EXHIBIT 10I
CHANGE IN CONTROL AGREEMENT
This AGREEMENT (the "Agreement") by and between MFN Financial Corporation,
a Delaware corporation (the "Company"), and Xxxx X. Xxxxxxx (the "Executive"),
dated as of the 23rd day of March, 1999.
W I T N E S S E T H:
WHEREAS, the Executive is currently employed as Vice President and
Controller of the Company;
WHEREAS, the Board of Directors of the Company (the "Board") has determined
that it is in the best interests of the Company and its stockholders to assure
that the Company will have the continued dedication of the Executive, despite
the possibility, threat or occurrence of a Change in Control (as defined below)
of the Company; and
WHEREAS, the Board believes that it is imperative to diminish the
inevitable distraction of the Executive which would result from the personal
uncertainties and risks created by a threatened or pending Change in Control and
to encourage the Executive's full attention and dedication to the business of
the Company currently and in the event of any threatened or pending Change in
Control and to provide the Executive with appropriate compensation and benefit
protection upon a Change in Control;
WHEREAS, the Executive desires to enter into this Agreement on the terms
and conditions hereinafter set forth.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Term. This Agreement shall become effective upon the occurrence of a
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Change in Control (as defined below) (hereinafter called the "Effective Date")
and shall remain in effect for a term continuing for twenty-four (24) months.
2. Termination of Employment. Should the Executive's employment with the
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Company or its subsidiaries terminate for any reason (other than for (i) Cause
or (ii) voluntarily by Executive other than for Good Reason) within twenty-four
(24) months after a Change in Control of the Company (the "Termination Date"),
the Company shall cause the Executive to receive the aggregate of the following
within three (3) business days after the Termination Date:
(1) a lump sum cash amount (subject to the usual withholding taxes)
equal to (A) three times the sum of (1) the Executive's salary properly in
effect immediately prior to the Change of Control and (2) a bonus amount equal
to one hundred percent (100%) of the Executive's target bonus, if any, for the
year in which the Termination Date occurs, or, if none, such bonus amount of his
most recent annual bonus, plus (B) an amount equal to the compensation (at the
Executive's salary properly in effect immediately prior to the Change of
Control) payable for unused and accrued vacation benefits determined under the
Company's vacation pay plan or program covering the Executive immediately prior
to the Change in Control;
(2) Continuation of coverage under the group health, group life,
group long-term disability and similar group insurance plans, if any, maintained
by the Company or any of its subsidiaries, with such continuation being at an
employee cost which is the same as the employee cost in effect immediately
preceding the Change in Control, until the earlier of (i) three (3) years after
Termination Date or (ii) the date on which the Executive becomes employed by a
new employer and qualifies for comparable benefits from that new employer;
provided, however, that if such continued participation is precluded by the
provisions of such plans or by applicable law, the Company shall provide the
Executive with comparable benefits of equal value; provided, further, however,
that execution of this Agreement by the Executive shall not be considered a
waiver of any rights or entitlements he may have under applicable law to
continuation of coverage under the group health plan maintained by the Company
or any of its subsidiaries;
(3) Any options or stock (or other equity-based) awards previously
granted and not yet vested as of the later of the Termination Date or date of
Change in Control shall be fully vested immediately, and all options shall
remain exercisable through the end of their original term; and
(4) All unpaid and vested compensation and benefits accrued or earned
by the Executive as of the later of the Termination Date or date of Change in
Control, including, but not limited to, all Accrued Obligations.
For purposes of this Section 2, the Executive's salary shall be determined prior
to reduction for deferred compensation, salary reduction contributions to a cash
or deferred arrangement under Section 401(k) of the Code, or to a cafeteria plan
under Section 125 of the Code, and similar items. Further, any reduction in the
Executive's salary or group insurance coverage from the Company or any of its
subsidiaries occurring within twenty-four (24) months after the Change in
Control shall be disregarded for purposes of determining the Executive's
benefits pursuant to this Section 2.
3. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
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limit the Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliated companies
and for which the Executive may qualify.
4. Full Settlement; Resolution of Disputes. The Company's obligation to
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make payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense, mitigation or other claim, right or action which the
Company may have against the Executive or others. In the event that the
Executive is the prevailing party, or is successful to a material degree, in
pursuing or defending, whether in arbitration or litigation, any claim or
dispute relating to (a) this Agreement, or (b) the failure or refusal of the
Company to perform fully in accordance with the terms hereof, the Company shall
promptly reimburse the Executive for all reasonable costs and expenses
(including, without
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limitation, attorneys' fees) relating solely, or allocable, to such claim or
dispute, plus in each case interest on any delayed payment at the applicable
federal rate provided for in Section 7872(f)(2)(A) of the Code. In any other
case, the Executive and the Company shall each bear all their own respective
costs and attorneys' fees.
5. Certain Additional Payments by the Company.
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(1) Notwithstanding anything in this Agreement to the contrary, in
the event it shall be determined that any payment or distribution to or for the
benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
5) (a "Payment") would be subject to the excise tax imposed by Section 4999 of
the Code or any interest or penalties are incurred by the Executive with respect
to such excise tax (such excise tax, together with any such interest and
penalties, hereinafter collectively referred to as the "Excise Tax"), then the
Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments;
(2) Subject to the provisions of Section 5(c), all determinations
required to be made under this Section 5, including whether and when Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by the
accounting firm then serving as independent auditors for the Company (the
"Accounting Firm"); provided, however, that the Accounting Firm shall not
determine that no Excise Tax is payable by the Executive unless it delivers to
the Executive a written opinion (the "Accounting Opinion") that failure to
report the Excise Tax on the Executive's applicable federal income tax return
would not result in the imposition of a negligence or similar penalty. In the
event that the Accounting Firm has served, at any time during the two years
immediately preceding the date of a Change in Control, as accountant or auditor
for the individual, entity or group that is involved in effecting or has any
material interest in the Change in Control, the Executive shall appoint another
nationally recognized accounting firm to make the determinations and perform the
other functions specified in this Section 5 (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Within fifteen (15)
business days of the receipt of notice from the Executive that there has been a
Payment or such earlier time as is requested by the Company, the Accounting Firm
shall make all determinations required under this Section 5, shall provide to
the Company and the Executive a written report setting forth such
determinations, together with detailed supporting calculations, and, if the
Accounting Firm determines that no Excise Tax is payable, shall deliver the
Accounting Opinion to the Executive. Any Gross-Up Payment, as determined
pursuant to this Section 5, shall be paid by the Company to the Executive within
five (5) days of the receipt of the Accounting Firm's determination. Subject to
the remainder of this Section 5, any determination by the Accounting Firm shall
be binding upon the Company and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by
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the Accounting Firm hereunder, it is possible that Gross-Up Payments which will
not have been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that it is ultimately determined in accordance with the procedures set forth in
Section 5(c) that the Executive is required to make a payment of any Excise Tax,
the Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Company to or
for the benefit of the Executive;
(3) The Executive shall notify the Company in writing of any claims
by the Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than thirty (30) days after the Executive actually
receives notice in writing of such claim and shall apprise the Company of the
nature of such claim and the date on which such claim is requested to be paid;
provided, however, that the failure of the Executive to notify the Company of
such claim (or to provide any required information with respect thereto) shall
not affect any rights granted to the Executive under this Section 5. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which he gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(1) give the Company information reasonably requested by the
Company relating to such claim; and
(2) if the Company elects not to assume and control the defense
of such claim permit the Company to participate in any proceedings relating
to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including, without limitation, legal fees and other related expenses
and interest and penalties) incurred by Executive in connection with such
contest and shall indemnify and hold the Executive harmless, on an after-tax
basis, for any Excise Tax or income tax (including interest and penalties with
respect thereto) imposed and payment of costs and expenses. The Company's right
to assume the defense of and control the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and the Executive
shall be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority; and
(4) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 5(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 5(c)) promptly pay to the
Company the amount of such refund. If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 5(c), a determination is made
that the Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of thirty (30) days after
such determination, then such advance shall be forgiven and shall
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not be required to be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.
6. Confidential Information. The Executive shall hold in a fiduciary
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capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company, or any of its subsidiaries,
affiliates and business, which shall have been obtained by the Executive
pursuant to his employment by the Company or any of its subsidiaries and
affiliates and which shall not have become public knowledge. After the
Termination Date, the Executive shall not, without the prior written consent of
the Company, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. However, in no event
shall an asserted violation of the provisions of this Section 6 constitute a
basis for deferring or withholding any amounts otherwise payable to the
Executive under this Agreement.
7. Definitions. As used in this Agreement, the terms set forth below
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shall have the following respective meanings:
"Accrued Obligations" shall mean (i) the Executive's salary, and (ii) any
other rights and benefits available to the Executive under employee compensation
and benefit arrangements of the Company (without duplication) in which the
Executive was a participant on the Termination Date, determined in accordance
with the applicable terms and provisions of such arrangements.
"Change in Control" shall mean any of the following:
1. The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person")
(excluding any of the Holders (as defined in paragraph (iv), below)
and their affiliates) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of more than 50% of
either (i) the then outstanding shares of capital stock of the Company
(the "Outstanding Company Capital Stock") or (ii) the combined voting
power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Company
Voting Securities"); provided, however, that if the Holders cease to
be, in the aggregate, beneficial owners of at least 20% of both the
Outstanding Company Capital Stock and the Company Voting Securities, a
Change in Control shall mean the acquisition by any individual, entity
or group (other than any of the Holders and their affiliates) of
beneficial ownership of 30% or more of either the Outstanding Company
Capital Stock or the Company Voting Securities; provided further that
(X) any acquisition by or from the Company or any of its subsidiaries
which is recommended or approved by the Executive, (Y) any acquisition
by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any of its subsidiaries or (Z) any
acquisition by any entity with respect to which, following such
acquisition, more than 80% of, respectively, the then outstanding
shares of capital stock of such entity and the combined voting power
of the then outstanding voting securities of such entity entitled to
vote generally in the election of directors is then beneficially
owned, directly or indirectly,
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by all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Company
Capital Stock and Company Voting Securities immediately prior to such
acquisition, in substantially the same proportion as their ownership,
immediately prior to such acquisition, of the Outstanding Company
Capital Stock and Company Voting Securities, as the case may be, shall
not constitute a Change in Control;
2. A change in the composition of the Board such that
individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute a simple
majority of the Board, provided that any individual becoming a
director subsequent to the date hereof whose election, or nomination
for election by the Company's shareholders, was approved by the
Executive and by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office
is in connection with an actual or threatened election contest
relating to the election of the directors of the Company;
3. Approval by the shareholders of the Company of a
reorganization, merger or consolidation (a "Business Combination")
with respect to which all or substantially all of the individuals and
entities who were the respective beneficial owners of the Outstanding
Company Capital Stock and Company Voting Securities immediately prior
to such Business Combination do not, following such Business
Combination, beneficially own, directly or indirectly, more than 80%
of, respectively, the then outstanding shares of capital stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the entity resulting from the Business Combination, in
substantially the same proportion as their ownership immediately prior
to such Business Combination of the Outstanding Company Capital Stock
and Company Voting Securities, as the case may be; or
4. (1) A complete liquidation or dissolution of the
Company or (2) a sale or other disposition of all or substantially all
of the assets of the Company other than to an entity with respect to
which, following such sale or disposition, more than 80% of,
respectively, the then outstanding sharers of capital stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors is then owned
beneficially, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Capital Stock and Company
Voting Securities immediately prior to such sale or disposition, in
substantially the same proportion as their ownership of the
Outstanding Company Capital Stock and Company Voting Securities, as
the case may be, immediately prior to such sale or disposition.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
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"Cause" shall mean Executive's commission of an act materially and
demonstrably detrimental to the Company, which act constitutes gross negligence
or willful misconduct by Executive in the performance of his material duties to
the Company or (ii) Executive's commission of any material act of dishonesty or
breach of trust resulting or intended to result in material personal gain or
enrichment of Executive at the expense of the Company, or (iii) Executive's
conviction of a felony involving theft or moral turpitude, but specifically
excluding any conviction based entirely on vicarious liability.
"Disability" shall mean Executive's inability for a period of at least
120 consecutive days to substantially perform his duties, with reasonable
accommodation, as evidenced by a certificate signed either by a physician
mutually acceptable to the Company and the Executive or, if the Company and the
Executive cannot agree upon a physician, by a physician selected by agreement of
a physician designated by the Company and a physician designated by the
Executive.
"Good Reason" shall mean:
5. The assignment to the Executive of any duties
inconsistent in any respect with the Executive's position (including
status, offices, titles and reporting relationships), authority,
duties or responsibilities or any other action by the Company which
results in a significant diminution in such position, authority,
duties or responsibilities, excluding any isolated, immaterial and
inadvertent action not taken in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the
Executive;
6. The filing of any involuntary bankruptcy petition
against the Company which is not dismissed within sixty (60) days of
the filing of the petition;
7. The revocation of any significant business license of
the Company by any state, except such a revocation which does not have
a material adverse effect on the business or prospects of the Company
taken as a whole;
8. Any criminal indictment of the Company, except for any
such indictment (A) which (1) is based upon the investigation by the
federal Securities and Exchange Commission into actions of the Company
which preceded the July 15, 1998 filing date of the bankruptcy
petition of the Company and (2) does not have a material adverse
effect on the business or prospects of the Company taken as a whole or
(B) which is based primarily upon the Executive's own actions, but
excluding any indictment based upon an allegation of vicarious
liability on the part of the Executive, with vicarious liability
meaning liability which is based on actions of the Company for which
the Executive is alleged to be responsible solely as a result of his
offices with the Company and in which he was not directly involved and
of which he did not have prior knowledge; or
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9. Termination by the Executive for any reason (or
termination because of Executive's death or Disability) within the
twenty-four (24) month period after a Change in Control.
8. No Obligation to Mitigate Damages. In no event shall the Executive be
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obligated to seek other employment or take any other action by way of mitigation
of the amounts payable to the Executive under any of the provisions of this
Agreement, and such amounts shall not be reduced whether or not the Executive
obtains other employment.
9. Successors.
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(1) This Agreement is personal to the Executive and without the prior
written consent of the Company his rights hereunder shall not be assignable by
the Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's heirs, executors and other legal representatives.
(2) This Agreement shall inure to the benefit of and be binding upon
the Company and may only be assigned to a successor described in Section 9(c).
(3) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Corporation to obtain such agreement prior to
the effectiveness of any such succession shall entitle the Executive to
terminate his employment and to receive the payments provided for in Section 2,
above. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement, by operation of
law or otherwise.
10. Miscellaneous.
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(1) This Agreement shall be governed by and construed in accordance
with the laws of the State of Illinois, without reference to principles of
conflict of laws that would require the application of the laws of any other
state or jurisdiction.
(2) This Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their respective successors,
heirs, executors or other legal representatives.
(3) All notices and other communications hereunder shall be in
writing and shall be given, if by the Executive to the Company, by telecopy or
facsimile transmission at the telecommunications number set forth below or, if
by either the Company or the Executive, by delivery to the other party by hand,
by reputable commercial delivery service, or by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:
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If to the Executive:
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Xxxx X. Xxxxxxx
W. 169 N. 0000 Xxxxxxxx Xxxxx
Xxxxxxxxx Xxxxx, XX 00000
If to the Company:
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MFN Financial Corporation
000 Xxxxx Xxxxx, Xxxxx 000
Xxxx Xxxxxx, Xxxxxxxx 00000
Attention: President, Chief Executive Officer
or to such other address as either party shall have furnished to the other by
written notice in accordance herewith. Notice and communications shall be
effective when actually received by the addressee.
(4) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(5) The Company may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(6) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof, or the failure to assert any right the
Executive or the Company may have hereunder, shall not be deemed to be a waiver
of such provision or right or any other provision or right of this Agreement.
(7) The headings and section designations of this Agreement are
included solely for convenience of reference and shall in no event be construed
to affect or modify any provisions of this Agreement.
(8) In this Agreement where the context permits, words in any gender
shall include the other genders, words in the plural shall include the singular,
and words in the singular shall include the plural.
(9) This Agreement may be executed in two (2) or more counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same document.
11. Termination of Employment Prior to Change in Control. This Agreement
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shall terminate if the Executive's employment with the Company and all of its
subsidiaries is
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terminated, either voluntarily or involuntarily, for any reason prior to a
Change in Control of the Company; provided, however, that anything in this
Agreement to the contrary notwithstanding, if a Change in Control occurs and if
the Executive's employment with the Company and all of its subsidiaries is
terminated within two hundred and seventy (270) days prior to the date on which
the Change in Control occurs, then for all purposes of this Agreement the Change
in Control shall be deemed to have occurred on the date immediately prior to the
date of such termination of employment, unless it is reasonably demonstrated by
the Company that such termination of employment was (a) for Cause or (b) for
some other specific substantial business reason unrelated to the Change in
Control.
IN WITNESS WHEREOF, the parties have executed this Agreement, all as of the
day and year first above written.
MFN FINANCIAL CORPORATION
By: ____________________________________
Its: ____________________________________
_________________________________________
"Executive"
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