EXHIBIT 10.1
FARMERS & MERCHANTS STATE BANK
CHANGE IN CONTROL -
SEVERANCE COMPENSATION AGREEMENT
This is a Change in Control - Severance Compensation Agreement (the
"Agreement") made by and between Farmers & Merchants State Bank ("Company") and
Xxxxxxx X. Xxx ("Executive").
RECITALS
WHEREAS, Company is a bank which is engaged in the business of banking and
businesses incidental thereto.
WHEREAS, Executive possesses unique skills, knowledge and experience
relating to the business of the Company.
WHEREAS, Company desires to recognize the past and future services of
Executive, and, in that connection, Executive desires to be assured that, in the
event of a change in the control of Company, Executive will be provided with an
adequate severance payment for termination without cause or as compensation for
Executive's Severance because of a material change in his duties and functions.
WHEREAS, Company desires to be assured of the objectivity of Executive in
evaluating a potential change of control and advising whether or not a potential
change of control is in the best interest of Company and its shareholders.
WHEREAS, Company desires to induce Executive to remain in the employ of the
Company (as hereinafter defined) following a change of control to provide for
continuity of management.
NOW, THEREFORE, in consideration of the premises and of their mutual
covenants expressed in this Agreement, the parties hereto make the following
agreement, intending to be legally bound thereby:
SECTION 1 - DEFINITIONS
A. Board - "Board" shall mean the Board of Directors of Company.
B. Cause - "Cause" shall mean and be limited to Executive's (a) criminal
dishonesty, (b) failure to perform his duties on an exclusive and
substantially full-time basis (unless unable to so perform by reason of
disability), (c) failure to act in accordance with any specific substantive
instructions given by Company with respect to Executive's performance of
duties normally associated with his position prior to the Change in Control
(unless unable to so perform by reason of disability), or (d) engaging in
conduct which could be materially damaging to Company without a reasonable
good faith belief that such conduct was in the best interest of Company.
C. Change in Control - A "Change" in Control" shall result if, and shall be
deemed to have occurred on the date of, a transaction pursuant to which:
1. Any person or group (as such terms are used in connection with
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13(d)(3) and 13(d)(5) under the
Exchange Act), directly or indirectly, of securities of the Company
representing 35% or more of the combined voting power of the Company's
then outstanding securities;
2. A merger, consolidation, sale of assets, reorganization, or proxy
contest is consummated and, as a consequence of which, members of the
Board in office immediately prior to such transaction or event
constitute less than a majority of the Board thereafter;
3. During any period of 24 consecutive months, individuals who at the
beginning of such period constitute the Board (including for this
purpose any new director whose election or nomination for election by
the Company's stockholders was approved by a vote of at least one-half
of the directors then still in office who were directors at the
beginning of such period) cease for any reason to constitute at least
a majority of the Board; or
4. A merger, consolidation or reorganization is consummated with any
other corporation pursuant to which the shareholders of the Company
immediately prior to the merger, consolidation or reorganization do
not immediately thereafter directly or indirectly own more than fifty
percent (50%) of the combined voting power of the voting securities
entitled to vote in the election of directors of the merged,
consolidated or reorganized entity.
Notwithstanding the foregoing, no trust Department or designated fiduciary
or other trustee of such trust department of the Company or a subsidiary of
the Company, or other similar fiduciary capacity of the Company with direct
voting control of the stock shall be treated as a person or group within
the meaning of subsection C.1. hereof. Further, no profit-sharing, employee
stock ownership, employee stock purchase and savings, employee pension, or
other employee benefit plan of the Company or any of its subsidiaries, and
no Trustee of any such plan in its capacity as such Trustee, shall be
treated as a person or group within the meaning of subsection C.1. hereof.
D. Code - "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
E. Company - "Company" shall include Farmers & Merchants Bancorp, Inc. and any
members of its Affiliated Group, as that term is defined in Section 1504 of
the Code, and shall include any predecessor corporations of the Company and
its Affiliated Group.
F. Disability - "Disability" shall mean disability as determined under the
plans, policies or programs applicable to the Executive and if no such
plan, policy or program exists, "disability" shall mean the Executive is
unable to perform the material and substantial functions or duties of the
Executive's position due a medical condition (including mental conditions).
G. Exchange Act - "Exchange Act" means The Securities Exchange Act of 1934.
H. One Year of Compensation - "One Year of Compensation" means the annual
equivalent of the highest rate of the Executive's salary in effect during
the one-year period ending with the date of the Change in Control, and the
average amount paid in bonus and other incentive compensation for the three
year period ending with the date of the Change in Control.
SECTION 2 - TERM OF AGREEMENT
This Agreement shall be effective from the date of this Agreement until the
Agreement Termination Date, which is the later of: (i) Company's payment of any
amounts due under Sections 4 and 6, and (ii) the earliest of:
A. The date this Agreement is mutually rescinded.
B. The date prior to a Change in Control on which the Executive's employment
with the Company is terminated by death, retirement, disability,
resignation, or dismissal for any reason.
C. The date Executive's employment is terminated for Cause after a Change in
Control.
D. The date which is two (2) years after the date of a Change in Control.
E. The date which the Company or any other member of its Affiliated Group, and
over which Executive has managerial control, or which employs Executive,
and which is a depository institution that is insured by an agency of any
state or the United States Federal Government:
1. becomes insolvent; or
2. has appointed any conservator or receiver; or
3. is determined by an appropriate federal banking agency to be in a
troubled condition, as defined in the applicable law and regulations;
or
4. is assigned a composite rating of 4 or 5 by the appropriate federal
banking agency or is informed in writing by the Federal Deposit
Insurance Corporation that it is rated a 4 or 5 under the Uniform
Financial Institution's Rating System of the Federal Financial
Institutions Examination Council; or
5. has initiated against it by the Federal Deposit Insurance Corporation
a proceeding to terminate or suspend deposit insurance; or
6. reasonably determines in good faith and with due care that the
payments called for under this Agreement, or the obligations and
promises assumed and made under this Agreement have become proscribed
under applicable law or regulations. Provided, however, if such law or
regulations apply prospectively only, or for some other reason do not
apply to this Agreement, then this Agreement shall not be deemed by
Company to be proscribed.
SECTION 3 - REDUCTION IN COMPENSATION PROSCRIBED AFTER A CHANGE IN CONTROL
During the term of this Agreement from the date of a Change in Control forward,
Executive shall receive as compensation, while still employed by Company, a
salary at a rate no less than the highest rate in effect during the one-year
period before the Change in Control, and shall, in addition, be entitled to
receive a bonus equal to at least the average of the last three years of bonuses
paid before the Change in Control. In addition, during such period, the Company
shall provide for Executive all of the fringe benefits and other perquisites as
provided to any similarly situated employee of the Company, including but not
limited to retirement benefits, health, disability, dental, life insurance, club
memberships, etc., all of which shall be at levels and amounts no less favorable
than levels and amounts in effect as of the Change in Control and at the same
cost to Executive as provided to any similarly situated employee of Company.
SECTION 4 - PAYMENTS AND BENEFITS FOR TERMINATION OF EMPLOYMENT RELATED TO A
CHANGE IN CONTROL
A. If during the term of this Agreement and:
1. Within four (4) months before the date of a Change in Control, as
defined in Agreement Section 1.C. (1, 2 and 4), Executive resigns
because he has: (i) had his compensation reduced, or (ii) had his
principal place of employment transferred away from Xxxxxx County,
Defiance County or a county contiguous to Xxxxxx County Ohio;
2. Within two (2) years after the date of a Change in Control, Executive
is discharged without Cause or Executive resigns because he has: (i)
had his compensation reduced or, (ii) had his principal place of
employment transferred away from Xxxxxx County, Defiance County or a
county contiguous to Xxxxxx County Ohio ; or
3. Within one year before the date of a Change in Control, the Executive
is discharged by Company other than for Cause;
Then the Company shall make the payments to Executive set forth in
subsection B of this Section 4.
B. In the event of the termination of Executive's employment as described in
Section 4.A. Executive shall be entitled to receive One Year of
Compensation paid in either of the following methods as determined in the
sole discretion of the Company:
1. in one lump sum payment within fourteen (14) days of the later of
termination or Change in Control; or
2. in twenty-four (24) semi-monthly payments of 1/24 of One Year of
Compensation beginning within fourteen (14) days of the later of
termination or Change in Control.
C. IF EXECUTIVE'S EMPLOYMENT IS TERMINATED AS DESCRIBED IN SECTION 4.A. (1 OR
2), THEN IN ADDITION TO THE ABOVE CASH PAYMENT(S), COMPANY SHALL CONTINUE
AT NO COST TO EXECUTIVE FOR THE TERM OF THE BENEFIT PERIOD AS DEFINED
BELOW, EXECUTIVE'S COVERAGE IN COMPANY'S HEALTH, DISABILITY, DENTAL, AND
LIFE INSURANCE AT THE SAME LEVELS THAT HAD BEEN PROVIDED IMMEDIATELY PRIOR
TO HIS TERMINATION OF EMPLOYMENT. THE BENEFIT PERIOD SHALL COMMENCE ON THE
DATE OF TERMINATION OF THE EXECUTIVE'S EMPLOYMENT AND SHALL END ON THE LAST
DAY OF THE 12TH CONSECUTIVE WHOLE MONTH THEREAFTER.
D. In the event Executive dies before collecting all amounts and benefits due
under this Section, any payments owed shall be paid to the person or
persons as stated in the last designation of beneficiary concerning this
Agreement signed by Executive and filed with Company, and if no such
designation has been made, then to the surviving spouse, and if there is no
surviving spouse, to his/her estate.
E. The payments and benefits provided for herein are in lieu of compensation,
benefits or amounts the Executive might otherwise be entitled to from the
Company by reason of termination of employment (except as required or
mandated by law).
F. In the event the payments required under this Agreement, when added
together with any other amounts required to be included by Executive under
the provisions of the Code, result in an "Excess Parachute Payment," as
that term is defined in Section 280G of the Code, then the amount of the
payments provided for in this Agreement shall be increased in an amount
equal to 140% of any excise tax imposed under Section 4999 (or any
successor thereto) of the Code and otherwise payable by the Executive.
G. Any subsequent employment by Executive shall not reduce the obligation of
the Company to make the full payments and provide the full benefits
specified herein and Executive shall have no obligation to seek other
employment or otherwise mitigate the effect of his discharge from
employment.
SECTION 5 - PROVISION FOR OUTPLACEMENT SERVICES
In the event of the termination of employment of Executive as specified in
Section 4.A. (1 and 2) of this Agreement, Executive shall be entitled to six
months of out-placement services following termination of employment. Such
services shall include employment counseling, resume services, executive
placement services and similar services generally provided to executives by
professional executive out placement service providers. All costs of such out
placement services shall be paid for by the Company.
SECTION 6 - ARBITRATION
Subject to the Company's right to seek injunctive relief under Section 8 of this
Agreement, the parties hereto agree to arbitrate any issue, misunderstanding,
disagreement or dispute in connection with the terms in effect in this Agreement
before an arbitrator or an arbitration panel as hereinafter. The parties may
agree to one mutually acceptable arbitrator. If the parties have been unable to
agree upon one arbitrator, then each party may appoint one arbitrator and the
two appointed arbitrators shall appoint a third neutral arbitrator. If the
arbitrators selected by the parties are unable or fail to agree upon the third
arbitrator, an Ohio common pleas court judge located in Xxxxxx County Ohio
chosen at random shall select the third arbitrator. Failure by a party to
appoint an arbitrator, within 30 days of receipt of notice of the appointment of
an arbitrator by the other party, shall be deemed as acceptance of arbitration
by such single arbitrator. The arbitration shall occur in Archbold, Ohio, or
such other place as mutually agreed upon. The prevailing party shall be entitled
to recover any and all costs associated with any arbitration proceeding (and any
subsequent proceeding to enforce rights thereunder) including the recovery of
reasonable attorneys fees. Judgment on the award rendered by the arbitrator(s)
may be entered in any court having jurisdiction thereof.
SECTION 7 - RIGHT TO OTHER BENEFITS
Nothing in this Agreement shall abridge, eliminate, or cause Executive to lose
Executive's right or entitlement to any other Company benefit to which Executive
may be entitled due to his status as an employee under any plan or policy of
Company on such terms and conditions as are required of any employee under any
plan or policy of Company. Further, nothing in this Agreement shall create in
Executive any greater rights or entitlements, except as specified in this
Agreement. The plans and policies referred to in this Section 7 include, but are
not limited to, qualified and nonqualified retirement plans, life insurance
plans, dental, disability or health insurance benefits, severance policies, and
accrued vacation pay.
SECTION 8 - MISCELLANEOUS
A. Notice and Payments
ALL PAYMENTS REQUIRED OR PERMITTED TO BE MADE UNDER THE PROVISIONS OF THIS
AGREEMENT, AND ALL NOTICES AND OTHER COMMUNICATIONS REQUIRED OR PERMITTED
TO BE GIVEN OR DELIVERED UNDER THIS AGREEMENT TO COMPANY OR TO EXECUTIVE,
WHICH NOTICES OR COMMUNICATIONS MUST BE IN WRITING, SHALL BE DEEMED TO HAVE
BEEN GIVEN IF DELIVERED BY HAND, OR MAILED BY FIRST-CLASS MAIL, ADDRESSED
AS FOLLOWS:
1. If to Company:
Farmers & Merchants State Bank
Attn: Chairman, Compensation Committee
000-00 X. Xxxxxxxx Xxxxxx
Xxx 000
Xxxxxxxx, XX 00000
2. If to Executive:
Xxxxxxx X. Xxx
00000 Xxxx Xxx
Xxxxxxx, XX 00000
Company or Executive may, by notice given to the other from time to time
and at any time, designate a different address for making payments required
to be made, and for the giving of notices or other communications required
or permitted to be given, to the party designating such new address.
B. Payroll Taxes
ANY PAYMENT REQUIRED OR PERMITTED TO BE MADE OR GIVEN TO EXECUTIVE UNDER
THIS AGREEMENT SHALL BE SUBJECT TO THE WITHHOLDING AND OTHER REQUIREMENTS
OF APPLICABLE LAWS, AND TO THE DEDUCTION REQUIREMENTS OF ANY BENEFIT PLAN
MAINTAINED BY COMPANY IN WHICH EXECUTIVE IS A PARTICIPANT, AND TO ALL
REPORTING, FILING AND OTHER REQUIREMENTS IN RESPECT OF SUCH PAYMENTS, AND
COMPANY SHALL USE ITS BEST EFFORTS PROMPTLY TO SATISFY ALL SUCH
REQUIREMENTS.
C. Governing Law
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF OHIO.
D. Duplicate Originals
THIS AGREEMENT MAY BE EXECUTED IN ONE OR MORE COUNTERPARTS, EACH OF WHICH
SHALL BE DEEMED TO BE A DUPLICATE ORIGINAL, BUT ALL OF WHICH, TAKEN
TOGETHER, SHALL CONSTITUTE A SINGLE INSTRUMENT.
E. Captions
THE CAPTIONS CONTAINED IN THIS AGREEMENT ARE INCLUDED ONLY FOR CONVENIENCE
OF REFERENCE AND DO NOT DEFINE, LIMIT, EXPLAIN OR MODIFY THIS AGREEMENT OR
ITS INTERPRETATIONS, CONSTRUCTION OR MEANING AND ARE IN NO WAY TO BE
CONSTRUED AS A PART OF THIS AGREEMENT.
F. Severability
IF ANY PROVISION OF THIS AGREEMENT OR THE APPLICATION OF ANY PROVISION TO
ANY PERSON OR ANY CIRCUMSTANCES SHALL BE DETERMINED TO BE INVALID OR
UNENFORCEABLE, SUCH PROVISION OR PORTION THEREOF SHALL NEVERTHELESS BE
EFFECTIVE AND ENFORCEABLE TO THE EXTENT DETERMINED REASONABLE. SUCH
DETERMINATION SHALL NOT AFFECT ANY OTHER PROVISION OF THIS AGREEMENT OR THE
APPLICATION OF SAID PROVISION TO ANY OTHER PERSON OR CIRCUMSTANCE, ALL OF
WHICH OTHER PROVISIONS SHALL REMAIN IN FULL FORCE AND EFFECT, AND IT IS THE
INTENTION OF COMPANY AND EXECUTIVE THAT IF ANY PROVISION OF THIS AGREEMENT
IS SUSCEPTIBLE OF TWO OR MORE CONSTRUCTIONS, ONE OF WHICH WOULD RENDER THE
PROVISION ENFORCEABLE AND THE OTHER OR OTHERS OF WHICH WOULD RENDER THE
PROVISIONS UNENFORCEABLE, THEN THE PROVISIONS SHALL HAVE THE MEANING WHICH
RENDERS IT ENFORCEABLE.
G. Number and Gender
WHEN USED IN THIS AGREEMENT, THE NUMBER AND GENDER OF EACH PRONOUN SHALL BE
CONSTRUED TO BE SUCH NUMBER AND GENDER AS THE CONTEXT, CIRCUMSTANCES OR ITS
ANTECEDENT MAY REQUIRE.
H. Successors and Assigns
THIS AGREEMENT SHALL INURE TO THE BENEFIT OF AND BE BINDING UPON THE
SUCCESSORS AND ASSIGNS (INCLUDING SUCCESSIVE, AS WELL AS IMMEDIATE,
SUCCESSORS AND ASSIGNS) OF COMPANY; PROVIDED, HOWEVER, THAT COMPANY MAY NOT
ASSIGN THIS AGREEMENT OR ANY OF ITS RIGHTS OR OBLIGATIONS HEREUNDER TO ANY
PARTY OTHER THAN A CORPORATION WHICH SUCCEEDS TO SUBSTANTIALLY ALL OF THE
BUSINESS AND ASSETS OF COMPANY BY MERGER, CONSOLIDATION, SALE OF ASSETS OR
OTHERWISE. THIS AGREEMENT SHALL INURE TO THE BENEFIT OF AND BE BINDING UPON
THE SUCCESSOR AND ASSIGNS (INCLUDING SUCCESSIVE, AS WELL AS IMMEDIATE,
SUCCESSORS AND ASSIGNS) OF EXECUTIVE; PROVIDED, HOWEVER, THAT THE RIGHT OF
EXECUTIVE UNDER THIS AGREEMENT MAY BE ASSIGNED ONLY TO HIS PERSONAL
REPRESENTATIVE OR TRUSTEE OR BY WILL OR PURSUANT TO APPLICABLE LAWS OF
DESCENT AND DISTRIBUTION.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
on and to be effective on December 16, 2005.
SECTION 1 IN THE PRESENCE OF: EXECUTIVE
/s/ Xxxxxxx X. Xxx
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Xxxxxxx X. Xxx
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IN THE PRESENCE OF: FARMERS & MERCHANTS STATE BANK
By: /s/ Xxx X. Xxxxxxxxxx
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Its: Chairman of the Board
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