TAX GROSS UP AGREEMENT
This
Tax
Gross Up Agreement (this “Agreement”) is entered into this 14th day of
December, 2007 by and between MB Financial, Inc. (the “Company”) and Xxxxx X.
Xxxxxxxxxx (the “Employee”).
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 Employee shall be considered willful unless the Employee acted
or
failed to act in bad faith and without a reasonable belief that his action
or
failure to act was in the best interest of the Company or a Company
subsidiary. The Employee shall not be subject to or experience a
Termination for Cause unless and until there shall have been delivered to the
Employee a copy of a resolution, duly adopted by the affirmative vote of not
less than a majority of the entire membership of the Board of Directors of
the
Company (the “Board”) at a meeting of the Board duly called and held for such
purpose (after reasonable notice to the Employee and an opportunity for the
Employee, together with the Employee’s counsel, to be heard before the Board),
stating that in the good faith opinion of the Board the Employee has engaged
in
conduct described above and specifying the particulars thereof in
detail.
(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.
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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, 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 theretofor 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.
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.
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This
Agreement has been executed by the parties hereto as of the date first above
written.
MB
FINANCIAL,
INC.
By:
/s/ Xxxx X.
York
EMPLOYEE
/s/
Xxxxx
Xxxxxxxxxx
Xxxxx
Xxxxxxxxxx
