EXHIBIT 10.13
THIS
SEVERANCE COMPENSATION AGREEMENT (the “Agreement”), has been made on
March 9, 2006 by FENTURA FINANCIAL, INC., a Michigan corporation (the
“Company”), THE STATE BANK, (the “Bank”) and XXXXXXX X.
XXXXXX, an individual (the “Executive”).
BACKGROUND STATEMENT:
The
Executive is a principal officer of the Bank and the Company and his continued services
are important to the Bank, its depositors and customers, and the Company’s
shareholders. The Bank and the Company believe it is in their best interests that the
Executive continue to render services to the Bank and the Company if a Change of Control
is threatened or occurs, free from the distractions and vexations which might result if
his personal economic security is made uncertain as a result of an impending Change of
Control.
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1. |
Definitions. The following words and phrases have the following meanings: |
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a) |
“Cause” means (i) the willful and continuing failure by
the Executive to substantially perform his duties with the Bank or the Company
(other than any such failure resulting from the Executive’s death or
Disability) and which is not remedied in a reasonable period of time after
receipt by Executive of written notice from the Bank specifying the duties the
Executive has failed to perform, or (ii) the willful and continued engaging
by Executive in gross misconduct that is materially injurious to the Bank or the
Company and which is not ceased within a reasonable period of time after receipt
by Executive of written notice from the Bank specifying the misconduct and the
injury, or (iii) an adjudication of the Executive’s guilt of any crime
involving a serious and substantial breach of the Executive’s fiduciary
duties to the Bank. No act or failure to act on the Executive’s part shall
be considered “willful” unless done, or omitted to be done, by him in
bad faith and without reasonable belief that his action or omission was in the
best interest of the Bank or the Company. |
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b) |
“Change in Control” means (i) the acquisition, directly,
indirectly and/or beneficially, by any person or group, of more than fifty
percent (50%) of the voting securities of the Company or the Bank,
(ii) the occurrence of any event at any time during any two (2) year
period which results in a majority of the Board of Directors of the Company or
the Bank being comprised of individuals who were not members of such Board at
the commencement of that two (2) year period (the “Incumbent
Board”); provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by the
Company’s or the Bank’s shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding for this purpose any such individual whose initial assumption of the
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a person other than the
Incumbent Board, (iii) a sale of all or substantially all of the assets of
the Company or the Bank to another entity, or (iv) a merger or
reorganization of the Company or the Bank with another entity. |
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c) |
“Compensation” means with respect to the period under
consideration, the aggregate of all amounts paid by the Company and the Bank to
and includable in the Executive’s earnings as base salary, bonuses,
commissions, fees and any other compensation, but excluding contributions made
to any welfare and pension benefit plans by the Bank and/or Company at its or
their sole expense. |
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d) |
“Disability” means any physical or mental impairment which
meets the definition of disability found in the long-term or short-term
disability policy insuring the Executive at the time disability is alleged or if
no such policy is in effect at that time, any physical or mental impairment
that, on the basis of qualified medical opinion of three (3) medical
doctors, has rendered Executive wholly and permanently unable to engage in the
regular and continuous occupation or employment for remuneration or profit of a
nature similar to his employment with the Bank for a period of six
(6) consecutive months or more. |
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e) |
“Good Reason” means any of the following, as determined by the
Executive in his discretion: (i) the assignment to the Executive by the
Bank or the Company of any duties inconsistent with his position, duties,
responsibilities and status with the Bank or the Company immediately prior to a
Change in Control, or a change adverse to Executive in Executive’s
reporting responsibilities, titles, terms of employment (including bonus,
compensation, fringe benefits and vacation entitlement) or offices as in
effect immediately prior to a Change in Control; or (ii) the Bank or the
Company requiring Executive to be based anywhere other than within fifteen
(15) miles of his present office location, or to travel on business of the
Bank to an extent substantially greater than Executive’s present business
travel obligations; or (iii) the failure by the Company to obtain the
assumption of this Agreement as contemplated in Section 6 hereof. If any of
the foregoing result from, or follow, a termination of employment for Cause,
then Good Reason will not have occurred. |
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2. |
Income Protection Benefits. If the Executive is an employee of the Bank
or the Company when a Change in Control occurs, and the Executive’s
employment is thereafter terminated without Cause either by the Bank or the
Company, or by the Executive for Good Reason, or by any party because of the
Executive’s death or Disability, then: |
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a) |
The Company and the Bank shall pay to the Executive, in a lump sum in cash
within 30 days after the date of termination of employment the aggregate of the
following amounts: |
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i) |
that portion of the Executive’s annual base salary and director’s fees
through the date of termination not theretofore paid, and |
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ii) |
the product of (x) the sum of all commissions and bonuses of any kind paid
or payable to Executive in the calendar year immediately preceding the year in
which termination of employment occurs multiplied by (y) a fraction, the
numerator of which is the number of days in the current calendar year through
the date of termination, and the denominator of which is 365, and |
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iii) |
any compensation previously deferred by the Executive (together with any accrued
interest or earnings thereon), and |
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iv) |
any accrued vacation pay. |
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b) |
The Executive shall have the right within 90 days following termination of
employment to exercise any stock options awarded him prior to the termination of
his employment. |
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c) |
The Bank and/or the Company shall thereafter pay to the Executive an annual
amount equal to 50% of the highest amount of the Executive’s annual
Compensation in the five calendar years immediately preceding Executive’s
termination for a period of 1 year from and after the Executive’s
termination of employment, payable in equal monthly installments commencing the
first day of the month coinciding with or immediately following the
Executive’s termination of employment. If the Executive dies after the
Bank’s and the Company’s obligation to make these payments is
triggered, the Bank and the Company shall thereafter pay to the Executive’s
Beneficiary a lump sum amount equal to the present value of the unpaid monthly
installments, discounted using a ten percent (10%) per annum interest rate.
In lieu of the foregoing installments, the Executive may elect by written notice
to the Bank within ninety (90) days of the Executive’s termination of
employment to receive a lump sum amount equal to the present value of the
monthly installments, discounted by using a ten percent (10%) per annum
interest rate. |
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d) |
The Bank and/or the Company shall provide to the Executive, at its expense,
hospital and medical insurance coverage of the same or equivalent scope as he
was covered by immediately prior to termination of his employment for a period
of 1 year after the Executive’s termination of employment. |
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3. |
Maximum Benefits Upon Change of Control. If the Bank’s usual
certified public accountants determine that any payment by the Bank or the
Company to or for the benefit of the Executive (whether paid or payable pursuant
to the terms of this Agreement or otherwise) (the
“Payment”) would be nondeductible by the Bank or the Company for
Federal Income Tax purposes because of Section 280G of the Internal Revenue
Code of 1986, as amended (the “Code), then the aggregate present value of
amounts payable to or for the benefit of the Executive pursuant to this
Agreement (the “Agreement Payments”) shall be reduced (but not
below zero) to the Reduced Amount. The “Reduced Amount” means an
amount expressed in present value, determined in accordance with
Section 280G(d)(4) of the Code, which maximizes the present value of
all Agreement Payments without causing any Payment to be nondeductible by the
Bank or the Company because of Section 280G of the Code. |
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4. |
Term. Unless earlier terminated by mutual agreement of the Company and
the Executive, this Agreement shall terminate upon the earliest of (a) the
termination of the Executive’s employment with the Bank and the Company for
any reason prior to a Change in Control; or (b) five (5) years from
the date of a Change in Control. Obligations under Section 2 of this Agreement
created prior to termination shall survive termination. |
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5. |
Termination Prior To Change in Control. Notwithstanding anything in this
agreement to the contrary, if a Change of Control occurs and (i) if the
Executive’s employment with the Company or the Bank is terminated prior to
the date on which Change of Control occurs, and if the termination of employment
(a) was at the request or suggestion of a 3rd party who has taken steps
reasonably calculated to effect the Change of Control or (b) otherwise
arose in connection with or in anticipation of the Change of Control, or
(ii) Executive has terminated his employment with Company and/or Bank for
Good Reason prior to Change of Control, then Executive shall be entitled to the
Income Protection Benefits and all other rights and privileges provided by this
Agreement. |
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6. |
Successors, Binding Agreements. |
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a) |
Any purchaser, successor or assign (whether direct or indirect), to or of all,
substantially all, or any material part of the business, properties and assets
of the Bank and/or the Company shall be bound by the terms of this Agreement,
and the Bank and the Company shall require any such purchaser, successor or
assign, by agreement in form and substance satisfactory to Executive, expressly,
absolutely and unconditionally to assume and agree to perform this Agreement in
the same manner and to the same extent that the Bank and the Company would be
required to perform if no such succession or assignment had taken place. |
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b) |
The Bank and the Company each hereby guarantee the timely payment and
performance, when due, of the other’s obligations under this Agreement. |
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c) |
This Agreement shall inure to the benefit of and be enforceable by the
Executive’s personal and legal representatives, executives, administrators,
successors, heirs, distributees, devisees and legatees. |
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7. |
Notices. Notices under this Agreement shall be in writing and shall be
deemed given when hand delivered or three (3) days after being mailed by
United States registered or certified mail, return receipt requested, postage
prepaid, as follows: |
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If to the Company
or the Bank:
If to the Executive:
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Fentura Financial, Inc.
000 X. Xxxxx Xx.
XX Xxx 000
Xxxxxx, XX 00000-0000
Xx. Xxxxxxx X. Xxxxxx
000 X. Xxxxx Xx.
Xxxxxxxxx, XX 00000
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or
to such other address as either party may designate. |
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8. |
At Will Preserved. This Agreement is intended only to provide an economic
benefit for Executive if his employment with the Bank or the Company is
terminated under the circumstances described herein. Even though this economic
benefit may be payable, Executive’s employment with the Bank and the
Company shall continue to be “at will,” and the Bank, the Company or
the Executive may terminate Executive’s employment with the Bank or the
Company at any time, with or without cause. Further, the existence of this
Agreement and the economic benefits herein provided shall not contradict,
override, supersede or in any way detract from or affect the “at will”
employment status of any other employee of the Bank or the Company. The
employment terms set forth in the Bank’s employee handbook or employee
manual, as they may be in effect from time to time, shall control. |
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a) |
Modification; Waiver. This Agreement may be modified, waived or
discharged only in, and limited to the extent specifically set forth in, a
written document signed by the Executive and the Company. |
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b) |
Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect. |
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c) |
Governing Law. This Agreement shall be governed in all respects according
to the laws of the State of Michigan. |
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COMPANY:
FENTURA FINANCIAL, INC.,
a Michigan corporation
By /s/ Xxxxxxx X. Xxxxx
——————————————
Xxxxxxx X. Xxxxx, Chairman |
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BANK:
THE STATE BANK
By /s/ Xxxxx X. Xxxxx
——————————————
Xxxxx X. Xxxxx, Chairman |
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EXECUTIVE:
/s/ Xxxxxxx X. Xxxxxx
——————————————
Xxxxxxx X. Xxxxxx |
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