Document:

Exhibit 10.3

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”) by and among FIRST MICHIGAN BANCORP, INC., a Michigan corporation (the “Corporation”), FIRST MICHIGAN BANK, a state chartered banking institution and wholly-owned subsidiary of the Corporation (the “Bank”) and DENNIS KLAESER (“Executive”) is made and entered into on May 4, 2010 but shall be effective as of May 10, 2010 (the “Effective Date”).  The Corporation and the Bank shall be collectively referred to herein as the “Company.”

 

1.                                      Employment.

 

(a)                                 The Company agrees to employ Executive and Executive accepts the employment, on the terms and subject to the conditions set forth below.  During the term of employment hereunder, Executive shall serve as the Chief Financial Officer and Executive Managing Director of each of the Corporation and the Bank, and shall do and perform diligently all such services, acts and things as are customarily done and performed by those holding similar senior executive positions with companies similar in business and size to the Corporation and the Bank, as applicable, together with such other duties as may reasonably be requested from time to time by the Chief Executive Officer of the Company, which duties shall be consistent with Executive’s positions as set forth above.

 

(b)                                 For service as an officer, employee and director of the Corporation, Executive shall be entitled to the full protection of the applicable indemnification provisions of the Articles of Incorporation of the Corporation, as they may be amended from time to time.  For service as an officer, employee and director of the Bank, Executive shall be entitled to the full protection of the applicable indemnification provisions of the Articles of Incorporation of the Bank, as they may be amended from time to time.  The Company agrees that Executive will be named as an additional insured under the Company’s Directors’ and Officers’ Errors and Omissions Insurance during his employment hereunder.

 

2.                                      Term of Employment.

 

(a)                                 Subject to the provisions for termination provided below, the term of Executive’s employment under this Agreement shall commence on the Effective Date and shall continue thereafter until the first year anniversary of the Effective Date; provided however, that the term of this Agreement shall be automatically extended for successive terms of one (1) year each, unless either party notifies the other party in writing of its desire to terminate this Agreement at least sixty (60) days before the end of the term then in effect.

 

(b)                                 Executive acknowledges and agrees that Executive is an “at-will” employee and that Executive’s employment may be terminated, with or without Cause (as defined in Section 7(b) below), at the option of Executive or the Company.

 

3.                                      Devotion to the Company’s Business.

 

Executive shall devote his best efforts, knowledge, skill, and his entire productive time, ability and attention to the business of the Company during the term of this Agreement; provided, however, Executive’s expenditure of reasonable amounts of time to various charitable and other community activities, or to the Executive’s own personal investments and projects, shall not be deemed a breach of this Agreement so long as the amount of time so devoted does not materially impair, detract or adversely affect the performance of Executive’s duties under this Agreement, and so long as such activities are disclosed to the Boards and do not violate Section 9 of this Agreement.

 

 

4.                                      Compensation.

 

(a)                                 General Statement.  During the term of this Agreement, the Company shall pay or provide, as the case may be, to Executive the compensation and other benefits and rights set forth in Sections 4, 5 and 6 of this Agreement.

 

(b)                                 Base Compensation.  As compensation for the services to be performed after the Effective Date, the Company shall pay to Executive, during his employment hereunder, an annual base salary (the “Base Salary”) payable in accordance with Company’s usual pay practices (and in any event no less frequently than monthly) at the rate of Three Hundred and Twenty Five Thousand Dollars per annum ($325,000).  The Corporation and the Bank shall each pay a portion of the Base Salary, with each such portion being determined based on the allocation of Executive’s time to the Corporation and the Bank.  Executive’s Base Salary may be increased, but not decreased, at the sole discretion of the Corporation Board upon a recommendation by the Compensation Committee of the Corporation Board (the “Compensation Committee”) that Executive’s performance merits such an increase.  The Company intends to, but shall not be obligated to, increase the Executive’s Base Salary or other compensation, to the extent warranted based upon the Executive’s and the Company’s performance, so that the Executive’s total compensation is in the top 25% of compensation paid to executives holding substantially similar positions with companies in the Company’s peer group as the Executive’s positions with the Company.

 

(c)                                  Annual Bonus.  Executive shall be eligible to receive an annual incentive (the “Bonus”) paid by the Corporation, as determined by the Corporation Board based on (i) the Company achieving certain performance criteria, (ii) the Executive’s performance, and (iii) such other criteria as the Corporation Board and its Compensation Committee shall determine. Executive also shall be eligible to receive such other bonus compensation as may be determined by the Corporation Board and its Compensation Committee from time to time. Notwithstanding any other provision of this Agreement, the Company shall have no obligation to pay any Bonus under this Section 4(c) in the event that the established performance criteria are not met for the applicable performance period. Any Bonus to which Executive shall be entitled will be paid to Executive 30 days after it is determined, but in no event later than two and one-half months following the year in which the bonus is earned.

 

(d)                                 Equity Compensation.  The Corporation has established the First Michigan Bancorp, Inc. Equity Incentive Plan (as it may be amended or restated from time to time, the “Equity Incentive Plan”).  Upon execution of this Agreement, the Corporation will grant Executive stock options to purchase 300,000 shares of the Corporation’s common stock pursuant to a stock option agreement (the “Option Award”).  Shares granted to Executive under the Option Award shall have an exercise price equal to the fair market value of the Corporation’s common stock on the date of grant (the “Grant Date”), with one-third of the shares subject to the Option Award vesting on each of the first, second and third anniversaries of the Grant Date.  The Executive shall be eligible to receive future option grants and/or restricted share grants as recommended by the Compensation Committee and approved by the Corporation Board.

 

(e)                                  Disability.  During any period that Executive is Disabled (as defined below) (the “Disability Period”), Executive shall continue to receive his full Base Salary, Bonus and other benefits at the rate in effect for such period until his employment is terminated by Company pursuant to Section 7(a)(iii) hereof; provided, however, that payments so made to Executive during the Disability Period shall be reduced by the sum of the amounts, if any, which are paid to Executive under disability insurance or disability benefit plans of the Company.  For purposes of this Section 4(e) only, Executive shall be deemed to be “Disabled,” and on a bona fide leave of absence, if he is eligible to receive disability benefits under any disability benefit plan or insurance policy provided by the Company to its employees generally or to Executive 

 

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specifically (a “Company Sponsored Plan”). If Company does not provide coverage to Executive under a Company Sponsored Plan, Executive shall be deemed to be “Disabled” if he is unable to perform the essential functions of his duties hereunder (with or without reasonable accommodation by the Company) as a result of incapacity due to physical or mental illness or injury.

 

5.                                      Benefits.

 

(a)                                 Insurance. The Company shall provide to Executive life, disability, medical, hospitalization and dental insurance for himself, his spouse and eligible dependents as is provided to other executive employees of the Company for which the Executive qualifies under the terms of such insurance plans. The Executive’s participation in and benefits under any such plan shall be on the terms and subject to the conditions specified in the governing document of the particular plan.

 

(b)                                 Benefit Plans.  Executive, at his election, may participate, during his employment hereunder, in all retirement plans, 401(k) plans and other benefit plans of the Company generally available from time to time to other executive employees of the Company, and for which Executive qualifies under the terms of the plans (and nothing in this Agreement shall or shall be deemed to in any way affect Executive’s right and benefits under any such plan except as expressly provided herein).  Executive shall also be entitled to participate in any equity incentive plan, option plan or other employee benefit plan that is generally available to senior executives, as distinguished from general management, of the Company.  Executive’s participation in and benefits under any such plan shall be on the terms and subject to the conditions specified in the governing document of the particular plan.

 

(c)                                  Annual Vacation. Executive shall be entitled to such number of days of vacation time each year without loss of compensation as is customary for executives similar to the Executive and as are approved by the Board.

 

(d)                                 Relocation. If the Executive relocates to the Detroit, Michigan area within 18 months of the Effective Date, the Company shall pay him $100,000 to cover relocation expenses and fees. The Executive shall provide the Company with any documentation substantiating the deductibility of such expenses and fees. To the extent that the $100,000 payment exceeds such deductible expenses and such excess amount therefore is taxable to the Executive as wages, the Company shall provide an additional payment to make the Executive whole for any taxes paid on such wages.

 

6.                                      Reimbursement of Business Expenses.

 

The Company shall reimburse Executive or provide him with an expense allowance during the term of this Agreement for travel, entertainment, business development and other expenses reasonably and necessarily incurred by Executive in connection with the Company’s business, including, without limitation, such expenses incurred in connection with Executive’ long-distance commuting from his home to the Company’s offices; provided, however, that commuting expenses shall not be reimbursable at any time after Executive relocates to the Detroit, Michigan area. Executive shall furnish such documentation with respect to reimbursement to be paid hereunder as the Company shall reasonably request.  In the event that any of the foregoing reimbursable business expenses are taxable to Executive as wages, the Company shall provide an additional payment to make the Executive whole for any taxes paid thereon.

 

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7.                                      Termination of Employment.

 

(a)                                 This Agreement and Executive’s employment hereunder may be terminated:

 

(i)                                     by either Executive or the Company at any time for any reason whatsoever or for no reason upon not less than sixty (60) days prior written notice;

 

(ii)                                  by the Company at any time for Cause (as defined in Section 7(b) below ) without prior notice; and

 

(iii)                               upon Executive’s death or if Executive is Totally Disabled (as defined in Section 7(c) below).

 

(b)                                 For purposes of this Agreement, for “Cause” means (i) a material breach of any provision of this Agreement by Executive (if the breach is curable, it will constitute Cause only if it continues uncured for a period of twenty (20) days after Executive’s receipt of written notice of such breach from the Company), (ii) Executive’s failure or refusal, in any material manner, to perform all lawful services required of him pursuant to this Agreement, which failure or refusal continues for more than twenty (20) days after Executive’s receipt of written notice of such deficiency, (iii) Executive’s commission of fraud, embezzlement or theft, or a crime constituting moral turpitude, in any case whether or not involving the Company, that in the reasonable good faith judgment of the Corporation Board or Bank Board, renders Executive’s continued employment harmful to the Company, (iv) Executive’s misappropriation of Company assets or property, including, without limitation, obtaining material reimbursement through fraudulent vouchers or expense reports, or (v) Executive’s conviction or the entry of a plea of guilty or no contest by Executive with respect to any felony or other crime that, in the reasonable good faith judgment of the Corporation Board or Bank Board, adversely affects the Company, its reputation or business.

 

(c)                                  For purposes of this Section 7 and payment of compensation and benefits pursuant to Section 8(d), Executive shall be considered “Totally Disabled” if, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, (i) he is unable to engage in any substantial gainful activity, or (ii) he is receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Company.

 

8.                                      Compensation Upon Termination.

 

(a)                                 If Company terminates this Agreement either by providing notice of non-renewal pursuant to Section 2 or without Cause pursuant to Section 7(a)(i) hereof or if Executive voluntarily terminates this Agreement for Good Reason (as defined below) then (i) the Company shall pay to Executive within thirty (30) days after the effective date of such termination (the last day of the term then in effect if due to non-renewal) any unpaid Base Salary accrued and earned by him hereunder up to and including the termination date, (ii) the Company shall pay to Executive the sum of one times the Executive’s annual Base Salary in effect as of the termination date plus an amount equal to the average of the Executive’s Bonus paid in respect of the prior two calendar years, if any (which amount, with respect to a termination date during the first two years following the Effective Date only, shall be not less than 50% of Executive’s Base Salary) (the “Severance Payment”), with such payment being made in equal installments over a one (1) year period in accordance with the Company’s ordinary payroll practices, except as otherwise provided below and (iii) Executive’s outstanding stock options shall accelerate and become fully vested and exercisable for a period of one year following the termination date. To the extent any portion of the applicable Severance Payment exceeds the “safe harbor” amount described in Treasury Regulation Section 1.409A-1(b)(9)(iii)(A), the Executive shall receive such portion of the 

 

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applicable Severance Payment that exceeds the “safe harbor” amount in a single lump sum payment within sixty (60) days following the date of termination.  Notwithstanding any other provision of this Agreement to the contrary, (A) Company’s obligations under this Section 8(a) shall be contingent on Executive executing and delivering to Company a general release of claims, substantially in the form attached hereto as Exhibit A.  Notwithstanding any other provision of this Agreement to the contrary, if the Executive has been designated as a “Specified Employee” within the meaning of Section 409A(a)(2)(B)(i) of the Internal Revenue Code of 1986, as amended (the “Code”), 50% of the Severance Payment shall be paid to Executive on the six month anniversary of the effective date of the termination of employment and the remainder of the Severance Payment shall be paid in equal installments over the six-month period immediately following such six month anniversary, in accordance with the Company’s ordinary payroll practices. For purposes of this Agreement, “Good Reason” means the occurrence of any of the following events: (a) a substantial adverse change, not consented to by Executive, in the nature or scope of Executive’s responsibilities, authorities or duties hereunder, (b) a material involuntary reduction in Executive’s Base Salary except for an across-the-board and proportional salary reduction similarly affecting all or substantially all employees (provided that the Base Salary shall be increased proportionately at any later time as any other senior executive base salary is thereafter increased), or (c) the relocation, without the Executive’s consent, of Executive’s principal place of employment to another location of Company outside a 60-mile radius from the location of Executive’s principal place of employment as of the date hereof. Executive must provide written notice to the Company of the existence of a condition, or conditions, that the Executive believes constitutes Good Reason within ninety (90) days of the initial existence of such condition(s). Upon receipt by the Company of such notice, the Company will have thirty (30) days to remedy the condition(s). If the Company remedies the condition(s) of which it received notice from Executive within thirty (30) days, then such condition(s) shall not constitute Good Reason.  If the Company determines that it will not cure, or that it cannot cure, such condition, the Executive’s date of termination shall be the thirtieth day following the date the Company receives the notice from the Executive.

 

(b)                                 If Executive voluntarily terminates this Agreement pursuant to Section 7(a)(i) for any reason other than Good Reason (i) Executive shall be entitled to no further compensation or other benefits under this Agreement, other than any unpaid Base Salary accrued and earned by Executive hereunder for the period up to and including the effective date of such termination, and (ii) Executive’s vested stock options shall continue to be exercisable for a period of one year following the date the Executive’s employment is terminated.

 

(c)                                  If Company terminates this Agreement for Cause pursuant to Section 7(a)(ii), (i) Executive shall be entitled to no further compensation or other benefits under this Agreement, other than any unpaid Base Salary accrued and earned by Executive hereunder for the period up to and including the effective date of such termination, and (ii) Executive shall forfeit all stock options granted to him by the Company.

 

(d)                                 If the Company terminates this Agreement pursuant to Section 7(a)(iii) hereof upon the Executive’s death or Total Disability, (i) the Company shall pay Executive or his designated beneficiary, as applicable, within thirty (30) days after the effective date of such termination any unpaid Base Salary accrued and earned by him hereunder up to and including the effective date of such termination, (ii) Executive’s vested stock options shall continue to be exercisable for a period of ninety (90) days following the date the Executive’s employment is terminated and (iii) the Company shall pay to Executive or his designated beneficiary a pro rated Bonus for the year of termination based on the actual results of the Company, determined in accordance with the performance criteria established under Section 4(c).

 

(e)                                  Except as otherwise specified in this Section 8 and, if applicable, Sections 9 and 10 below, Executive shall not be entitled to any other compensation or benefits upon the 

 

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termination of his employment with Company for any reason whatsoever.

 

(f)                                   Immediately upon the cessation of Executive’s employment with the Company for any reason whatsoever, notwithstanding anything else to the contrary contained in this Agreement or otherwise, Executive will stop serving the functions of his terminated or expired position(s) and shall be without any of the authority or responsibility for such position(s).  Upon the Company’s request, at any time following the cessation of his employment for any reason, Executive shall resign from the Boards if then a member.

 

(g)                                  Notwithstanding anything to the contrary in this Section 8, the Company’s obligation to pay, and Executive’s right to receive, any compensation under this Section 8, shall terminate upon Executive’s breach of any provision of Section 10 hereof.  In addition, Executive shall automatically forfeit and promptly remit to the Company any compensation received from the Company under this Section 8 upon Executive’s breach of any provision of Section 10 hereof.

 

9.                                      Change in Control.

 

(a)                                 If there is a Change in Control Event during the term of this Agreement, (i) the Company will pay the Executive the Change in Control Payment in cash at the closing of the Change of Control Event, and (ii) Executive’s outstanding stock options shall accelerate and become fully vested and continue to be exercisable as provided in the agreement or plan under which they were granted.

 

(b)                                 For purposes of this Agreement, “Change in Control Payment” means a lump sum payment equal to one times the Severance Payment; provided, however, that if the Company’s assets are in excess of $2 billion as of the date of the Change in Control, then the Change in Control Payment shall be equal to two times the Severance Payment.

 

(c)                                  For purposes of this Agreement, a “Change in Control Event” means: (i) a sale of all or substantially all of the Company’s assets (whether by merger, consolidation or otherwise), or (ii) any other transaction in which all of the stockholders of the Company sell or dispose of their Common Stock in the Company, other than any such transaction described in clause (i) or (ii) in which the stockholders of the Company immediately prior to such transaction possess, directly or indirectly, 50% or more of the total voting power of the Company or other surviving, acquiring or controlling entity immediately following such transaction.  Notwithstanding the foregoing, neither the Corporation’s current private placement nor any follow-on private placement relating thereto shall be deemed to be a Change in Control Event.

 

(d)                                 Anything to the contrary in this Agreement notwithstanding, in no event shall more than one Change in Control Payment be made to Executive under this Agreement, regardless of whether more than one Change in Control Event occurs during the term of this Agreement.

 

(e)                                  Notwithstanding any other provision of this Agreement, if, in connection with a Change of Control Event, the Executive’s employment is terminated without Cause by the Company or the Executive terminates his employment for Good Reason, the Executive shall be entitled to receive either the Severance Payment under Section 8 or the Change of Control Payment under this Section 9, but shall not be entitled to receive both the Severance Payment and the Change of Control Payment. Without limiting the foregoing, a termination of the Executive’s employment shall be deemed conclusively to be “in connection with” a Change of Control Event if it occurs within six months before or after the closing date of the Change of Control Event.

 

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(f)                                   Prior to and as a condition of any payment under this Section 9, Executive shall execute and deliver to Company a general release of claims to other change in control payments in a form acceptable to the Company and, if Executive’s employment has been terminated, a general release of claims, substantially in the form attached hereto as Exhibit A.

 

(g)                                  Notwithstanding anything to the contrary in this Section 9, the Company’s obligation to pay, and Executive’s right to receive, any Change in Control Payment under this Section 9, shall terminate upon Executive’s breach of any provision of Section 10 hereof.  In addition, Executive shall automatically forfeit and promptly remit to the Company any Change in Control Payment received from the Company under this Section 9 upon Executive’s breach of any provision of Section 10 hereof.

 

10.                               Covenant Not To Compete and Confidentiality.

 

(a)                                 Executive acknowledges the Company’s reliance and expectation of Executive’s continued commitment to performance of his duties and responsibilities under this Agreement.  In light of such reliance and expectation on the part of the Company, Executive agrees to the provisions set forth below.

 

(i)                                     During the Covenant Period (as defined below), Executive shall not compete with the Company, as such phrase is defined below. The “Covenant Period” shall begin on the Effective Date and end: (A) if the Company terminates this Agreement without Cause or the Executive terminates this Agreement for Good Reason and the Company pays the Severance Payment to the Executive as provided in Section 8(a), the 12-month anniversary of the effective date of the termination of the Executive’s employment by the Company; (B) if the employment of the Executive is terminated by any party for any other reason and the Company elects to extend the Covenant Period by making the Non-Compete Payments, the date through which the Company continues to pay the Executive his Base Salary at the rate in effect as of the termination date in accordance with the regular payroll practices of the Company (such payments, the “Non-Compete Payments”); provided that the Company may not extend the Covenant Period pursuant to this clause (B) beyond the 12-month anniversary of the effective date of the termination of the Executive’s employment.

 

(ii)                                  The phrase “shall not compete with the Company” means that Executive shall not, directly or indirectly, engage in, or have an interest in or be associated with (whether as an officer, director, stockholder, partner, associate, employee, consultant, owner or otherwise) any corporation, firm or enterprise which is engaged in operating a bank in the State of Michigan or within 50 miles of a Company or subsidiary location, if located outside of the State of Michigan where the Company operates as a bank during the term of this Agreement (the “Business”); provided, however, that Executive shall be permitted to make passive investments in the stock of any publicly traded business (including a competitive business), so long as the stock investment in any competitive business does not rise above one percent (1%) of the outstanding shares of such business.

 

(iii)                               Executive shall not at any time, for so long as any Confidential Information (as defined below) shall remain confidential or otherwise remain wholly or partially protectable, either during the term of this Agreement or thereafter, use or disclose any Confidential Information, directly or indirectly, to any person outside of the Company or any company owned or controlled by the Corporation or the Bank or under common control with the Corporation or the Bank (an “Affiliate”). “Confidential Information” means all business information of any nature and in any form which at the time or times concerned is not generally known to those persons engaged in business

 

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similar to that conducted or contemplated by the Company or any Affiliate (other than by the act or acts of an employee not authorized by Company to disclose such information) and which relates to any one or more of the aspects of the business of the Company, or any of the Affiliates or any of their respective predecessors, including, without limitation, patents and patent applications, inventions and improvements (whether or not patentable), development projects, policies, processes, formulas, techniques, know-how, and other facts relating to sales, advertising, promotions, financial matters, customers, customer lists, customer purchases or requirements, and other trade secrets.

 

(iv)                              Promptly upon the termination of this Agreement for any reason, Executive (or in the event of Executive’s death, his personal representative) shall return to Company any and all copies (whether prepared by or at the direction of the Company or Executive) of all records, drawings, materials, memoranda and other data constituting or pertaining to Confidential Information.

 

(v)                                 During the Covenant Period, the Executive shall not, either directly or indirectly, divert, or by aid to others, do anything which would tend to divert, from the Company or any Affiliate any trade or business with any customer or supplier with whom Executive had any contact or association during the term of Executive’s employment with the Company or with any party whose identity or potential as a customer or supplier was confidential or learned by Executive during his employment by the Company.

 

(vi)                              Notwithstanding anything to the contrary in this Section 10, the Executive shall automatically forfeit and promptly remit to the Company any Non-Compete Payments previously received from the Company under this Section 10 upon Executive’s breach of any provision of this Section 10.

 

(b)                                 Executive agrees and understands that the remedy at law for any breach by him of this Section 10 will be inadequate and that the damages flowing from such breach are not readily susceptible to being measured in monetary terms.  Accordingly, Executive acknowledges that Company shall be entitled to immediate injunctive relief and may obtain a temporary order restraining any threatened or further breach.  Nothing in this Section 10 shall be deemed to limit the Company’s remedies at law or in equity for any breach by Executive of any of the provisions of this Section 10 which may be pursued or availed of by the Company.

 

(c)                                  Executive acknowledges and agrees that the covenants set forth above are reasonable and valid in geographical and temporal scope and in all other respects.  If any court determines that any of the covenants, or any part of any covenant, is invalid or unenforceable, the remainder of the covenants shall not be affected and shall be given full effect, without regard to the invalid portion.  If any court determines that any of the covenants, or any part of any covenant, is unenforceable because of its duration or geographic scope, such court shall have the power to reduce the duration or scope, as the case may be, and, enforce such provision in such reduced form.  Executive and the Company intend to and hereby confer jurisdiction to enforce the covenants upon the courts of any jurisdiction within the geographical scope of such covenants.  If the courts of any one or more of such jurisdictions hold the covenants, or any part of any covenant, unenforceable by reason of the breadth of such scope or otherwise, it is the intention of Executive and the Company that such determination not bar or in any way affect the right of the Company to the relief provided above in the courts of any other jurisdiction within the geographical scope of such covenants as to breaches of such covenants in such other respective jurisdictions.  For this purpose, such covenants as they relate to each jurisdiction shall be severable into diverse and independent covenants.

 

(d)                                 In consideration of Executive’s performance of his obligations under this Section 10, if the Company terminates this Agreement with Cause pursuant to Section 7(a)(i)

 

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above or if Executive voluntarily terminates this Agreement without Good Reason, then the Company at its option shall pay the Executive an amount equal to his Base Salary at the usual payroll intervals for a period of up to twelve (12) months following the termination date (the “Non-Compete Amount”); provided that the Company shall not be obligated to pay Executive any portion of the Non-Compete Amount after any breach by Executive of his obligations under Section 10.

 

11.                               Intellectual Property Rights.  Executive hereby agrees that any procedures, methodologies, systems, formulas, processes, discoveries, improvements, product enhancements, copyrights, trademarks and inventions relating to the business of the Corporation, the Bank and their respective affiliates (the “Intangibles Rights”), whether or not patentable or copyrightable, that are conceived, developed, made, invented, or suggested either by Executive alone or in collaboration with others during the term of his employment by the Company, or arising in connection with or related to Executive’s employment hereunder or through activity utilizing any machinery, equipment or other property of the Corporation, the Bank and their respective affiliates, whether or not during working hours, shall be promptly disclosed to, without further compensation, and shall be the sole and exclusive property of, the Company, as works made for hire or otherwise.  To the extent that any Intangibles Rights are not or are deemed not to be works made for hire, Executive shall execute and deliver, without further compensation, any further documentation deemed by the Company to be necessary to vest ownership of all such Intangibles Rights in the Company. Executive agrees and understands that the remedy at law for any breach by him of this Section 11 will be inadequate and that the damages flowing from such breach are not readily susceptible to being measured in monetary terms.  Accordingly, Executive acknowledges that Company shall be entitled to immediate injunctive relief and may obtain a temporary order restraining any threatened or further breach.  Nothing in this Section 11 shall be deemed to limit the Company’s remedies at law or in equity for any breach by Executive of any of the provisions of this Section 11 which may be pursued or availed of by the Company.

 

12.                               Excise Tax Payment. Anything in this Agreement to the contrary notwithstanding, if any of the payments or benefits received or to be received by Executive following a Change in Control Event and/or Executive’s termination or resignation of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company) (the “Aggregate Payment”) is determined to constitute a “parachute payment” as such term is deemed in Section 280G(b)(2) of the Code, the Company shall pay to Executive an additional amount which, after the imposition of all income and excise taxes thereon, is equal to the excise tax imposed by Section 4999 of the Code with respect to the Aggregate Payment. The determination of whether the Aggregate Payment constitutes a parachute payment and, if so, the amount to be paid to Executive shall be made by a nationally recognized United States public accounting firm selected by the Company which has not, during the two years preceding the date of its selection, acted in any way on behalf of the Company. The Company shall pay Executive the amount payable to him under this Section 11 by the end of the taxable year in which Executive remits these amounts to the taxing authority(s).

 

13.                               No Conflicting Agreements. Executive represents and warrants that he is not a party to any agreements, contracts, understandings or arrangements, whether written or oral, in effect which would prevent him from rendering exclusive services to the Company during the term hereof, and that he has not made and will not make any commitment to do any act in conflict with this Agreement.

 

14.                               Arbitration.  The parties agree that any and all disputes, controversies or claims of any nature whatsoever relating to, or arising out of, this Agreement or Executive’s employment, whether in contract, tort, or otherwise (including, without limitation, claims of wrongful termination of employment, claims under Title VII of the Civil Rights Act, the Fair Labor Standards Act, the Americans with Disabilities Act, the Age Discrimination in Employment Act, 

 

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or comparable state or federal laws, and any other laws dealing with employees’ rights and remedies), shall be settled by mandatory arbitration administered by the American Arbitration Association under its National Rules for the Resolution of Employment Disputes (the “Rules”) and the following provisions: (A) a single arbitrator (the “Arbitrator”), mutually agreeable to Company and Executive, shall preside over the arbitration and shall make all decisions with respect to the resolution of the dispute, controversy or claim between the parties; (B) in the event that the Company and Executive are unable to agree on an Arbitrator within fifteen (15) days after either party has filed for arbitration in accordance with the Rules, they shall select a truly neutral arbitrator in accordance with the rules for the selection of neutral arbitrators, who shall be the “Arbitrator” for the purposes of this Section 14; (C) the place of arbitration shall be Troy, Michigan unless mutually agreed otherwise; (D) judgment may be entered on any award rendered by the Arbitrator in any federal or state court having jurisdiction over the parties; (E) all fees and expenses of the Arbitrator shall be shared equally between the Company and Executive; (F) the decision of the Arbitrator shall govern and shall be conclusive and binding upon the parties; (G) the parties shall be entitled to reasonable levels of discovery in accordance with the Federal Rules of Civil Procedure or as permitted by the Arbitrator, provided, however, that the time permitted for discovery shall not exceed eight (8) weeks and each party shall be limited to two (2) depositions; and (H) this provision shall be enforceable by specific performance and/or injunctive relief, and shall constitute a basis for dismissal of any legal action brought in violation of the duty to arbitrate.  The parties hereby acknowledge that it is their intent to expedite the resolution of any dispute, controversy or claim hereunder and that the Arbitrator shall schedule the timing of discovery and of the hearing consistent with that intent.  Notwithstanding anything to the contrary herein, nothing contained in this Section shall be construed to preclude the Company from obtaining injunctive or other equitable relief to secure specific performance or to otherwise prevent Executive’s breach of Section 10 of this Agreement.

 

15.                               Notice.  All notices, requests, consents and other communications, required or permitted to be given under this Agreement shall be personally delivered in writing or shall have been deemed duly given when received after it is posted in the United States mail, postage prepaid, registered or certified, return receipt requested addressed as set forth below. In addition, a party may deliver a notice via another reasonable means that results in the recipient party receiving actual notice, as conclusively demonstrated by the party giving such notice.

 

If to Corporation:

 

First Michigan Bancorp, Inc.

2301 West Big Beaver Road, Suite 525

Troy, Michigan 48084

Attn: Chief Executive Officer

 

If to Bank:

 

First Michigan Bank

2301 West Big Beaver Road, Suite 525

Troy, Michigan 48084

Attn: Board of Directors

 

If to Executive:

 

Dennis Klaeser

 

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In all events, with a copy to:

 

Barack Ferrazzano Kirschbaum & Nagelberg LLP

200 West Madison Street, Suite 3900

Chicago, Illinois 60606

Attn:  Donald L. Norman, Jr.

 

and to:

 

Jaffe, Raitt, Heuer & Weiss,

Professional Corporation

27777 Franklin Road, Suite 2500

Southfield, Michigan 48034

Attn:  Peter Sugar

 

16.                               Cooperation in Future Matters.  Executive hereby agrees that for a period of eighteen (18) months following his termination of employment he shall cooperate with the Company’s reasonable requests relating to matters that pertain to Executive’s employment by the Company, including, without limitation, providing information or limited consultation as to such matters, participating in legal proceedings, investigations or audits on behalf of the Company, or otherwise making himself reasonably available to the Company for other related purposes. Any such cooperation shall be performed at scheduled times taking into consideration Executive’s other commitments, and Executive shall be compensated at a reasonable hourly or per diem rate to be agreed upon by the parties to the extent such cooperation is required on more than an occasional and limited basis. Executive shall not be required to perform such cooperation to the extent it conflicts with any requirements of exclusivity of services for another employer or otherwise, nor in any manner that in the good faith belief of Executive would conflict with his rights under or ability to enforce this Agreement.

 

17.                               Miscellaneous.

 

(a)                                 The provisions of this Agreement are severable and if any one or more provisions may be determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions and any partially unenforceable provision to the extent enforceable in any jurisdiction nevertheless shall be binding and enforceable.

 

(b)                                 The rights and obligations of the Company under this Agreement shall inure to the benefit of, and shall be binding on, the Company and its successors and assigns. This Agreement is personal to Executive and he may not assign his obligations under this Agreement in any manner whatsoever and any purported assignment shall be void.  For all purposes under this Agreement, the term “Company” shall include any successor to the Company’s business and/or assets that assumes the Company’s rights and obligations under this Agreement.

 

(c)                                  The failure of any party to enforce any provision or protections of this Agreement shall not in any way be construed as a waiver of any such provision or provisions as to any future violations thereof, nor prevent that party thereafter from enforcing each and every other provision of this Agreement.  The rights granted the parties herein are cumulative and the waiver of any single remedy shall not constitute a waiver of such party’s right to assert all other legal remedies available to it under the circumstances.

 

(d)                                 This Agreement sets forth the entire understanding and agreement of Executive and the Company with respect to its subject matter and supersedes all prior understandings and agreements, whether written or oral. If the terms of this Agreement shall 

 

11

 

conflict with the terms of any other agreement between the Executive and the Company or any compensation plan, arrangement or policy of the Company applicable to the Executive, the provisions of this Agreement shall control.

 

(e)                                  This Agreement shall be governed by and construed in accordance with the laws of the State of Michigan, without regard to its conflicts of law principles.

 

(f)                                   Captions and section headings used herein are for convenience and are not a part of this Agreement and shall not be used in construing it.

 

(g)                                  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  Copies (whether photostatic, facsimile or otherwise) of this Agreement may be made and relied upon to the same extent as an original.

 

(h)                                 The Company may withhold such amounts as may be required under federal, state and local law to be withheld from the payments made under this Agreement.

 

(i)                                     No modification, termination or attempted waiver of this Agreement shall be valid unless in writing and signed by the party against whom the same is sought to be enforced.

 

(j)                                    The provisions of Sections 10, 11, 14, 15, 16 and 17 of this Agreement shall survive the termination of this Agreement, notwithstanding anything to the contrary herein.

 

(k)                                 Executive may, on a form prescribed by the Company, designate a beneficiary or beneficiaries to receive the benefits under this Agreement in the event of his death. If Executive does not designate a beneficiary, his benefits will be paid first to his spouse, if surviving him, and if unmarried or if his spouse does not survive him, in equal shares to his children surviving him, and if neither his spouse nor children survive him, to his estate.

 

(l)                                     The Executive acknowledges that the Company has advised the Executive to consult with an attorney of his choosing prior to signing this Agreement and the Executive hereby represents to the Company that he has been offered an opportunity to consult with an attorney prior to signing this Agreement.

 

[SIGNATURES ON FOLLOWING PAGE]

 

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IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of the date first written above.

 

	
 
    	
CORPORATION:
    
	
 
    	
 
    
	
 
    	
FIRST   MICHIGAN BANCORP, INC., a Michigan limited liability company
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   David Provost
    
	
 
    	
Its:
    	
President   and CEO
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
BANK:
    
	
 
    	
 
    
	
 
    	
FIRST   MICHIGAN BANK, a Michigan state chartered banking institution
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   David Provost
    
	
 
    	
Its:   
    	
Chairman,   President and CEO
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
EXECUTIVE:
    
	
 
    	
 
    
	
 
    	
/s/ Dennis Klaeser
    
	
 
    	
DENNIS   KLAESER
    

 

[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]

 

13

 

EXHIBIT A

 

RELEASE AND WAIVER

 

This release and waiver (the “Termination Release”) is made as of the          day of                     , 20    by                                              (the “Executive”).

 

WHEREAS, the Executive, First Michigan Bancorp, Inc., a Michigan corporation (the “Corporation”) and First Michigan Bank, a state chartered banking institution and wholly-owned subsidiary of the Corporation (the “Bank,” and together with the Corporation, the “Company”) have entered into an Employment Agreement (the “Agreement”) effective as of                                     , 2010 that provides for certain compensation and severance amounts upon his termination of employment; and

 

WHEREAS, the Executive has agreed, pursuant to the terms of the Agreement, to execute a release and waiver in the form set forth in this Release and Waiver (“Termination Release”) in consideration of the Company’s agreement to provide the compensation and severance amounts upon the termination of his employment as set forth in the Agreement; and

 

WHEREAS, the Executive has incurred a termination of employment effective as of                   , 20    ; and

 

NOW THEREFORE, in consideration of the mutual covenants and agreements set forth below and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Executive agrees as follows:

 

1.                                      RELEASE. In consideration for the payments to be made pursuant to the Agreement:

 

(a)                                 Except as set forth in Section 1(b) below, Executive knowingly and voluntarily releases, acquits and forever discharges the Corporation and the Bank and their current and former respective owners, parents, stockholders, predecessors, successors, assigns, agents, directors, officers, employees, representatives, divisions and subsidiaries (collectively, the “Releasees”) from any and all charges, complaints, claims, liabilities, obligations, promises, agreements, damages, causes of action, suits, rights, costs, losses, debts and expenses of any nature whatsoever, known or unknown, suspected or unsuspected, foreseen or unforeseen, matured or unmatured, against them which the Executive or any of his heirs, executors, administrators, successors and assigns (“Executive Persons”) ever had, now has or at any time hereafter may have, own or hold by reason of any matter, fact, or cause whatsoever from the beginning of time up to and including the date of this Termination Release, including, without limitation, all claims for salary, bonuses, severance pay, vacation pay or any benefits arising under the Employee Retirement Income Security Act of 1974, as amended; any claims of sexual harassment, or discrimination based upon race, color, national origin, ancestry, religion, marital status, sexual orientation, citizenship status, medical condition or disability under Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the American with Disabilities Act, The Consolidated Omnibus Budget Reconciliation Act, as amended, The Fair Labor Standards Act, as amended, and any other federal, state or local law relating to employment or termination of employment; any claims of age discrimination under the Age Discrimination in Employment Act, as amended by the Older Workers Benefit Protection Act, or under any other federal, state or local law prohibiting age discrimination; claims of breach of implied or express contract, breach of promise, misrepresentation, negligence, fraud, estoppel, defamation, infliction of emotional distress, violation of public policy, wrongful or constructive discharge, or any other employment-related tort; any claim for wages, bonus, compensation, stock options or other equity awards (except as provided in Section 1(b) below),  costs, fees, or other expenses, including attorneys 

 

A-1

 

fees; and all claims under any other federal, state or local laws relating to employment, except in any case to the extent such release is prohibited by applicable federal, state and/or local law.

 

(b)                                 Notwithstanding the foregoing, this Release shall not be construed so as to release or discharge the Company from its obligations under Sections 8 or 9 of the Agreement or with respect to any vested benefits (including, but not limited to equity incentive plans) the Executive may have earned through the date of termination. In addition, notwithstanding this Release, Executive shall continue to be covered by the Company’s directors and officers liability insurance and the indemnification provisions of the Company’s governing documents to the extent such insurance and such indemnification provisions are applicable to Executive.

 

(c)                                  Executive represents that he has not filed against the Releasees, any complaints, charges or lawsuits and covenants and agrees that he will not seek or be entitled to any personal recovery in any court or before any governmental agency, arbitrator or self-regulatory body against any of the Releasees arising out of any matters set forth in Section 1(a) hereof. If Executive has filed a complaint, charge, grievance, lawsuit or similar action, he agrees to remove, dismiss with prejudice or take similar action to eliminate such complaint, charge, grievance, lawsuit or similar action within five (5) days of signing this Termination Release.

 

(c)                                  Notwithstanding the foregoing, this Termination Release is not intended to interfere with Executive’s right to file a charge with the Equal Employment Opportunity Commission (hereinafter referred to as the “EEOC”) in connection with any claim he believes he may have against the Company.  Executive hereby agrees to waive the right to recover money damages in any proceeding he may bring before the EEOC or any other similar body or in any proceeding brought by the EEOC or any other similar body on his behalf. This Termination Release does not release, waive or give up any claim for workers’ compensation benefits, vested retirement or welfare benefits he is entitled to under the terms of the Company’s retirement and welfare benefit plans, as in effect from time to time, any right to unemployment compensation that Executive may have, or his right to enforce his rights under the Agreement.

 

2.                                      CONFIRMATION OF OBLIGATIONS.  Executive hereby confirms and agrees to his continuing obligations under Sections 10 and 16 of the Agreement.

 

3.                                      NO DISPARAGEMENT.  The parties agree not to disparage the other party , including making any statement or comments or engaging in any conduct that is disparaging or derogatory toward the other party or, whether directly or indirectly, by name or innuendo; provided, however, that nothing in this Termination Release shall restrict testimony or communications ordered and required by a court or an administrative agency of competent jurisdiction.

 

4.                                      CONFIDENTIALITY.  The Executive agrees to keep the terms of this Agreement and of this Termination Release confidential and shall not disclose the fact or terms to third parties, except as required by applicable law or regulation or by court order; provided, however, that Executive may disclose the terms of this Termination Release to members of his immediate family, his attorney or counselor, and persons assisting him in financial planning or tax preparation, provided these people agree to keep such information confidential; provided, further, however, that the Company may disclose the terms of this Termination Release to its certified public accounts, outside counsel or others on a need to know basis, provided these people agree to keep such information confidential.

 

5.                                      ACKNOWLEDGMENT. The Company has advised the Executive to consult with an attorney of his choosing prior to signing this Termination Release and the Executive hereby represents to the Company that he has been offered an opportunity to consult with an attorney prior to signing this Termination Release. The Executive shall have twenty-one (21) days to 

 

A-2

 

consider the waiver of his rights in this Termination Release, although he may sign this Termination Release sooner if he chooses. Once he has signed this Termination Release, the Executive shall have seven (7) additional days from the date of execution to revoke his consent to the waiver of his rights. If no such revocation occurs, the Executive’s waiver of rights in this Termination Release shall become effective seven (7) days from the date of execution by the Executive. In the event that the Executive revokes his waiver of rights in this Termination Release, this Termination Release will have no force and effect and no Severance Payments (as defined in the Agreement) shall be due or payable.

 

6.                                      GOVERNING LAW. This Termination Release shall be governed and construed in accordance with the laws of State of Michigan, without giving regard to its conflict of laws principles.

 

IN WITNESS WHEREOF, the Executive has executed this Termination Release as of                                      20    .

 

A-3Exhibit 10.4

 

FIRST MICHIGAN BANCORP, INC.

EQUITY INCENTIVE PLAN

 

First Michigan Bancorp, Inc. (the “Company”), has adopted the First Michigan Bancorp, Inc. Equity Incentive Plan (the “Plan”) as set forth herein.

 

Article I.

Purpose and Adoption of the Plan

 

1.01                                      Purpose.  The purpose of the Plan is to provide certain employees, directors, consultants and advisors of the Company with an additional incentive to promote the Company’s financial success and to provide an incentive which the Company may use to induce able persons to enter into or remain in the employment of the Company or a Subsidiary by providing such persons an opportunity to acquire or increase their respective direct proprietary interests in the operations and future of the Company.

 

1.02                                      Adoption and Term.  The Plan was adopted by the Company’s Board of Directors (the “Board”) and will remain in effect until all Shares authorized under the terms of the Plan have been issued, unless earlier terminated or abandoned by action of the Board.

 

Article II.

Definitions

 

2.01                                      Administrator is defined in Section 3.01 of this Plan.

 

2.02                                      Award means any one or combination of Options, Shares or any Other Award made under the terms of the Plan.

 

2.03                                      Award Agreement means a written agreement between the Company and Participant or a written acknowledgment from the Company specifically setting forth the terms and conditions of an Award granted under the Plan.

 

2.04                                      Award Period means, with respect to an Award, the period of time set forth in the Award Agreement during which specified conditions set forth in the Award Agreement must be satisfied.

 

2.05                                      Beneficiary means (a) an individual, trust or estate who or which, by will or by operation of the laws of descent and distribution, succeeds to the rights and obligations of the Participant under the Plan and Award Agreement upon the Participant’s death; or (b) an individual, who by designation of the Participant, succeeds to the rights and obligations of the Participant under the Plan and Award Agreement upon the Participant’s death.

 

2.06                                      Board means the Board of Directors of the Company.

 

2.07                                      Change of Control Event means: (a) a sale of all or substantially all of the Company’s (whether by merger, consolidation or otherwise), or (b) any other transaction in which stockholders of the Company sell or dispose of their Shares in the Company and as a result of such sale or disposition, the stockholders of the Company immediately prior to such transaction possess less than 50% of the voting power of the Company or other surviving entity immediately following such transaction. Notwithstanding the foregoing, the 2010 Private Placement shall not be deemed to be a Change of Control Event.

 

2.08                                      Code means the Internal Revenue Code of 1986, as amended.  References to a 

 

 

section of the Code shall include that section and any comparable section or sections of any future legislation that amends, supplements or supersedes that section, together with all Department of Treasury regulations.

 

2.09                                      Company means First Michigan Bancorp, Inc., a Michigan corporation.

 

2.10                                      Date of Grant means the date designated by the Administrator as the date as of which it grants an Award, which shall not be earlier than the date on which the Administrator approves the granting of such Award.

 

2.11                                      Expiration Date means the date specified in an Award Agreement as the expiration date of such Award.

 

2.12                                      Fair Market Value means, on any given grant date, the fair market value of the Shares as determined by the reasonable application of reasonable valuation methods or procedures as shall be established by the Administrator in good faith.

 

2.13                                      Options means all options granted at any time under the Plan.

 

2.14                                      Participant shall have the meaning set forth in Article V.

 

2.15                                      Plan means the First Michigan Bancorp, Inc. Equity Incentive Plan as it may be amended from time to time.

 

2.16                                      2010 Private Placement means the proposed private placement during 2010 of shares of the Company’s common stock to be offered and sold to accredited investors for the primary purpose of raising capital to acquire branches, loans and other assets of financial institutions through the Federal Deposit Insurance Corporation bid process for failed financial institutions.

 

2.17                                      Redeemable Share is defined in Section 10.06 of this Plan.

 

2.18                                      Redemption Price means, with respect to a Participant’s Redeemable Shares, the Redemption Price set forth in the applicable Award Agreement or, if no redemption price is set forth in the Award Agreement, Redemption Price means the Fair Market Value of such Redeemable Shares on the last day that such Participant is employed by, or provides services to, the Company; provided, however, if such Participant is terminated for “cause” (as defined in Section 7.02), the Redemption Price shall be the lesser of 50% of the price established in the preceding clause.

 

2.19                                      Restricted Share Rights means certain rights awarded to Participants pursuant to this Plan and subject to any restrictions that the Administrator, in its sole discretion, may attach to the Award.

 

2.20                                    Rule 16b-3 means Rule 16b-3 promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act, as currently in effect and as it may be amended from time to time, and any successor rule.

 

2.21                                    Shares means shares of the Company’s common stock.

 

2.22                                      Subsidiary shall have the meaning set forth in Section 424(f) of the Code, including, without limitation, First Michigan Bank.

 

2

 

2.23                                      Termination of Service means the voluntary or involuntary termination of a Participant’s employment with the Company for any reason, including death, disability, retirement or as the result of the divestiture of the Participant’s employer or any other similar transaction in which the Participant’s employer ceases to be the Company or a Subsidiary of the Company.  Unless otherwise determined by the Administrator, a Participant’s employment or service with the Company shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders service to the Company. Whether an authorized leave of absence or absence on military or government service, absence due to disability, or absence for any other reason shall constitute Termination of Service shall be determined in each case by the Administrator in its sole discretion.

 

Article III.

Administration

 

3.01                                      Administration.  The Plan shall be administered by the Board or, to the extent determined by the Board, a committee consisting of not less than two representatives of the Board to be appointed by, and to serve at the pleasure of, the Board (in either case, the “Administrator”). The Administrator shall administer the Plan in accordance with this provision and shall have the sole discretionary authority to interpret the Plan, to establish and modify administrative rules for the Plan, to impose such conditions and restrictions on Awards as it determines appropriate, to cancel Awards (including those made pursuant to other plans of the Company) and to substitute new options (including options granted under other plans of the Company) with the consent of the recipient, to correct any defect or omission and to reconcile any inconsistency in this Plan or in any Award Agreements, as applicable, and to take such steps in connection with the Plan and Awards granted thereunder as it may deem necessary or advisable.  All decisions and interpretations of the Administrator shall be binding on all persons, including the Company, the Company’s shareholders, the Participants and any Beneficiaries. The Administrator may delegate such of its powers and authority under the Plan as it deems appropriate to designated officers or employees of the Company.

 

3.02                                      Indemnification.  Members of the Board, or any committee created by the Board, shall be entitled to indemnification and reimbursement from the Company for any action or any failure to act in connection with service as Administrator to the full extent provided for or permitted by the Company’s governing documents or by any insurance policy or other agreement intended for the benefit of the Company’s officers, directors, or employees or by any applicable law.

 

Article IV.

Shares Issuable Pursuant to the Plan

 

4.01                                      Shares Issuable.  Shares to be issued under the Plan may be authorized and unissued Shares or issued Shares which have been reacquired by the Company. Except as provided in Section 4.03, the Awards granted to any Participant and to all Participants in the aggregate under the Plan shall be limited so that the sum of the Shares issued or issuable pursuant to such Awards and/or represented by such Awards shall initially be 769,810 Shares and shall thereafter be automatically increased upon the closing of the 2010 Private Placement so that the total number of Shares issuable under the Plan shall equal ten percent (10%) of the total number of Shares outstanding upon the closing of the 2010 Private Placement, on a fully-diluted basis.  Upon the closing of the 2010 Private Placement, the Administrator shall set forth on the attached Exhibit A the total number of Shares of the Company outstanding, on a fully-diluted basis, and the total number of Shares issuable under the Plan.

 

4.02                                      Shares Subject to Terminated Awards.  In the event that any Award at any 

 

3

 

time granted under the Plan shall be surrendered to the Company, be terminated or expire before it shall have been fully exercised, then all Shares formerly subject to such Award as to which such Award shall not have been exercised shall be available for any Award subsequently granted in accordance with the Plan.

 

4.03                                      Adjustments to Reflect Capital Changes.

 

(a)                                Recapitalization.  The number and kind of securities subject to outstanding Awards, the exercise price for such securities, and the number and kind of securities available for Awards subsequently granted under the Plan shall be appropriately adjusted to reflect any equity capital offering, reorganization, recapitalization, reclassification, Share split, combination or exchange of Shares, merger, consolidation or other change in capitalization with a similar substantive effect upon the Plan or the Awards granted under the Plan.  The Administrator shall have the power to determine the amount of the adjustment to be made in each case, which adjustment shall be final, binding and conclusive.  No fractional Shares or other securities shall be issued under the Plan resulting from any such adjustment, but the Administrator, in its sole and absolute discretion, may either make a cash payment in lieu of such fractional Shares or other securities or round any resulting fractional Shares or other securities down to the nearest whole number.

 

(b)                                Change of Control Event.  Except with respect to specific Options as the Administrator otherwise determines at the time of grant, upon the effectiveness of a Change of Control Event, unless provision is made in connection with the transaction for the assumption of all outstanding Options granted hereunder, or the substitution of such Options with new options of the successor entity or parent thereof, with appropriate adjustment as to the number and kind of Shares or other securities and, if appropriate, the per Share exercise price as provided in Section 4.03(a) above, the Plan and all outstanding Options shall terminate upon the occurrence of the Change of Control Event.  In the event of such termination, each Participant shall be permitted to exercise for a period of at least ten (10) days prior to the anticipated effective date of such Change of Control Event all outstanding Options held by such Participant which are then vested and exercisable (after giving effect to the acceleration of vesting provided for in connection with the Change of Control Event, if any); provided, that the exercise of the portion of such Options that became vested and exercisable in connection with the Change of Control Event, if any, shall be subject to and conditioned upon the occurrence of the Change of Control Event.

 

(c)                                 Options to Purchase Stock of Acquired Companies.  After any reorganization, merger or consolidation in which the Company or a Subsidiary of the Company shall be a surviving entity, the Administrator may grant substituted Awards under the provisions of the Plan replacing stock and stock based, or unit and unit based, awards granted under a plan of another party to the reorganization, merger or consolidation, where such party’s securities may no longer be issued following such reorganization, merger or consolidation.  The foregoing adjustments and manner of application of the foregoing provisions shall be determined by the Administrator in its sole discretion.  Any adjustments may provide for the elimination of any fractional shares which might otherwise have become subject to any Awards.  Any Shares issued by the Company pursuant to its assumption or substitution of outstanding grants from acquired companies shall not reduce the number of Shares available for Awards under this Plan unless issued under this Plan.

 

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Article V.

Participation

 

5.01                                      Eligible Participants. Participants in the Plan shall be employees, directors, consultants and advisors of the Company or any Subsidiary, as determined and selected from time to time by the Administrator, in its sole and absolute discretion; provided, however, that, with respect to consultants and advisors, such persons must provide bona-fide services to the Company, a Subsidiary or its affiliates.  The Administrator’s designation of a Participant in any year shall not require the Administrator to designate such person to receive Awards in any other year.  The Administrator shall consider such factors as it deems pertinent in selecting Participants and in determining the type and amount of their respective Awards.

 

Article VI.

Option Awards

 

6.01                                      Power to Grant Options.  The Administrator may grant, to such Participants as the Administrator may select, Options entitling the Participant to purchase Shares from the Company at such price, in such quantity and on such terms and subject to such conditions, not inconsistent with the terms of this Plan, as may be established by the Administrator.  The terms of any Option granted under this Plan shall be set forth in an Award Agreement.

 

6.02                                      Rights as a Shareholder.  The Participant or any transferee of an Option pursuant to Section 10.04 shall have no rights as a shareholder with respect to any Shares covered by an Option until the Participant or transferee shall have become the holder of record of any such Shares, and no adjustment shall be made for cash or other property or distributions or other rights with respect to any such Shares for which the record date is prior to the date on which the Participant or a transferee of the Option shall have become the holder of record of any such Shares covered by the Option.

 

Article VII.

Terms of Options

 

7.01                                      Duration of Options.  Options shall terminate after the first to occur of the following events:

 

(a)                                Expiration Date of the Award as provided in the Award Agreement; or

 

(b)                                Termination of the Award as provided in Sections 4.03 or 7.02.

 

7.02                                      Exercise on Death or Termination of Service.

 

(a)                                Unless otherwise provided in the Award Agreement, in the event of the death of a Participant while an employee of the Company or a Subsidiary of the Company, the right to exercise all unvested Options shall be accelerated and shall accrue as of the date of death, and the Participant’s Options may be exercised by his Beneficiary at any time within one year after the date of the Participant’s death.

 

(b)                                Unless otherwise provided in the Award Agreement, in the event of a Participant’s Termination of Service at any time for any reason other than death or for “cause” (as defined in paragraph 7.02(c) below), an Option may be exercised, but only to the extent it was otherwise exercisable, on the date of Termination of Service, within thirty days after the date of Termination of Service.  In the event of the death of the 

 

5

 

Participant within the 30-day period following Termination of Service, his Option may be exercised by his Beneficiary within the one year period provided in paragraph 7.02(a) above.  Notwithstanding anything to the contrary herein, if the Participant violates the non-competition or confidentiality provisions of any employment agreement, confidentiality or non-competition agreement or other agreement between the Company and Participant, the right to exercise an Award shall terminate immediately upon such violation.

 

(c)                                 Unless otherwise provided in the Award Agreement, in the event that a Participant’s Termination of Service is for “cause”, all Options shall terminate immediately upon Termination of Service.  For purposes hereof, “cause” shall have the meaning set forth in the Participant’s written employment, consulting or similar agreement with the Company or, if “cause” is not defined therein, or if there is no such agreement, “cause” shall mean: (i) any material breach by the Participant of any agreement to which the Participant and the Company are parties; (ii) an act or omission by the Participant involving malfeasance, misfeasance, nonfeasance, fraud or moral turpitude, (iii) the substantial or repeated failure or refusal of the Participant to perform according to reasonable expectations and standards set by the Board and/or management consistent with Participant’s title and position, (iv) Participant’s conviction (including any pleas of guilty or nolo contendre) of any crime which impairs the Participant’s ability to perform his or her duties, or (v) the Participant’s theft, dishonesty or falsification of the Company’s documents or records.

 

7.03                                      Acceleration of Exercise Time.  The Administrator, in its sole discretion, shall have the right (but shall not in any case be obligated) to permit purchase of Shares under any Award prior to the time such Award would otherwise become exercisable under the terms of the Award Agreement.

 

7.04                                      Extension of Exercise Time.  The Administrator, in its sole discretion, shall have the right (but shall not in any case be obligated) to permit any Award granted under this Plan to be exercised after its Expiration Date or after the thirty-day period following Termination of Service.

 

7.05                                      Conditions for Exercise. An Award Agreement may contain such vesting periods, exercise dates and restrictions on exercise (including, but not limited to, periodic vesting installments which may be cumulative) as may be determined by the Administrator at the Date of Grant.

 

7.06                                      Exercise Procedures.  Each Option granted under the Plan shall be exercised by written notice to the Company, which must be received by the officer or other representative of the Company designated in the Award Agreement on or before the Expiration Date of the Award.  The exercise price of Shares purchased upon exercise of an Option granted under the Plan shall be paid in full by certified or bank check or other instrument acceptable to the Administrator in U.S. funds payable to the order of the Company pursuant to the Award Agreement; provided, however, that the Administrator may (but need not) permit payment to be made by delivery to the Company of such other consideration as the Administrator deems appropriate and in compliance with applicable law.

 

Article VIII.

Restricted Awards

 

8.01                                      Restricted Share Rights.  The Administrator may grant to any Participant an Award entitling such person to receive Restricted Share Rights in such quantity, and on such 

 

6

 

terms, conditions and restrictions (whether based on performance standards, periods of service or otherwise) as the Administrator shall determine on or prior to the Date of Grant.  The terms of any Award of Restricted Share Rights granted under the Plan shall be set forth in an Award Agreement.

 

8.02                                      Forfeiture of Restricted Share Rights.  Subject to Section 8.04, all Restricted Share Rights shall vest in accordance with the terms and conditions set forth in the Award Agreement.  Except as otherwise provided in an Award Agreement, upon a Termination of Service for any reason (other than on account of a termination by the Company for cause, as defined in Section 7.02), the portion of such Participant’s Restricted Share Rights that has not fully vested as of the date of Termination of Service shall be automatically forfeited by such Participant at such time and such Shares shall automatically revert to the Company without any payment of consideration by the Company in connection therewith.  Upon a Termination of Service for cause, all of such Participant’s Restricted Share Rights (whether or not vested as of the date of Termination of Service) shall be automatically forfeited by such Participant at such time and such Shares shall automatically revert to the Company without any payment of consideration by the Company in connection therewith.

 

8.03                                      Delivery of Shares Upon Vesting.  Upon the lapse of the restrictions established in the Award Agreement, the Participant shall be entitled to receive, without payment of cash or other consideration, certificates or other evidence of ownership of the Shares covered by the Award.

 

8.04                                      Waiver or Modification of Forfeiture Provisions.  The Administrator has full power and authority to modify or waive any or all terms, conditions or restrictions applicable to any Restricted Share Rights granted to a Participant under the Plan; provided that no modification shall, without consent of the Participant, adversely affect the Participant’s rights thereunder.

 

8.05                                      Restriction on Transfer of Restricted Share Rights.  Participants may not sell, pledge, assign or otherwise directly or indirectly dispose of (a “Transfer”) any interest in any Restricted Share Rights until and to the extent that such Restricted Share Rights vest in accordance with the terms of the Award Agreement.  Following such vesting, Participants may only Transfer interests in Restricted Share Rights in accordance with Section 10.04 below.

 

8.06                                      Rights as a Shareholder.  Any dividends or distributions made with respect to any Restricted Share Rights shall be held by the Company and not distributed to the Participants until such time, and to the extent that, the Restricted Share Rights vest in accordance with the terms hereof.

 

Article IX.

Other Share-Based Awards

 

9.01                                      Grant of Other Awards.  Other Awards of Shares of the Company and other Awards that are valued in whole or in part by reference to, or are otherwise based on, Shares (“Other Awards”) may be granted either alone or in addition to or in conjunction with Options or Restricted Share Rights under the Plan.  Any Other Award shall be confirmed by an Award Agreement executed by the Administrator and the Participant, which agreement shall contain such provisions as the Administrator determines to be necessary or appropriate to carry out the intent of this Plan with respect to the Other Award.

 

9.02                                      Terms of Other Awards.  In addition to the terms and conditions specified in the Award Agreement, Other Awards made pursuant to this Article IX shall be subject to the 

 

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following:

 

(a)                                Any Shares subject to such Other Awards may not be sold, assigned, transferred or otherwise encumbered prior to the date on which the Shares are issued, or, if later, the date on which any applicable restriction, performance or deferral period lapses; and

 

(b)                                If specified by the Administrator and the Award Agreement, the recipient of an Other Award shall be entitled to receive, currently or on a deferred basis, interest or dividends or dividend equivalents with respect to the Shares covered by the Other Award; and

 

(c)                                 The Award Agreement with respect to any Other Award shall contain provisions providing for the disposition of such Other Award in the event of Termination of Service prior to the exercise, realization or payment of such Other Award, with such provisions to take account of the specific nature and purpose of the Other Award.

 

Article X.

Terms Applicable to All Awards

 

10.01                               Award Agreement.  The grant and the terms and conditions of any Award shall be set forth in an Award Agreement between the Company and the Participant.  No person shall have any rights under any Award granted under the Plan unless and until the Administrator and the Participant to whom the Award is granted shall have executed and delivered an Award Agreement expressly granting the Award to such person and setting forth the terms of the Award.

 

10.02                               Plan Provisions Control Award Terms.  The terms of the Plan shall govern all Awards granted under the Plan, and in no event shall the Administrator have the power to grant any Award under the Plan which is contrary to any of the provisions of the Plan.  In the event any provision of any Award granted under the Plan shall conflict with any term in the Plan as constituted on the Date of Grant of such Award, the term in the Plan as constituted on the Date of Grant of such Award shall control.  Except as provided in Section 4.03, the terms of any Award granted under the Plan may not be changed after the granting of such Award without the express approval of the Participant.

 

10.03                               Taxes.  The Company shall be entitled, if the Administrator deems it necessary or desirable, to withhold (or secure payment from the Participant in lieu of withholding) the amount of any withholding or other tax required by law to be withheld or paid by the Company with respect to any amount payable and/or Shares issuable under such Participant’s Award and the Company may defer payment or issuance of the cash or Shares upon exercise or vesting of an Award unless indemnified to its satisfaction against any liability for such tax.  The Participant shall provide to the Company such information as the Company shall require to determine the amounts to be withheld and the time such withholding requirements become applicable.  The amount of such withholding or tax payment shall be determined by the Administrator and, unless otherwise provided by the Administrator, shall be payable by the Participant at the time of issuance or payment in accordance with the following rules:

 

(a)                                A Participant shall meet his or her withholding requirement by direct payment to the Company in cash of the amount of any taxes required to be withheld with respect to such Award.

 

(b)                                If permitted under applicable federal income tax laws, a Participant may elect to be taxed in the year in which an Award is exercised or received, even if it would 

 

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not otherwise have become taxable to the Participant.  If the Participant makes such an election, the Participant shall promptly notify the Company in writing and shall provide the Company with a copy of the executed election form as filed with the Internal Revenue Service no later than thirty days from the date of exercise or receipt.  Promptly following such notification, the Participant shall pay directly to the Company the cash amount determined by the Company to be sufficient to satisfy applicable federal, state or local withholding tax requirements.

 

10.04                               Limitations on Transfer.  A Participant may not transfer, assign, pledge or otherwise encumber any Options or Other Awards other than by will or the laws of descent and distribution.  A Participant may not transfer, assign, pledge or otherwise encumber any vested Restricted Share Rights except in accordance with this Plan or the applicable Award Agreement.

 

10.05                               General Restriction.  Notwithstanding anything to the contrary herein, the Company shall have no obligation or liability to deliver any Shares under the Plan or to make any other distribution of benefits under the Plan unless such delivery or distribution would comply with all applicable laws, rules and regulations, including, without limitation, the Securities Act of 1933, as amended, and applicable state securities laws.

 

10.06                               Redemption Option.  Unless otherwise provided in an Award Agreement, upon a Participant’s Termination of Service for any reason or for no reason whatsoever (other than in connection with a Change of Control Event), the Company shall have the right (but not the obligation) to redeem any or all Shares issued to such Participant under this Plan (collectively, “Redeemable Shares”) for the Redemption Price. The closing of any redemption under this Section 10.06 shall take place at the principal offices of the Company on a date specified by the Company, but in no event shall the closing occur more than ninety (90) days after the termination of Participant’s Award in accordance with Section 7.02 and/or the applicable provisions of the Award Agreement. At the closing, (a) the Company shall pay the Redemption Price to Participant in immediately available funds, and (b) Participant shall execute and deliver to the Company any and all documents which are reasonably necessary to assign and transfer to the Company the portion of Participant’s Redeemable Shares purchased by the Company hereunder, free and clear of all claims, liens, encumbrances and restrictions.  Notwithstanding anything to the contrary herein, this Section 10.06 shall terminate and be of no further force or effect upon the closing of an underwritten initial public offering of the Company’s equity securities.

 

Article XI.

General Provisions

 

11.01                               Amendment and Termination of Plan.

 

(a)                                Amendment.  The Board shall have complete power and authority to amend the Plan at any time and to add any other stock based Award or other incentive compensation programs to the Plan as it deems necessary or appropriate and no approval by the stockholders of the Company or by any other person, committee or entity of any kind shall be required to make any amendment; provided, however, that the Board shall not, without the requisite affirmative approval of stockholders of the Company, (i) make any amendment which requires stockholder approval under any applicable law, including Rule 16b-3 or the Code.  No termination or amendment of the Plan may, without the consent of the Participant to whom any Award shall already have been granted under the Plan, adversely affect the right of such individual under such Award.  For the purposes of this section, an amendment to the Plan shall be deemed to have the affirmative approval of the stockholders of the Company if such amendment shall have been submitted for a 

 

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vote by the stockholders at a duly called meeting of such stockholders at which a quorum was present and the majority of votes cast with respect to such amendment at such meeting shall have been cast in favor of such amendment, or if the holders of outstanding stock having not less than a majority of the outstanding shares consent to such amendment in writing in the manner provided under the Company’s bylaws.

 

(b)                                Termination.  The Board shall have the right and the power to terminate the Plan at any time.  If the Plan is not earlier terminated, the Plan shall terminate when all Shares authorized under the Plan have been issued.  No Award shall be granted under the Plan after the termination of the Plan, but the termination of the Plan shall not have any other effect and any Award outstanding at the time of the termination of the Plan may be exercised after termination of the Plan at any time prior to the Expiration Date of such Award to the same extent such award would have been exercisable if the Plan had not been terminated.

 

11.02                               No Right To Employment.  No employee or other person shall have any claim or right to be granted an Award under this Plan.  Neither the Plan, any applicable Award Agreement nor any action taken hereunder or thereunder shall be construed as giving any Participant any right to be retained in the employ of, or service to, the Company or a Subsidiary of the Company or interfere in any way with the right of the Company or its Subsidiaries to terminate the Participant’s employment or service at any time.

 

11.03                               Compliance with Rule 16b-3.  It is intended that the Plan be applied and administered in compliance with Rule 16b-3.  If any provision of the Plan would be in violation of Rule 16b-3 if applied as written, such provision shall not have effect as written and shall be given effect so as to comply with Rule 16b-3, as determined by the Administrator.  The Board is authorized to amend the Plan and to make any such modifications to Award Agreements to comply with Rule 16b-3, as it may be amended from time to time, and to make any other such amendments or modifications as it deems necessary or appropriate to better accomplish the purposes of the Plan in light of any amendments made to Rule 16b-3.

 

11.04                               Securities Law Restrictions.  The Shares issuable pursuant to the terms of any Awards granted under the Plan will be issued by the Company without registration or qualification of such Shares under the Securities Act of 1933, as amended, and under various state securities laws pursuant to an exemption from such registration requirements. The Company shall be under no obligation to issue Shares upon exercise of an Award unless and until such time as there is an appropriate exemption available from the registration or qualification requirements of federal or state law as determined by the Administrator in its sole discretion.  The Administrator may require any person who is granted an Award hereunder to agree with the Company to represent and agree in writing that if such Shares are issuable under an exemption from registration requirements, the Shares will be “restricted” securities which may be resold only in compliance with applicable securities laws, and that such person is acquiring the Securities issued upon exercise of the Award for investment, and not with the view toward distribution.

 

11.05                               Governing Document Restrictions. The Company shall be under no obligation to issue Shares upon exercise of an Award unless and until such Participant represents and agrees in writing that such person is bound by all of the terms and provisions of the Company’s governing documents, including, without limitation, the Bylaws of the Company, as amended, and any buy-sell, voting or similar agreement among the Company’s shareholders.

 

11.06                               Nonexclusivity of the Plan.  Neither the adoption of the Plan by the Board nor the submission of the Plan to the shareholders of the Company for approval shall be construed as 

 

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creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of equity or equity options otherwise than under the Plan.

 

11.07                               Captions.  The captions (i.e., all section headings) used in the Plan are for convenience only, do not constitute a part of the Plan, and shall not be deemed to limit, characterize or affect in any way any provisions of the Plan, and all provisions of the Plan shall be construed as if no captions have been used in the Plan.

 

11.08                               Severability.  Whenever possible, each provision in the Plan and every Award at any time granted under the Plan shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of the Plan or any Award at any time granted under the Plan shall be held to be prohibited or invalid under applicable law, then (a) such provision shall be deemed amended to accomplish the objectives of the provision as originally written to the fullest extent permitted by law and (b) all other provisions of the Plan and every other Award at any time granted under the Plan shall remain in full force and effect.

 

11.09                               No Strict Construction.  No rule of strict construction shall be implied against the Company, the Administrator, or any other person in the interpretation of any of the terms of the Plan, any Award granted under the Plan or any rule or procedure established by the Administrator.

 

11.10                               Choice of Law.  The Plan shall be governed by, and construed in accordance with, the laws of the State of Michigan (without regard to such state’s conflicts of laws principles).

 

11.11                 Section 409A of the Code.  The Company intends for the Awards granted under the Plan to be excluded from coverage under Section 409A of the Code. If, however, the Administrator determines that a Participant would be subject to the additional 20% tax imposed by Section 409A of the Code as a result of failure to meet the requirements of Section 409A, the Participant may exercise an Award prior to the exercise date stated in the Award Agreement to the extent necessary to pay the aggregate Federal Insurance Contributions Act (FICA) tax and any income tax in accordance with Section 1.409A-3(j)(4) of the Treasury regulations.

 

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