SETTLEMENT AGREEMENT AND GENERAL
RELEASE
This Settlement
Agreement and General Release (the “Settlement
Agreement”) is made this 6 th day of November, 2008, by and among James J.
Giancola (“Giancola”), and Midwest Banc Holdings, Inc.
(“Midwest”), together with any subsidiaries,
affiliates, successors, assigns, agents, and employees of Midwest
(collectively, the “Released Parties”). The Settlement
Agreement is based upon the consideration provided hereunder and
the parties’ mutual obligations and commitments as agreed to
release the Released Claims, as defined herein.
WHEREAS, Giancola
has been employed by Midwest in the position of President during
the years 2004 through 2008; and
WHEREAS, pursuant
to the terms of his employment agreement with Midwest, Giancola was
granted one hundred fifty thousand (150,000) shares of restricted
Midwest common stock (the “Restricted Shares”) on the
date of his employment, which Restricted Shares were subject to a
substantial risk of forfeiture at the time of the grant;
and
WHEREAS, Giancola
became vested in 30,000 Restricted Shares on January 1, 2005,
January 1, 2006, January 1, 2007, and January 1,
2008, and upon such event, such Restricted Shares were no longer
subject to a substantial risk of forfeiture and were therefore
taxable to Giancola as wages; and
WHEREAS, Midwest
did not report the value of the Restricted Shares in which Giancola
became vested during each year on the statement of taxable wage
income (Form W-2) issued to Giancola for the taxable years ended
December 31, 2005, December 31, 2006, and
December 31, 2007; and
WHEREAS, the
parties believe that, as a result of Midwest’s failure to
report the value of the vested Restricted Shares on
Giancola’s Form W-2 for each of the years at issue, Giancola
may have a claim against Midwest and/or the Released Parties for
negligent misrepresentation or breach of an implied contract to
accurately report Giancola’s taxable wage income to him each
year.
NOW, THEREFORE, in
consideration of the mutual covenants contained herein, and other
good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Midwest
has issued to Giancola corrected Forms W-2 for the years 2005,
2006, and 2007. Each corrected Form W-2 reflects the value of the
30,000 Restricted Shares in which Giancola became vested during
such year.
2. Giancola
has filed amended state and federal income tax returns for the
years 2005, 2006 and 2007 that show as gross income and wages the
value of the 30,000 Restricted Shares that vested for the benefit
of Giancola during each such year, and has paid all additional
taxes attributable to the parties’ failure to report as
income the value of such Restricted Shares with respect to each
year and all additional interest assessed by state and federal
taxing authorities due to such failure and will pay all penalties
assessed by state and federal taxing authorities due to such
failures.
3. Midwest
agrees to pay to Giancola in 2008 the sum of $415,799, reduced for
payroll withholding as required by law. The amount of such
payment
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