EXHIBIT 10.5
AMENDED AND RESTATED
CHANGE IN CONTROL AGREEMENT
JANUARY 3, 2006
This is an amended and restated agreement (the "Agreement") of that certain
agreement by and between MBT Financial Corp., a Michigan Corporation ("MBT") and
H. Douglas Chaffin ("Executive") dated July 30, 2001.
RECITALS
WHEREAS, MBT is a bank holding company whose principal subsidiary is
engaged in the business of banking and businesses incidental thereto.
WHEREAS, Executive possesses unique skills, knowledge and experience
relating to the business of MBT.
WHEREAS, MBT desires to retain the future services of Executive, and, in
that connection, Executive desires to be assured that, in the event of a change
in the control of MBT, 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, MBT 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 MBT and its shareholders.
WHEREAS, MBT 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 MBT.
B. MBT -"MBT" means MBT Financial Corp., a Michigan corporation and the parent
corporation of Monroe Bank & Trust.
C. Cause - "Cause" shall mean and be limited to Executive's (a) criminal
dishonesty, (b) refusal to perform his duties on an exclusive and
substantially full-time basis, (c) refusal 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, 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.
D. Change in Control - "Change in Control" shall have the meaning set forth on
Exhibit A.
E. Code - "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
F. Company - "Company" means MBT, Monroe Bank & Trust and all other members of
MBT's Affiliated Group, over which Executive has managerial control, as the
term "Affiliated Group" is defined in Section 1504 of the Code, and shall
include any predecessor or successor corporations of the Company and its
Affiliated Group.
G. Compensation - "Compensation" shall mean Executive's then current annual
base salary plus any cash bonuses for the last whole calendar year
preceding Executive's termination of employment. Compensation shall not
include any amount, other than base salary and cash bonuses, 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.
H. Exchange Act - "Exchange Act" means the Securities Exchange Act of 1934.
SECTION 2 - TERM OF AGREEMENT.
This Agreement shall terminate on the date which is the latest of: (i) Company's
payment of any amounts due under Section's 4 and 6, (ii) the performance of
Executive's obligations under Section 9 hereof, and (iii) the earliest of:
1. The date this Agreement is mutually rescinded;
2. The date which is two (2) years after the date of a Change in Control.
3. Before a Change in Control, on the date which Monroe Bank & Trust, or
any other member of the Company's Affiliated Group, and over which
Executive has managerial control, which is a depository institution
which is insured by an agency of any state or the United States
Federal Government:
a. becomes insolvent; or
b. has appointed any conservator or receiver; or
c. is determined by an appropriate federal banking agency to be in a
troubled condition, as defined in the applicable law and
regulations; or
d. 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
e. has initiated against it by the Federal Deposit Insurance
Corporation a proceeding to terminate or suspend deposit
insurance; or
f. 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.
From the date of a Change in Control to the date of termination of this
Agreement 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 bonuses paid before the Change in Control. In addition, during such
period, the Company shall pay and provide for Executive at no cost to Executive,
all of his then-current fringe benefits, including but not limited to health,
disability, dental, life insurance and club memberships, all of which shall be
at levels and amounts no less favorable than levels and amounts in effect as of
the Change in Control.
SECTION 4 - PAYMENTS DUE AFTER A CHANGE IN CONTROL.
A. If during the term of this Agreement and after the date of a Change in
Control, Executive is discharged without Cause or Executive resigns because
he has: (i) been demoted, (ii) had his compensation reduced, (iii) had his
principal place of employment transferred away from Monroe County,
Michigan, or a county contiguous thereto, or (iv) had his job title, status
or responsibility materially reduced, then the Company shall make the
payments to Executive set forth in subsection D of this Section 4.
B. If Executive voluntarily terminates employment not earlier than six (6)
months and not later than nine (9) months following a Change in Control,
then the Company shall make the payments to Executive set forth in
subsection D of this Section 4.
C. If Executive is discharged by Company other than for Cause and there is a
Change in Control within two years following the discharge, then the
Company shall make the payments to Executive set forth in subsection D of
this Section 4.
D. In the event of the termination of Executive's employment as described in
A, B or C above, Executive shall be entitled to receive a cash payment
equal to one (1) times his Compensation. The payment required shall be paid
at the end of the first month commencing after the Executive's termination
of employment in the case of a benefit entitlement under Subsection A, or B
above. In the event of termination of employment as described in C above,
payment shall be made immediately upon the Change in Control. If
Executive's employment is terminated as described in Subsection A or
Subsection B above, then in addition to the above cash payment, Company
shall make an additional cash payment equal to twelve months of the then
current cost of any club memberships provided by the Company for the
benefit of Executive and 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.
In the event Executive dies before collecting all amounts and benefits due
under this Section, any payments owing 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 not, then to
the personal representative of Executive.
The payments and benefits provided for herein are in lieu of compensation,
benefits or amounts the Executive might otherwise be entitled to under the
Company's severance policy or otherwise payable by the Company be reason of
termination of employment.
E. 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 250% of any excise tax imposed
under Section 4999 (or any successor thereto) of the Code and otherwise
payable by the Executive.
F. 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.
G. Notwithstanding the provisions of this agreement providing for payment of
benefits, if at the time a benefit would otherwise be payable, Employee is
a "specified employee" [as defined below], and the payment provided for
would be deferred compensation with the meaning of the Internal Revenue
Code (the "Code"), section 409A, the distribution of the Employee's benefit
may not be made until six months after the date of the Employee's
separation from service with the Company [as that term may be defined in
Section 409A(a)(2)(A)(i) of the Code and regulations promulgated
thereunder], or, if earlier the date of death of the Employee. This
requirement shall remain in effect only for periods in which the stock of
the Company is publicly traded on an established securities market. For
purposes of this subparagraph a "specified employee" shall mean any
Employee of the Company who is a "key employee" of the Company within the
meaning of Code section 416(i). This shall include any Employee who is (i)
a 5-percent owner of the Company's common stock, or (ii) an officer of the
Company with annual compensation from the Company of $130,000.00 or more,
or (iii) a 1-percent owner of Company's common stock with annual
compensation from the Company of $150,000.00 or more (or such higher annual
limit as may be in effect for years subsequent to 2005 pursuant to indexing
section 416(i) of the Code). The provisions of this subparagraph have been
adopted only in order to comply with the requirements added by Code section
409A. These provisions shall be interpreted and administered in a manner
consistent with the requirements of Code section 409A, together with any
regulations or other guidance which may be published by the Treasury
Department or Internal Revenue Service interpreting such Code section 409A.
SECTION 5 - QUALIFIED AND NON-QUALIFIED RETIREMENT PENSION PLANS.
Nothing in this Agreement shall reduce any pension benefits or benefits from
other qualified or non-qualified retirement plans maintained by Company to which
Executive is otherwise entitled without regard to this Agreement.
SECTION 6 - PROVISION FOR OUTPLACEMENT SERVICES.
In the event of the termination of employment of Executive requiring the
payments specified in Section 4 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 7 - ARBITRATION.
Subject to the Company's right to seek injunctive relief under Section 9 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
in accordance with the Rules of the American Arbitration Association, before one
arbitrator mutually agreeable to the parties. If either party determines that
the parties have been unable to agree upon one arbitrator, then such party may
appoint one arbitrator and require the other party to appoint a second
arbitrator. Whereupon, 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, the American Arbitration Association
shall select the third arbitrator. Failure by a party to either (i) accept as
mutually agreeable, or (ii) 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 Monroe, Michigan, 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. Judgement on
the award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof.
SECTION 8 - RIGHT TO OTHER BENEFITS.
Except as otherwise specified herein, 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 8 include, but are
not limited to, life insurance plans, dental, disability or health insurance
benefits, severance policies, club memberships, and accrued vacation pay.
SECTION 9 - NONCOMPETITION AND NONSOLICITATION AGREEMENT AND BUSINESS
PROTECTION.
Notwithstanding anything to the contrary contained elsewhere in this Agreement:
A. Noncompetition Agreement and Nonsolicitation Agreement
1. In view of Executive's importance to the success of the Company,
Executive and Company agree that the Company would likely suffer
significant harm from Executive's competing with Company during
Executive's term of employment with Company and for some period of
time thereafter. Accordingly, Executive agrees that Executive shall
not engage in competitive activities while employed by Company and
during the Restricted Period. Executive shall be deemed to engage in
competitive activities if he shall, without the prior written consent
of the Company, (i) in Monroe County, Michigan and counties contiguous
thereto (including the municipalities therein), render services
directly or indirectly, as an employee, officer, director, consultant,
advisor, partner or otherwise, for any organization or enterprise
which competes directly or indirectly with the business of Company or
any of its affiliates in providing financial products or services
(including, without limitation, banking, insurance, or securities
products or services) to consumers and businesses, or (ii) directly or
indirectly acquires any financial or beneficial interest in (except as
provided in the next sentence) any organization which conducts or is
otherwise engaged in a business or enterprise in Monroe County,
Michigan, and counties contiguous thereto (including all
municipalities therein) which competes directly or indirectly with the
business of Company or any of its affiliates in providing financial
products or services (including, without limitation, banking,
insurance or securities products or services) to consumers and
businesses. Notwithstanding the preceding sentence, Executive shall
not be prohibited from owning less that 1 percent of any publicly
traded corporation, whether or not such corporation is in competition
with Company. For purposes of this paragraph 9 the term "Restricted
Period" shall equal one year, commencing as of the date of Executive's
termination of employment.
2. While employed by Company and for a period of one (1) year following
Executive's termination of employment with Company, Executive agrees
that Executive shall not, in any manner, directly or indirectly, (i)
solicit by mail, by telephone, by personal meeting, or by any other
means, either directly or indirectly, any customer or prospective
customer of Company to whom Executive provided services, or for whom
Executive transacted business, or whose identity become known to
Executive in connection with Executive's services to Company
(including employment with or services to any predecessor or successor
entities), to transact business with a person or an entity other than
the Company or its affiliates or reduce or refrain from doing any
business with the Company or its affiliates or (ii) interfere with or
damage (or attempt to interfere with or damage) any relationship
between Company or its affiliates and any such customer or prospective
customer. The term "solicit" as used in this Agreement means any
communication of any kind whatsoever, inviting, encouraging or
requesting any person to take or refrain from taking any action with
respect to the business of Company and its subsidiaries.
3. While employed by Company and for a period of one (1) year following
Executive's termination of employment with Company, Executive agrees
that Executive shall not, in any manner, directly or indirectly,
solicit any person who is an employee of Company or any of its
affiliates to apply for or accept employment or a business opportunity
with any other person or entity.
4. The parties agree that nothing herein shall be construed to limit or
negate the common law of torts or trade secrets where it provides
broader protection than that provided herein.
B. Confidential Information
Executive has obtained and may obtain confidential information concerning the
businesses, operations, financial affairs, organizational and personnel matters,
policies, procedures and other non-public matters of Company and its affiliates,
and those of third-parties that is not generally disclosed to persons not
employed by Company or its subsidiaries. Such information (referred to herein as
the "Confidential Information") may have been or may be provided in written form
or orally. Executive shall not disclose to any other person the Confidential
Information at any time during his employment with Company or after the
termination of his employment, provided that Executive may disclose such
Confidential Information only to a person who is then a director, officer,
employee, partner, attorney or agent of Company who, in Executive's reasonable
good faith judgment, has a need to know the Confidential Information.
C. Remedies
1. Executive acknowledges that a violation on Executive's part of this
Section 9 would cause immeasurable and irreparable damage to Company.
Accordingly, Executive agrees that notwithstanding Section 7 hereof,
Company shall be entitled to injunctive relief in any court of
competent jurisdiction for any actual or threatened violation of any
of the provisions of this Section 9, in addition to any other remedies
it may have.
2. In addition to Company's right to seek injunctive relief as set forth
in subparagraph 1 above of this Section 9.C, in the event that
Executive shall violate the terms and conditions of this Section 9,
Company may: (i) make a general claim for damages and (ii) terminate
any payments or benefits payable by Company, if applicable, to
Executive.
3. The Board shall be responsible for determining whether Executive shall
have violated this Section 9, and in the absence of Executive's
ability to show that the Board has acted in bad faith and without fair
dealing, such decision will be final and binding. Upon the request of
Executive, the Company shall provide an advance opinion as to whether
a proposed activity would violate the provisions of this Agreement.
SECTION 10 - 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:
A. If to Company:
MBT Financial Corp
102 E. Front Street
Monroe, MI 48161
Attn: Chairman, Compensation Committee
B. If to Executive:
H. Douglas Chaffin
c/o MBT Financial Corp
102 E. Front Street
Monroe, MI 48161
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.
SECTION 11 - 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
it best efforts promptly to satisfy all such requirements.
SECTION 12 - GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Michigan.
SECTION 13 - 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.
SECTION 14 - 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.
SECTION 15 - 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.
SECTION 16 - 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.
SECTION 17 - SUCCESSOR 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.
SECTION 18 -PRIOR AGREEMENT SUPERCEDED.
This Agreement supersedes the previous agreement dated July 30, 2001.
IN WITNESS WHEREOF, the parties hereto have caused this Amended Agreement to be
executed on and to be effective on January 18, 2006.
In the Presence of: EXECUTIVE
/s/ H. Douglas Chaffin
----------------------------------------
/s/ Bonnie S. Snyder H. Douglas Chaffin
/s/ Donald M. Lieto
In the Presence of: MBT FINANCIAL CORP.
/s/ William D. McIntyre, Jr.
----------------------------------------
/s/ Bonnie S. Snyder By: William D. McIntyre, Jr.
/s/ Donald M. Lieto Its: Chairman
Exhibit A
Change in Control Definition
A "Change in Control" shall mean a "Change in Ownership" as
defined in (a) hereof; a "Change in Effective Control" as defined in (b),
hereof; or a "Change in Ownership of a Substantial Portion of Assets" as
defined in (c) hereof.
(a) Change in Ownership. For purposes of this Agreement, a "change in the
ownership" of the Company occurs on the date that any one person, or
more than one person acting as a group (as defined in subsection (d)
hereof, acquires ownership of stock of the Company that, together with
stock held by such person or group, constitutes more than 50 percent
of the total fair market value or total voting power of the stock of
the Company. However, if any one person, or more than one person
acting as a group, is considered to own more than 50 percent of the
total fair market value or total voting power of the stock of the
Company, the acquisition of additional stock by the same person or
persons is not
considered to cause a change in the ownership of the Company (or to
cause a change in the effective control of the Company (within the
meaning of subsection (b) hereof. An increase in the percentage of
stock owned by any one person, or persons acting as a group, as a
result of a transaction in which the Company acquires its stock in
exchange for property will be treated as an acquisition of stock for
purposes of this section.
(b) Change in the Effective Control. For purposes of this Agreement, a
change in the effective control of the Company occurs on the date that
either -
(i) Any one person, or more than one person acting as a group (as
determined under subsection (d) hereof, acquires (or has acquired
during the 12-month period ending on the date of the most recent
acquisition by such person or persons) ownership of stock of the
Company possessing 35 percent or more of the total voting power
of the stock of the Company; or
(ii) a majority of members of the Company's board of directors is
replaced during any 12-month period by directors whose
appointment or election is not endorsed by a majority of the
members of the Company's board of directors prior to the date of
the appointment or election.
In the absence of an event described in subsection (b)(i) or
(ii) above, a change in the effective control of a Company will not
have occurred.
(c) Change in the Ownership of a Substantial Portion of the Company's
Assets. For purposes of this Agreement, a change in the ownership of a
substantial portion of the Company's assets occurs on the date that
any one person, or more than one person acting as a group (as
determined in subsection(d) hereof, acquires (or has acquired during
the 12-month period ending on the date of the most recent acquisition
by such person or persons) assets from the Company that have a total
gross fair market value equal to or more than 40 percent of the total
gross fair market value of all of the assets of the Company
immediately prior to such acquisition or acquisitions. For this
purpose, gross fair market value means the value of the assets of the
Company, or the value of the assets being disposed of, determined
without regard to any liabilities associated with such assets.
There is no Change in Control Event under this subsection
(c) when there is a transfer to an entity that is controlled by the
shareholders of the Company immediately after the transfer, as
provided in this paragraph. A transfer of assets by the Company is not
treated as a change in the ownership of such assets if the assets are
transferred to --
(i) A shareholder of the Company (immediately before the asset
transfer) in exchange for or with respect to its stock;
(ii) An entity, 50 percent or more of the total value or voting power
of which is owned, directly or indirectly, by the Company;
(iii) A person, or more than one person acting as a group, that owns,
directly or indirectly, 50 percent or more of the total value or
voting power of all the outstanding stock of the Company; or
(iv) An entity, at least 50 percent of the total value or voting power
of which is owned, directly or indirectly, by a person described
in subsection (iii) hereof.
For purposes of this subsection(c) and except as otherwise
provided, a person's status is determined immediately after the
transfer of the assets. For example, a transfer to a corporation in
which the transferor corporation has no ownership interest before the
transaction, but which is a majority-owned subsidiary of the
transferor corporation after the transaction is not treated as a
change in the ownership of the assets of the transferor corporation.
(d) Persons Acting as a Group. Persons will not be considered to be acting
as a group solely because they purchase assets or purchase or own
stock of the same corporation at the same time, or as a result of the
same public offering. However, persons will be considered to be acting
as a group if they are owners of a corporation that enters into a
merger, consolidation, purchase or acquisition of stock, purchase or
acquisition of assets, or similar business transaction with the
Company. If a person, including an entity shareholder, owns stock in
both corporations that enter into a merger, consolidation, purchase or
acquisition of stock, or similar transaction, such shareholder is
considered to be acting as a group with other shareholders in a
corporation only to the extent of the ownership in that corporation
prior to the transaction giving rise to the change and not with the
ownership interest in the other corporation.