<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X] Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under Section 240.14a-12
MFN Financial Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total Fee Paid:
------------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
[ ] Fee paid previously by written preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
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<PAGE>
MFN FINANCIAL CORPORATION
100 Field Drive
Lake Forest, Illinois 60045
847-295-8600
Dear Stockholder:
Enclosed are the Annual Report to Stockholders and the Proxy Statement in
connection with our Annual Meeting of Stockholders to be held on April 25,
2000. Please note that attendance at the meeting will be limited to
stockholders of MFN Financial Corporation ("MFN") who bring evidence of
ownership of our common stock as of March 3, 2000, the record date for
determination of stockholders entitled to notice of and to vote at the Annual
Meeting. If your shares are held by a bank or broker, please bring to the
meeting your bank or broker statement evidencing your beneficial ownership of
MFN stock to gain admission to the meeting.
By Order of the Board of Directors
Mark E. Dapier
Secretary
Lake Forest, Illinois
March 27, 2000
<PAGE>
MFN FINANCIAL CORPORATION
100 Field Drive
Lake Forest, Illinois 60045
847-295-8600
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held April 25, 2000
----------------
To the Stockholders of
MFN Financial Corporation
Notice is hereby given that the annual meeting of stockholders of MFN
FINANCIAL CORPORATION, a Delaware corporation (the "Company"), will be held at
the North Shore Hotel Moraine, 700 Sheridan Road, Highwood, Illinois, on
Tuesday, April 25, 2000, at 10:00 a.m. local time, for the following purposes:
1. To elect seven directors of the Company to hold office for the ensuing
year.
2. To consider and vote upon a proposal to approve the MFN Financial
Corporation Annual Executive Incentive Bonus Plan.
3. To consider and transact such other business as may properly come before
the meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on March 3, 2000, as
the record date for determination of stockholders entitled to notice of and to
vote at the annual meeting of stockholders.
By Order of the Board of Directors
Mark E. Dapier
Secretary
Lake Forest, Illinois
March 27, 2000
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE DATE, SIGN AND MAIL THE
ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED WHICH REQUIRES NO POSTAGE FOR
MAILING IN THE UNITED STATES. A PROMPT RESPONSE IS HELPFUL, AND YOUR
COOPERATION WILL BE APPRECIATED.
<PAGE>
MFN FINANCIAL CORPORATION
100 Field Drive
Lake Forest, Illinois 60045
847-295-8600
----------------
PROXY STATEMENT
Annual Meeting of Stockholders
April 25, 2000
----------------
VOTING INFORMATION
This Proxy Statement is being mailed to stockholders of MFN Financial
Corporation (the "Company") on or about March 27, 2000 and is furnished in
connection with the Board of Directors' solicitation of proxies for the annual
meeting of stockholders to be held on April 25, 2000, for the purposes of
considering and acting upon the matters specified in the Notice of Annual
Meeting of Stockholders accompanying this Proxy Statement. If the form of
proxy which accompanies this Proxy Statement is executed and returned, it may
be revoked by the person giving it at any time prior to the voting thereof by
written notice to the Secretary, by delivery of a later dated proxy or by
requesting to vote in person at the meeting. Without extra compensation,
certain directors, officers and employees of the Company may make additional
solicitations in person or by telephone or facsimile. Expenses incurred in the
solicitation of proxies, including postage, printing and handling, and actual
expenses incurred by brokerage houses, custodians, nominees and fiduciaries in
forwarding documents to beneficial owners, will be paid by the Company.
Each holder of the Company's Common Stock, par value $.01 per share (the
"Common Stock") is entitled to one vote per share upon each matter submitted
to the vote of stockholders at this annual meeting. For purposes of the
meeting, a quorum means a majority of the issued and outstanding shares of
Common Stock entitled to vote at the annual meeting. As of the close of
business on March 3, 2000, the record date for stockholders entitled to vote
at the annual meeting, there were outstanding 10,000,000 shares of Common
Stock. In determining whether a quorum exists at the meeting, all shares
represented in person or by proxy will be counted. A holder of Common Stock
may, with respect to the election of directors, (i) vote for the election of
all named director nominees, (ii) withhold authority to vote for all named
director nominees or (iii) vote for the election of all named director
nominees other than any nominee with respect to whom the stockholder withholds
authority to vote by so indicating in the appropriate space in the proxy. With
respect to the proposal regarding the MFN Financial Corporation Annual
Executive Incentive Bonus Plan (the "Bonus Plan"), a stockholder may (i) vote
for the proposal, (ii) vote against the proposal, or (iii) abstain from
voting. Proxies properly executed and received by the Company prior to the
meeting and not revoked will be voted as directed therein on all matters
presented at the meeting. In the absence of a specific direction from the
stockholder, proxies will be voted for the election of all named director
nominees, each to hold office until the next annual meeting of stockholders or
until his successor is duly elected and qualified and for the approval of the
Bonus Plan.
Proxies relating to "street name" shares that are voted by brokers on one
but not both of the matters will be treated as shares present for purposes of
determining the presence of a quorum on both matters, but will be treated as
shares entitled to vote only as indicated below ("broker non-votes"). The
affirmative vote of the holders of a majority of the shares of Common Stock
present in person or by proxy at the meeting and entitled to vote is required
in the election of directors and the approval of the Bonus Plan. Shares
represented by proxies which are marked "abstain" with respect to the Bonus
Plan will be treated as shares present and entitled to vote, but will have the
same effect as a vote against approval of the Bonus Plan. Withholding
authority to vote for a director nominee will in effect count as a vote
against the director nominee. Broker non-votes will have no effect in the
election of directors or approval of the Bonus Plan.
<PAGE>
The Board of Directors knows of no other matter which may come up for
action at the meeting. However, if any other matter properly comes before the
meeting, the persons named in the proxy form enclosed will vote in accordance
with their judgment upon such matter.
Stockholders wishing to include proposals in the Company's proxy statement
and form of proxy for the year 2001 annual meeting must submit such proposals
so that they are received by the Secretary of the Company at its Lake Forest
address by no later than November 27, 2000. Stockholders wishing to present
proposals at the annual meeting (but not include them in the proxy statement)
are required to notify the Secretary of the Company in writing at the Lake
Forest address by no later than January 26, 2001 and no earlier than December
27, 2000.
2
<PAGE>
STOCK OWNERSHIP INFORMATION
The table below sets forth certain information as of March 3, 2000, with
respect to each person known by the Company to be the beneficial owner of more
than five percent of the outstanding shares of Common Stock based on the
Company's review of Schedules 13D and 13G filed with the Securities and
Exchange Commission, and the beneficial ownership of the outstanding shares of
Common Stock of each director, each current executive officer shown in the
Summary Compensation Table and all executive officers and directors as a
group. Except as set forth below, the address for such person or group is the
Company's Lake Forest office. Unless otherwise noted, each person has sole
power to vote and dispose of the Common Stock beneficially owned.
<TABLE>
<CAPTION>
Number of
Shares Percent
Beneficially of
Name Owned (a) Class
- ---- ------------ -------
<S> <C> <C>
Franklin Mutual Advisers, LLC............................ 1,709,451 17.1%
51 John F. Kennedy Parkway
Short Hills, NJ 07078
Goldman, Sachs & Co...................................... 1,737,509 17.4%
The Goldman Sachs Group, Inc.
85 Broad Street
New York, NY 10004
Stephen Feinberg......................................... 870,757(b) 8.7%
450 Park Avenue
28th Floor
New York, New York 10022
Principal Life Insurance Company......................... 940,194 9.4%
Principal Mutual Holding Company
711 High Street
Des Moines, IA 50392-0088
Intermarket Corp......................................... 1,868,744(c) 18.7%
667 Madison Avenue
New York, New York 10021
Merrill Lynch, Pierce Fenner & Smith Incorporated........ 1,240,204 12.4%
World Financial Center
North Tower
250 Vesey Street
New York, New York 10281
Thomas L. Gooding........................................ 15,948(d) *
Andrew C. Halvorsen...................................... 13,542 *
Edward G. Harshfield..................................... 541,666 5.1%
Michael A. Kramer........................................ 13,542 *
Martin L. Solomon........................................ 13,542 *
Robert Stucker........................................... 13,542 *
George R. Zoffinger...................................... 13,542 *
Jeffrey B. Weeden........................................ 111,333 1.1%
Mark E. Dapier........................................... 54,167 *
Mark D. Whitham.......................................... 27,083 *
All executive officers and directors
as group (10 persons)................................... 817,457(d) 7.6%
</TABLE>
- --------
*Less than 1%
3
<PAGE>
(a) Includes shares that may be acquired within 60 days of March 3, 2000,
pursuant to stock options as follows:
Mr. Gooding, 13,542 shares;
Mr. Halvorsen 13,542 shares;
Mr. Harshfield, 541,666 shares;
Mr. Kramer, 13,542 shares;
Mr. Solomon, 13,542 shares;
Mr. Stucker, 13,542 shares;
Mr. Zoffinger, 13,542 shares;
Mr. Weeden, 108,333 shares;
Mr. Dapier, 54,167 shares;
Mr. Whitham, 27,083 shares; and
all executive officers and directors as a group, 812,501 shares
(b) Includes 158,247 shares of common stock held by Cerberus Partners, L.P.,
486,462 shares of common stock held by Cerberus International, Ltd. and
225,948 shares of common stock held by certain private investment funds.
(c) Includes 358,914 shares of common stock held by Fernwood Associates, L.P.,
556,440 shares of common stock held by Fernwood Restructurings, Limited
and 19,018 shares of common stock held by Fernwood Foundation Fund, L.P.
(d) Includes 1,869 shares that may be acquired by Mr. Gooding within 60 days
of March 3, 2000, pursuant to warrants.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that certain
of the Company's directors, officers and stockholders file with the Securities
and Exchange Commission an initial statement of beneficial ownership and
certain statements of changes in beneficial ownership of Common Stock of the
Company. Based solely on its review of such forms received by the Company and
written representation from the directors and officers that no other reports
were required, the Company is unaware of any instances of noncompliance, or
late compliance, with such filings during the year ended December 31, 1999.
ELECTION OF DIRECTORS
At the annual meeting of stockholders, seven directors, constituting the
entire Board of Directors of the Company, are to be elected to hold office
until the next annual meeting of stockholders or until their successors are
duly elected and qualified. Unless otherwise indicated on the proxy form, it
is intended that the proxies will be voted for the nominees listed below. It
is expected that these nominees will serve, but, if for any unforeseen cause
any such nominee should decline or be unable to serve, the proxies will be
voted to fill any vacancy so arising in accordance with the discretionary
authority of the persons named in the proxies unless otherwise indicated on
the proxy form.
4
<PAGE>
Nominees
The following information concerning the nominees has been furnished by the
nominees:
<TABLE>
<CAPTION>
First
Principal Occupation Year
During Last Five Years Elected
Name Age and Other Directorships Director
---- --- ----------------------- --------
<C> <C> <S> <C>
Thomas L. Gooding 64 Chairman and Chief Executive Officer of First Community 1999
Bank of Hillsboro since 1998. President, Chairman and
Chief Executive Officer of BoatMen's National Bank of
Central Illinois from 1988-1998.
Andrew C. Halvorsen 53 Private investor since 1998. Chief Financial Officer and 1999
member of Office of the President of Beneficial Corpora-
tion, a financial services company, from 1986-1998. Di-
rector of Beneficial Corporation from 1984-1998.
Edward G. 63 Chairman and Chief Executive Officer of the Company since 1999
Harshfield March 1999. President and Chief Executive Officer of Cal-
ifornia Federal Bank from October 1993 until January 1997
and Vice Chairman from January 1997 until January 1999.
Director and Chairman, Credit Policy Committee of Cali-
fornia Federal Bank. Director and Chairman, Compensation
Committee of Cash Technologies Inc.
Michael A. Kramer 31 Managing Director, Houlihan, Lokey, Howard & Zukin, Inc., 1999
an investment banking firm. Director of Ascent Assurance
Corporation.
Martin L. Solomon 63 Chairman and Chief Executive Officer of American Country 1999
Holdings, Inc., a property and casualty insurance compa-
ny, since June 1997. Vice Chairman of Great Dane Hold-
ings, a manufacturer of truck trailers and metal
stampings, a lessor of taxicabs and a property and casu-
alty insurance company, from 1985--1996. Private investor
since 1990. Also Director of Hexcel Corporation, XTRA
Corporation and Telephone and Data Systems, Inc.
Robert Stucker 55 Partner in the law firm of Vedder, Price, Kaufman & 1999
Kammholz, which firm provides legal services to the Com-
pany. Director of General Binding Corporation.
George R. Zoffinger 52 President and Chief Executive Officer of Constellation 1999
Capital Corp., a financial services company, since March
1998. President and Chief Executive Officer of Value
Property Trust, a real estate investment trust, from Oc-
tober 1995 to February 1998. Chairman of Core States New
Jersey Bank from 1994 through December 1996. Director of
New Jersey Resources, Admiralty Bancorp., Commercial Fed-
eral Bancorp. and Atlas Steel Corp.
</TABLE>
5
<PAGE>
COMPENSATION
The following table sets forth the cash and noncash compensation for each
of the last three fiscal years awarded to or earned by the executive officers
named below.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
---------------------- ------------
Number of
Shares
Other Underlying
Name and Principal Annual Stock All other
Position Year Salary($) Bonus($) Compensation ($) Options(#) Compensation ($)
------------------ ---- --------- --------- ---------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Edward G. Harshfield 1999 776, 923(1) 900,000 115,500(3) 1,000,000 737,600(4)
Chairman of the Board
and 1998 -- -- -- -- --
Chief Executive Officer 1997 -- -- -- -- --
Jeffrey B. Weeden 1999 207,788(2) 200,000 -- 250,000 82,666(5)
President and Chief 1998 -- -- -- -- --
Operating Officer 1997 -- -- -- -- --
Mark E. Dapier 1999 171,435 170,000 -- 125,000 3,200(6)
Executive Vice
President, 1998 124,000 40,000 -- -- 22,377(7)
General Counsel and 1997 112,769 40,250 -- -- 2,255(6)
Secretary
Mark D. Whitham 1999 95,000 75,000 -- 60,000 35,585(8)
Chief Accounting
Officer 1998 -- -- -- -- --
1997 -- -- -- -- --
William A. Brandt, Jr.
(9) 1999 187,500 1,000,000 0 0 0
President and 1998 750,000 0 0 0 0
Chief Executive Officer 1997 750,000 0 0 0 0
</TABLE>
- --------
(1) Excludes (a) $121,689 paid to Mr. Harshfield during 1998 and $250,000
during 1999 in his role as a consultant prior to his election as Chairman
of the Board and Chief Executive Officer. Excludes a $4,000,000 signing
bonus for Mr. Harshfield paid to induce Mr. Harshfield to accept
employment following the Company's emergence from Chapter 11
reorganization proceedings.
(2) Excludes $46,371 paid to Mr. Weeden in 1999 in his role as a consultant
prior to his election as President and Chief Operating Officer.
(3) Represents reimbursement of housing expenses.
(4) Represents a one-time payment to Mr. Harshfield as a result of an
adjustment to his employment agreement.
(5) Represents reimbursement for relocation expenses.
(6) Represents Company contributions under the Company's 401(k) plan.
(7) Includes $19,900 for services rendered to the Board of Directors and
$2,477 of Company contributions under the Company's 401(k) plan.
(8) Includes $33,462 for reimbursement of relocation expenses and $2,123 of
contributions under the Company's 401(k) plan.
(9) Mr. Brandt resigned as President and Chief Executive Officer effective
March 23, 1999, the effective date of the Company's emergence from Chapter
11 reorganization proceedings.
6
<PAGE>
The table below sets forth certain information with respect to stock
options granted under the Company's Amended and Restated Stock Option Plan
during 1999 to the executive officers named in the Summary Compensation Table.
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------------------------
Number of % of Total Grant
Shares Options date
Underlying Granted to Exercise or present
Options Employees Base Price Expiration value
Granted # in Fiscal Year ($/Share) Date ($)(1)
---------- -------------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Edward G. Harshfield.... 1,000,000(2) 69.7% $8.50 3/23/09 5,950,000
Jeffrey B. Weeden....... 200,000(2) 17.4% $8.50 3/23/09 1,190,000
50,000(3) $7.875 10/26/09 259,500
Mark E. Dapier.......... 100,000(2) 8.7% $8.50 3/23/09 595,000
25,000(3) $7.875 10/26/09 129,750
Mark D. Whitham......... 50,000(2) 4.2% $8.50 3/23/09 297,500
10,000(3) $7.875 10/26/09 51,900
William A. Brandt, Jr... 0 0 -- -- 0
</TABLE>
- --------
(1) The amounts set forth were calculated using the Black-Scholes option
pricing model. Values are calculated assuming risk free rates of return of
5.19% as of March 23, 1999 and 6.42 % as of October 26, 1999, zero
dividends, volatility rates of 85.0% as of March 23, 1999 and 75.0 % as of
October 26, 1999, and an average term of five years. No adjustment has
been made for nontransferability or risk of forfeiture.
(2) One-half of this amount was fully vested on the date of grant; one-quarter
of this grant becomes vested in twelve monthly installments beginning with
the first anniversary of the grant date; and one quarter of this grant
becomes vested in twelve monthly installments beginning with the second
anniversary of the grant date.
(3) Vests 1/3 per year beginning the first anniversary of the date of grant.
No stock options were exercised by the executive officers named in the
Summary Compensation Table during 1999. The following table sets forth
information with respect to unexercised options held at fiscal year end.
Fiscal Year End Option Values
<TABLE>
<CAPTION>
Number of Shares Value of Unexercisable
Underlying Unexercised In-the-Money Options at
Options at Fiscal Year End Fiscal Year End ($)
(#) Exercisable/ Exercisable/
Name Unexercisable Unexercisable (1)
---- -------------------------- -----------------------
<S> <C> <C>
Edward G. Harshfield.... 500,000/500,000 $0/0
Jeffrey B. Weeden....... 100,000/150,000 0/0
Mark E. Dapier.......... 50,000/75,000 0/0
Mark D. Whitham......... 25,000/35,000 0/0
William A. Brandt, Jr... 0/0 0/0
</TABLE>
- --------
(1) Value is calculated based on the difference between the option exercise
price and the closing market price of the Common Stock at year end
multiplied by the applicable number of shares.
7
<PAGE>
Retirement Plan
The Company has a defined benefit Retirement Plan (the "Retirement Plan")
covering eligible employees who are at least 21 years of age and have
completed at least 1 year of service. The amount of the Company's annual
contribution to the Retirement Plan is determined for the total of all
participants covered by such Retirement Plan, and the amount of payment in
respect of a specified person is not and cannot readily be separated or
individually calculated by the regular actuaries for the Retirement Plan. The
remuneration covered by the Retirement Plan ("pension based pay") is the
highest average monthly total compensation for any 5 consecutive years out of
the employee's last 10 years of employment. The normal retirement benefit at
age 65 equals 70% of pension base pay minus 50% of the participant's primary
Social Security benefit. This amount is reduced by 1/35th for each year by
which the participant has fewer than 35 years of participation in the
Retirement Plan. Benefits are also available to participants who terminate
employment before age 65 after completing 5 or more years of service or due to
total and permanent disability.
The following table sets forth estimated annual benefits upon retirement,
payable on a straight life annuity basis, for employees in the specified
pension base pay (shown on an annual basis) and years of participation
classifications, and is based upon the assumption that the Retirement Plan
will be continued and that the employee will continue with the Company until
his normal retirement age of 65:
Number of Years of Participation
<TABLE>
<CAPTION>
Remuneration** 5 10 15 20 25 30 35
- -------------- ------- ------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$100,000............ $ 8,930 $17,860 $26,790 $35,720 $44,650 $ 53,580 $ 62,510
$110,000............ $ 9,930 $19,860 $29,790 $39,720 $49,650 $ 59,580 $ 69,510
$120,000............ $10,930 $21,860 $32,790 $43,720 $54,650 $ 65,580 $ 76,510
$130,000............ $11,930 $23,860 $35,790 $47,720 $59,650 $ 71,580 $ 83,510
$140,000............ $12,930 $25,860 $38,790 $51,720 $64,650 $ 77,580 $ 90,510
$150,000............ $13,930 $27,860 $41,790 $55,720 $69,650 $ 83,580 $ 97,510
$160,000............ $14,930 $29,860 $44,790 $59,720 $74,650 $ 89,580 $104,510
$170,000............ $15,930 $31,860 $47,790 $63,720 $79,650 $ 95,580 $111,510
$180,000............ $16,930 $33,860 $50,790 $67,720 $84,650 $101,580 $118,510
$190,000............ $17,930 $35,860 $53,790 $71,720 $89,650 $107,580 $125,510*
$200,000............ $18,930 $37,860 $56,790 $75,720 $94,650 $113,580 $132,510*
</TABLE>
- --------
* The annual retirement benefits are subject to maximum limitations ($130,000
at December 31, 1999) under the Internal Revenue Code.
**The annual limit on remuneration for purposes of pension plan benefit
calculation was $160,000 at December 31, 1999 under the Internal Revenue Code.
The credited years of participation for the individuals named in the above
compensation table are as follows: Edward G. Harshfield, 1 year; Jeffrey B.
Weeden, 1 year; Mark E. Dapier, 8 years; and Mark D. Whitham, 1 year. Mr.
Brandt did not participate in the Plan.
Board of Directors
The Board of Directors held 4 meetings in 1999. The Personnel and
Compensation Committee held 2 meetings and the Audit Committee held 1 meeting.
All directors were present for at least 75% of the meetings for which they
were in office and the respective committees on which they served. Non-
employee directors are paid a fee of $3,000 each fiscal quarter and $1,000 for
each Board or committee meeting they attend. Employee directors receive no
compensation as such. Except for Mr. Harshfield, each director received an
initial grant of options to purchase 25,000 shares at an exercise price of
$8.50 per share. One half of the options were immediately vested with the
balance vesting pro rata during the second and third years following grant of
Common Stock upon becoming a director.
8
<PAGE>
The Board of Directors has an Audit Committee and a Personnel and
Compensation Committee, each currently composed of Thomas L. Gooding, Andrew
C. Halvorsen, Martin L. Solomon and George R. Zoffinger. The Audit Committee
reviews the scope and results of the audit by the Company's independent
auditors, reviews the Company's procedures for monitoring internal accounting
controls and recommends the selection of independent auditors. The Personnel
and Compensation Committee makes the determinations with respect to the
compensation of the Chairman of the Board and Chief Executive Officer and
establishes general compensation policies with respect to all other executive
officers of the Company. During 1999, the Board of Directors as a whole, other
than Mr. Harshfield, acted as both the Audit Committee and the Personnel and
Compensation Committee. The Board currently has no Executive or Nominating
Committee.
Employment Contracts and Change of Control Agreements
The Company entered into an Employment Agreement with Edward G. Harshfield
on March 23, 1999 which expires on March 23, 2002, whereby the Company agreed
to employ Mr. Harshfield as President and Chief Executive Officer of the
Company and to elect Mr. Harshfield as a member and Chairman of the Company's
Board of Directors. Mr. Harshfield receives an annual base salary of $1
million and an annual bonus in an amount determined by the Board of Directors
or the Personnel and Compensation Committee. Mr. Harshfield's minimum annual
bonus for each of the second and third years of Mr. Harshfield's employment
will be at least $500,000, subject to achieving certain performance levels
agreed to by the Company and Mr. Harshfield. Mr. Harshfield also received a
signing bonus of $4 million and options to purchase 1,000,000 shares of the
Company's Common Stock, certain of which are subject to a vesting schedule. In
the event Mr. Harshfield is terminated by the Company without cause, or Mr.
Harshfield terminates the employment agreement for good reason, or if there is
a change of control (as defined), Mr. Harshfield is entitled to continuation
of his base salary through March 23, 2002, and his unvested options would
become fully exercisable. The Company also entered into a change of control
agreement with Mr. Harshfield. If Mr. Harshfield's employment is terminated
within 24 months of a change of control (as defined) for any reason other than
for cause, or by Mr. Harshfield for good reason, Mr. Harshfield is entitled to
a lump sum cash amount equal to three times Mr. Harshfield's salary
immediately prior to the change in control and a bonus equal to the greater of
$500,000 or 100% of Mr. Harshfield's targeted bonus for the year in which the
termination occurs. Mr. Harshfield's unvested options would also become fully
exercisable on a change of control and certain employee benefits would be
continued following termination up to a maximum of three years. Mr. Harshfield
would also receive gross-up payments in the event he incurs any excise taxes
on receipt of these amounts.
The Company entered into an Employment Agreement with Jeffrey B. Weeden on
March 23, 1999, which expires on March 23, 2002. Mr. Weeden received an
initial annual base salary of $250,000, which will be reviewed annually by the
Company's Personnel and Compensation Committee. Mr. Weeden is also eligible to
receive an annual bonus, subject to a guaranteed bonus of $100,000 for the
first year of the agreement. Mr. Weeden received options to purchase 200,000
shares of Common Stock in connection with his employment agreement, certain of
which are subject to a vesting schedule. In the event Mr. Weeden is terminated
without cause, or Mr. Weeden terminates his employment for good reason, Mr.
Weeden is entitled to continuation of his base salary through March 23, 2002,
and his unvested options would become fully exercisable.
The Company entered into an Employment Agreement with Mr. Dapier on March
23, 1999, which expires on March 23, 2002. Mr. Dapier received an initial
annual base salary of $150,000, which will be reviewed annually by the
Company's Personnel and Compensation Committee. Mr. Dapier is also eligible to
receive an annual bonus, subject to a guaranteed bonus of $60,000 for the
first year of employment. Mr. Dapier received options to purchase 100,000
shares of Common Stock in connection with his employment agreement, certain of
which are subject to a vesting schedule. If Mr. Dapier is terminated without
cause, or Mr. Dapier terminates his employment for good reason, then Mr.
Dapier is entitled to continuation of his base salary through March 23, 2002,
and his unvested stock options would become fully exercisable.
The Company also entered into change in control agreements with Mr. Weeden,
Mr. Dapier and Mr. Whitham. The change of control agreements provide that if
the employee's employment is terminated within 24
9
<PAGE>
months of a change of control (as defined) for any reason other than for cause
or by the employee for good reason, then the employee is entitled to a lump
sum cash amount equal to three times employee's base salary in effect
immediately prior to the change of control and a bonus equal to 100% of the
employee's targeted bonus for the year in which the termination occurs, and
employee's unvested options would become fully exercisable. Certain employee
benefits would be continued following termination up to a maximum of three
years. The employee would also receive gross-up payments in the event he
incurs any excise taxes on receipt of these amounts.
REPORT OF THE PERSONNEL AND COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Personnel and Compensation Committee of the Board of Directors is
responsible for the Company's executive compensation policies. It annually
determines the compensation to be paid to the executive officers of the
Company.
Compensation For The Chairman of the Board and Chief Executive Officer
Mr. Harshfield's three year employment agreement, which includes his
initial compensation package, was established during the Company's
reorganization proceedings as a result of negotiations between Mr. Harshfield
and the Company's prior Board of Directors, with the consent of the Creditors
Committee and the approval of the Bankruptcy Court.
Overview and Philosophy
The objective of the executive compensation program is to provide overall
levels of compensation for the executive officers which will both attract and
retain superior talent and align the interests of the Company's executive
officers with the financial success of the Company. The Committee believes
that its task of determining fair and competitive compensation is ultimately
subjective.
The program is composed of base salary, annual bonus, equity based
incentives and other benefits generally available to all employees. The
program will also consist of the MFN Financial Corporation Annual Executive
Incentive Bonus Plan described herein if it is approved by the Company's
stockholders. As of December 31, 1999, stock options on 1,435,000 shares of
the Company's common stock were outstanding, all of which were granted during
the year then ended.
The Internal Revenue Code limits the ability of the Company to deduct from
taxable income compensation paid to any executive officer in excess of $1
million. In the event compensation for any of the Company's executive officers
exceeds this $1 million threshold, the Committee will balance the benefits of
tax deductibility with its responsibility to hire, retain and motivate
executive officers with competitive compensation programs. As a result, the
Committee may take actions it deems to be in the best interest of the
Company's stockholders, including: (1) providing non-deductible compensation
above the $1 million threshold and/or (2) modifying the Company's compensation
programs to qualify bonuses or other performance-based compensation to be
exempt from the deduction limit.
Base Salary
The base salary for each executive is intended primarily to be competitive
with companies in the industry and geographic area in which the Company
competes. In setting these compensation levels, the Committee considered a
variety of factors including levels of responsibility as well as the unique
abilities and individual experience and performance of each executive officer.
In making annual adjustments to base salary, the Committee also considers the
individual's performance over a period of time as well as any other
information which may be available as to the value of the particular
individual's past and prospective future services to the Company. This
information includes comments and performance evaluations by the Company's
Chairman of the Board and Chief Executive Officer. The Committee considers all
such data; it does not prescribe the relative weight to be given to any
particular component.
10
<PAGE>
Bonus
Annual bonuses for the Company's executive officers have been determined by
the Committee based on the financial performance of the Company and the
progress by the Company in reaching key initiatives established by the Board
of Directors, as well as the individual performance of each such officer.
Certain executive officers have employment agreements with targeted annual
bonus amounts and minimum guaranteed payments. The MFN Financial Corporation
Annual Executive Incentive Bonus Plan will replace the past discretionary
bonus policy.
Long-term Incentives
In general, the Committee believes that equity based compensation should
form a part of an executive's total compensation package. Stock options are
granted to executives because they directly relate the executive's earnings to
the stock price appreciation realized by the Company's stockholders over the
option period. Stock options also provide executives the opportunity to
acquire an ownership interest in the Company. The number of shares covered by
each executive's option was determined by factors similar to those considered
in establishing base salary.
Other
Other benefits are generally those available to all other employees in the
Company, or a subsidiary, as appropriate. Together with perquisites, these
benefits (not including one-time reimbursement for relocation expenses) did
not exceed 10% of any executive's combined salary and bonus in 1999.
Personnel and Compensation Committee
Thomas L. Gooding
Andrew C. Halvorsen
Martin L. Solomon
George R. Zoffinger
11
<PAGE>
Performance Graph
The following performance graph compares the yearly percentage change in
the Company's cumulative total stockholder return on its Common Stock with the
cumulative total return of the Russell 2000 and the SNL Auto Finance indices
for the period commencing May 7, 1999, the first date the Company's new common
stock began trading, and ending December 31, 1999. On March 10, 1999, the
Company's Second Amended Plan of Reorganization (the "Plan") was approved by
the United States Bankruptcy Court for the Northern District of Illinois. The
Plan was effective March 23, 1999. Under the Plan, the Company's previous
senior lenders received 9,500,000 shares (95%) of the new common stock of the
Company and the prior stockholders received 500,000 shares (5%) of the
Company's new common stock and three series of warrants to purchase new common
stock. As such, the performance of the Company's common stock prior to the
effective date of the Plan is not meaningful.
[GRAPH CHART]
<TABLE>
<CAPTION>
Period Ending
--------------------------------------------
Index 05/07/99 05/31/99 06/30/99 09/30/99 12/31/99
- ----- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
MFN Financial Corporation.......... 100.00 175.00 168.75 141.67 108.33
Russell 2000....................... 100.00 100.68 105.23 98.58 116.76
SNL Auto Finance Index............. 100.00 100.03 103.33 100.40 107.77
</TABLE>
- --------
(1) The stock price performance shown on the graph above is not necessarily
indicative of future price performance.
12
<PAGE>
PROPOSAL TO APPROVE THE MFN FINANCIAL CORPORATION ANNUAL EXECUTIVE INCENTIVE
BONUS PLAN
In the fourth quarter of 1999, the Company retained William M. Mercer,
Incorporated ("Mercer") to perform a study of the Company's compensation
programs compared to other companies in the same industry. As a result of the
recommendations of Mercer, the Company has established the MFN Financial
Corporation Annual Executive Incentive Bonus Plan (the "Plan"), to be
effective as of January 1, 2000, to replace its past discretionary bonus
policy for executives of the Company. The Plan was adopted by the Board of
Directors (the "Board") on January 25, 2000, effective as of January 1, 2000,
subject to approval by the Company's stockholders at the Annual Meeting.
Stockholder approval is sought in order to qualify the Plan under Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code") and
thereby permit the Company to deduct for Federal income tax purposes all
compensation paid to the eligible executives under the Plan.
The following is a brief summary of certain features of the Plan and is
qualified in its entirety by reference to the full text of the Plan, which is
set forth as Appendix A to this Proxy Statement.
In accordance with the requirements of Code Section 162(m), the Plan is
administered by the Personnel and Compensation Committee of the Board (the
"Committee"), which is comprised solely of non-employee directors. Only those
executives of the Company selected by the Committee, or pursuant to authority
delegated to the Chief Executive Officer of the Company by the Committee, are
eligible to participate in the Plan. For 2000, a total of 16 executives of the
Company have been selected for participation in the Plan. The Committee
directly selected Messrs. Harshfield, Weeden, Dapier and Whitham (the "Senior
Executives") as participants in the Plan for 2000, and the other 12
participants were selected by Mr. Harshfield, as the Chief Executive Officer
of the Company, pursuant to authority delegated to him by the Committee. Mr.
Harshfield consulted with the Board of Directors in determining the other 12
participants.
Under the Plan, each year, as soon as practicable following the Company's
development of its operating plan for that year, but not later than March 1 of
the year, the Committee will review the operating plan and establish a number
of objectively determinable performance measures for the Company for that year
("Objectives"), while the outcome of the operating plan is substantially
uncertain. The Objectives will then be the basis on which the amounts of the
bonuses payable under the Plan will be determined, except to the extent that,
pursuant to authority delegated by the Committee, the Chief Executive Officer
and/or the Chief Operating Officer of the Company have established additional
or alternative objectively determinable performance measures for participants
other than themselves.
The Objectives are formulated by the Committee in terms of threshold, plan
and goal levels of achievement for each of the performance measures used, and
each performance measure is then assigned a relative percentage weighting by
the Committee. The performance measures for the Objectives must be one, all or
a combination of the following: return on equity, earnings per share, credit
quality, cost control, systems implementation, loan volume, receivables
growth, revenue growth, market share, special projects and net income.
For 2000, the Committee has established Objectives for four of the
performance measures, and achievement as to those Objectives will be the
entire basis for determining the amounts of any bonuses payable to the four
Senior Executives under the Plan for 2000. These objectives for 2000 are
weighted 75% on achieving a net income goal and 25% on strategic initiatives
approved by the Committee. For the other 12 participants in the Plan for 2000,
additional or alternative objectively determinable performance measures
established by the Chief Executive Officer or the Chief Operating Officer of
the Company may affect the bonus amounts payable. If, as can be expected to be
the case, there are different levels of achievement for different Objectives,
the bonuses earned will be based on a weighted blend of achievement levels.
The Committee may, in future years, change the Objectives and relative
weightings as it deems appropriate and consistent with the Company's strategic
priorities. In order to preserve the compliance of the Plan with the
performance-based compensation requirements of Code Section 162(m), the
Committee will not use a
13
<PAGE>
performance measure that differs from those specifically identified in the
Plan without submitting such measure to the stockholders for approval.
No bonuses will be earned with respect to any Objective established under
the Plan unless at least threshold performance for that Objective has been
achieved. The Committee will certify in writing the levels of performance
achieved for the year with respect to each of the Objectives established by
the Committee and will promptly authorize payment of the amounts of any
bonuses earned.
The maximum annual bonus which can be paid to any individual under the Plan
for any year will be limited to two times such individual's annual base salary
as of the first day of the year. Therefore, as of January 1, 2000, the maximum
annual bonus amounts which would be permitted under the Plan to Messrs.
Harshfield, Weeden, Dapier and Whitham would be $2,000,000, $650,000, $400,000
and $280,000, respectively. The aggregate of the maximum annual bonus amounts
which would be permitted for the other 12 participants in the Plan for 2000
would be $2,826,400. However, there is no present intention to award a maximum
permissible annual bonus to any participant. For example, the maximum bonus
amounts which may be earned under the Plan for 2000 by Messrs. Harshfield,
Weeden, Dapier and Whitham under the particular Objectives and award levels
actually established by the Committee for 2000 will be $1,500,000, $390,000,
$200,000 and $98,000, respectively.
Bonuses earned under the Plan will be paid in cash. In the event of a Plan
participant's death, disability or retirement, or termination of the
participant's employment by the Company without cause, the participant, or his
or her beneficiary or representative, will receive a prorated payout which
will be determined by the Committee in its reasonable discretion. Termination
of employment for any other reason will result in the forfeiture of any right
to a bonus under the Plan for the year in which termination occurs.
The Plan may be amended by the Board of Directors, but any amendment which
would affect the Plan's compliance with Code Section 162(m) will not be
effective unless approved by the Company's stockholders. According to its
current terms, the Plan will terminate December 31, 2004.
The benefits to be received by the participating executives for 2000 are
not currently determinable. The following table sets forth the benefits that
would have been received by those executives for 1999 if the Plan and the
bonus opportunity levels established by the Committee for 2000 had been in
effect for 1999 and the Objectives for 2000 had been achieved for 1999 at the
plan level of performance:
New Plan Benefits
MFN Financial Corporation
Annual Executive Incentive Bonus Plan
<TABLE>
<CAPTION>
Dollar
Name and Position Value
----------------- ----------
<S> <C>
Edward G. Harshfield,......................................... $1,000,000
Chief Executive Officer
Jeffrey B. Weeden,............................................ $ 150,000
Chief Operating Officer
Mark E. Dapier,............................................... $ 87,500
General Counsel
Mark D. Whitham,.............................................. $ 42,000
Chief Financial Officer
Executive Group............................................... $1,279,000
Non-Executive Director Group.................................. *
Non-Executive Officer Employee Group.......................... $ 395,930
</TABLE>
- --------
*Not applicable
14
<PAGE>
Vote Required for Approval
The affirmative vote of the holders of a majority of the shares of Common
Stock present in person or by proxy at the meeting and entitled to vote is
required for approval of the Plan. Abstentions will count as votes against the
proposal. Broker non-votes will have no effect.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE
PLAN.
FINANCIAL INFORMATION
The Company has furnished its financial statements to stockholders in its
1999 Annual Report, which accompanies this Proxy Statement. In addition, the
Company will promptly provide without charge to any stockholder an additional
copy of the 1999 Annual Report, on the request of such stockholder, to the
Company's Secretary at MFN Financial Corporation, 100 Field Drive, Lake
Forest, Illinois 60045, or by telephone to (847) 295-8600, ext. 129.
ACCOUNTING INFORMATION
Selection of the independent auditors is made by the Board of Directors
upon consultation with the Audit Committee. The Company's Independent Public
Accountants for the year ended December 31, 1999 were Grant Thornton LLP,
which the Company engaged on April 29, 1999. Prior to this engagement, the
Company had not consulted with Grant Thornton LLP regarding any of the matters
described in Item 304(a)(2) of Regulation S-K during the fiscal years ended
December 31, 1997 and 1998, or through the interim period ending April 29,
1999. The Audit Committee will vote upon the selection of auditors for the
current fiscal year at a future meeting. Grant Thornton LLP is expected to
have representatives at the annual meeting of stockholders who will be
available to respond to appropriate questions at that time and have an
opportunity to make a statement if they desire to do so.
On March 23, 1999, Arthur Andersen LLP informed the Company that it had
declined to stand for re-appointment as the Company's independent accountant
for the 1999 fiscal year. Arthur Andersen LLP indicated that as a result of
the confirmation by the United States Bankruptcy Court for the Northern
District of Illinois of the Company's Second Amended Plan of Reorganization,
the Company was considered by the firm to be a "new client", and the firm was
not currently accepting new audit engagements in the sub prime consumer
finance industry.
The audit reports of Arthur Andersen LLP on the financial statements of the
Company for each of the Company's last two fiscal years were qualified as to
uncertainty regarding the Company's ability to continue as a going concern.
More specifically, Arthur Andersen LLP's report relating to the Company's
financial statements for the year ended December 31, 1997, noted that (i) the
Company had incurred losses in 1997 and 1996 and was continuing to incur
losses in 1998, (ii) all of the Company's debt was subject to acceleration or
had matured by its terms as a result of the Company's defaults of its various
lending agreements, (iii) the Company was a defendant in various litigation
arising from the restatement of previously reported financial information for
1995 and interim earnings in 1996, and (iv) such matters raised doubt about
the Company's ability to continue as a going concern. Similarly, Arthur
Andersen LLP's report relating to the Company's financial statements for the
year ended December 31, 1998, noted that (i) the Company had incurred losses
in 1996 through 1998 and was continuing to incur losses in 1999, (ii) the
continuation of the business after the effective date of the Company's Second
Amended Plan of Reorganization was dependent on the Company's ability to
achieve sufficient cash flow to meet its restructured debt obligations, and
(iii) such matters raised substantial doubt about the Company's ability to
continue as a going concern. The audit reports of Arthur Andersen LLP on the
financial statements for the Company's last two fiscal years did not contain
any adverse opinion or disclaimer of opinion, nor was either opinion qualified
or modified as to audit scope or accounting principles.
15
<PAGE>
During the two most recent fiscal years of Arthur Andersen LLP's
engagement, there were no disagreements with Arthur Andersen LLP on any matter
of accounting principles or practices, financial statement disclosure or
auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of Arthur Andersen LLP, would have caused it to make reference to
the subject matter of the disagreements in connection with its report. There
have occurred no "reportable events" within the meaning of Item 304(a)(1)(v)
of Regulation S-K during the Company's two most recent fiscal years.
The Company requested that Arthur Andersen LLP furnish it with a letter
addressed to the Securities and Exchange Commission ("SEC") stating whether or
not it agrees with the above statements. Such letter dated March 26, 1999, has
been filed as Exhibit 16 to the Company's Current Report on Form 8-K dated
March 26, 1999.
OTHER MATTERS
The Board of Directors knows of no other proposals which may be presented
for action at the meeting. However, in accordance with the Company's bylaws,
if any other proposal properly comes before the meeting, the persons named in
the proxy form enclosed will vote in accordance with their judgment upon such
matter.
By Order of the Board of Directors
Mark E. Dapier
Secretary
March 27, 2000
16
<PAGE>
Appendix A
MFN FINANCIAL CORPORATION
ANNUAL EXECUTIVE INCENTIVE BONUS PLAN
I. Article Establishment, Purpose and Duration
The MFN Financial Corporation Annual Executive Incentive Bonus Plan (the
"Plan") is hereby established by MFN Financial Corporation (the "Company").
The purpose of the Plan is to promote the success and enhance the value of the
Company by providing selected executives of the Company with the opportunity
to earn additional compensation based upon Company, and in certain cases
individual, performance. The Plan and the grant of awards hereunder are
expressly conditioned upon the Plan's approval by the stockholders of the
Company. The Plan is adopted, subject to stockholder approval, effective as of
January 1, 2000, and shall remain in effect, subject to the right of the Board
of Directors to amend or terminate the Plan at any time pursuant to Article 7,
below, until December 31, 2004.
II. Article Committee
The Plan shall be administered by a committee, designated by the Board of
Directors of the Company (the "Board"), comprised solely of two or more Board
members who are "outside directors" within the meaning of Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Committee").
III. Article Eligibility
Only those executives selected by, or pursuant to authority delegated by,
the Committee shall be eligible to participate in the Plan. References herein
to a "participant" shall refer to only those executives who have been selected
for participation in the Plan.
IV. Article Awards
No later than March 1 of each calendar year, the Committee shall establish
threshold, plan and goal Company performance objectives for the calendar year
(the "Objectives") based on one or more of the following criteria for the
Company's performance: return on equity, earnings per share, credit quality,
cost control, systems implementation, loan volume, receivables growth, revenue
growth, market share, special projects and net income. The Committee shall
also determine at that time the specific bonus amounts which may be earned by
the participants upon the Company's attainment of various levels of
performance with respect to the Objectives; provided, however, that no bonus
shall be earned unless at least threshold performance is achieved with respect
to one or more Objectives for the calendar year. However, for participants
other than the Chief Executive Officer of the Company (the "CEO") and the
Chief Operating Officer of the Company (the "COO"), the Committee may delegate
to the CEO (who may further delegate to the COO) (a) the selection of such
additional participants, (b) the establishment of threshold, plan and goal
levels of performance for the calendar year based on the Objectives for the
year and/or on other objectively determinable measures of performance related
to the individual participant's responsibilities, (c) the setting of specific
bonus amounts which may be earned by those participants upon attainment of
various levels of performance, and (d) certification as to the levels of
performance achieved with respect to criteria other than the Objectives
established by the Committee. All bonus opportunities shall be described as
percentages of the base salaries of participants. However, in no event may a
participant receive, with respect to any calendar year, payments under the
Plan aggregating more than two times such participant's base annual salary as
in effect on the first day of such calendar year.
V. Article Payouts
The Committee shall certify as to the levels of performance achieved with
respect to the Objectives established by the Committee for each year and shall
authorize prompt payment of the bonuses earned.
17
<PAGE>
VI. Article Termination
In the event a participant's employment is terminated by reason of death,
disability or retirement or by the Company without cause, the participant
shall receive a prorated payment, which shall be determined by the Committee
in its reasonable discretion, based upon the length of time the participant
was included in the Plan during the calendar year then in progress. In the
event a participant's employment is terminated for any other reason, all of
the participant's rights to an award for the year then in progress shall be
forfeited.
VII. Article Amendment
The Plan may be amended, modified or terminated by the Board, subject to
the approval of the stockholders of the Company if required for compliance
with Section 162(m) of the Internal Revenue Code of 1986, as amended;
provided, however, that no such action may, without the written consent of the
participant who is affected, adversely affect the rights of any participant
with respect to a bonus opportunity which has previously been awarded by, or
pursuant to authority delegated by, the Committee.
VIII. Article Withholding
The Company shall have the power and the right to deduct or withhold, or
require a participant to remit to the Company, an amount sufficient to satisfy
Federal, state and local taxes (including the participant's FICA obligation)
required by law to be withheld with respect to any taxable event arising as a
result of the Plan.
IX. Article Beneficiaries
The Committee shall establish such procedures as it deems appropriate for a
participant to designate a beneficiary or beneficiaries to whom any amounts
payable in the event of the participant's death are to be paid.
X. Article Miscellaneous
A. Headings. The headings contained in the Plan are for reference purposes
only and shall not affect the meaning or interpretation of the Plan.
B. Severability. If any provision of the Plan shall for any reason be held
to be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision hereof, and the Plan shall be construed as if such
invalid or unenforceable provision were omitted.
C. Successors and Assigns. The Plan shall inure to the benefit of and be
binding upon each successor and assign of the Company. All obligations imposed
upon a participant, and all rights granted to the Company hereunder, shall be
binding upon the participant's heirs, legal representatives and successors.
D. Controlling Law. The Plan and all awards made and actions taken
hereunder shall be governed by and construed in accordance with the laws of
the State of Illinois (other than its law regarding choice of law).
18
<PAGE>
PROXY PROXY
MFN FINANCIAL CORPORATION
100 Field Drive, Lake Forest, Illinois 60045
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Edward G. Harshfield and Jeffrey B. Weeden and
Mark E. Dapier, or any of them, as proxies, with full power of substitution, to
represent and to vote, as designated below, all of the undersigned's Common
Stock in MFN Financial Corporation at the annual meeting of stockholders of MFN
Financial Corporation to be held on Tuesday, April 25, 2000, at 10:00 a.m.,
local time, at the North Shore Hotel Moraine, 700 Sheridan Road, Highwood,
Illinois, and at any adjournment thereof, with the same authority as if the
undersigned were personally present.
THE UNDERSIGNED HEREBY REVOKES ANY PROXY HERETOFORE GIVEN AND ACKNOWLEDGES
RECEIPT OF THE NOTICE AND PROXY STATEMENT FOR THE ANNUAL MEETING.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1 AND 2.
(Continued and to be signed on reverse side.)
MFN FINANCIAL CORPORATION
Please mark vote in oval in the following manner using dark ink only.
1. Election of Directors -
Thomas L. Gooding, Andrew C. Halvorsen,
Edward G. Harshfield, Michael A. Kramer,
Martin L. Solomon, Robert Stucker,
George R. Zoffinger
FOR WITHHOLD FOR ALL
ALL ALL (EXCEPT*)
/__/ /__/ /__/
---------------------
*Nominee Exception(s)
2. Approval of the MFN Financial Corporation
Annual Executive Incentive Bonus Plan.
FOR AGAINST ABSTAIN
/__/ /__/ /__/
3. In their discretion, the Proxy is authorized to
vote upon such other business as may properly
come before the meeting.
(If the stock is registered in the name
of more than one person, the proxy
should be signed by all named holders.
If signing as attorney, executor,
administrator, trustee, guardian,
corporate official, etc., please give
full title as such.)
____________________________(Signature)
DATED:___________________________, 2000
____________________________(Signature)
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
