EXECUTIVE EMPLOYMENT
AGREEMENT
THIS EMPLOYMENT
AGREEMENT (“Agreement”) is made this 6th day of May,
2009, and is effective as of the 15th day of May 2009 (the
“Effective Date”), by and among Midwest Banc Holdings,
Inc. (“Midwest”) and Midwest Bank and Trust Company
(“Midwest Bank”) (collectively Midwest and Midwest Bank
are referred to herein as the “Employer”), and Roberto
R. Herencia (“Executive”).
A. Employer
desires to employ Executive as President and Chief Executive
Officer of Midwest, and President and Chief Executive Officer of
Midwest Bank, and Executive desires to become employed by Employer
on the terms and conditions set forth in this Agreement;
and
B. In the
course of employment with Employer, Executive will have access to
certain confidential information that relates to or will relate to
the business of Employer, and Executive will be introduced to
important business contacts. Therefore, Executive has agreed to be
bound by certain covenants concerning the protection of such
confidential information.
NOW THEREFORE, in
consideration of the above premises and the following mutual
covenants and conditions, the parties agree as follows:
1.
Employment and Duties . Each of Midwest and Midwest Bank
shall employ Executive as its President and Chief Executive Officer
as of the Effective Date. Executive shall, during the term of this
Agreement and subject to the provisions of this Paragraph and
Paragraph 2 below, devote his full time and effort to his
duties under this Agreement. Executive shall perform those duties
identified in the position description for the President and Chief
Executive Officer, as stated in the Bylaws of the Employer as
assigned to the President and Chief Executive Officer, subject to
the direction of the Board of Directors. Executive shall report to
the Board. Executive may serve on corporate, industry, civic,
religious or charitable boards or committees, so long as such
duties do not conflict with Executive’s duties
hereunder.
2.
Executive Loyalty and Compliance with Policies . During the
term of this Agreement, and except as permitted above in
Paragraph 1, Executive shall not engage, directly or
indirectly, as a shareholder, member, partner, officer, director,
manager, contractor, agent, employee, or in any other capacity, in
any other business without the prior written approval of the Board
of Directors. Executive shall comply with the terms of all Employer
policies, including but not limited to, Employer’s conflict
of interest policy, Employer’s policies concerning or
relating to disclosure of business relationships with clients and
with applicable provisions of the American Recovery and
Reinvestment Act of 2009 (“ARRA”), the Emergency
Economic Stabilization Act of 2008 (“EESA”) and related
rules to which the Employer may be subject due to its participation
in EESA’s Troubled Asset Relief Program (“TARP”).
Nothing in this Agreement shall be construed to prevent Executive
from (a) owning less than a two percent (2%) interest in any
publicly held corporation, provided, however, the corporation is
not involved in the banking or financial services industry;
(b) investing in any privately-held corporation, partnership
or other entity that is not involved in providing banking or
financial services and that does not have any contractual or other
relationship with the Employer; or (c)
holding a board
of director position for a non-profit or charitable organization,
provided that obligation does not prevent Executive from performing
his full-time duties to the Employer and further provided the
business purposes and mission of the entity do not conflict with or
are competitive to those of the Employer.
3.
Indefinite Term . The term of Executive’s employment
will be indefinite, and Executive shall serve at the pleasure of
the Board of Directors of the Employer, which can terminate
Executive’s employment at any time, subject to the provisions
of Paragraphs 7 and 8 below.
A.
Salary . Employer shall pay Executive an annual base salary
of $500,000, subject to increase (but not decrease) from time to
time by the Employer (as adjusted, the “Base Salary”),
payable in substantially equal installments in accordance with
Employer’s regular payroll practices. Executive’s
salary shall be subject to any payroll or other deductions as may
be required by law, government order, or by agreement with
Executive.
B. Annual
Bonus . Beginning January 1, 2010, the Executive shall be
eligible to earn an annual bonus under the Employer’s
Management Incentive Compensation Plan, or such annual bonus plan
as in effect from time to time (the “Bonus Plan”). To
the extent that the Employer continues to be subject to the
compensation limitations contained under Section 111(b)(3)(D)
of EESA as amended by Section 7001 of ARRA and the rules and
regulations to be promulgated thereunder (the “TARP
Compensation Limitations”), Executive shall be eligible to
earn under the Bonus Plan an annual bonus in such amount, payable
in such form, and subject to such vesting provisions as will
provide the Executive with the maximum permissible incentive
compensation under such TARP Compensation Limitations. Once the
Employer is no longer subject to the TARP Compensation Limitations,
the Executive shall be eligible to earn under the Bonus Plan a
market competitive annual bonus award.
C. Other
Benefits . Executive shall be entitled to participate in those
vacation (with a minimum of four (4) weeks of vacation
annually) and other benefit plans as are available to all other
employees of Employer. In addition, Executive shall be entitled to
participate in the Employer’s executive perquisite program
and the Employer’s Supplemental Executive Retirement Plan, in
accordance with its terms and as modified from time to time by the
Employer, provided such modifications apply to all covered
executives. Nothing contained herein shall be deemed a limitation
on the ability of Employer to discontinue, modify, supplement or
amend its employee benefit plans or the scope of benefits it
provides to its employees.
D.
Restricted Stock . Executive shall be entitled to
participate in the Employer’s Stock and Incentive Plan, in
accordance with its terms and as modified from time to time by
Employer (the “Plan”), a copy of which has been
provided to Executive. In addition, on the Effective Date, Employer
shall grant to Executive a restricted stock award under the Plan
with a fair market value (as calculated under the Plan) as of the
Effective Date of $250,000 (the “RSA Award”), either
under the Plan or as an inducement award. The RSA Award shall vest
on December 31, 2009 or such later date as may be required in
order to comply with
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Section 111(b)(3)(D) of EESA as amended by
Section 7001 of ARRA and the rules and regulations to be
promulgated thereunder. In addition, the RSA Award (and any other
equity award received by the Executive) shall vest (and any options
shall immediately become exercisable) upon a Change of Control (as
defined in the Plan) provided that such early vesting shall only be
permitted while the Employer remains subject to the TARP
Compensation Limitations if such vesting is permitted by such TARP
Compensation Limitations. Once the Employer is no longer subject to
the TARP Compensation Limitations, the Executive shall be eligible
to earn a market competitive annual long-term incentive
award.
E. Board
Positions . Employer shall appoint Executive to the Board of
Directors of each of Midwest and Midwest Bank as of the date of the
execution of this Agreement. Executive shall resign as a director
of Midwest and Midwest Bank upon the termination of his employment
as provided in Paragraph 7.
5.
Expenses . Employer will reimburse Executive for all
necessary and reasonable out-of-pocket expenses he incurs which are
related to Executive’s responsibilities under this Agreement;
provided that any expenditure in excess of the expense policies and
budgets adopted from time to time by Employer’s Board of
Directors must be approved in writing in advance by the Chairman of
the Board of Directors. Employer will reimburse Executive for the
reasonable attorneys fees incurred by him relating to the
negotiation and documentation of this Agreement and related
documents.
6.
Termination . Notwithstanding anything in Paragraph 3
of this Agreement to the contrary, Executive’s employment
shall terminate upon the first to occur of the following
events:
A. Upon
Executive’s date of death, or the date Executive is given
written notice that Employer has determined that Executive is
permanently disabled. For purposes of this Agreement, Executive
shall be deemed to be permanently disabled if Executive, as a
result of illness or incapacity, shall be unable to perform
substantially all of his required duties for a period of three (3)
consecutive months or for any aggregate period of six
(6) months in any twelve (12) month period. A termination
of Executive’s employment by Employer for disability shall be
communicated to Executive by written notice and shall be effective
on the tenth (10th) business day after receipt of such notice by
Executive.
B. On the
date Employer provides Executive with written notice that his
employment is being terminated for “cause.” For
purposes of this Agreement, “cause” shall be defined
as:
(1) the
willful and continued (for a period of not less than 10 business
days after written notice thereof during which the Executive may
remedy such failure if capable of remedy) failure to perform
substantially the duties of the Executive’s employment (other
than as a result of physical or mental incapacity, or while on
vacation or other approved absence) which are within the
Executive’s control (mere inability to achieve financial or
other performance targets or objectives, alone, shall not
constitute such a willful and continued failure);
(2) the
commission of any felony involving fraud, theft, misappropriation,
dishonesty, or embezzlement or involving a crime of moral
turpitude;
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(3) the
willful violation of any written Employer policies or procedures
which materially damages the economic interests or reputation of
Employer;
(4) the
Executive is prohibited from engaging in the business of banking by
any governmental regulatory agency having jurisdiction over Midwest
or Midwest Bank;
(5) the
deliberate breach by Executive of Section 5 of his Resignation
and Transition Agreement, dated November 6, 2008, by and
between Executive and his former employer, which materially damages
the economic interests or reputation of Employer; or
(6) the
willful breach by Executive of the restrictive covenants in
Paragraphs 8D (confidentiality), 8G (customer non-solicitation) or
8H (employee non-solicitation) of this Agreement;
provided,
however, that no act or failure to act, on the Executive’s
part, shall be considered “willful” unless it is done,
or omitted to be done, by the Executive in bad faith or without
reasonable belief that Executive’s action or omission was in
the best interests of Midwest or Midwest Bank.
C. On the
date Employer terminates Executive’s employment for any
reason, other than a reason set forth in Paragraphs 7A. or 7B.,
provided that Employer shall give Executive thirty (30) days
written notice prior to such date of its intention to terminate
Executive’s employment.
D. On the
date Executive terminates his employment for “Good
Reason”. For purposes of this Agreement, “Good
Reason” shall mean the occurrence, other than in connection
with a discharge, of any of the following without the
Executive’s consent: (A) a reduction in the
Executive’s Base Salary, annual bonus opportunity (other than
a proportionate reduction applicable to all executives of the
Employer), or (B) the Executive being required to be based at
an office or location which is more than 50 miles from his then
current office, (C) a diminution of Executive’s duties
and authorities as set forth in Paragraph 1, (D) a
diminution in the Executive’s reporting responsibilities
following which the Executive does not report directly to the
Board, (E) the Executive’s removal or failure to be
reelected as a member of the Board, or (F) the failure of a
successor to assume the obligations of the Employer under this
Agreement (to the extent not otherwise assumed by operation of
law). The Executive must provide written notice to the Employer of
the existence of Good Reason no later than ninety (90) days
after it
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