UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 15, 2006 (March 9, 2006)
RURBAN FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
Ohio 0-13507 34-1395608
(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation or organization) Identification No.)
401 Clinton Street, Defiance, Ohio 43512
(Address of principal executive offices) (Zip Code)
(419) 783-8950
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On March 9, 2006 and March 10, 2006, Rurban Financial Corp. (the "Company")
entered into Supplemental Executive Retirement Plan Agreements (the "SERP
Agreements") and Change in Control Agreements (the "Change in Control
Agreements") with each of Duane L. Sinn, Executive Vice President and Chief
Financial Officer of the Company; Henry R. Thiemann, President and Chief
Executive Officer of Exchange Bank; Jeffrey D. Sewell, President and Chief
Executive Officer of Rurban Operations Corp.; and Mark K. Klein, President and
Chief Executive Officer of The State Bank and Trust Company. The Company also
entered into a SERP Agreement with Kenneth A. Joyce, Chief Executive Officer of
the Company. Each of these SERP Agreements and Change in Control Agreements is
effective as of March 1, 2006.
Portions of the SERP Agreements and the Change in Control Agreements are
subject to deferred compensation rules under Section 409A of the Internal
Revenue Code and will be amended to fully reflect those rules after the Internal
Revenue Service issues final regulations. Until those regulations are issued,
the Company will administer the SERP Agreements and the Change in Control
Agreements in a good faith attempt to comply with Section 409A of the Internal
Revenue Code.
SERP Agreements
Under the SERP Agreements, if the executive officer remains in the
continuous employment of the Company or one of its subsidiaries, he must retire
on the first December 31st after his 65th birthday (62nd birthday for Mr. Joyce)
(the "Retirement Date"), unless the Board of Directors shortens or extends the
employment period. Beginning on the first day of the month following retirement,
the executive officer will receive an annual benefit equal to a portion of his
"Annual Direct Salary" (25% for Mr. Joyce, 20% for Messrs. Sinn and Thiemann,
and 15% for Messrs. Klein and Sewell) in equal monthly installments of 1/12th of
the annual benefit for a period of 180 months. "Annual Direct Salary" means the
highest base salary paid to the executive officer for any calendar month during
the 36-month period preceding the termination of his employment, multiplied by
12.
If there is a "change in control" of the Company (as defined in the SERP
Agreements) the executive officer will receive an annual benefit equal to a
portion of his Annual Direct Salary (25% for Mr. Joyce, 20% for Messrs. Sinn and
Thiemann, and 15% for Messrs. Klein and Sewell) calculated as of the date of the
change in control or the date his employment is terminated, whichever is higher.
The annual benefit will be paid in equal monthly installments of 1/12th of the
annual benefit for a period of 180 months, beginning on the executive officer's
Retirement Date. If the compensation provided to an executive officer under his
SERP Agreement in connection with a change in control would constitute a
"parachute payment" within the meaning of Section 280G of the Internal Revenue
Code, then the relevant portions of any separate Change in Control Agreement
between the Company and the executive officer would apply. If the Company and
the executive officer are not parties to a separate Change in Control Agreement,
the amount of compensation payable under the executive officer's SERP Agreement
will be reduced to the extent necessary to avoid excise taxes under Section 4999
of the Internal Revenue Code.
If an executive officer voluntarily terminates his employment after
completing at least five years of employment but prior to his Retirement Date,
his SERP Agreement will terminate immediately and the Company will pay the
executive officer early retirement compensation equal to:
- a portion of the executive officer's Annual Direct Salary (15% for Mr.
Joyce, 10% for Messrs. Sinn and Thiemann, and 5% for Messrs. Klein and
Sewell) if the executive officer terminates employment after age 55
and before age 60;
- a portion of the executive officer's Annual Direct Salary (20% for Mr.
Joyce, 15% Messrs. Sinn and Thiemann, and 10% for Messrs. Klein and
Sewell) if the executive officer terminates employment after age 60
and before age 65 (after age 59 and before age 61 for Mr. Joyce); or
- a portion of the executive officer's Annual Direct Salary (25% for Mr.
Joyce; 20% for Messrs. Sinn and Thiemann, and 15% for Mr. Klein and
Mr. Sewell) if the executive officer terminates employment at age 65
(age 62 for Mr. Joyce).
The early retirement compensation described above will be paid beginning on
the first day of the month following the executive officer's Retirement Date in
equal monthly installments of 1/12th of the annual benefit for a period of 180
months. If the executive officer dies at any time after age 55 but prior to his
Retirement Date while employed by the Company (or one of its subsidiaries, as
applicable), his death will be treated as an early retirement and his designated
beneficiary or estate will receive early retirement compensation as described
above beginning on the first day of the first month beginning after the
executive officer's death. If the executive officer voluntarily terminates his
employment prior to age 55 or if the executive officer is discharged at any time
for "Cause" (as defined in the SERP Agreements) he will not be entitled to any
compensation under his SERP Agreement.
If an executive officer dies or becomes permanently disabled during his
employment prior to attaining age 55, his SERP Agreement will terminate and the
Company will have no further obligations to the executive officer under his SERP
Agreement. However, any compensation that becomes payable to an executive
officer under his SERP Agreement prior to his death or permanent disability
(i.e., compensation arising from retirement, early retirement or a change in
control) will continue to be paid to the executive officer or his designated
beneficiary or estate, as appropriate.
The SERP Agreements do not require the executive officers to mitigate the
amount of any compensation payable to them under the SERP Agreements by seeking
other employment or otherwise. The compensation payable to the executive
officers under the SERP Agreements will not be reduced by any other compensation
or benefits the executive officers earn or become entitled to receive after the
termination of their employment with the Company and its subsidiaries.
During the term of the SERP Agreements and for a period of two years
thereafter, the executive officers are prohibited from:
- providing financial or executive assistance to any person or entity
(1) located within 50 miles of the office of the Company or its
subsidiary at which the executive officer works and (2) engaged in the
banking or financial services industry or any other activity engaged
in by the Company or its subsidiaries at the beginning of the
non-competition period;
- directly or indirectly soliciting, inducing or encouraging any of the
customers or referral sources of the Company and its subsidiaries (who
were customers or referral sources during the executive officer's
employment with the Company) to become a customer or referral source
of another company; and
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- directly or indirectly contacting, soliciting or inducing any of the
employees of the Company and its subsidiaries (who were employees
during the executive officer's employment) to terminate their
employment with the Company or its subsidiaries or to seek, obtain or
accept employment with another company.
The SERP Agreements also prohibit the executive officers from using or
disclosing any material confidential information of the Company and its
subsidiaries to any person other than an employee of the Company or its
subsidiaries or a person to whom the disclosure is reasonably necessary or
appropriate in connection with the executive officer's duties to the Company and
its subsidiaries.
In the event of a dispute between the Company and the executive officer
regarding a SERP Agreement, the parties will submit the dispute to binding
arbitration. The Company and its subsidiaries will bear all costs associated
with any disputes arising under the SERP Agreements, including reasonable
accounting and legal fees incurred by the executive officers.
Change in Control Agreements
The term of each Change in Control Agreement begins on March 1, 2006 is
effective through the March 31, 2008 (March 31, 2009 for Mr. Sinn). Each Change
in Control Agreement will renew automatically for an additional year unless the
Company provides the executive officer with notice of non-renewal in accordance
with the Change in Control Agreement. The Company is prohibited from delivering
such notice during the "Protection Period" and each Change in Control Agreement
will remain in effect throughout any Protection Period. The Change in Control
Agreements define the "Protection Period" as the period beginning on the first
date the Board of Directors of the Company learns of an event that would result
in a "change in control" if completed and ending on the latest of:
- the last day of the twelfth complete calendar month beginning after
the change in control;
- 60 days after the date the executive officer learns of an event
occurring during the Protection Period which falls within the
definition of "Good Reason" (as defined in the Change in Control
Agreements) and which the Company or its successor concealed; or
- 60 days after the conclusion of an unsuccessful attempt to terminate
the executive officer for "Cause" (as defined in the Change in Control
Agreements).
Each Change in Control Agreement will terminate on the earliest of the
following events:
- the executive officer's employment is terminated before the beginning
of a Protection Period;
- the executive officer is reassigned before the beginning of a
Protection Period to a more junior position (unless a majority of the
employees in the new job classification have change in control
agreements);
- the executive officer agrees to terminate his Change in Control
Agreement; or
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- all payments due to the executive officer under the Change in Control
Agreement have been paid.
A "change in control" is defined by the Change in Control Agreements as:
- any transaction that would be required to be reported in a proxy
statement sent to the Company's shareholders;
- a merger or consolidation of the Company or the purchase of all or
substantially all of the Company's assets by another person or group,
in each case, resulting in less than a majority of the successor
entity's outstanding voting stock being owned immediately after the
transaction by the holders of the Company's voting stock before the
transaction;
- any person becoming a "beneficial owner" of securities representing
50% or more of the combined voting power of the Company eligible to
vote for the election of the Company's Board of Directors;
- any person other than the Company, the executive officer or the Rurban
ESOP and Savings Plan becoming the beneficial owner of securities
representing 25% or more of the combined voting power of the Company
(disregarding any securities which were not acquired for the purpose
of changing or influencing control of the Company);
- individuals who constitute the Company's Board of Directors on March
1, 2006 ceasing for any reason to constitute at least a majority of
the members of the Company's Board of Directors (unless the new
directors were approved by the vote of at least 2/3rds of the then
incumbent directors); or
- any other change of control of the Company similar in effect to any of
the foregoing.
Under each Change in Control Agreement, (1) if an executive officer is
terminated by the Company or its successor in connection with a "change in
control" of the Company (other than termination of employment for "Cause" as
defined in the Change of Control Agreements) during the Protection Period or (2)
if the executive officer terminates his employment for "Good Reason" during the
Protection Period, the Company or its successor will:
- pay the executive officer a lump sum cash payment equal to 2 times
(1.5 times for Mr. Sewell) the executive officer's Annual Direct
Salary (i.e., the highest base salary paid to the executive officer
for any calendar month during the 36-month period preceding the
termination of his employment, multiplied by 12);
- provide the executive officer and his family (if the executive officer
elected family coverage prior to the termination of his employment)
with continued health care, life insurance and disability insurance
coverage without cost to the executive for a period of two years (1.5
years for Mr. Sewell), at the same level and subject to the same terms
that were in effect on the first day of the Protection Period; and
- any other payments or benefits to which the executive officer is
entitled under the terms of any other agreement, arrangement, plan or
program in which he participates.
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If the Company or its successor is unable to provide the health care, life
insurance and disability insurance coverage described above through an insured
arrangement for active employees and with the same tax consequences available to
active employees, the Company or its successor will pay the executive officer an
additional amount of cash equal to the executive officer's cost of procuring
equivalent coverage. The amount of this cash payment will be "grossed up" to
ensure that the executive officer receives enough cash to pay the cost of
procuring equivalent coverage after payment of all applicable federal, state and
local taxes.
If the compensation provided to an executive officer under his Change in
Control Agreement would constitute a "parachute payment" within the meaning of
Section 280G of the Internal Revenue Code, then the amount of compensation
payable under the executive officer's Change in Control Agreement will be
reduced to the extent necessary to avoid excise taxes under Section 4999 of the
Internal Revenue Code.
Under each Change in Control Agreement, if an executive officer's
employment is terminated for "Cause" (as defined in the Change in Control
Agreements) or if the executive officer voluntarily terminates his employment
without "Good Reason" (as defined in the Change in Control Agreements), the
Change in Control Agreement will terminate immediately and the executive officer
will not be entitled to any compensation or benefits other than salary accrued
through the date his employment terminated and benefits to which the executive
officer is entitled under the terms of the Company's (or any successor entity's)
benefit plans.
If an executive officer dies or becomes permanently disabled during his
employment, his Change in Control Agreement will terminate and the Company will
have no further obligations to the executive officer under his Change in Control
Agreement. However, any compensation that becomes payable to an executive
officer under his Change in Control Agreement prior to his death or permanent
disability will continue to be paid to the executive officer or his designated
beneficiary or estate, as appropriate.
The Change in Control Agreements do not require the executive officers to
mitigate the amount of any compensation payable to them under the Change in
Control Agreements by seeking other employment or otherwise. The compensation
payable to the executive officers under the Change in Control Agreements will
not be reduced by any other compensation or benefits the executive officers earn
or become entitled to receive after the termination of their employment with the
Company or its successor and their subsidiaries.
If a change in control occurs and the executive officer receives payments
under his Change in Control Agreement, the executive officer will be prohibited
from engaging the in following activities for two years (18 months for Mr.
Sewell) following the termination of the executive officer's employment with the
Company or its successor:
- providing financial or executive assistance to any person or entity
(1) located within 50 miles of the office of the Company or its
subsidiary at which the executive officer works and (2) engaged in the
banking or financial services industry or any other activity engaged
in by the Company or its subsidiaries on the date of the change in
control;
- directly or indirectly contacting, soliciting or inducing any of the
customers or referral sources of the Company and its subsidiaries (who
were customers or referral sources during
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the executive officer's employment with the Company or its
subsidiaries) to become a customer or referral source of another
company; and
- directly or indirectly soliciting, inducing or encouraging any of the
employees of the Company or its successor and their subsidiaries (who
were employees during the executive officer's employment) to terminate
their employment with the Company or its successor and their
subsidiaries or to seek, obtain or accept employment with another
company.
The Change in Control Agreements also prohibit the executive officers from
using or disclosing any material confidential information of the Company or its
successor and their subsidiaries to any person other than an employee of the
Company or its successor and their subsidiaries or a person to whom the
disclosure is reasonably necessary or appropriate in connection with the
executive officer's duties to the Company or its successor and their
subsidiaries.
In the event of a dispute between the Company and the executive officer
regarding a Change in Control Agreement, the parties will submit the dispute to
binding arbitration. The Company and its subsidiaries will bear all costs
associated with any disputes arising under the Change in Control Agreements,
including reasonable accounting and legal fees incurred by the executive
officer.
ITEM 1.02. TERMINATION OF A MATERIAL DEFINITIVE AGREEMENT
The Executive Salary Continuation Agreement, dated December 3, 2001, by and
between the Company and Mr. Joyce was superseded by his SERP Agreement described
under Item 1.01 above effective as of March 1, 2006.
The Severance Agreement Due to Change in Control of Rurban Financial Corp.,
dated as of March 14, 2001, by and between the Company and Mr. Sinn and the
Executive Salary Continuation Agreement, dated as of July 1, 2001, by and
between the Company and Mr. Sinn were each superseded by Mr. Sinn's SERP
Agreement and Change in Control Agreement described under Item 1.01 above
effective as of March 1, 2006.
The Severance Agreement Due to Change in Control of Rurban Financial Corp.,
dated as of March 14, 2001, by and between the Company and Mr. Thiemann and the
Supplemental Severance Agreement Due to Change in Control of Rurban Financial
Corp., dated June 25, 2002, by and between the Company and Mr. Thiemann were
each superseded by Mr. Thiemann's SERP Agreement and Change in Control Agreement
described under Item 1.01 above effective as of March 1, 2006.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired - Not Applicable
(b) Pro forma financial information - Not Applicable
(c) Exhibits - None
[Remainder of page intentionally left blank; signature on following page.]
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
RURBAN FINANCIAL CORP.
Dated: March 15, 2006 By: /s/ Duane L. Sinn
------------------------------------
Duane L. Sinn
Executive Vice President and Chief
Financial Officer
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