TAX GROSS UP AGREEMENT
EXHIBIT
10.24
This
Tax
Gross Up Agreement (this “Agreement”) is entered into this 25th day of August,
2006 by and between MB Financial, Inc. (the “Company”) and Xxxxxxx X. Xxxxxx,
Xx. (the “Employee”).
WHEREAS,
the Company and the Employee have entered into an Employment Agreement on the
date hereof (the “Employment Agreement”);
WHEREAS,
it is possible that the Employee may receive or be entitled to receive payments
or benefits from the Company and/or its subsidiaries and/or predecessors
(“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 (as defined in the Employment Agreement) or
a
Voluntary Termination (as defined in the Employment Agreement) prior to age
65,
in either case during the Term (as defined in the Employment Agreement) and
prior to or within one year following a Change in Control.
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 (i) 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; or (ii) in the event the Employee
experiences an Involuntary Termination (as defined in the Employment Agreement)
within two years from the date hereof, the change in ownership of First Oak
Brook Bancshares, Inc. arising from the acquisition of First Oak Brook
Bancshares, Inc. by the Company.
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 anticipated Penalty Tax used in calculating the Adjusted Gross
Up
Payment (such excess amount is hereafter referred to as the “Underpayment”). In
such event, the Company shall pay to the Employee, in immediately available
funds, at the time the Underpayment is assessed or otherwise determined, an
additional amount equal to the Additional Gross Up Payment. The “Additional
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 (i) 100% of the
portion of the Underpayment attributable to the Payment, (ii) 100% of the
portion of the Underpayment attributable to the Adjusted Gross Up Payment and
(iii) 100% of the Penalty Tax imposed on the Additional Gross Up Payment.
Notwithstanding the foregoing, in the event the Employee experiences a
Termination for Cause or a Voluntary Termination, in either case during the
Term
and prior to or within one year after a Change in Control, then in that event,
(a) if such termination occurs prior to the payment to the Employee of any
Adjusted Gross Up Payment, then the Employee shall not be entitled to receive
any Adjusted Gross Up Payment or Additional Gross Up Payment or (b) if such
termination occurs after an Adjusted Gross Up Payment has been made to the
Employee, then the Employee shall remit to the Company within five days after
such termination the full amount of the Adjusted Gross Up Payment and Additional
Gross Up Payments thereto for paid to the Employee and the Employee shall not
be
entitled to receive any other payments pursuant to this Section 2. However,
if
it is later determined that the Employee’s Termination for Cause was improper,
then the Employee shall be entitled to receive the Adjusted Gross Up Payment
and
Additional Gross Up Payment, together with any actual consequential and
incidental damages arising from the delay in his receipt of such
payments.
53
3. 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.
4. Governing
Law.
This
Agreement shall be governed by the laws of the State of Illinois.
5. 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:
______________________________
Authorized
Officer
EMPLOYEE
By:
_______________________________
Xxxxxxx
X.
Xxxxxx, Xx.
54
