health insurance plan for employees (as

11

 

such plan is then in
effect and as it may be amended at any time and from time to time during the period of coverage) in
which Executive was participating immediately prior to termination, at Employer’s expense, subject
to any normal employee contributions, if any. The period during which Executive is being provided
with health insurance under this Agreement shall be credited against Executive’s period of COBRA
coverage, if any. Executive shall promptly notify Employer if, prior to the expiration of the
maximum period of COBRA coverage, Executive becomes eligible for coverage under another group
health plan with no pre-existing condition limitation or exclusion or Executive becomes entitled to
benefits under Medicare.

               (v) Definitions. For the purposes of this Section 9(f), the term “Constructive
Termination” shall have the same meaning as such term is defined in Section 9(e) with the following
modifications:

                    (A) A Constructive Termination shall be deemed to have occurred if after a Change in Control,
the Executive’s Adjusted Total Compensation is reduced to less than (1) 100% of the Adjusted Total
Compensation of Executive for the twelve-month period ending as of the last day of the month
immediately preceding the month in which the Constructive Termination occurs or (2) 100% percent of
the Executive’s Adjusted Total Compensation for the twelve-month period ending as of the last day
of the month preceding the Effective Date, whichever is greater.

                    (B) A Constructive Termination shall also be deemed to have occurred if after a Change in
Control, Employer (or the successor thereto) delivers written notice to Executive that it will
continue to employ Executive but will reject this Agreement (other than due to the expiration of
the Term of this Agreement).

                    (C) Subsection 9(e)(v)(B) shall not be applicable to a Constructive Termination following a
Change in Control.

               (vi) Competition and Solicitation. Notwithstanding the first paragraph of Section 4
of this Agreement, in the event of Executive’s termination pursuant to this Section 9(f), for a
period of two years after termination of Executive’s employment with Employer, Executive shall not
directly or indirectly, either alone or in conjunction with any other person, firm, association,
company or corporation violate any of the provisions set forth in Sections 4(b), 4(c), 4(d) of this
Agreement.

          (g) Voluntary Termination. Executive may voluntarily terminate employment during the
Term of this Agreement by a delivery to Employer of a written notice at least 60 days in advance of
the termination date. If Executive voluntarily terminates employment prior to the expiration of
the Term of this Agreement, any and all of the Employer’s obligations under this
Agreement shall terminate immediately except for the Employer’s obligations contained in
Section 9(a) hereof. Notwithstanding the foregoing, termination of employment shall not affect the
obligations of Executive that, pursuant to the express provisions of this Agreement, continue in
effect.

          (h) Termination For Cause. If Executive is terminated for Cause as determined by the
written resolution of Employer’s Board of Directors or the Compensation

12

 

Committee or any successor
committee of Employer’s Board of Directors, all obligations of the Employer shall terminate
immediately except for Employer’s obligations described in Section 9(a) hereof. Notwithstanding
the foregoing, termination of employment shall not affect the obligations of Executive that,
pursuant to the express provisions of this Agreement, continue in effect. For purposes of this
Agreement, termination for “Cause” means:

               (i) Executive’s failure or refusal, after written notice thereof and after reasonable
opportunity to cure, to perform specific directives approved by a majority of the Employer’s or
Wintrust’s Board of Directors which are consistent with the scope and nature of Executive’s duties
and responsibilities as provided in Section 1 of this Agreement;

               (ii) Habitual drunkenness or illegal use of drugs which interferes with the performance of
Executive’s duties and obligations under this Agreement;

               (iii) Executive’s conviction of a felony;

               (iv) Any defalcation or acts of gross or willful misconduct of Executive resulting in or
potentially resulting in economic loss to Employer or Wintrust or substantial damage to Employer’s
or Wintrust’s reputation;

               (v) Any breach of Executive’s covenants contained in Sections 4 through 6 hereof;

               (vi) A written order requiring termination of Executive from Executive’s position with
Employer by any regulatory agency or body; or

               (vii) Executive’s engagement, during the performance of Executive’s duties hereunder, in acts
or omissions constituting fraud, intentional breach of fiduciary obligation, intentional wrongdoing
or malfeasance, or intentional and material violation of applicable banking laws, rules, or
regulations.

          (i) Executive’s right to receive Severance Pay per Sections 9(c) through 9(f) hereof is
contingent upon (i) Executive having executed and delivered to Employer a release in such form as
provided by Employer and (ii) Executive not violating any of Executive’s on-going obligations under
this Agreement.

          (j) The payment of Severance Pay to Executive pursuant to Sections 9(c) through 9(f) hereof
shall be liquidated damages for and in full satisfaction of any and all claims Executive may have
relating to or arising out of Executive’s employment and termination of employment by Employer, any
and all claims Executive may have relating to or arising out of this
Agreement and the termination thereof and any and all claims Executive may have arising under
any statute, ordinance or regulation or under common law. Executive expressly acknowledges and
agrees that, except for whatever claim Executive may have to Severance Pay, Executive shall not
have any claim for damages or other relief of any sort relating to or arising out of Executive’s
employment or termination of employment by Employer or relating to or arising out of this Agreement
and the termination thereof.

13

 

          (k) Upon termination of employment with Employer for any reason, Executive shall promptly
deliver to Employer all writings, records, data, memoranda, contracts, orders, sales literature,
price lists, client lists, data processing materials, and other documents, whether or not obtained
from Employer, Wintrust or any Affiliate, which pertain to or were used by Executive in connection
with Executive’s employment by Employer or which pertain to Wintrust or any other Affiliate,
including, but not limited to, Confidential Information, as well as any automobiles, computers or
other equipment which were purchased or leased by Employer for Executive.

     10. Resolution of Disputes. Except as otherwise provided herein, any disputes arising
under or in connection with this Agreement or in any way arising out of, relating to or associated
with the Executive’s employment with Employer or the termination of such employment (“Claims”),
that Executive may have against Employer, Wintrust or any Affiliate of Wintrust, or the officers,
directors, employees or agents of Employer, Wintrust, or any Affiliate of Wintrust in their
capacity as such or otherwise, or that Employer, Wintrust, or any Affiliate of Wintrust may have
against Executive, shall be resolved by binding arbitration, to be held in Chicago, Illinois, in
accordance with the rules and procedures of the National Rules for the Resolution of Employment
Disputes of the American Arbitration Association (the “AAA”) and the parties hereby agree to
expedite such arbitration proceedings to the extent permitted by the AAA. Judgment upon the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The Claims
covered by this Agreement include, but are not limited to: claims for wages or other compensation
due; claims for breach of any contract or covenant, express or implied; tort claims; claims for
discrimination, including but not limited to discrimination based on race, sex, sexual orientation,
religion, national origin, age, marital status, handicap, disability or medical condition or
harassment on any of the foregoing bases; claims for benefits, except as excluded in the following
paragraph; and claims for violation of any federal, state or other governmental constitution,
statute, ordinance, regulation, or public policy. The Claims covered by this Agreement do not
include claims for workers’ compensation benefits or compensation; claims for unemployment
compensation benefits; claims based upon an employee pension or benefit plan, the terms of which
contain an arbitration or other non-judicial resolution procedure, in which case the provisions of
such plan shall apply; and claims made by either Employer or the Executive for injunctive and/or
other equitable relief regarding the covenants set forth in Sections 3, 4, 5 and 6 of this
Agreement. Each party shall initially bear their own costs of the arbitration or litigation,
except that, if Employer is found to have violated any material terms of this Agreement, Employer
shall reimburse Executive for the entire amount of reasonable attorneys’ fees incurred by Executive
as a result of the dispute hereunder in addition to the payment of any damages awarded to
Executive.

     11. General Provisions.

          (a) All provisions of this Agreement are intended to be interpreted and construed in a manner
to make such provisions valid, legal, and enforceable. To the extent that any Section of this
Agreement or any word, phrase, clause, or sentence hereof shall be deemed by any court to be
illegal or unenforceable, such word, clause, phrase, sentence, or Section shall be deemed
modified, restricted, or omitted to the extent necessary to make this Agreement enforceable.
Without limiting the generality of the foregoing, if the scope of any covenant in this Agreement is
too broad to permit enforcement to its full extent, such covenant shall be

14

 

enforced to the maximum
extent provided by law; and Executive agrees that such scope may be judicially modified
accordingly.

          (b) This Agreement may be assigned by Employer. This Agreement and the covenants set forth
herein shall inure to the benefit of and shall be binding upon the successors and assigns of
Employer and Wintrust.

          (c) This Agreement may not be assigned by Executive, but shall be binding upon Executive’s
executors, administrators, heirs, and legal representatives.

          (d) No waiver by either party of any breach by the other party of any of the obligations,
covenants, or representations under this Agreement shall constitute a waiver of any prior or
subsequent breach.

          (e) Where in this Agreement the masculine gender is used, it shall include the feminine if the
sense so requires.

          (f) Employer may withhold from any payment that it is required to make under this Agreement
amounts sufficient to satisfy applicable withholding requirements under any federal, state, or
local law.

          (g) This instrument constitutes the entire agreement of the parties with respect to its
subject matter. This Agreement may not be changed or amended orally but only by an agreement in
writing, signed by the party against whom enforcement of any waiver, change, modification,
extension, or discharge is sought. Any other understandings and agreements, oral or written,
respecting the subject matter hereof are hereby superseded and canceled.

          (h) The provisions of Sections 4, 5, 6, 7, 9(i), 9(j), 10, 11, and 12 of this Agreement shall
survive the termination of Executive’s employment with Employer and the expiration or termination
of this Agreement.

     12. Governing Law. The parties agree that this Agreement shall be construed and
governed by the laws of the State of Illinois, excepting its conflict of laws principles. Further,
the parties acknowledge and specifically agree to the jurisdiction of the courts of the State of
Illinois in the event of any dispute regarding Sections 3, 4, 5, or 6 of this Agreement.

     13. Notice of Termination. Subject to the provisions of Section 8, in the event that
Employer desires to terminate the employment of the Executive during the Term of this Agreement,
Employer shall deliver to Executive a written notice of termination, stating whether
the termination constitutes a termination in accordance with Section 9(c), 9(d), 9(e), 9(f), or
9(h). In the event that Executive determines in good faith that Executive has experienced a
Constructive Termination, Executive shall deliver to Employer a written notice stating the
circumstances that constitute such Constructive Termination. In the event that the Executive
desires to effect a voluntary termination of Executive’s employment in accordance with Section
9(g), Executive shall deliver a written notice of such voluntary termination to Employer.

15

 

     IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date
written opposite their signatures.

	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	WINTRUST FINANCIAL CORPORATION	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 
	 	 	Edward J. Wehmer	 	 	 	Thomas P. Zidar	 	 
	Its:

	 	President and Chief Executive Officer	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Dated: 

	 	 	 	 	Dated:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 

16

 

EXHIBIT A

Advantage National Bank

Barrington Bank & Trust Company, N.A.

Beverly Bank & Trust Company, N.A.

Crystal Lake Bank & Trust Company, N.A.

First Insurance Funding Corporation

Focused Investments LLC

Hinsdale Bank & Trust Company

Lake Forest Bank & Trust Company

Libertyville Bank & Trust Company

North Shore Community Bank & Trust Company

Northbrook Bank & Trust Company

Old Plank Trail Community Bank, N.A.

State Bank of the Lakes

Town Bank (Wisconsin)

Tricom, Inc. of Milwaukee

Village Bank & Trust-Arlington Heights

Wayne Hummer Asset Management Company

Wayne Hummer Investments, LLC

Wayne Hummer Trust Company, N.A.

Wheaton Bank & Trust Company

Wintrust Information Technology Services Companyexv10w1

 

Exhibit 10.1

MIDWEST BANC HOLDINGS, INC.

STOCK AND INCENTIVE PLAN

ADOPTED BY THE BOARD OF DIRECTORS MARCH 23, 2005

APPROVED BY STOCKHOLDERS MAY 18, 2005

AMENDED BY STOCKHOLDERS AS OF MAY 3, 2006

ARTICLE I

ARTICLE III ESTABLISHMENT, PURPOSE, DURATION AND EFFECTIVE DATE

     1.1 Establishment of the Plan. Midwest Banc Holdings, Inc., a Delaware corporation
(hereinafter referred to as the “Company”), adopted the Midwest Banc Holdings, Inc. Stock and
Incentive Option Plan, f/k/a Midwest Banc Holdings, Inc. 1996 Stock Option Plan (the “Plan”),
effective November 19, 1996. The Company now wishes to amend and restate the Plan to make such
changes in the Plan necessary to: increase the number of shares of Common Stock that may be issued
pursuant to Awards under the Plan to 2,500,000 (Article IV), add Stock Appreciation Rights (Article
VII), Restricted Stock (Article VIII), and Restricted Stock Units (Article IX), to extend the
duration of the Plan to March 23, 2015 (Section 1.3), and to allow Non-Employee Directors to
participate in the Plan (Article V). Inasmuch as the 10-year duration of the Incentive Stock Option
plan will expire on November 18, 2006 and no Incentive Stock Options have been granted under the
Plan, the Incentive Stock Option plan is terminated and a new Incentive Stock Option plan is hereby
established in this amended and restated Plan.

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

     1.3 Duration of the Plan. The Plan shall remain in effect, subject to the right of the Board
of Directors to amend or terminate the Plan at any time pursuant to Article XIII hereof, until all
Shares subject to it shall have been purchased or acquired according to the Plan’s provisions.
Unless sooner terminated, the Plan shall terminate on the date before the tenth anniversary of the
date the Plan is adopted by the Board or approved by the stockholders of the Company, whichever is
earlier. No Awards may be granted under the Plan after the Plan is terminated.

     1.4 Effective Date. The Plan as amended and restated shall become effective on March 23, 2005,
but no Awards shall be granted unless and until the Plan has been approved by the stockholders of
the Company, which approval shall be within twelve months before or after the date the Plan is
adopted by the Board.

ARTICLE II

DEFINITIONS

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

     “Award” means, individually or collectively, a grant under this Plan of Nonqualified Stock
Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock or Restricted Stock
Units.

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

 

 

     “Beneficial Owner” or “Beneficial Ownership” shall have the meaning ascribed to such term in
Rule 13d-3 of the General Rules and Regulations under the Exchange Act, or any successor rule or
regulation promulgated under the Exchange Act.

     “Board” means the Board of Directors of the Company.

     “Cause” means, with respect to termination of a Participant’s employment (or status as a
Non-Employee Director), the occurrence of any one or more of the following, as determined by the
Committee, in the exercise of good faith and reasonable judgment:

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

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

     (iii) In the case of a Non-Employee Director, the removal of the Non-Employee Director
pursuant to a vote of the stockholders of the Company or the removal of a Non-Employee
Director pursuant to a direction received from any authorized bank regulatory agency.

     No act or failure to act on a Participant’s part shall be considered willful unless done, or
omitted to be done, by the Participant not in good faith and without reasonable belief that his
action or omission was in the best interest of the Company.

“Change Of Control” means the occurrence of any one or more of the following events:

     (i) The Company is merged or consolidated or reorganized into or with another
corporation or other legal person (an “Acquiror”) and as a result of such merger,
consolidation or reorganization less than 50% of the outstanding voting securities or other
capital interests of the surviving, resulting or acquiring corporation or other legal person
are owned in the aggregate by persons who were stockholders of the Company, directly or
indirectly, immediately prior to such merger, consolidation or reorganization, other than by
the Acquiror or any corporation or other legal person controlling, controlled by or under
common control with the Acquiror;

     (ii) The Company sells all or substantially all of its business and/ or assets to an
Acquiror, of which less than 50% of the outstanding voting securities or other capital
interests are owned in the aggregate by persons who were stockholders of the Company,
directly or indirectly, immediately prior to such sale, other than by any corporation or
other legal person controlling, controlled by or under common control with the Acquiror;

     (iii) Any person or group (as the terms “person” and “group” are used in Section
13(d)(3) or Section 14(d)(2) of the Exchange Act and the rules and regulations promulgated
thereunder) has become the Beneficial Owner of more than 50% of the issued and outstanding
shares of voting securities of Company, other than (a) a trustee or other fiduciary holding
securities under any employee benefit plan of

2

 

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

     (iv) Individuals who are members of the Incumbent Board cease to constitute a majority
of the Board. For this purpose, “Incumbent Board” means (a) the members of the Board of
Directors of the Company on the Effective Date and (b) any individual who becomes a member
of the Board after the Effective Date, if such individual’s election or nomination for
election as a Director was approved by the affirmative vote of the then Incumbent Board; or

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

The Board has final authority to determine the exact date on which a Change in Control has been
deemed to have occurred under paragraphs (i), (ii), (iii), (iv) and (v) above.

     “Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor
legislation thereto, and the rules and regulations thereunder.

     “Committee” means the Committee as specified in Article III herein appointed by the Board to
administer the Plan with respect to grants of Awards.

     “Common Stock” or “Shares” means the common stock, $0.01 par value per share, of the Company.

     “Company” means Midwest Banc Holdings, Inc., a Delaware corporation, as well as any successor
to the Company which shall maintain this Plan as provided in Article XVI herein.

     “Director” means any individual who is a member of the Board. Notwithstanding the foregoing, a
Non-Employee Director who, with the approval of the Board or the Committee, enters into a
continuing participant agreement with the Company or a Subsidiary effective upon such person
ceasing to be a Non-Employee Director, shall continue to be a Non-Employee Director for purposes of
this Plan and shall not be deemed to incur a termination of directorship during the term of such
continuing participant agreement.

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

     “Early Retirement” means the Participant’s termination of employment with the Company and its
Subsidiaries (for reasons other than Cause) on or after attaining age 55 having completed five or
more years of employment with the Company or its Subsidiaries.

     “Effective Date” means March 23, 2005, except as otherwise provided herein.

     “Employee” means any full-time salaried employee (including officers and directors) of the
Company and its Subsidiaries, including Subsidiaries which become such after adoption of the Plan.
Mere service as a Director or payment of a Director’s fee by the Company or a Subsidiary, however,
shall not be sufficient to qualify such Director as an “Employee” of the Company or a Subsidiary.
Notwithstanding the foregoing, a full-time salaried employee who, with the approval of the Board or
the Committee, enters into a continuing participant agreement with the Company or a Subsidiary
effective upon such person ceasing to be a full-time salaried employee, shall continue to be an
Employee for purposes of this Plan and shall not be deemed to incur a termination of employment
during the term of such continuing participant agreement; provided, however, that for purposes of
Incentive Stock Options, the term “Employee” does not include any person who is not an “employee”
within the meaning of Section 422 of the Code.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any
successor act thereto, and the rules and regulations thereunder.

3

 

     “Fair Market Value” means, as of any date, the value of the Common Stock determined as
follows:

     (i) If the Common Stock is at the time traded on the NASDAQ National Market System (or
any similar system or exchange), then the Fair Market Value shall be the average of the
highest and lowest prices of the Common Stock as reported by the consolidated tape of the
NASDAQ National Market System (or any similar system or exchange) on the date of
determination. In the event that there are no Common Stock transactions on such date, the
Fair Market Value shall be determined as of the immediately preceding date on which there
were Common Stock transactions.

     (ii) If the Common Stock is regularly quoted on an automated quotation system
(including OTB Bulletin Board) or by a recognized securities dealer, then the Fair Market
Value shall be the closing sales price for the shares as quoted on such system on the date
of determination. If selling prices are not reported, the Fair Market Value of a Share shall
be the mean between the high bid and low asked prices for the Common Stock on the date of
determination (or, if no such prices were reported on that date, on the last date such
prices were reported), as reported in The Wall Street Journal or such other source as the
Committee deems reliable.

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

     “Incentive Stock Option” or “ISO” means an option to purchase Shares granted under Article VI
hereof and which is designated as an Incentive Stock Option and which qualifies as an ISO under
Section 422 of the Code and the regulations promulgated thereunder.

     “Non-Employee Director” means a Director who is not also a current Employee.

     “Nonqualified Stock Option” or “NQSO” means an option to purchase Common Stock of the Company
other than an Incentive Stock Option described in Section 422 of the Code that satisfies the
following requirements: (1) the amount required to purchase the Common Stock under the Nonqualified
Stock Option (the exercise price) may never be less than the Fair Market Value of the underlying
Common Stock on the date the Nonqualified Stock Option is granted; (2) the receipt, transfer or
exercise of the Nonqualified Stock Option is subject to taxation under Section 83 of the Code; and
(3) the Nonqualified Stock Option does not include any feature for the deferral of compensation
other than the deferral of recognition of income until the later of exercise or disposition of the
option under Section 1.83-7 of the Treasury regulations.

     “Option” means an ISO or a NQSO granted pursuant to the Plan.

     “Participant” means a holder of an outstanding Award granted under the Plan.

     “Period of Restriction” means the period during which the transfer of Restricted Stock or
Restricted Stock Units is limited in some way (based on the passage of time, the achievement of
performance goals, or upon the occurrence of other events as determined by the Committee, at its
discretion).

     “Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act
and used in Sections 13(d) and 14(d) thereof, including a group as defined in Section 13(d)
thereof.

     “Related” means (i) in the case of an SAR or other right, an SAR or other right which is
granted in conjunction with, and to the extent exercisable, in whole or in part, in lieu of, an
Option or another right and (ii) in the case of an Option, an Option with respect to which and to
the extent an SAR or other right is exercisable, in whole or in part, in lieu thereof.

     “Restricted Stock” means Shares granted under Article VIII herein.

     “Restricted Stock Unit” means a unit granted under Article IX evidencing the right to receive
either Common Stock or a cash payment equal to the Fair Market Value of a Share (or a combination
thereof) at some future date.

4

 

     “Retirement” means the Participant’s termination of employment with the Company or its
Subsidiaries (for reasons other than Cause) on or after the date the Participant attains age 65 or,
in the case of a Non-Employee Director, it means the cessation of the Non-Employee Director’s
duties as a Director due to his decision to resign or not stand for re-election or due to the Board
of Directors decision not to reslate him for election as a Director (other than for Cause).

     “Rule 16b-3” means Rule 16b-3 or any successor or comparable rule or rules applicable to
Awards granted under the Plan promulgated by the Securities and Exchange Commission under Section
16(b) of the Exchange Act.

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

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

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

     2.3 Severability. In the event any provision of the Plan shall be held illegal or invalid for
any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the
Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

ARTICLE III

ADMINISTRATION

     3.1 The Committee. The Plan shall be administered by the Board of Directors acting as a
committee or by the Compensation Committee of the Board of Directors, or by any other Committee
appointed by the Board of Directors. The Committee administering the Plan shall consist of two or
more Directors who are (i) “non-employee directors” as the term (or any similar successor) is
defined in Rule 16b-3, and (ii) “outside directors” within the meaning of Section 162(m) of the
Code.

     3.2 Authority of the Committee. Except as limited by law or by the amended and restated
Certificate of Incorporation (the “Certificate”) or the amended and restated By-laws (the
“By-laws”) of the Company, and subject to the provisions herein, the Committee (acting by majority
action (whether taken during a meeting or by written consent)) shall have full and complete
discretionary power to:

	 	•	 	select Employees and Non-Employee Directors to whom Awards will be provided;
	 
	 	•	 	determine the number, sizes and types of Awards, the date the Awards may be
exercised and the date on which the risk of forfeiture shall lapse, the acceleration of
any such dates and the expiration date of an Award;
	 
	 	•	 	determine the terms and conditions of Awards in a manner consistent with the Plan;
	 
	 	•	 	determine whether, to what extent and under what circumstances an Award may be
settled, or the exercise price of an Award may be paid, in cash, Shares, other means or
a combination thereof;
	 
	 	•	 	construe and interpret the Plan and any agreement or instrument entered into under the Plan;

5

 

	 	•	 	establish, amend, or waive rules and regulations for the Plan’s administration;
	 
	 	•	 	(subject to the provisions of Article XIII herein) amend the terms and conditions of
any outstanding Award to the extent such terms and conditions are within the discretion
of the Committee as provided in the Plan; and
	 
	 	•	 	make all other determinations which may be necessary or advisable for the
administration of the Plan.

     3.3 Manner of Exercise of Committee Authority; Subcommittees. The express grant of any
specific power to the Committee, and the taking of any action by the Committee, shall not be
construed as limiting any power or authority of the Committee. The Committee may act through
subcommittees, including for purposes of perfecting exemptions under Rule 16b-3 or qualifying
Awards under Section 162(m) of the Code as performance-based compensation, in which case the
subcommittee shall be subject to and have authority granted hereunder to the Committee, and the
acts of the subcommittee shall be deemed to be acts of the Committee hereunder.

     3.4 Decisions Binding. All determinations and decisions made by the Committee pursuant to the
provisions of the Plan and all related orders and resolutions of the Board shall be final,
conclusive and binding on all persons, including the Company, its stockholders, Employees,
Participants, and their estates and beneficiaries.

ARTICLE IV

SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS

     4.1 Shares Available For Awards. (a) Subject to adjustment as provided in Section 4.4, the
aggregate number of Shares which may be issued or used for reference purposes over the term of the
Plan shall not exceed 3,900,000 Shares (inclusive of shares issued prior to March 23, 2005), which
may be either authorized and unissued Shares or Shares held in or reacquired for the treasury of
the Company.

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

          (c) Of the aggregate number of Shares available for Awards set forth in paragraph (a), the
total number of Shares of Company Stock with respect to which Incentive Stock Option Awards may be
granted shall not exceed 1,037,846 Shares.

     4.2 Reuse. If, and to the extent:

     (i) an Option shall expire, terminate, lapse or be cancelled for any reason without
having been exercised in full (including, without limitation, cancellation and re-grant), or
in the event that an Option is exercised or settled in a manner such that some or all of the
Shares related to the Option are not issued to the Participant (or beneficiary) (including
as the result of a Share-for-Share exercise or the use of Shares for withholding taxes), the
Shares subject thereto which have not become outstanding shall (unless the Plan shall have
terminated) remain available for issuance under the Plan; or

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

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

6

 

canceled, the canceled Option or SAR shall
continue to count against the maximum number of Shares with respect to which Options and SARs may
be granted to the Participant. For this purpose, the repricing of an Option shall be treated as the
cancellation of the existing Option and the grant of a new Option.

          (b) No Participant may be granted, during any fiscal year, Awards consisting of Shares or
units denominated in such shares (other than any Awards consisting of Options or SARs) covering or
relating to more than 150,000 Shares, subject to adjustment pursuant to the provisions of Section
4.4 hereof.

     4.4 Adjustments in Authorized Shares. In the event of any change in corporate capitalization,
such as a stock split, stock dividend, recapitalization, or a corporate transaction, such as any
merger, consolidation, combination, separation, including a spin-off, or other distribution of
stock or property of the Company, any reorganization (whether or not such reorganization comes
within the definition of such term in Section 368 of the Code) or any partial or complete
liquidation of the Company, an adjustment shall be made in the number and class of Shares available
for Awards, the number and class of and/ or price of Shares subject to outstanding Awards granted
under the Plan and the number of Shares set forth in Sections 4.1, 4.2 and 4.3, as may be
determined to be appropriate and equitable by the Committee, in its sole discretion, to prevent
dilution or enlargement of rights; provided, however, that the number of Shares subject to any
Award shall always be a whole number.

ARTICLE V

ELIGIBILITY AND PARTICIPATION

     5.1 Eligibility. The persons eligible to participate in this Plan are as follows:

          (i) Employees; and

          (ii) Non-Employee Directors.

     Notwithstanding the foregoing, only Employees are eligible to receive Incentive Stock Options.

     5.2 Actual Participation. Subject to the provisions of the Plan, the Committee shall have
full authority to determine which eligible persons are to receive Awards and the nature and amount
of each Award.

ARTICLE VI

STOCK OPTIONS

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

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

the provisions of Section 6.4. The Award Agreement shall also specify whether the Option is
intended to be an Incentive Stock Option or a Nonqualified Stock Option.

     6.3 Exercise Price. Subject to the provisions of this Section 6.3, the exercise price for
each Option shall be determined by the Committee in its sole discretion.

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          (a) Nonqualified Stock Options. In the case of a Nonqualified Stock Option, the exercise price
shall be not less than the Fair Market Value of a Share on the date of the grant.

          (b) Incentive Stock Options. In the case of an Incentive Stock Option, the exercise price
shall be not less than one hundred percent (100%) of the Fair Market Value of a Share on the date
of the grant; provided, however, that if on the date of the grant, the Employee (together with
persons whose stock ownership is attributed to the Employee pursuant to Section 424(d) of the Code)
owns stock representing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or any of its Subsidiaries, the exercise price shall be not less
than one hundred and ten percent (110%) of the Fair Market Value of a Share on the date of the
grant.

          (c) Substitute Options. Notwithstanding the provisions of paragraphs (a) and (b), in the event
that the Company or a Subsidiary consummates a transaction described in Section 424(a) of the Code
(e.g., the acquisition of property or stock from an unrelated corporation), persons who become
Employees on account of such transaction may be granted Options in substitution for options granted
by their former employer. If such substitute Options are granted, the Committee, in its sole
discretion and consistent with Section 424(a) of the Code, shall determine the exercise price of
such substitute Options.

     6.4 Expiration of Options. Subject to the provisions of Section 6.8 and Section 6.11, Options
granted pursuant to this Article VI shall expire in accordance with this Section 6.4.

          (a) Expiration Dates in General. Each Option granted pursuant to this Article VI shall
terminate no later than the first to occur of the following events:

     (i) The date for termination of the Option set forth in the written Award Agreement; or

     (ii) The expiration of ten (10) years measured from the date of the grant; or

     (iii) The expiration of three (3) months from the date of the Participant’s termination
of employment (or termination as a Non-Employee Director) for a reason other than the
Participant’s death, Disability, Retirement, or for Cause; or

     (iv) The expiration of one (1) year from the date of the Participant’s termination of
employment (or termination as a Non-Employee Director) by reason of death, Disability or
Retirement; or

     (v) The date of termination of employment (or termination as a Non-Employee Director)
in the event of a termination for Cause.

          (b) Effect of Termination of Service. Notwithstanding Section 6.4(a) or 6.5:

     (i) Upon the death, Disability or Retirement of the Participant, each Option held by
the Participant shall become exercisable in full (without regard to any installment or other
vesting provisions thereof) and shall be exercisable thereafter until the first to occur of
the dates set forth in Section 6.4(a)(i), (ii) or (iv).

     (ii) Upon Early Retirement, each Option held by a Participant who from such Early
Retirement retires and agrees to remain retired from the industry (a “sunset arrangement”)
shall become exercisable in full (without regard to any installment or other vesting
provisions thereof) and shall be exercisable by the Participant until the earlier of the
dates set forth in Section 6.4(a)(i), (ii) or (iii).

     (iii) In the event of the death of the Participant after his termination of employment
(or his termination as a Non-Employee Director), but prior to the expiration of his Options,
then his then exercisable Options shall be exercisable in full by his beneficiaries until
the earlier of the date such

Options would have expired had the Participant survived until such date or the expiration of one
(1) year from the date of the Participant’s termination.

8

 

     (iv) If the employment of the Participant (or his status as a Non-Employee Director)
shall terminate for any reason other then death, Disability, Retirement, Early Retirement,
or for Cause, the rights under any then outstanding Option granted pursuant to the Plan
shall terminate upon the expiration date of the Option or three (3) months after such date
of termination, whichever first occurs; provided, however, that in the event such
termination occurs after a Change in Control, the rights under any then outstanding Option
granted pursuant to the Plan shall terminate upon the expiration date of the Option or one
(1) year after such date of termination of service, whichever first occurs.

     (v) Where termination of employment (or termination as a Non-Employee Director) is for
Cause, rights under all Options shall terminate immediately upon such termination.

     6.5 Terms of Exercise. Options granted under the Plan shall be exercisable at such times and
be subject to such restrictions and conditions as the Committee shall determine in its sole
discretion and prescribe in the Award Agreement; provided that, to the extent required to comply
with Rule 16b-3, no Option shall be exercisable within the first six months of its term, unless
death or Disability of the Participant occurs during such period. Each Option which is intended to
qualify as an Incentive Stock Option under Section 422 of the Code shall comply with the applicable
provisions of the Code pertaining to such Options. In the event that the Award Agreement does not
set forth times with respect to the exercisability of Options, then each such Option granted to an
Employee or Non-Employee Director shall become exercisable on the first anniversary of the date of
the grant at the rate of one-fourth (25%) of the Shares which may be purchased under the Option
(rounded down to the nearest whole number), and on each of the second, third and fourth anniversary
of the date of the grant to the extent of an additional one-fourth (25%) of such Shares. After an
Option is granted, the Committee, in its sole discretion, may accelerate the exercisability of the
Option. Notwithstanding the foregoing, upon a Change in Control or an event described in Section
6.4(b)(i) or (ii), any and all Options granted under this Article VI shall become immediately
exercisable in full.

     6.6 Method of Exercise; Cancellation of Related SAR.

          (a) Options shall be exercised by the Participant’s delivery of a written notice of exercise
to the President of the Company (or his designee), setting forth the number of Shares with respect
to which the Option is to be exercised, accompanied by full payment for the Shares.

          (b) The exercise of an Option shall cancel any Related SAR to the extent of the number of
Shares as to which the Option is exercised. As soon as practicable after receipt of a written
notification of exercise and full payment for the Shares purchased, the Company shall deliver to
the Participant (or the Participant’s designated broker), Share certificates (which may be in book
entry form) representing such Shares.

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

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

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

     (iii) by any other means which the Committee, in its sole discretion, determines to
both provide legal consideration for the Shares, and to be consistent with the purposes of
the Plan; or

     (iv) by a combination of (i), (ii) and (iii), as the Committee, in its sole discretion,
may permit.

     6.8 Limited Transferability of Options. (a) An Incentive Stock Option shall be exercisable
only by the Participant during his lifetime and shall not be assignable or transferable other than
by will or by the laws of descent and distribution following the Participant’s death.
Notwithstanding the foregoing, the Participant may, by delivering written notice to the Company, in
a form satisfactory to the Company, designate a third party who, in the event of the death of the
Participant, shall thereafter be entitled to exercise the Option.

9

 

          (b) The Committee may, in its discretion, authorize all or a portion of the Nonqualified Stock
Options granted to a Participant to be on terms which permit transfer by such Participant to:

     (i) the spouse, children or grandchildren of the Participant (“Immediate Family
Members”),

     (ii) a trust or trusts for the exclusive benefit of such Immediate Family Members, or

     (iii) a partnership in which such Immediate Family Members are the only partners,
provided that (A) there may be no consideration for any such transfer, (B) the Award
Agreement pursuant to which such Options are granted expressly provides for transferability
in a manner consistent with this Section 6.8, and (C) subsequent transfers of transferred
Options shall be prohibited except those in accordance with Article X.

          (c) Following transfer, any such Options shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer; provided that for purposes of Article
X hereof the term “Participant” shall be deemed to refer to the transferee. The provisions of
Article VI and Article XII relating to the period of exercisability and expiration of the Option
shall continue to be applied with respect to the original Participant, and the Options shall be
exercisable by the transferee only to the extent, and for the periods, set forth in Article VI and
Article XII.

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

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

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

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

          (b) Termination of Continuous Service; Exercise. Notwithstanding anything in this Plan to the
contrary, no Incentive Stock Option may be exercised more than three (3) months after the
Participant’s termination of employment with the Company and all Subsidiaries for any reason other
than Disability or death (in which case the Incentive Stock Option may be exercised until the
expiration of one (1) year from the date of death or Disability). In the event the Participant dies
during the three-month period after termination of employment, the Incentive Stock Option may be
exercised by such Participant’s beneficiaries for the period ending one (1) year after the date of
the Participant’s death. In the event the Award Agreement or the Committee permits later exercise
and the Incentive Stock Option is not exercised within such three (3) month or one (1) year period,
whichever is applicable, then such Incentive Stock Option shall become a Nonqualified Stock Option.

          (c) Option Term. The term of each Incentive Stock Option shall be fixed by the Committee.
Notwithstanding the foregoing, no Incentive Stock Option may be exercised after the expiration of
ten (10) years from the date such Option is granted; provided, however, that if the Incentive
Stock Option is granted to an Employee who, together with persons whose stock ownership is
attributed to the Employee pursuant to Section 424(d) of the Code, owns stock possessing more than
10% of the total combined voting power of all classes

10

 

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

ARTICLE VII

STOCK APPRECIATION RIGHTS

     7.1 Grant of Stock Appreciation Rights. Subject to the provisions of Section 1.3 and Article
IV, Stock Appreciation Rights may be granted to Employees at any time and from time to time as
shall be determined by the Committee. An SAR may be granted at the discretion of the Committee in
any of the following forms:

	 	•	 	In conjunction with Options;
	 
	 	•	 	In addition to Options;
	 
	 	•	 	Upon lapse of Options;
	 
	 	•	 	Independent of Options; or
	 
	 	•	 	Each of the above in connection with previously awarded Options.

     7.2 Exercise of SARs In Conjunction With Options. SARs granted in conjunction with Options
may be exercised for all or part of the Shares subject to the Related Option upon the surrender of
the right to exercise an equivalent number of Options. The SAR may be exercised only with respect
to the Shares for which its Related Option is then exercisable. Option Shares with respect to which
the SAR shall have been exercised may not be subject again to an Award under this Plan. SARs
granted pursuant to this Section 7.2 with respect to which the Option Shares have been exercised
will immediately lapse upon such exercise.

     7.3 Exercise of SARs in Addition to Options. SARS granted in addition to Options shall be
deemed to be exercised upon the exercise of the Related Options.

     7.4 Exercise of SARs Upon Lapse of Options. SARs granted upon lapse of Options shall be
deemed to have been exercised upon the lapse of the Related Options as to the number of Shares
subject to the Options. Notwithstanding Section 4.2, cancelled Options in an amount equal to the
related SARs shall not be available again for Awards under the Plan.

     7.5 Exercise of SARs Independent of Options. SARs granted independent of Options may be
exercised upon whatever terms and conditions the Committee, in its sole discretion, imposes upon
the SARs.

     7.6 Payment of SAR Amount. Upon exercise of the SAR, the holder shall be entitled to receive
payment of an amount (subject to Section 7.7 below) determined by multiplying:

          (a) The difference between the Fair Market Value of a Share at the date of exercise over the
Fair Market Value of a Share on the date the right is granted, by

          (b) The number of Shares with respect to which the Stock Appreciation Right is exercised.

     7.7 Form and Timing of Payment. At the discretion of the Committee, payment for SARs may be
made in cash or Shares, or in a combination thereof.

     7.8 Limit of Appreciation. At the time of grant, the Committee may establish in its sole
discretion, a maximum amount per Share which will be payable upon exercise of an SAR.

     7.9 Term of SAR. The term of an SAR granted under the Plan shall not exceed ten (10) years.

11

 

     7.10 Termination of Service. In the event the termination of a Participant’s service for any
reason, any SARs outstanding shall terminate in the same manner as specified for Options under
Section 6.4(b) hereof.

     7.11 Nontransferability of SARs. No SAR granted under the Plan may be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of
descent and distribution. Further, all SARs granted to a Participant under the Plan shall be
exercisable only by the Participant during his lifetime.

ARTICLE
VIII

RESTRICTED STOCK

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

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

     8.3 Other Restrictions. The Committee shall impose such other restrictions on any shares of
Restricted Stock granted under the Plan as it may deem advisable including, without limitation,
restrictions under applicable Federal or state securities laws, and shall legend the Share
certificates representing the Restricted Stock to give appropriate notice of such restrictions.

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

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

     8.6 Termination of Service Due to Retirement, Death or Disability. In the event a
Participant’s employment (or his status as a Non-Employee Director) terminates due to his or her
Retirement, death or Disability, the remaining restrictions with respect to the Restricted Stock,
except as otherwise provided by the Committee in the Award Agreement pursuant to Sections 8.2 or
8.3 hereof, shall automatically terminate so that all Shares of Restricted Stock shall be free of
all restrictions and freely transferable.

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

     8.8 Performance Goals. One or more of the following business criteria for the Company, on a
consolidated basis, and/ or for specified subsidiaries or affiliates or other business units of the
Company shall be used by the Committee in establishing performance goals: (1) revenue measures; (2)
operating income, earnings form operations, earnings before or after taxes, or earnings before or
after extraordinary or special items, (3) net income per common share (basic or diluted) or
earnings per share (basis or diluted); (4) return on assets, return on investment, return on
capital, or return on equity; (5) cash flow, free cash flow, cash flow return on investment, or net
cash provided by operations; (6) efficiency ratio; (7) economic profit or value created; (8) net
interest margin; (9) stock price or total stockholder return; and (10) strategic business criteria,
consisting of one or more objectives

12

 

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

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

ARTICLE IX

RESTRICTED STOCK UNITS

     9.1 Grant of Restricted Stock Units. Subject to the provisions of Section 1.3 and Article IV,
the Committee, at any time and from time to time, may grant Restricted Stock Units under the Plan
to such Employees or Non-Employee Directors as it shall determine. Each Restricted Stock Unit Award
shall be evidenced by an Award Agreement and may provide for payment to the Participant in cash or
Shares or a combination thereof upon expiration of the Period of Restriction. The Committee, in its
discretion, may permit a Participant to defer receipt of Common Stock or a cash payment beyond the
expiration of any applicable Period of Restriction or the satisfaction of other restrictions
imposed by the Committee.

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

     9.3 Other Restrictions. The Committee shall impose such other restrictions on Restricted
Stock Units granted pursuant to the Plan as it may deem advisable including, without limitation,
restrictions under applicable Federal or state securities laws.

     9.4 Rights as a Stockholder. No voting or dividend rights as a stockholder shall exist with
respect to Restricted Stock Units prior to the issuance of Shares in the name of the Participant.
An Award Agreement may provide for dividend equivalent units.

     9.5 Termination of Service Due to Retirement, Death, or Disability. In the event a
Participant’s employment (or his status as a Non-Employee Director) terminates due to his
Retirement, death or Disability, the remaining restrictions with respect to the Restricted Stock
Units, except as otherwise provided by the Committee in the Award Agreement pursuant to Sections
9.2 or 9.3 hereof, shall automatically terminate and the Participant shall be entitled to receive
Shares or a cash payment, or a combination thereof, provided in the Award Agreement.

     9.6 Termination of Service For Reasons Other Than Retirement, Death, or Disability. In the
event that a Participant’s his employment (or his status as a Non-Employee Director) terminates
with the Company for reasons other than Retirement, death, or Disability, all Restricted Stock
Units subject to restrictions shall be forfeited and returned to the Company; provided, however,
that, the Committee in its sole discretion may waive restrictions remaining on any or all
Restricted Stock Units and distribute Shares or make a cash payment, or a combination thereof, as
set out in the Award Agreement.

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     9.7 Application of Section 409A of the Code. Section 409A of the Code will apply to
Restricted Stock Unit Awards until otherwise provided by Treasury regulations or other guidance
issued by the U.S. Department of Treasury.

ARTICLE X

BENEFICIARY DESIGNATION

     Each Participant under the Plan may, from time to time, name any beneficiary or beneficiaries
(who may be named contingently or successively) to whom any benefit under the Plan is to be paid in
case of his death before he receives any or all of such benefit. Each such designation shall revoke
all prior designations by the same Participant, shall be in a form prescribed by the Committee, and
will be effective only when filed by the Participant in writing with the Committee during the
Participant’s lifetime. In the absence of any such designation, benefits remaining unpaid at the
Participant’s death shall be paid to the Participant’s estate.

ARTICLE XI

RIGHTS OF PARTICIPANTS

     11.1 Service. Nothing in the Plan shall interfere with or limit in any way the right of the
Company or a Subsidiary to terminate any Participant’s employment (or status as a Director) at any
time, nor confer upon any Participant any right to continue in the employ (or as a Director) of the
Company or a Subsidiary.

     11.2 Participation. No Employee (or Non-Employee Director) shall have a right to be selected
as a Participant, or, having been so selected, to be selected again as a Participant.

ARTICLE XII

CHANGE IN CONTROL

     Except as expressly provided otherwise in an Award Agreement, in the event of a Change in
Control as defined in Section 2.1 above, all Awards under the Plan shall vest 100% and shall be
fully exercisable, whereupon all Options and SARs shall become exercisable in full and the
restrictions applicable to Restricted Stock and Restricted Stock Units (including any Period of
Restriction) shall terminate.

ARTICLE
XIII

AMENDMENT, MODIFICATION, AND TERMINATION

     13.1 Amendment, Modification, and Termination. The Board may at any time and from time to
time, alter, amend, suspend or terminate the Plan in whole or in part for the purpose of meeting or
addressing any changes in legal requirements or for any other purpose permitted by law.

     13.2 Stockholder Approval. The Board shall obtain stockholder approval of any Plan amendment
to the extent the Board deems necessary or desirable or to comply with applicable laws or the rules
of the NASDAQ National Market System or any other system or exchange on which the Shares are then
listed or quoted. Notwithstanding the foregoing, the Board shall obtain stockholder approval to
amend the Plan to (i) materially increase the maximum number of Shares issuable under the Plan
(except for permissible adjustments under Section 4.4); (ii) materially increase the benefits
accruing to Participants in the Plan; or (iii) materially modify the eligibility requirements for
participation in the Plan.

     13.3 Effect of Amendment or Termination. No amendment, termination, or modification of the
Plan shall adversely affect in any material way any Award previously granted under the Plan or the
rights of any Participant without the written consent of the Participant holding such Award.

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ARTICLE XIV

WITHHOLDING

     14.1 Tax Withholding. The Company shall have the power and the right to deduct or withhold, or
require a Participant to remit to the Company, an amount sufficient to satisfy Federal, state, and
local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any
taxable event arising as a result of the Plan.

     14.2 Share Withholding. With respect to withholding required upon the exercise of Options or
SARs, upon the lapse of restrictions on Restricted Stock, or upon any other taxable event arising
as a result of Awards granted hereunder, Participants may elect to satisfy the withholding
requirement, in whole or in part, by having the Company withhold Shares having a Fair Market Value
on the date the tax is to be determined equal to the minimum statutory total tax which would be
imposed on the transaction; provided, however, that in the event a deferral election is in effect
with respect to the Shares deliverable upon exercise of an Option, then the Participant may only
elect to have such withholding made from the Shares tendered to exercise such Option. All such
elections shall be irrevocable, made in writing, signed by the Participant, and shall be subject to
any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.

ARTICLE XV

INDEMNIFICATION

     Each Person who is or shall have been a member of the Committee or of the Board shall be
indemnified and held harmless by the Company against and from any loss, cost, liability, or expense
that may be imposed upon or reasonably incurred by him in connection with or resulting from any
claim, action, suit, or proceeding to which he may be a party or in which he may be involved by
reason of any action taken or failure to act under the Plan and against and from any and all
amounts paid by him in settlement thereof, with the Company’s approval, or paid by him in
satisfaction of any judgment in any such action, suit, or proceeding against him, provided he shall
give the Company an opportunity, at its own expense, to handle and defend the same before he
undertakes to handle and defend it on his own behalf. The foregoing right of indemnification shall
not be exclusive of any other rights of indemnification to which such persons may be entitled under
the Certificate or By-laws of the Company, as a matter of law, or otherwise, or any power that the
Company may have to indemnify them or hold them harmless.

ARTICLE XVI

SUCCESSORS

     All obligations of the Company under the Plan with respect to Awards granted hereunder shall
be binding on any successor to the Company, whether the existence of such successor is the result
of a direct or indirect merger, consolidation, purchase of all or substantially all of the business
and/ or assets of the Company or otherwise.

ARTICLE XVII

LEGAL CONSTRUCTION

     17.1 Requirements of Law. The granting of Awards and the issuance of Shares under the Plan
shall be subject to all applicable laws, rules, and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required.

     17.2 Governing Law. To the extent not preempted by Federal law, the Plan and all Award
Agreements hereunder, shall be construed in accordance with and governed by the laws of the State
of Delaware.

* * *

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     IN WITNESS WHEREOF, Midwest Banc Holdings, Inc. by its appropriate officers duly authorized,
has executed this instrument this 3rd day of May, 2006.

	 	 	 	 	 
	 	 	MIDWEST BANC HOLDINGS, INC.
	 
	 	 	 	 
	 

	 	By:
	 	     /s/James J. Giancola
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	As its:
	 	   President and Chief Executive Officer
	 

	 	 	 	 

16

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