WHEREAS, it is possible that the Employee may receive or be entitled to receive payments or benefits from the Company and/or its subsidiaries ("Payments") in connection with or arising from a Change in Control (as hereinafter defined), or an associated event linked to a Change in Control, which could result in the receipt by the Employee of an "excess parachute payment" (as such term is defined in Section 280G(b)(1) of the Internal Revenue Code of 1986, as amended (the "Code"));
WHEREAS, if the Employee receives an "excess parachute payment" from the Company and/or any of its subsidiaries, the Employee will be subject to a 20% excise tax under Section 4999 of the Code;
WHEREAS, it is the intention of the parties that the Employee should not be subject to any penalty tax by virtue of any Payments unless his employment ceases due to a Termination for Cause or a Voluntary Termination (as such terms are hereinafter defined); and
WHEREAS, it has been agreed to by the Company and the Employee that if the Employee is subject to an excise tax under Section 4999 by virtue of any Payments, then the Company shall make an additional cash payment or cash payments to the Employee that will provide the Employee with sufficient funds, on an after tax basis, to pay the penalty tax imposed on any such Payment and the penalty tax imposed on the additional cash payment or payments, unless the Employee's employment ceases due to a Termination for Cause or a Voluntary Termination.
NOW, THEREFORE, in consideration of the premises, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the parties, it is agreed by the parties as follows:
1. Definition of Certain Terms.
(a) "Change in Control" means a change in ownership of the Company or a significant financial institution subsidiary of the Company that independently or in conjunction with another event (such as a termination of the employment of the Employee) would result in the Employee receiving an "excess parachute payment" under Section 280G of the Code.
(b) "Termination for Cause" means termination of the employment of the
Employee by the Company or a Company subsidiary at any time prior to or within one year
following a Change in Control because of the Employee's willful misconduct, breach of a
fiduciary duty involving personal profit, intentional failure to perform stated duties, willful
violation of any law, rule, or regulation (other than traffic violations or similar offenses) or final
cease-and-desist order, or material breach of his written employment agreement, if any, with the
Company or a Company subsidiary. No act or failure to act by the
(c) "Voluntary Termination" means the termination of employment by the Employee voluntarily within one year prior to or within one year after a Change in Control; except a Voluntary Termination shall not include a termination by the Employee due to (i) death, (ii) disability, (iii) retirement after age 65, (iv) a requirement by the Company or a Company subsidiary, without the Employee's written consent, that the Employee perform his services at a location that is not within a 35 mile radius of downtown Chicago, Illinois, other than reasonable travel requirements, (v) a reduction in the Employee's base annual salary without his written consent, unless such reduction occurs at least 6 months prior to a Change in Control and is applied on a uniform and equitable basis to all members of senior management, or (vi) a material reduction in the Employee's contractual incentive or bonus compensation or benefits, if any, without his written consent.
2. Adjusted Gross Up Payment and Additional Gross Up Payment. In the event that
any Payments would be subject to excise tax under Section 4999 of the Code (such excise tax
and any penalties and interest collectively, the "Penalty Tax"), the Company shall pay to the
Employee in cash an additional amount equal to the Adjusted Gross Up Payment. The "Adjusted
Gross Up Payment" shall be an amount such that after payment by the Employee of all federal,
state, local, employment and medicare taxes thereon (and any penalties and interest with respect
thereto), the Employee retains on an after tax basis a portion of such amount equal to the
aggregate of 100% of the Penalty Tax imposed upon the Payment and 100% of the Penalty Tax
imposed upon the Adjusted Gross Up Payment. For purposes of determining the amount of the
Adjusted Gross Up Payment, the value of any non-cash benefits and deferred payments or
benefits subject to the Penalty Tax shall be determined by the Company's independent auditors in
accordance with the principles of Section 280G(d)(3) and (4) of the Code. The Adjusted Gross
Up Payment less required tax withholding shall be paid by the Company to the Employee on the
earlier of (i) the date the Company and/or any of its subsidiaries is required to withhold tax with
respect to any Payment or (ii) the date any Penalty Tax is required to be paid by the Employee.
In the event that, after the Adjusted Gross Up Payment is made, the Employee becomes entitled
to receive a refund of any portion of the Penalty Tax, the Employee shall promptly pay to the
Company 100% of such Penalty Tax refund attributable to the Payment (together with 100% of
any interest paid or credited thereon by the Internal Revenue Service) and 100% of the Penalty
Tax refund attributable to the Adjusted Gross Up Payment (together with 100% of any interest
paid or credited thereon by the Internal Revenue Service). As a result of the uncertainty
regarding the application of Section 4999 of the Code, it is possible that the Internal Revenue
Service may assert that the Penalty Tax due is in excess of the amount of the
3. Repeal and Relacement of Contrary Provisions. In the event the Company and/or its subsidiaries, on the one hand, and the Employee, on the other hand, are parties to any agreement or arrangement, including without limitation, any employment agreement, change in control agreement, severance agreement or arrangement, stock option agreement, restricted stock agreement, that provides for (a) a reduction of payments or benefits to the Employee so that the payments or benefits do not become nondeductible pursuant to or by reason of Section 280G of the Code or (b) a limitation on the circumstances under which a tax gross up payment is to be paid, or the amount of a gross up payment to be paid, to the Employee, (the "Contrary Provisions"), such Contrary Provisions are hereby repealed and terminated and superceded and replaced by the provisions of Section 2 of this Agreement, to the extent applicable, entitling the Employee to full and complete tax gross up protection for Penalty Taxes.
4. Final Agreement and Binding Effect. This Agreement represents the final agreement between the parties relating to the subject matter hereof, and may only be modified or amended by subsequent writing that is executed by the parties. This Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns and the Employee and his or her estate, heirs and beneficiaries.
5. Governing Law. This Agreement shall be governed by the laws of the State of Illinois.
6. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original.
This Agreement has been executed by the parties hereto as of the date first above written.
|MB FINANCIAL, INC.|
|By|| /s/ Jill E. York|
Jill E. York
| /s/ Mitchell Feiger|