Alan P. Hoblitzell Jr. will receive $4.2 million in cash plus other benefits as a result of his resignation as chairman of financially troubled MNC Financial Inc., the region's largest bank company.

Sources said the severance package, known as a "golden parachute," was approved by MNC's board of directors last week and includes the $4.2 million lump-sum payment, an annual pension of more than $280,000 and other benefits.

Although it is considered common practice for America's biggest corporations to use hefty severance payments to ease the transition when top management changes, employees of MNC's three bank subsidiaries said yesterday they are outraged by Hoblitzell's award and criticized the board for approving it.

Golden parachutes and other special severance arrangements often spark controversy among employees and investors, particularly when shareholders suffer while a departing executive is paid well.

MNC shareholders have lost more than 70 percent of the value of their stock in the past year.

The agreement with Hoblitzell is the second multimillion-dollar payment to a top executive of a beleaguered local company in recent months. In July, the chairman of Kay Jewelers Inc., Kay Anthonie van Ekris, received a promise of $10 million over five years following his negotiation of the sale of that company to Ratners PLC.

That sum was promised in return for his consulting services and agreement not to compete against the company in the future.

The furor over large executive severance payments has recently been raised nationally because of agreements to pay $10 million to Peter Cohen, the departing chairman of the troubled Shearson Lehman Brothers Inc. brokerage, and $30 million to Frank Lorenzo, the departing chairman of struggling Texas Air Corp., now Continental Holdings.

Compensation experts say high severance payments are needed to attract top management and that their generous terms are simply a reflection of high salaries.

In addition, they say the payments can benefit shareholders by allowing executives to concentrate on getting the best takeover deal rather than rejecting takeover bids just to hold onto their jobs.

In the Kay Jewelers's case, the $10 million severance package has not been a source of controversy. Shareholders were paid $17 for shares that had been trading for less than $10 at the time the sale was negotiated. And although more than 300 employees in Northern Virginia have lost their jobs, most have also received attractive severance packages.

The MNC arrangement with Hoblitzell, though, has already been a source of controversy.

"This certainly wasn't a reward for outstanding performance," said one executive of American Security Bank, one of MNC's subsidiary banks.

"This kind of payment is way out of line with what he deserves."

Hoblitzell announced last week that he would accept early retirement as top executive of MNC -- also parent of Maryland National Bank and Equitable Bank -- and turn the reins over to Cleveland insurance and real estate mogul Alfred Lerner, MNC's largest shareholder.

Hoblitzell's decision to step aside came amid growing concern about the financial health of the bank company, which lost $75 million in the second quarter because of mounting problems with its commercial real estate loans.

The employees' anger has been buoyed by top management's recent decision to restructure the bank company, a move that already has prompted the ouster of more than a dozen senior executives and will culminate with layoffs at all levels of the bank company.

The golden parachute was outlined in Hoblitzell's contract and would have been triggered in the event of an MNC takeover.

But there has been no formal takeover of the company, and sources said the severance agreement needed board approval to take effect when Hoblitzell retired.

MNC spokesman Daniel J. Finney confirmed that the board had approved a severance package for Hoblitzell, but he declined to disclose the terms and said Hoblitzell was unavailable to comment.

Other MNC board members declined to be interviewed.

During his six years as chairman, Hoblitzell led MNC through a period of tremendous growth, with a series of acquisitions that ultimately combined the financial power of three of the region's biggest banks.

The mergers gave MNC total assets of $27 billion, making it one of the largest bank holding companies in the nation, and its record earnings last year appeared to solidify MNC's reputation as one of America's strongest financial institutions.

But in recent months, MNC has seen its troubled loans skyrocket and its stock price plummet because of the slowdown in the local real estate market, an area that once provided the bank with large profits.

Those problems also resulted in a cash crunch at the holding company because Wall Street brokers decided that MNC had become too risky an investment.

Lerner, already MNC's largest shareholder, helped ease the cash shortage by promising to pump $180 million into the institution in exchange for shares of preferred stock.

Sources said it is this agreement, which would give Lerner a 23 percent stake in MNC, that prompted the change in top management last week.

Staff writer Kara Swisher contributed to this report.