CHFC 2018 Proxy Statement

a level commensurate with his position. Mr. Rathbun was also entitled to participate in health and dental, life insurance, short and long term disability insurance, retirement and other employee fringe benefit programs covering our salaried employees as a group, and in any programs applicable to our senior executives. We also agreed to reimburse Mr. Rathbun for his expenses to purchase or lease an automobile not to exceed $900 per month and agreed to reimburse him for country club membership dues. Under his employment agreement, Mr. Rathbun was also entitled to certain severance benefits, including if he terminated his employment for “Good Reason,” which was generally defined as (a) his being removed from his principal positions, (b) a material diminution in his status, authority or responsibility, (c) a material reduction in his salary, (d) his relocation more than 60 miles from his current location or any substantial increase in business travel, or (e) any material breach of his employment agreement by us. This severance benefit was equal to one times the sum of his then-current base salary and the average cash bonus paid to him in each of the last three completed years. He would also be entitled to receive a lump sum payment equal to 12 times our monthly contribution towards his dependent health, prescription drug and dental coverage elections. As part of our corporate restructuring, Mr. Rathbun was appointed to a new role, Regional President, effective November 2017. Accordingly, on November 3, 2017, we entered into an offer letter agreement with Mr. Rathbun, which terminates and supersedes his employment agreement (other than the covenants not to compete, which will remain in effect and be modified to six months from 12 months). The terms of his current offer letter agreement are described below. Offer Letter Agreement Under the offer letter agreement, Mr. Rathbun’s annual base salary was set at $250,000, and we accelerated the vesting of all of his current outstanding stock options. Under the offer letter, for 2017, he is eligible for a targeted annual cash incentive payment of 60% of his $330,000 base salary under his employment agreement and an annual equity incentive award of 70% of his $330,000 base salary under his employment agreement. After 2017, he will be eligible to participate in our annual cash incentive plan and annual long term incentive plan, with target awards of 35% and 45% of his base salary, respectively, for 2018. In addition, in consideration of termination of his employment agreement and agreement to continue to provide services, we determined to pay him a retention bonus in the amount of $200,000 on January 12, 2018. In addition, Mr. Rathbun will receive a second retention bonus of $100,000, if he remains employed by Chemical Bank on October 1, 2018, or if Chemical Bank terminates his employment without Cause (as defined in the letter agreement) before October 1, 2018. Mr. Rathbun’s offer letter also provides for certain payments upon termination, as described below under "Potential Payments upon Termination or Change in Control." Mr. Rathbun’s 2017 awards under our annual incentive plan and long-term incentive plan are explained under “Elements of Compensation – Annual Incentive Plan” and “Elements of Compensation – Long-Term Equity Compensation” in the Compensation Discussion and Analysis section of this Proxy Statement. Employment Agreement and General Release Agreement with Mr. Ramaker Employment Agreement On August 31, 2016, we entered into an employment agreement with Mr. Ramaker to serve as our President and Chief Executive Officer. Under the employment agreement, Mr. Ramaker was entitled to an annual base salary of $740,000 and he was entitled to participate in any stock option or other equity compensation programs that we offer at a level commensurate with his position. He was also entitled to participate in health and dental, life insurance, short and long term disability insurance, retirement and other employee fringe benefit programs covering our salaried employees as a group, and in any programs applicable to our senior executives. We also agreed to reimburse Mr. Ramaker up to $7,200 per year for country club membership dues. Mr. Ramaker announced his retirement in June 2017. As a result, we entered into a General ReleaseAgreement with Mr. Ramaker, described below, that ended his employment relationship and terminated his employment agreement effective August 8, 2017. 46