Severance Compensation
Agreement
This Severance Compensation
Agreement (the “Agreement”), has been made
on July 24, 2008 by Fentura Financial, Inc. , a
Michigan corporation (the “Company”), The State Bank , (the
“Bank”) and Donald L. Grill , an
individual (the “Executive”).
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 in
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 in
Control.
1. Definitions. The following words and phrases have
the following meanings:
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a)
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“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)
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“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
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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)
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“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)
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“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)
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“Good Reason”
means any of the
following, as determined by the Executive in his discretion:
(i) a material diminution of the Executive’s duties,
responsibilities, or authority 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 (ii) the Bank or the Company
requiring Executive to be based anywhere other than within fifty
(50) miles of his present office location, or (iii) a material
breach of this Agreement including the failure by the Company to
obtain the assumption of this Agreement as contemplated in
Section 6 hereof. Upon the occurrence of any event referenced
above, Executive shall, within ninety (90) of any occurrence,
provide the Bank and the Company notice of the existence of the
condition. Upon receiving notice, the Bank and the Company
shall
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have no more
than thirty (30) days to remedy the condition. Executive shall
have two years from the date of the initial existence of a
violation of one of the above events to terminate his employment
under this section.
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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 with the Bank, the Company and all
affiliates of the Company is thereafter terminated without Cause,
or by the Executive for Good Reason, then:
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a)
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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)
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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)
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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)
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