TRANSITIONAL EMPLOYMENT AGREEMENT
Exhibit 2.01
This Transitional Employment Agreement (“Agreement”) is made as of this ___ day of _________, by and
between Midwest Banc Holdings, Inc. (the “Employer”) and the undersigned executive officer (the
“Executive”).
W I T N E S S E T H:
WHEREAS, the Executive has been employed for some years by the Employer; and
WHEREAS, the Employer wishes to assure both itself and the Executive of continuity of
management in the event of any actual Change in Control (as defined in Paragraph 2) of the Employer
on the terms and conditions set forth herein; and
WHEREAS, the Executive desires to provide such services and continuity; and
WHEREAS, to achieve this purpose, the Board of Directors of the Employer considered and
approved this Agreement to be entered into with the Executive as being in the best interests of the
Employer and its stockholders;
NOW, THEREFORE, in consideration of the promises and mutual covenants set forth herein, the
parties hereto agree as follows:
1. Operation of Agreement. The “Effective Date of this Agreement” shall be the date
on which a Change in Control occurs, and this Agreement shall not have any force or effect
whatsoever prior to that date.
2. Change in Control. For the purposes of this Agreement, a “Change in Control” means
a change in the ownership or effective control of the Employer, or in the ownership of a
substantial portion of the assets of the Employer as provided in Section 409A(a)(2)(A)(v) of the
Internal Revenue Code of 1986, as amended from time to time (the “Code”) and the final Treasury
regulations thereunder. In accordance with the final Treasury regulations, “Change in Control”
means any one of the events described below:
(a) Change in Ownership. A change in the ownership of the Employer occurs on the date that
any person or persons acting as a group acquires ownership of stock of the Employer that, together
with stock held by such person or group, constitutes more than fifty (50) percent of the total fair
market value or total voting power of the stock of such Employer. If a person or group is
considered to own more than fifty (50) percent of the total fair market value or total combined
voting power of the stock of the Employer, the acquisition of additional stock by the same person
or persons is not considered to cause a change in the ownership of the Employer (or to cause a
change in the “effective control of the Employer” within the meaning of paragraph (c)).
(b) Change in Effective Control. A change in the effective control of the Employer occurs on
the date that a majority of the Employer’s board of directors is replaced during any 12-month
period by directors whose appointment or election is not endorsed by a
majority of the members of the Employer’s board of directors prior to the date of the
appointment or election.
(c) Change in Ownership of a Substantial Portion of the Employer’s Assets. A change in the
ownership of a substantial portion of the Employer’s assets occurs on the date that any person or
group acquires (or has acquired during the 12-month period ending on the date of the most recent
acquisition by such person or persons) assets from the Employer that have a total gross fair market
value equal to or more than fifty (50) percent of the total gross fair market value of all of the
assets of the Employer immediately prior to such acquisition or acquisitions.
3. Employment. The Employer hereby agrees to continue the Executive in its employ for
a period of ______ months commencing on the Effective Date of this Agreement (the “Employment Period”),
with the same director and officer titles, duties and responsibilities as in effect immediately
prior to the Effective Date of this Agreement. The Executive agrees that during the Employment
Period he or she shall continue to devote such time to his or her executive duties as devoted prior
to the Effective Date of the Agreement and shall perform such duties faithfully; provided, however,
that Executive’s continued service for other corporations and entities, and on any other corporate,
civic, charity or foundation board shall not be deemed to breach Executive’s obligations hereunder.
4. Compensation, Compensation Plans, Benefits and Perquisites. During the Employment
Period, the Executive shall:
(a) Receive an annual salary and director’s fees at a rate which is not less than his or her
rate of annual salary and director’s fees immediately prior to the Effective Date of this
Agreement, with the opportunity for increases from time to time thereafter which are in accordance
with the regular practices of the Employer or its affiliates (which for purposes of this Agreement,
shall mean any corporation or enterprise which, as of a given date, is a member of the same
controlled group of entities, the same group of trades or businesses under common control or the
same affiliated service group, determined in accordance with Section 414(b), (c), (m) or (o) of the
Code (as defined in Paragraph 7 hereof), as is the Employer) with respect to executives with
comparable duties;
(b) Be eligible to participate on a comparable basis, in each calendar year during which the
Employment Period runs, in an annual bonus program maintained by the Employer or its affiliates in
which executives with comparable duties are eligible to participate;
(c) Be eligible to participate on a comparable basis in the stock option or other equity
incentive plans and any other bonus incentive compensation plans (collectively, the “Incentive
Plans”), maintained from time to time by the Employer or its affiliates during the Employment
Period and in which executives with comparable duties are eligible to participate, and the
Executive’s benefits, if any, in any Incentive Plans existing on the date hereof shall not be
reduced or eliminated;
(d) Be entitled to participate (i) in any group or executive medical, dental, disability, life
insurance, retirement, profit sharing, thrift and other plans and programs, including nonqualified
and deferred compensation plans and programs, maintained from time to
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time by the Employer or its affiliates during the Employment Period and in which similarly
situated executives (with comparable duties) are eligible to participate and (ii) in special
medical or life insurance arrangements, and profit sharing contributions to any deferred
compensation plan maintained by the Employer to the same extent the Executive participated in such
benefits before the Effective Date of the Agreement; and
(e) Be entitled to receive vacation and perquisites which are provided by the Employer or its
affiliates from time to time during the Employment Period to executives with comparable duties, but
in no event less favorable than the vacation and perquisites to which he or she was entitled
immediately prior to the Effective Date of this Agreement (including, but not limited to, company
car and allowances, club memberships and dues, subscriptions and travel).
(f) Be entitled to receive benefits under any supplemental executive retirement agreement, if
one is in place prior to the Effective Date, between the Employer and the Executive according to
its terms.
5. Termination During Employment Period.
(a) For purposes of this Agreement, the term “termination” shall mean (i) termination by the
Employer of the employment of the Executive with the Employer and all of its subsidiaries during
the Employment Period for any reason other than death, disability or “cause” (as defined below), or
(ii) resignation of the Executive for “good reason” (as defined below).
(b) The term “good reason” shall mean the Executive’s resignation from the Employer and all of
its subsidiaries during the two-year period following the initial existence of one of the following
conditions arising without the consent of the Executive.
(i) A material diminution in the Executive’s base salary.
(ii) A material diminution in the Executive’s authority, duties, or responsibilities.
(iii) A material change in the geographic location at which the Executive must perform
the services.
(iv) Any other action or inaction that constitutes a material breach by the Employer of
the agreement under which the Executive provides services.
The Executive must notify the Employer of the existence of the condition described in
paragraph (a) within ninety (90) days of the initial existence of the condition, upon the notice of
which the Employer has a period of ninety (90) days during which to remedy the condition.
(c) The term “cause” means (i) felony indictment or conviction, other than a felony predicated
upon the Executive’s vicarious liability or (ii) the Executive’s continued and willful failure to
substantially perform his or her duties under this Agreement. For purposes of this Paragraph, no
act or failure to act on the Executive’s part will be considered “willful” unless
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done, or omitted to be done, by him or her not in good faith and without reasonable belief
that his or her action or omission was in the interests of the Employer or its affiliates or not
opposed to the interests of the Employer or its affiliates.
6. Termination Benefits. In the event of a termination of the Executive during the
Employment Period, the Employer shall provide and the Executive shall be entitled to receive the
following benefits (the “Termination Benefits”) upon execution by Executive of a release, in
substantially the form attached hereto as Exhibit A, of all claims (other than claims for
benefits granted under this Agreement) against Employer, the Resulting Entity and their affiliates
and successors:
(a) The Executive shall, notwithstanding his or her termination, be entitled to receive salary
payments and director’s fees from the date of his termination and continuing until the second
anniversary of said termination date (the “Salary Continuation Period”) which period shall be
treated hereunder as a continuation of the Employment Period. These sums shall be paid at the
greater of the rate required by Paragraph 4(a) and that in effect immediately prior to termination.
The schedule for the time of the salary payments will be the same schedule as the time for
receiving salary payments during the period of the Executive’s employment. Similarly, the form of
the payment shall be the same form as the Executive was receiving during the period of the
Executive’s employment. The schedule for the time and the form of payment are fixed as provide
herein and may not be modified by the Executive or the Employer without compliance with Section
409A of the Code.
(b) In addition to the payments under (a) above, the Executive shall receive a bonus payment
with respect to each calendar year ending during Salary Continuation Period equal to the annual
cash bonus paid (including, for this purpose, bonus amounts declared but deferred pursuant to the
Executive’s election) during the year immediately preceding the Effective Date of the Agreement (or
if the annual bonus is greater, the date of the Executive’s termination of employment), plus a
pro rata payment for the calendar year in which such Salary Continuation Period ends based
on the cash bonus amount for the prior calendar year. The bonus payments for each calendar year
shall be made at such times and in such manner as they would have been paid had the Executive’s
employment not been terminated; provided, however, in no event will the bonus payment for a
particular calendar year be paid later than the fifteenth (15th) day of the third month
following the end of the particular calendar year.
(c) Upon the termination of the Executive’s employment, the Executive (and, if applicable, his
or her dependents) shall be entitled to maintain group medical and dental coverage pursuant to the
continuation coverage provisions of such plans (“COBRA Coverage”), which entitlement shall be
subject to termination in the event of the failure of the Executive or the dependent to timely pay
the appropriate premium for such coverage (which, in this case, shall be the premium that would be
paid on the same cost-sharing basis as if the Executive continued to be actively employed by the
Employer), provided that such coverage shall be secondary to any group coverage (including Medicare
or any government-sponsored or mandated program) subsequently obtained or covering the Executive or
dependent.
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7. Adjustment Due to Excise Tax.
(a) If it is determined (in the reasonable opinion of independent public accountants then
regularly retained by the Employer), that any amount payable to Executive by Employer under this
Agreement or any other plan, program or agreement under which Executive participates or is a party
would constitute an “Excess Parachute Payment” within the meaning of Section 280G (or any similar
provision) of the Code, subject to the excise tax imposed by Section 4999 of the Code, as amended
from time to time (the “Excise Tax”), then the Termination Benefits payable to the Executive shall
be reduced to the extent necessary so that no portion of the amounts payable to the Executive is
subject to the Excise Tax. Executive shall be responsible for any and all Excise Tax (or similar
taxes imposed upon such payments).
(b) The determination of the amount of reduction, if any, in the amounts payable to the
Executive shall be made in good faith by the Employer’s independent public accountants, and a
written statement setting forth the calculation thereof shall be provided to the Executive.
(c) The Employer and the Employee hereby recognize that the restrictive nonsolicitation
provisions of Paragraph 15 have value and that value shall be recognized in the Section 280G
calculations by an allocation of the termination benefits between the nonsolicitation provision and
the other Termination Benefits based on the value of the fair market value of the nonsolicitation
provisions. The Employer shall make the determination of the fair value to be assigned.
8. No Obligation to Mitigate Damages. The Executive shall not be obligated to seek
other employment in mitigation of amounts payable or arrangements made under the provisions of this
Agreement and the obtaining of any such other employment shall in no event effect any reduction of
the Employer’s obligations under this Agreement.
9. Enforcement; Arbitration.
(a) Both the Employer and the Executive (or any successor) shall have the right and option to
elect to have any dispute or controversy arising under or in connection with this Agreement, or any
plan, program or arrangement referred to herein, or any breach thereof, settled exclusively by
arbitration, conducted before an arbitrator in accordance with rules of the American Arbitration
Association then in effect. Judgment may be entered on the award of the arbitrator in any court
having jurisdiction. Any such arbitration shall be held in Chicago, Illinois.
(b) The Employer shall pay all reasonable legal fees, costs of litigation, and other
reasonable expenses incurred by the Executive or any successor who is successful pursuant to legal
judgment, arbitration or settlement in a challenge resulting from the Employer’s refusal to pay any
amounts due under this Agreement or any plan, program or arrangement referred to herein to which it
is determined that the Executive or successor is entitled, or as a result of the Employer’s
contesting the validity, enforceability or interpretation of this Agreement or any such plan,
program or arrangement.
(c) Each of the Employer or the Executive or any successor shall provide written notice
(“initial notice”) at least fifteen (15) business days prior to the commencement of
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any legal action or claim under this Agreement or any plan, program or arrangement referred to
herein, which initial notice shall indicate whether such party is invoking arbitration pursuant to
Paragraph 9(a) above. If such party is not electing to invoke arbitration, then the other party
may by written notice within ten (10) business days following receipt of the initial notice elect
to invoke arbitration pursuant to said Paragraph 9(a).
10. Indemnification. In the event that legal action is instituted against the
Executive during or after the term of his or her employment by a third party (or parties) based on
the performance or nonperformance by Executive of his or her duties as an officer or director of
the Employer or any of its affiliates or a fiduciary of any benefit plan maintained by the Employer
or any of its affiliates during his or her employment with the Employer, the Resulting Entity,
their successors (collectively, the “Indemnifying Party”) or their affiliates, the Indemnifying
Party will assume the defense of such action by its attorney or attorneys selected by the
Indemnifying Party and will advance the costs and expenses thereof (including reasonable attorneys’
fees) and will indemnify the Executive against any judgment or amounts paid in settlement of said
actions in accordance with its charter, by-laws, insurance and applicable law, without prejudice to
or waiver by the Indemnifying Party of its rights and remedies against Executive. In the event
that there is a settlement or final judgment entered against Executive in any such litigation, and
the Indemnifying Party’s Board of Directors determines that Executive should, in accordance with
the Indemnifying Party’s charter, by-laws, insurance and applicable law, reimburse the Indemnifying
Party, Executive shall be liable to the Indemnifying Party for all such costs, expenses, damages
and other amounts paid or incurred by the Indemnifying Party in the defense, settlement or other
resolution of any such litigation (the “Reimbursement Amount”). The Reimbursement Amount shall be
paid by Executive within thirty (30) days after rendition of the final judgment. The Indemnifying
Party shall be entitled to set off the reimbursement amount against all sums which may be owed or
payable by the Indemnifying Party to Executive hereunder or otherwise. The parties shall cooperate
in the defense of any asserted claim, demand or liability against Executive or the Indemnifying
Party or its subsidiaries or affiliates. The term “final judgment” as used herein shall be defined
to mean the decision of a court of competent jurisdiction, and in the event of an appeal, then the
decision of the appellate court, after petition for rehearing has been denied, or the time for
filing the same (or the filing of further appeal) has expired.
The rights to indemnification under this Paragraph 10 shall be in addition to any rights which
Executive may now or hereafter have under the charter or By-Laws of the Indemnifying Party or any
of its affiliates, under any insurance contract maintained by the Indemnifying Party or any of its
affiliates or any agreement between Executive and the Indemnifying Party or any of its affiliates.
11. Payment in the Event of Death. Upon the death of the Executive prior to a
termination, any payment due and owing by the Employer to Executive under this Agreement shall be
made to such beneficiary as Executive may designate in writing, or failing such designation, the
executor of his or her estate. Upon the death of the Executive after a termination has occurred,
then the beneficiary designated by the Executive or, if no beneficiary has been designated, his or
her executor shall be entitled to a lump sum death benefit equal to the present value of the
payments that were remaining to be paid under Paragraph 6(a) as of the date of death. Such lump
sum present value payment shall be determined using an interest rate per
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annum equal to the prime rate of interest as published in The Wall Street Journal
(Midwest Edition) on the first business day of the month in which the Executive’s death occurred
and shall be paid within 30 days of the date of death. Such payments shall be in addition to the
amount of the bonus payment, if any, which may thereafter be due under Paragraph 6(b), any other
death benefits provided by the Employer or under any plan, program or arrangement maintained by the
Employer.
12. Notices. Any notices, requests, demands and other communications provided for by
this Agreement shall be sufficient if in writing and if sent by registered or certified mail to the
Executive at the last address he or she has filed in writing with the Employer or, in the case of
the Employer, at its principal executive offices.
13. Confidential Information. Executive acknowledges that during the course of his or
her employment he or she has learned or will learn or develop Confidential Information (as that
term is defined in this Paragraph 13). Executive further acknowledges that unauthorized disclosure
or use of such Confidential Information, other than in discharge of Executive’s duties, will cause
Employer or its affiliates irreparable harm.
For purposes of this Paragraph, Confidential Information means trade secrets (such as
technical and non-technical data, a program, method, technique or process) and other proprietary
information concerning the products, processes or services of Employer or its affiliates, including
but not limited to: computer programs; marketing, or organizational research and development;
business plans; revenue forecasts; personnel information, including the identity of other employees
of Employer, its successors or their affiliates, their responsibilities, competence, abilities, and
compensation; pricing and financial information; current and prospective customer lists and
information on customers or their employees; information concerning planned or pending acquisitions
or divestitures; and information concerning purchases of major equipment or property, which
information: (a) has not been made generally available to the public in violation of a
confidentiality agreement, fiduciary duty or similar obligation; and (b) is useful or of value to
the current or anticipated business, or research or development activities of Employer or its
affiliates; or (c) has been identified as confidential by: (i) Executive, or (ii) to Executive’s
knowledge, by Employer, its successors or their affiliates, either orally or in writing.
Except in the course of his or her employment and in the pursuit of the business of Employer,
its successor or their affiliates, Executive shall not, during the course of his or her employment,
including, without limitation the Salary Continuation Period, for any reason, directly or
indirectly, disclose, publish, communicate or use on his or her behalf or another’s behalf, any
confidential information, proprietary information or other data of Employer, its successors or
their affiliates.
14. Return of Employer’s Property. All notes, reports, plans, memoranda or other
documents created, developed, generated or held by Executive during his or her employment
concerning or related to Employer’s, its successors or their affiliates’ business, and whether
containing or relating to Confidential Information or not, are the property of Employer, its
successors or their affiliates, as applicable, and will be promptly delivered to Employer, its
successors or their affiliates upon termination of Executive’s employment for any reason
whatsoever.
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15. Restrictive Covenants. The Employer has agreed to provide benefits under this
Agreement in return for the Executive’s acceptance of restrictive covenants set forth in this
Paragraph 15. The Executive hereby acknowledges that the Termination Benefits provided hereunder
constitute adequate consideration for Executive’s obligations under this Paragraph 15.
The Employer shall not pay any Termination Benefit under this Agreement, and the Executive
shall be obligated to repay any Termination Benefits received under this Agreement if, at any time
during his or her employment or the Salary Continuation Period (collectively, the “Non-Solicitation
Period”), without the prior written consent of the Employer, Executive:
(a) either as an individual, on his or her own account, or as an agent, employee, director,
shareholder or otherwise, directly or indirectly, (i) solicit or attempt to solicit the business of
any customer of the Employer, the Resulting Entity, their affiliates or their successors, or (ii)
solicit, induce or encourage, or attempt to solicit, induce or encourage any customer of the
Employer, the Resulting Entity, their affiliates or their successors not to do business with the
Employer, the Resulting Entity, their affiliates or their successors. For purposes of this
paragraph, such customers and such affiliates shall be limited to those persons or entities which
are customers or affiliates as of the date immediately preceding the date of the Executive’s
termination of employment; or
(b) directly or indirectly solicits, induces or encourages any person who, as of the date
immediately preceding the date of the termination of employment, is an employee of the Employer,
the Resulting Entity, their affiliates or their successors to terminate his or her relationship
with the Employer, the Resulting Entity, their affiliates or their successors.
16. Remedies. Executive warrants and represents that: (i) Executive has read and
understands this Agreement; (ii) Executive has had an opportunity to consult with legal counsel in
connection herewith; (iii) the restraints and agreements herein provided are fair and reasonable;
(iv) enforcement of the provisions of Paragraphs 13, 14 and 15 will not cause him undue hardship;
and (v) that the above restrictions are reasonable in scope and duration and are the least
restrictive means to protect the Employer’s, the Resulting Entity’s, their affiliates’ and their
successors’ legitimate and proprietary business interests and property from irreparable harm.
Executive acknowledges that failure to comply with the terms of this Agreement will cause
irreparable damage to Employer or its affiliates. Therefore, Executive agrees that,
notwithstanding Paragraph 9 (Enforcement; Arbitration) above, Employer, the Resulting Entity and
their successors shall have the right to seek specific performance, injunctive relief (without
bond) and other equitable relief, as well as maintain an action for damages in any court of
competent jurisdiction (in addition to any other remedies available at law or in equity) for
Executive’s breach or threatened breach of the restrictions contained in Paragraphs 13, 14 and 15
and the existence of any claim or cause of action Executive may have against Employer will not
constitute a defense thereto. Executive further agrees to pay reasonable attorney fees and costs
of litigation incurred by Employer, the Resulting Entity, their affiliates or their successors in
any proceeding relating to the enforcement of said provisions or to any alleged breach thereof in
which Employer, the Resulting Entity, their affiliates or their successors prevail.
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In the event of a breach or a violation by Executive of any of the covenants and provisions of
this Agreement, the running of the Non-Solicitation Period (but not of Executive’s obligation
thereunder), shall be tolled during the period of the continuance of any actual breach or
violation.
17. Non-Alienation. The Executive shall not have any right to pledge, hypothecate,
anticipate or in any way create a lien upon any amounts provided under this Agreement, and no
benefits payable hereunder shall be assignable in anticipation of payment either by voluntary or
involuntary acts, or by operation of law, except by will or the laws of descent and distribution.
18. Governing Law. The provisions of this Agreement shall be construed in accordance
with the laws of the State of Illinois.
19. Amendment. This Agreement may be amended or canceled by mutual agreement of the
parties in writing (which, with respect to the Employer in the case of an amendment prior to the
Effective Date of the Agreement, shall have been approved by resolution of a majority of the
non-employee members of the Board of Directors of the Employer) without the consent of any other
person and, so long as the Executive lives, no person, other than the parties hereto, shall have
any rights under or interest in this Agreement or the subject matter hereof.
20. Binding Effect; Successors. Except as otherwise provided herein, this Agreement
shall be binding upon and inure to the benefit of the Employer and any successors of the Employer
or the Resulting Entity and to the benefit of Executive’s executors, administrators, legal
representatives, heirs and legatees. The Employer shall require any successor or assignee, whether
direct or indirect, by purchase, merger, consolidation or otherwise, expressly and unconditionally
to assume and agree to perform the Employer’s obligations under this Agreement, whereupon such
successor or assignee shall become the Employer hereunder.
21. Severability. In the event that any provision or portion of this Agreement shall
be determined to be invalid or unenforceable for any reason, it is the intent of the parties that
this Agreement be construed or reformed to the fullest extent possible so as to be enforceable and
be in conformance with the manner in which it was originally intended to operate, including,
without limitation, the deletion or modification of any invalid or unenforceable provision.
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IN WITNESS WHEREOF, the Executive has hereunto set his or her hand and, pursuant to the
authorization from its Board of Directors, the Employer has caused this Agreement to be executed in
its name on its behalf all as of the day and year first above written.
| EXECUTIVE: |
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| EMPLOYER:
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| MIDWEST BANC HOLDINGS, INC. | ||||
| By: | ||||
| As its: | ||||
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