Document:

EXHIBIT 10.5B

 

Compensation Amendment and Waiver Agreement
 Pursuant to TARP and Other Regulatory Requirements

 

	
February 2011
    	
 
    

 

TO:         MB Financial Officer

 

As you know, MB Financial, Inc. is a participant in the United States Department of Treasury (“Treasury”) TARP Capital Purchase Program (“CPP”).  The Company entered  into a letter agreement with Treasury in connection with that participation, which included a Securities Purchase Agreement — Standard Form (“Treasury Investment Agreement”) providing for the sale to the Treasury of preferred stock and a warrant .  The period that Treasury holds the preferred stock acquired from the Company in the CPP is the “TARP Period.”  Certain other terms used in this agreement are defined below.

 

In addition, as a public company and as financial institutions, MB Financial, Inc. and its affiliates, including MB Financial Bank, N.A., are subject to regulations issued by the banking regulators and rules issued by the SEC or NASDAQ  relating to our  incentive and other compensation programs.

 

In order for the Company to maintain compliance with the requirements of participation in the CPP and with other applicable rules and regulations, whether issued or as may be issued in the future,  the Company is required to take certain actions and adopt certain standards, and to make certain changes, to certain compensation arrangements of its senior executive officers and most highly compensated employees, in each case as those individuals are determined under applicable rules.  You are or may become a senior executive officer and/or a most highly compensated employee to whom some or all of the requirement may apply.

 

To comply with these requirements, and in consideration of your eligibility to receive future incentive compensation (including equity compensation) and the benefits that you receive as an employee, officer and/or stockholder of the Company as a result of the Company’s participation in the CPP or the Company’s status as a public company, you agree as follows:

 

(A)                              Prohibition on Certain Bonus, Retention or Incentive Compensation.  If you are one of the Company’s top five most highly compensated employees (a “High-5 Employee”) during the TARP Period, you may not earn, nor may the Company pay or award to you, any bonus, retention or incentive compensation for or at the times you are a High-5 Employee. However, this restriction does not preclude the awarding or earning of incentive compensation in the form of restricted stock or units to the extent permitted under the applicable Treasury regulations, or bonus, retention or incentive compensation as may otherwise be permitted under the Treasury regulations. Such permitted compensation includes bonus payments made prior to June 15, 2009, compensation attributable to long-term incentive awards or other contractual commitments in effect on February 9, 2009, or compensation which qualifies as commission payments under EESA.

 

(B)                                Clawback and Repayment of Bonus and Incentive Compensation.  If, during the TARP Period, you are a senior executive officer (a “SEO”) or you are one of top twenty most highly compensated of the other employees  (a “Top-20 Employee”), any bonus, retention or incentive compensation payments you receive will be subject to recovery (clawback) by the Company if the payment was based on materially inaccurate financial statements or any other materially inaccurate performance metric or criteria.  In addition to being subject to possible clawback under the CPP rules, incentive compensation paid to you may also be subject to clawback or to modification, such as delayed, deferred or reduced payment, as may be required by regulations applicable to the Company, including rules or regulations issued by the banking regulators, the SEC or NASDAQ under Dodd-Frank or otherwise.

 

 

(C)                                No Tax Gross-Up Payment.  If you are one of the Company’s SEOs or a Top-20 Employee during the TARP Period, the Company may not pay you any amount as a reimbursement of taxes owed by you with respect to your compensation.

 

(D)                               Prohibition on Severance or CIC Payments.  If at the time of your departure (termination of employment) or a change in control (“CIC”) of the Company during the TARP Period you are one of the Company’s SEOs or you are one of the top five most highly compensated of the other employees  (each such individual referred to as a “Top-10 Employee”), the Company may not make any severance or CIC payment to you at that time or later, including after the TARP Period. A severance or CIC payment for this purpose has the same meaning as “golden parachute payment” under EESA.  Generally, a payment (such as cash payment) or a benefit (such as accelerated vesting of an equity award) will be a golden parachute payment under EESA if it is triggered by a change in control of the Company or if the payment or benefit is triggered by the circumstances relating to termination of employment (such as severance pay paid upon involuntary termination without cause). A payment or benefit will not be a prohibited severance or CIC payment if the payment or benefit has already been earned (such as vested deferred compensation or a vested stock option) by the date of the CIC or termination of employment.

 

(E)                                 Avoidance of Compensation Arrangements Encouraging Excessive Risks, Posing Risks to the Company or Encouraging Manipulation of Reported Earnings.  EESA requires the Organization and Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”) to periodically review the provisions of the Company’s Compensation Arrangements for the purposes of determining if such arrangements encourage the taking of unnecessary and excessive risks that threaten the value of the Company, or pose unnecessary risks to the Company or encourage manipulation of reported earnings. Similar requirements to structure incentive compensation to avoid excessive risk are also imposed on the Company by the banking regulators. To the extent the Compensation Committee determines any such circumstances exist, it is obligated to take action to modify such Compensation Arrangements to limit or eliminate unnecessary or excessive risks or features that encourage earnings manipulation.

 

(F)                                 Amendment of Compensation Arrangements; Waiver and Repayment.  Each of the Company’s current and future compensation, bonus, incentive and other benefit plans, programs, arrangements and agreements of any type under which you are or may in the future be covered by or be a party to (collectively, “Compensation Arrangements”) is deemed amended by this letter agreement to the extent necessary to give effect to the prohibitions, limitations and requirements of EESA referred to in paragraphs (A) through (F) above, and to otherwise comply with the applicable requirements of EESA.  For this purpose, Compensation Arrangements include, without limitation, all employment agreements, change of control agreements, annual bonus and other incentive plans, and stock option, restricted stock and other cash-based or equity-based compensation plans and agreements.

 

To the extent required by EESA or other applicable law, rules or regulations, any payment or award to you which is provided for in any such Compensation Arrangement is subject to waiver, forfeiture or repayment to the extent such payment or award is subject to recovery or clawback as described above or did or would violate any applicable provision of EESA or such other laws, rules or regulations. In the event of any such circumstance, you shall be deemed to have waived your right to such payment or award such that no obligation on the part of the Company to pay or provide such waived amount shall exist, and you agree to such waiver and forfeiture, and, if applicable, to repay such amounts within 15 days of receipt of notice from the Corporation that such repayment is required.

 

(G)                                Definitions, Interpretation and Application.  The following definitions and interpretations shall apply to this letter:

 

“EESA” means the Emergency Economic Stabilization Act of 2008, as amended by the American Recovery and Reinvestment Act, and as implemented by rules, regulations, guidance or other requirements issued thereunder governing the CPP that have been issued by the Treasury, including, but not limited to the Interim Final Rule issued by the U.S. Treasury Department on June 15, 2009, together with any future amendments thereto, and any subsequent or similar legislation, rules, regulations and/or interpretations that may from time to time be enacted or promulgated.

 

 

“Senior executive officer,” “SEO” and “most highly compensated employee” have the meanings of such terms as defined under EESA and the regulations thereunder.  Generally, the determination of those individuals who are the Company’s SEOs or a High-5, Top-20, or Top-10 Employee for a calendar year during the TARP Period is fixed on January 1 of that year based on proxy statement rules (which automatically treat the CEO and CFO as SEOs) and compensation for the prior calendar year. Your execution of this letter agreement shall not be determinative of your status as an SEO, a High-5, Top-20 or Top-10 Employee. The Company will advise you as to whether you are an SEO, High-5, Top 20 and/ or Top-10 Employee of the Company.

 

“Company” means MB Financial, Inc. and includes MB Financial Bank, N.A. and any other entities treated as a single employer with MB Financial, Inc. under EESA.

 

The application of paragraphs (A) through (F) of this letter agreement are intended to, and shall be interpreted, administered and construed to amend the Compensation Arrangements only to the extent necessary to comply with the limitations, prohibitions and requirements of EESA and, to the maximum extent consistent with paragraphs (A) through (F) and EESA, to permit the operation of the Compensation Arrangements in accordance with their terms before giving effect to the provisions of this letter agreement. The application of paragraphs (A) through (F) above are also intended to advise you of the possibility that incentive or other compensation paid or payable to you may be subject to clawback or repayment under applicable law, rules or regulations, including, but not limited to EESA.

 

If this letter agreement sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter agreement will then constitute our agreement on this subject.

 

	
 
    	
 
    	
Sincerely,   
    
	
 
    	
 
    	
MB   Financial, Inc.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
Intending   to be legally bound, I agree to and accept the foregoing terms:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Print   Name:EXHIBIT 10.11A

 

MB FINANCIAL, INC.

 

Agreement Regarding Salary Adjustment and 
 Portion of Salary Payable by Stock

 

(EMPLOYEE):

 

By action of the Organization and Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of MB Financial, Inc. (the “Company”) and of the Board, you have been awarded additional base compensation effective MONTH/DAY/YEAR  (the “Salary Adjustment”) equal to $          on an annualized basis, which will be payable in Company common stock (the “Salary Stock”). The Salary Stock will to be paid to you in Shares as an Other Stock-Based Award under the Company’s Amended and Restated Omnibus Incentive Plan (the “Plan”), subject to the requirements set forth in this agreement (the “Agreement”).  Unless otherwise indicated, the capitalized terms used herein shall have the same meaning as set forth in the Plan.

 

1.             Annual Salary Stock Award.  Subject to your continued employment with the Company or its subsidiaries, your Salary Stock shall be paid to you in bi-weekly installments, at the conclusion of each of the Company’s bi-weekly pay periods, in the amount of $           .

 

2.             Number of Shares.  The number of shares of Salary Stock to be awarded to you with respect to each bi-weekly pay period will be determined with respect to each pay period by dividing $           by the reported closing price on the NASDAQ Global Select Market for a share of Company common stock on the pay date for such period (or if not a trading day, then on the immediately preceding trading day), rounded to the nearest whole share.  The number of shares of Salary Stock to be awarded to you with respect to a bi-weekly pay period during which you terminate employment, shall be pro-rated based on the number of days during such pay period until the date of your termination of employment.

 

3.             Vesting/Transfers Void.  The shares of Salary Stock subject to this Agreement shall be fully vested as of the date of their grant to you, but may not be sold, transferred, or otherwise disposed of, pledged or otherwise hypothecated until the earlier of (i) the second anniversary of the date of grant, or (ii) your termination of employment due to your death or Disability.  Any purported transfer or encumbrance of the shares of Salary Stock prior to the time set forth in this paragraph 3 shall be void, and the other party to any such purported transaction shall not obtain any rights to or interest in such shares of Salary Stock.

 

4.             Rights as a Stockholder.  From and after the date of grant, you shall have all of the rights of a stockholder with respect to the shares of Salary Stock granted hereby, including the right to vote the shares of Salary Stock and receive any dividends that may be paid thereon; provided however that any additional common shares or other securities that you may become entitled to receive pursuant to a stock dividend, stock split, combination of shares, recapitalization, merger, consolidation, separation or reorganization or any other change in the capital structure of the Company shall be subject to the same terms and restrictions as the shares of Salary Stock covered by this Agreement, including, without limitation, Section 3.

 

 

5.             Tax Withholding.  In the event withholding of the cash compensation otherwise payable to you at the time the Salary Stock is paid to you  is insufficient to satisfy any withholding obligation relating to such other compensation and the Salary Stock, you shall be permitted to satisfy, in whole or in part, any withholding tax obligation that may arise in connection with the bi-weekly payment of the Salary Stock pursuant to this Agreement by delivering to the Company common shares of the Company or cash in an amount equal to such withholding tax obligation or, alternatively, the withholding tax obligation may be satisfied by the Company withholding shares of Salary Stock.

 

6.             Condition.  Payment of the Salary Adjustment is conditioned upon your execution and delivery of this Agreement to the Company.  The Salary Adjustment shall be paid to you solely during your employment with the Company and its subsidiaries and shall terminate on termination of such employment for any reason.

 

7.             Amendment and Modification.  The Board (or Committee, as authorized) may, in its sole discretion, and without your consent, at any time terminate, suspend or modify this Agreement.  The terms and conditions of this Agreement are intended to comply with applicable law and shall be subject to and limited by any requirements or limitations that may apply under any applicable law, including the Emergency Economic Stabilization Act of 2008 as amended from time to time, including as amended by the American Recovery and Reinvestment Act of 2009 (“EESA”) and all regulations and guidance promulgated thereunder from time to time (collectively, the “TARP Requirements”).  In the event that all or any portion of this Agreement is found to be conflict with the TARP Requirements, then in such event this Agreement shall be automatically modified to reflect the requirements of the law, regulation and/or guidance, and this Award shall be interpreted and administered accordingly.  As a condition of your receiving the Salary Adjustment, including the Salary Stock, you acknowledge that (i) this Agreement remains subject to the TARP Requirements, (ii) it is subject to modification in order to comply with TARP Requirements, and (iii) you agree to immediately repay all amounts that may have been paid to you under this Agreement that are later determined to be in conflict with the requirements.

 

8.             Not An Employment Agreement.  Nothing herein contained shall be construed as a commitment to or agreement with you to continue your employment with the Company or any of its Subsidiaries, and nothing herein contained shall be construed as a commitment or agreement on the part of the Company to continue your employment or your annual rate of compensation for any period.

 

 

	
Date
    	
 
    	
MB   Financial, Inc.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Acknowledged   and Agreed: 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Date

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