Exhibit 10.4
Severance Compensation Agreement
     This Severance Compensation Agreement (the “Agreement”), has been made on
March 16, 2007 by Fentura Financial, Inc., a Michigan corporation (the
“Company”), West Michigan Community Bank, (the “Bank”) and Robert E. Sewick, 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 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:

  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

 

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      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.     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.     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.     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.     f)   “Separation from Service” means the termination of the
Executive’s employment with the Bank for reasons other than death or Disability.
Whether a Separation from Service takes place is determined by the Plan
Administrator based on the facts and circumstances surrounding the termination
of the Executive’s employment and whether the Bank and the Executive intended
for the Executive to provide significant services for the Bank following such
termination. A termination of employment will not be considered a Separation
from Service if:       (i) the Executive continues to provide services as an
employee of the Bank in an annualize amount that is twenty percent (20%) or more
of the services rendered, on average, during the immediately preceding three
full calendar years of employment (or, if employed less than three years, such
lesser period) and the annual remuneration for such services is twenty percent
(20%) or more of the average annual remuneration earned during the final three
full calendar years of employment (or, if less, such lesser period), or      
(ii) the Executive continues to provide services to the Bank in a capacity other
than as an employee of the Bank in an annualized amount that is fifty percent
(50%) or more of

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      the services rendered, on average, during the immediately preceding three
full calendar years of employment (or if employed less than three years, such
lesser period) and the annual remuneration for such services is fifty percent
(50%) or more of the average annual remuneration earned during the final three
full calendar years of employment (or if less, such lesser period), or      
(iii) immediately following the Executive’s termination of employment, the
Executive becomes an employee of (i) the Company, or (ii) any member of the
Controlled Group.     g)   “Specified Employee” means a key employee (as defined
in Section 416(i) of the Internal Revenue Code of 1986 without regard to
paragraph 5 thereof) of the Bank if any stock of the Bank is publicly traded on
an established securities market or otherwise.

     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:

  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:

  i)   that portion of the Executive’s annual base salary and director’s fees
through the date of termination not theretofore paid, and     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 o earnings thereon), and     iv)   any accrued vacation
pay.

  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.     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 5 years 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.     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 5 years after
the Executive’s termination of employment.

Notwithstanding the foregoing, if the Executive is considered a Specified
Employee at Separation from Service under such procedures as established by the
Bank in accordance with Section 409A of the Internal Revenue Code of 1986 (the
“Code”), benefit distributions that are made upon Separation from Service may
not, to the extent required by Section 409A of the Code, commence earlier than
six (6) months after the date of such Separation from Service. Therefore, in the
event this provision is applicable to the Executive, any distribution or series
of distributions to be made due to a Separation from Service shall commence no
earlier than the first day of the

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seventh month following the Separation from Service, provided that to the extent
permitted by Section 409A of the Code, only payments scheduled to be paid during
the first six (6) months after the date of such Separation from Service shall be
delayed and such delayed payments shall be paid in a single sum on the first day
of the seventh month following the date of such Separation from Service.
     3. Maximum Benefits Upon Change in Control. If it is determined, in the
opinion of the Company’s independent accountants, in consultation, if necessary,
with the Company’s independent legal counsel, that any amount paid under this
Agreement in connection with a Termination Upon Change in Control, either
separately or in conjunction with any other payments, benefits and entitlements
received by the Executive in respect of a Change in Control hereunder or under
any other plan or agreement under which the Executive participates or to which
he is a party, would constitute an “Excess Parachute Payment” within the meaning
of Section 280G of the Internal Revenue of 1986, and would thereby be subject to
the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then in
such event, the Company shall pay to the Executive a “grossing-up” amount equal
to the amount of such Excise Tax, plus all federal and state income or other
taxes with respect to the payment of the amount of such Excise Tax, including
all such taxes with respect to any such grossing-up amount. If, at a later date,
the Internal Revenue Service assesses a deficiency against the Executive for the
Excise Tax which is greater than that which was determined at the time such
amounts were paid, then the Company shall pay to the Executive the amount of
such unreimbursed Excise Tax, plus any interest, penalties and reasonable
professional fees or expenses incurred by the Executive as a result of such
assessment,

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including all such taxes with respect to any such additional amount. The highest
marginal tax rate applicable to individuals at the time of the payment of such
amounts will be used for purposes of determining the federal and state income
and other taxes with respect thereto. The Company shall withhold from any
amounts paid under this Agreement the amount of any Excise Tax or other federal,
state or local taxes then required to be withheld. Computations of the amount of
any grossing-up supplemental compensation paid under this Section shall be
conclusively made by the Company’s independent accountants, or other independent
accountants retained by the Company, in consultation, if necessary, with the
Company’s independent legal counsel. If, after the Executive receives any
gross-up payments or other amount pursuant to this Section, the Executive
receives any refund with respect to the Excise Tax, the Executive shall promptly
pay the Company the amount of such refund within ten (10) days of receipt by the
Executive, on a grossed-up basis. If the Company deems it necessary or advisable
to contest or appeal any assessment, or determination made by the Internal
Revenue Service relating to the imposition of an Excise Tax as described herein
(an “Excise Tax Contest/Appeal”), the Executive covenants and agrees to
reasonably cooperate with the Company in connection with the Excise Tax
Contest/Appeal; provided, however, that the Company shall be responsible for all
professional costs and expenses incurred by the Executive in connection with
such Excise Tax Contest/Appeal.
     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

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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.
     5. Termination Prior To Change in Control. Notwithstanding anything in this
agreement to the contrary, if a Change in Control occurs and (i) if the
Executive’s employment with the Company or the Bank is terminated prior to the
date on which Change in 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 in Control or (b) otherwise arose in
connection with or in anticipation of the Change in Control, or (ii) Executive
has terminated his employment with Company and/or Bank for Good Reason prior to
Change in Control, then Executive shall be entitled to the Income Protection
Benefits and all other rights and privileges provided by this Agreement.

  6.   Successors, Binding Agreements.     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.     b)   The Bank
and the Company each hereby guarantee the timely payment and

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      performance, when due, of the other’s obligations under this Agreement.  
  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.

     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:

         
 
  If to the Company   Fentura Financial, Inc.
 
  or the Bank:   175 N. Leroy St.
 
      PO Box 725
 
      Fenton, MI 48430-0725
 
       
 
  If to the Executive:   Mr. Robert E. Sewick
 
      2012 W. Glen Court
 
      Norton Shores, MI 49441

     or to such other address as either party may designate.
     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”

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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.

  9.   Miscellaneous.     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.     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.     c)   Entire
Agreement. This Agreement contains the entire understanding of the parties
concerning the Executive’s severance compensation opportunity. This Agreement
supersedes and controls over the Executive’s March 9, 2006 Severance
Compensation Agreement with the Company and the Bank. This Agreement does not
supersede Executive’s Fentura Financial, Inc. Confidentiality and Shareholder
Protection Agreement dated July 9, 2003.

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  d)   Governing Law. This Agreement shall be governed in all respects according
to the laws of the State of Michigan.

                  COMPANY:
 
                Fentura Financial, Inc.,     a Michigan corporation
 
           
 
  By:        /s/ Forrest A. Shook    
 
           
 
           Forrest A. Shook, Chairman    
 
                BANK:
 
                West Michigan Community Bank
 
  By:        /s/ James Wesseling    
 
           
 
           James Wesseling, Chairman    
 
                EXECUTIVE:               /s/ Robert E. Sewick                  
          Robert E. Sewick    

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