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EXHIBIT 10.5
FARMERS & MERCHANTS BANCORP, INC.
CHANGE IN CONTROL -
SEVERANCE COMPENSATION AGREEMENT
This is a Change in Control - Severance Compensation Agreement
(the
"Agreement") made by and between Farmers & Merchants
Bancorp, Inc. ("Company")
and James Burkhart ("Executive").
RECITALS
WHEREAS, Company is a bank holding company 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 and is presently
employed by the Company
or one or more of its subsidiaries.
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 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 Farmers
& Merchants
Bancorp, Inc.
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
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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 have the
meaning set forth
on Exhibit A.
D. Code - "Code" shall mean the Internal Revenue Code of 1986,
as amended from
time to time.
E. Company - "Company" shall mean Farmers & Merchants
Bancorp, Inc. and,
except in connection with the definition of Change in Control,
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 cash as bonus and other incentive
compensation for
the three year period ending with the date of the Change in
Control. "One
Year of Compensation" shall not include any amount, other than
salary and
cash bonuses or cash incentive compensation, that may be
included in
Executive's taxable compensation for federal income tax purposes
and
reported to Executive and Internal Revenue Service ("IRS") such
as the
reporting of previously deferred compensation or gain realized
upon
exercise of any non qualified stock options.
SECTION 2 - TERM OF AGREEMENT.
This Agreement shall be effective from the date hereof, until
the termination of
employment of the Executive for any reason, or two years
following a Change in
Control. Notwithstanding the forgoing, the obligations of the
Company pursuant
to Section 4 of this Agreement shall survive such termination
insofar as
provided thereunder. This Agreement shall not change, alter or
amend any rights
which either Company or Executive may have in respect of the
termination of the
employment of Executive by Company prior to a Change in Control.
Nothing
contained in this Agreement shall be construed to create any
additional right or
obligation of Executive to be employed by Company.
In addition to the forgoing this Agreement shall terminate on
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:
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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,
Executive resigns because he has: (i) had his compensation
reduced, or
(ii) had his principal place of employment transferred to a
location
greater than sixty (60) miles from the main office of the
Company
which is located at 307-11 N. Defiance Street, Archbold,
Ohio.;
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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 to a location greater than sixty (60)
miles
from the main office of the Company which is located at 307-11
N.
Defiance Street, Archbold, 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 a single lump sum payment within fourteen
(14) days of
the later of termination of employment of the Executive or the
occurrence
of the 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. Except as otherwise provided in Section 7, 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
sufficient to fully reimburse the Executive for any excise tax
imposed
under Section 4999 (or any successor thereto) of the Code and
otherwise
payable by the Executive.
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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.
H. Notwithstanding the provi
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