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Exhibit 10.4 Employment Agreement

Employment Agreement

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CHEMICAL FINANCIAL CORP | Chemical Bank | CHEMICAL FINANCIAL CORPORATION

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Title: EXHIBIT 10.4 EMPLOYMENT AGREEMENT
Date: 8/31/2016
Industry: Regional Banks     Sector: Financial

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EXHIBIT 10.4 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made by CHEMICAL FINANCIAL CORPORATION, a Michigan corporation (the “Corporation”) and DANIEL W. TERPSMA (“Executive”). The parties agree as follows.

WHEREAS, the Board of Directors of the Corporation believes that the future services of Executive as provided in this Agreement will be of great value to the Corporation; and

WHEREAS, the Corporation owns and operates a wholly owned subsidiary, Chemical Bank (“Bank”), which is engaged in the general business of banking; and

WHEREAS, the Board of Directors of the Corporation has determined that it is in the best interests of the Corporation, its shareholders and the Bank to secure Executive’s continued services and to ensure Executive’s continued dedication and objectivity in the event of any potential or occurrence of, or negotiation or other action that could lead to, or create the possibility of, a Change in Control (as hereafter defined) of the Corporation, without concern as to whether Executive might be hindered or distracted by personal uncertainties and risks created by any such possible Change in Control, and to encourage Executive’s full attention and dedication to the Corporation and the Bank, the Board of Directors has authorized the Corporation to enter into this Agreement; and

WHEREAS, Executive is willing to serve in the employ of the Corporation and the Bank on a full-time basis as an at-will employee as provided in this Agreement.

NOW, THEREFORE, the parties agree as follows.

1.      Effective Date and Term. This Agreement will take effect as of the Effective Time of the Corporation’s acquisition of Talmer Bancorp, Inc. (“Talmer”), as defined in the Agreement and Plan of Merger dated as of January 25, 2016, between Chemical and Talmer (the “Merger Agreement”) (“Effective Date”). If the merger of the Corporation and Talmer does not close, this Agreement shall be null and void. The initial term of this Agreement shall be two years, and, at the end of the initial term, the term shall automatically be extended by another year on each anniversary of the Effective Date unless either party gives the other notice (as provided in Section 15) of intention to terminate this Agreement at least thirty (30) days before an anniversary of the Effective Date, in which case this Agreement shall terminate at the end of the then-current term without any further extension; provided, however, that:

(a)      except for termination as provided above pursuant to notice from Executive to the Corporation, this Agreement will not terminate during an “Active Change in Control Proposal Period” (as defined in Section 10), even if the Corporation has given Executive notice of intention to terminate this Agreement;

(b)      except for termination as provided above pursuant to notice from Executive to the Corporation, upon the occurrence of a “Change in Control” (as defined in Section 9), the term of this Agreement shall automatically be extended until the second

 

 

 

anniversary of the effective date of the Change in Control, even if the Corporation has given notice of intention to terminate this Agreement; and

(c)      termination of this Agreement shall not affect the obligations of either party accrued before termination of this Agreement, including Executive’s obligations under Sections 11, 12 and 13.

2.       Employment. Executive will serve as: (A) Executive Vice President Director of Commercial Lending of the Corporation; (the “principal position”); and (B) in such positions with Affiliates (defined for purposes of this Agreement as any organizations controlling, controlled by or under common control with the Corporation) as reasonably requested by the Corporation, provided that the duties of such positions are consistent with Executive’s responsibilities in Executive’s principal position (together, the “Employment”). As used in this Agreement, the term “Corporation” includes the Bank, unless the context clearly requires otherwise.

Executive will serve the Corporation and the Bank well and faithfully during the Employment and will devote Executive’s best reasonable full time business efforts to the Employment, except that Executive may engage in civic and professional activities, service on boards of directors, and similar activities as long as such activities do not constitute a conflict of interest or impair Executive’s performance of the duties of the Employment. The Employment may be terminated during the term of this Agreement as provided in Sections 4 and 5.

3.       Compensation. Executive will be compensated during the Employment as follows:

(a)      Salary. Executive’s annual salary (“Salary”) will be $320,000.00, prorated for any partial year, subject to required payroll deductions and payable in weekly, bi-weekly or semi-monthly installments pursuant to the Corporation’s normal payroll practices. Such Salary shall be subject to review annually commencing in 2017 and will be subject to adjustment pursuant to the Corporation’s normal procedures.

(b)      Bonus. Executive will participate in any bonus programs for senior executives of the Corporation or the Bank, at a level commensurate with Executive’s principal position.

(c)      Equity Plans. Executive will participate in any stock option or other equity based compensation programs (“Equity Plans”) offered by the Corporation, at a level commensurate with Executive’s principal position.

(d)       Fringe Benefits. Executive will participate in health and dental, life insurance, short and long term disability insurance, retirement and other employee fringe benefit programs covering the Corporation’s salaried employees as a group, and in any programs applicable to senior executives of the Corporation or the Bank. The terms of applicable insurance policies and benefit plans in effect from time to time will govern with regard to specific issues of coverage and benefit eligibility. All benefit programs are subject to change from time to time in the Corporation’s discretion, except that Executive will at all times receive the following specific benefits:

 

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i.                Thirty (30) days of paid time off per year, to be taken in the year earned, and which may not be accumulated or carried forward except as permitted by Corporation policy. Such paid time off shall be subject to review annually commencing in 2017 and Executive’s days of paid time off per year shall be subject to adjustment pursuant to the Corporation’s normal procedures.

ii.              Reimbursement of expenses incurred to purchase or lease an executive automobile not to exceed $900.00 per month. Executive will be responsible for payment of all other expenses related to the automobile, such as fuel expenses, automobile insurance, maintenance and repair costs. Such automobile expense reimbursement shall be subject to review annually commencing in 2017 and subject to adjustment pursuant to the Corporation’s normal procedures.

(e)       Business Expenses. The Corporation will reimburse Executive for reasonable ordinary and necessary business expenses incurred in the course of the Employment, for fees and expenses of Executive’s attendance in the course of the Employment at banking related conventions and similar events, for reasonable professional association and seminar expenses, and for any additional expenses authorized by the Corporation, subject to Executive’s submission of proper documentation for tax and accounting purposes. Reimbursement under this section and Sections 3(d)(ii)-(iv) will be paid within thirty (30) days after Executive submits documentation as provided by this Section, provided that payments may not be made after March 15 of the calendar year following the calendar year in which the expenses were incurred.

4.      Termination of the Employment Without Severance Pay. Executive shall not be entitled to any further compensation from the Corporation or any Affiliate after termination of the Employment as permitted by this Section 4, except (A) unpaid Salary installments through the Employment termination date, (B) any vested benefits accrued as of the date of termination of the Employment under the terms of any written Corporation or Bank employment, compensation or benefit program; and (C) any rights of Executive to indemnification under the provisions of the Articles of Incorporation or Bylaws of the Corporation or the Bank or any indemnification agreement entered into between Executive and the Corporation or any Affiliate (together, the “Vested Rights”).

(a)       Death. The Employment will terminate automatically upon Executive’s death.

(b)       Disability. The Corporation may terminate the Employment due to Executive’s “Permanent Disability”, as defined and provided for in this Section 4(b). If Executive has been unable by reason of physical or mental disability to properly perform Executive’s duties hereunder for a period of one hundred eighty (180) days, the Corporation may give Executive notice of its intention to terminate the Employment due to Permanent Disability. If Executive wishes to contest the existence of termination due to Permanent Disability, he must give the Corporation notice of Executive’s disagreement within ten (10) days after receipt of the notice from the Corporation, and he must

 

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promptly submit to examination by three physicians who are reasonably acceptable to both Executive and the Corporation (with consultation from other physicians as determined by those three). If (A) within sixty (60) days after receipt by Executive of the notice from the Corporation, two of such physicians shall issue their written statement to the effect that in their opinion, based on their diagnosis, Executive is capable of resuming Executive’s employment and devoting Executive’s full time and energy to discharging Executive’s duties within sixty (60) days after the date of such statement, and (B) Executive does in fact within such sixty (60) day period resume the Employment and properly perform Executive’s duties hereunder, then the Employment shall not be terminated due to Permanent Disability. It is understood that the Corporation has the right to terminate the Employment due to Executive’s disability without meeting the standards in this Section 4(b), but in that event the termination shall be deemed to be a termination of the Employment pursuant to Section 5(a).

(c)       Termination by Corporation for Cause. The Corporation may terminate the Employment for “Cause”, defined as (i) removal by order of a regulatory agency having jurisdiction over the Corporation or the Bank, (ii) Executive’s conviction of, or plea of no contest to, a felony, (iii) Executive’s gross misconduct, or (iv) Executive’s willful and repeated failure to perform Executive’s duties under this Employment Agreement. The Corporation may only terminate the Employment for Cause under (iii) and (iv) above if the failure has not been cured by Executive within thirty (30) days after the Corporation gives notice thereof to Executive; it being expressly understood that negligence or bad judgment shall not constitute “Cause” so long as such act or omission shall be without intent of personal profit and is reasonably believed by Executive to be in or not adverse to the best interests of the Corporation.

(d)       Discretionary Termination by Executive. Executive may terminate the Employment at will, with at least thirty (30) days advance notice. If Executive gives such notice of termination, the Corporation may (but need not) relieve Executive of some or all of Executive’s offices and responsibilities for part or all of such notice period, provided that Executive’s Salary and benefits are continued for the lesser of thirty (30) days or the remaining period of the Employment.

(e)       Termination of Employment after Termination of This Agreement. If Executive continues to be employed by the Corporation or the Bank after termination of this Agreement as provided in Section 1, Executive’s employment shall be terminable by either party at will without any Severance Pay.

5.       Termination With Severance Pay. Executive shall not be entitled to any further compensation from the Corporation or any Affiliate after termination of the Employment as permitted by this Section 5, except (A) Vested Rights; and (B) Severance Pay under Section 6 or the Change in Control Severance under Section 7, whichever is applicable.

 

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(a)       Discretionary Termination by Corporation. The Corporation may terminate the Employment during the term of this Agreement at will, with at least thirty (30) days advance notice to Executive. Any termination of Executive’s Employment by the Corporation under Section 4 that is found not to meet the standards of such Section will be considered to have been a termination under this Section 5(a).

(b)      Termination by Executive for Good Reason . Executive may terminate the Employment during the term of this Agreement for “Good Reason” if there is a material negative change to the employment relationship between Executive and the Corporation because: (i) Executive is removed from any of Executive’s principal positions; (ii) the status, authority or responsibility of Executive’s principal positions is materially diminished; (iii) Executive’s Salary as then in effect is materially reduced without a corresponding reduction in the salaries of the Corporation and Bank’s other executives, (iv) the Corporation requires Executive be based in a facility that is more than sixty (60) miles from the facility where Executive is located immediately prior to the relocation or any substantial increase in the business travel required of Executive; or (v) any material breach by the Corporation or the Bank, or any successor, of its obligations to Executive under this Agreement.

Executive may not terminate the employment for “Good Reason” unless:

A.     Executive notifies the CEO in writing, within 60 days after Executive becomes aware of the act or omission constituting Good Reason, that the act or omission in question constitutes Good Reason and explaining why Executive considers it to constitute Good Reason;

B.     the Corporation fails, within 30 days after notice from Executive under A. above, to revoke the action or correct the omission and make Executive whole; and

C.     Executive gives notice of termination within 30 days after expiration of the 30-day period under B. above.

6.      Severance Pay. The Corporation will pay and provide Executive with the payments and benefit continuation provided in this Section 6 (“Severance Pay”) if Executive’s Employment is terminated during the term of this Agreement as provided in Section 5 in a manner that constitutes a “separation from service” as that term is defined by Section 409A of the Internal Revenue Code of 1986 (the “Code”) and Executive is not entitled to the Change in Control Severance under Section 7. If Executive becomes entitled to Severance Pay under this Section 6, and subsequently becomes entitled to the Change in Control Severance under Section 7, the amount of the lump sum Cash Payment under Section 7(a) shall be reduced by the amount of Severance Pay already received by Executive under this Section 6, and no further Severance Pay will be payable under this Section 6.

(a)      Amount and Duration of Severance Pay. Subject to the other provisions of this Section, Severance Pay will consist of:

 

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i.      Severance. Payment of an amount equal to one times the sum of (A) Executive’s then-current Salary (disregarding any reduction in Salary that constitutes Good Reason) and (B) the sum of Executive’s cash bonuses under the Corporation’s executive annual incentive plan for each of the most recent three complete calendar years of Executive’s employment by the Corporation (or such lesser number of complete calendar years as Executive has been employed by the Corporation) divided by three (or the lesser number of complete calendar years for which Executive has been employed by the Corporation), payable in equal installments over fifty-two (52) weeks following the week in which the Employment terminates (the “Severance Pay Period”) pursuant to the Corporation’s normal payroll process, subject to required payroll withholding;

ii.      Health Coverage Payment. The Corporation will pay Executive a lump sum equal to twelve (12) times the Corporation’s monthly contribution towards Executive’s then current employee and dependent health, prescription drug and dental coverage elections, payable in the first payroll occurring on or after the tenth business day after the date Executive’s Employment terminates, subject to required payroll withholding. If Executive is not enrolled in the Corporation’s health, prescription drug and dental plans, then the monthly contribution will be based on the Corporation’s contribution towards family coverage for such plans determined at the time employment terminates. Although the right to payment under this paragraph is based on the Corporation’s health, prescription drug and/or dental plan at the time employment terminates and is intended to fund payment for health coverage, the payment is not required to be used for health coverage and Executive may use the payment for any purpose;

iii.      Acceleration of Vesting . Effective at the time of termination of employment, all unvested stock options and stock previously issued to Executive as to which rights of ownership are subject to forfeiture shall immediately vest; all risk of forfeiture of the ownership of stock or stock options and restrictions on the exercise of options shall lapse; and, Executive shall be entitled to exercise any or all options, such that the underlying shares will be considered outstanding at the time of the termination of employment; and

iv.      Outplacement Services . The Corporation will provide Executive with executive-level outplacement services through an outplacement services firm selected by the Company with the Executive’s approval, which shall not be withheld if the firm selected is reputable, for a period not to exceed twelve (12) months after Executive’s termination date. The timing of outplacement services to be received shall be determined by the Executive, provided that all costs under this subsection must be incurred, and all applicable payments to the outplacement firm made, within twelve months following Executive’s termination of employment.

Executive will receive the Severance Pay provided in Section 6(a) notwithstanding any other earnings that Executive may have, and subject to offset only as provided in Section 6(c). If Executive dies during the Severance Pay Period, the Severance Pay under Section

 

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6(a) will continue for the remainder of the Severance Pay Period for the benefit of Executive’s designated beneficiary (or Executive’s estate if Executive fails to designate a beneficiary).

(b)       Conditions to Severance Pay. To be eligible for Severance Pay, Executive must meet the following conditions: (i) Executive must comply with Executive’s obligations under this Agreement that continue after termination of the Employment; (ii) Executive must promptly sign and continue to honor a release, in form acceptable to the Corporation, of any and all claims arising out of or relating to Executive’s employment or its termination and that Executive might otherwise have against the Corporation, the Corporation’s Affiliates, or any of their officers, directors, employees and agents, provided that the release will not waive Executive’s right to claims or rights related to (A) this Agreement; (B) unpaid salary through the employment termination date; (C) unpaid expense reimbursements for authorized business expenses incurred before the employment termination date; (D) any Equity Plan benefits; (E) benefit plans (for example to convert life insurance); (F) any rights under the terms of any qualified retirement plan covering Executive; and (G) rights of indemnification under the Corporation’s Articles of Incorporation or Bylaws or any indemnification agreement entered into between Executive and the Corporation or any Affiliate (


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