8-K

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) July 30, 2008 (July 24, 2008)

Fentura Financial, Inc.

(Exact name of registrant as specified in its charter)

Michigan
(State or other jurisdiction of incorporation)

0-23550	38-2806518
(Commission File Number)	(IRS Employer Identification No.)
175 North Leroy Street
P.O. Box 725
Fenton, Michigan	48430-0725
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code (810) 629-2263

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:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
	Item 9.01 Financial Statements and Exhibits.
SIGNATURES
EXHIBIT INDEX
Severance Compensation Agreement with Donald L. Grill
Severance Compensation Agreement with Ronald L. Justice
Severance Compensation Agreement with Dennis E. Leyder
Severance Compensation Agreement with Douglas J. Kelley
Severance Compensation Agreement with Holly J. Pingatore

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

     On July 24, 2008, Fentura Financial, Inc. (the “Corporation”) entered into amended and restated Severance Agreements with its Chief Executive Officer, Donald L. Grill, and the following executive officers of the Corporation: Ronald L. Justice, Dennis E. Leyder, Douglas J. Kelley, and Holly J. Pingatore. A summary of the material terms of the agreements are set forth below.

Amendments to Severance Compensation Agreements

     The Corporation and The State Bank or West Michigan Community Bank (the “Affiliate Banks”) have entered into severance compensation agreements (the “Severance Agreements”) with Donald L. Grill, Ronald L. Justice, Dennis E. Leyder, Douglas J. Kelley, and Holly J. Pingatore (the “Executives”). Under the Severance Agreements, if a “change in control” occurs while the Executive is an employee of the Corporation or the Affiliate Bank, and if within five years thereafter the Executive’s employment is terminated without “cause,” by the Executive for “good reason,” or by either party because of the Executive’s death or disability, then the Corporation and the Affiliate Bank are required to pay the Executive severance compensation.

     Prior to their amendment, the Severance Agreements provided that the amount of severance compensation payable to Mr. Kelley and Ms. Pingatore is determined in the same manner. First, within 30 days following termination of employment, the Corporation shall pay a lump sum payment in an amount equal to the unpaid amount of any base salary and director’s fees not yet paid, plus a pro rata portion of the executive’s annual bonus, plus any compensation previously deferred by the Executive, plus any accrued vacation pay. Second, the Executive shall have the right to exercise any stock options awarded prior to his termination of employment. Third, for a period of one year following the Executive’s termination of employment, the Corporation shall pay an annual amount to the Executive equal to 50% of the highest amount of the Executive’s annual compensation in the five preceding calendar years, with such payments being made in monthly installments. Fourth, for a period of one year following termination of employment, the Corporation shall provide Executive health insurance coverage equivalent to the insurance coverage in effect immediately prior to the termination of employment.

     The Severance Agreements for Mr. Kelley and Ms. Pingatore have been amended to provide that instead of the payment of 50% of the highest amount of the Executive’s annual compensation in the five preceding calendar years, the Corporation shall, within 30 days following termination of employment pay Mr. Kelley and Ms. Pingatore a lump sum amount equal to 100% of the highest amount of the Executive’s annual compensation in the five preceding calendar years. In addition, instead of providing health insurance coverage for a one year following termination of employment, the amended Severance Agreements provide that the Corporation shall provide Executive health insurance coverage equivalent to the insurance coverage in effect immediately prior to the termination of employment for a period of two years.

     Prior to its amendment, the Severance Agreement for Mr. Leyder provided that the amount of severance compensation payable to Mr. Leyder is determined in the following manner: First, within 30 days following termination of employment, the Corporation shall pay a lump sum payment in an amount equal to the unpaid amount of any base salary and director’s fees not yet paid, plus a pro rata portion of the executive’s annual bonus, plus any compensation previously deferred by the Executive, plus any accrued vacation pay. Second, the Executive shall have the right to exercise any stock options awarded prior to his termination of employment. Third, for a period of two years following the Executive’s termination of employment, the Corporation shall pay an annual amount to the Executive equal to 50% of the highest amount of the Executive’s annual compensation in the five preceding calendar years, with such payments being made in monthly installments. Fourth, for a period of two years following

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termination of employment, the Corporation shall provide Executive health insurance coverage equivalent to the insurance coverage in effect immediately prior to the termination of employment.

     The Severance Agreement for Mr. Leyder has been amended to provide that instead of the payment of 50% of the highest amount of the his annual compensation in the five preceding calendar years, the Corporation shall, within 30 days following termination of employment pay Mr. Leyder a lump sum amount equal to two times the highest amount of the Executive’s annual compensation in the five preceding calendar years. In addition, instead of providing health insurance coverage for a two years following termination of employment, the amended Severance Agreements provide that the Corporation shall provide Executive health insurance coverage equivalent to the insurance coverage in effect immediately prior to the termination of employment for a period of four years.

     In addition to the amendments described above, the Severance Agreements for each Executive were also amended to comply with Section 409A of the Internal Revenue Code or in the alternative to qualify as short-term deferrals, which are exempt from 409A. Pursuant to this amendment, payments under the Severance Agreements to the Executive will be made in a lump sum payment within 30 days following termination of the executive’s employment without “cause” by the Corporation within five years following a Change in Control, or termination by the Executive for “good reason,” or by either party because of the Executive’s death or disability, then the Corporation and the Affiliate Bank are required to pay the Executive severance compensation.

     “Change in Control” means (i) the acquisition, directly, indirectly and/or beneficially, by any person or group, of more than fifty percent (50%) of the voting securities of the Corporation or the Bank, (ii) the occurrence of any event at any time during any two (2) year period which results in a majority of the Board of Directors of the Corporation or the Affiliate Bank being comprised of individuals who were not members of such Board at the commencement of that two (2) year period (the “Incumbent Board”); provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Corporation’s or the Affiliate Bank’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding for this purpose any such individual whose initial assumption of the office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Incumbent Board, (iii) a sale of all or substantially all of the assets of the Corporation or the Affiliate Bank to another entity, or (iv) a merger or reorganization of the Corporation or the Affiliate Bank with another entity.

     “Cause” means (i) the willful and continuing failure by the Executive to substantially perform his duties with the Affiliate Bank or the Corporation (other than any such failure resulting from the Executive’s death or Disability) and which is not remedied in a reasonable period of time after receipt by Executive of written notice from the Affiliate Bank specifying the duties the Executive has failed to perform, or (ii) the willful and continued engaging by Executive in gross misconduct that is materially injurious to the Affiliate Bank or the Corporation and which is not ceased within a reasonable period of time after receipt by Executive of written notice from the Affiliate Bank specifying the misconduct and the injury, or (iii) an adjudication of the Executive’s guilt of any crime involving a serious and substantial breach of the Executive’s fiduciary duties to the Affiliate Bank. No act or failure to act on the Executive’s part shall be considered “willful” unless done, or omitted to be done, by him in bad faith and without reasonable belief that his action or omission was in the best interest of the Affiliate Bank or the Corporation.

     “Good Reason” means any of the following, as determined by the Executive in his or her discretion: (i) a material diminution of the Executive’s duties, responsibilities, or authority with the Bank or the Company from those in effect immediately prior to a Change in Control, or a change adverse to Executive in Executive’s reporting responsibilities, titles, terms of employment (including bonus, compensation, fringe benefits and vacation entitlement) or (ii) the Bank or the Company requiring Executive to be based anywhere

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other than within fifty (50) miles of his or her present office location, or (iii) a material breach of this Agreement. Upon the occurrence of any event referenced above, Executive shall, within ninety (90) of any occurrence, provide the Affiliate Bank and the Company notice of the existence of the condition. Upon receiving notice, the Affiliate Bank and the Company shall have no more than thirty (30) days to remedy the condition. Executive shall have two years from the date of the initial existence of a violation of one of the above events to terminate his or her employment under this section.

Summary of Federal Income Tax Consequences of the Severance Agreements

     The amounts payable to the Executives pursuant to the Severance Agreements are generally not included in the Executives’ income for federal income tax purposes until they are actually paid to the Executive. Except for any portion of payments under the Severance Agreements that are treated as excess parachute payments, as described below, the payments are intended to be deductible by the Corporation.

     The payments under the Severance Agreements may be considered to be indirectly contingent upon a Change in Control of the Corporation pursuant to the provisions of Section 280G of the Internal Revenue Code. If the present value as of the date of a Change in Control of the Corporation, together with all other payments to the Executive that are considered directly or indirectly contingent upon a Change in Control, exceeds three times the Executive’s base amount, then the amount in excess the Executive’s base amount is considered an excess parachute payment. The executive’s base amount is generally defined as the executive’s taxable compensation paid by the Corporation or its Bank Affiliates for the five calendar years preceding the year in which the Change in Control of the Corporation occurs.

     Excess parachute payments are not deductible by the Corporation and subject the Executive to an excise tax equal to 20% of the excess parachute payment. The Severance Agreement for Mr. Grill provides that in the event the Executive incurs a 20% excise tax, the Executive shall be entitled to a gross-up payment in an amount such that the Executive retains an aggregate after-tax amount equal to the amount that the Executive would have received had the executive not incurred any excise taxes on excess parachute payments under the Internal Revenue Code. The Severance Agreements for the remaining Executives provide that payments under the Severance Agreements shall be reduced by the amount necessary to make all payments under the Severance Agreements deductible to the Corporation.

     The Severance Agreements were previously subject to certain requirements of Section 409A of the Internal Revenue Code which include rules regarding the timing of payments to the Executives. If the Executives are considered key employees pursuant to Section 416 of the Internal Revenue Code, then payments to the Executives must not be made until six months following the Executive’s termination of employment. The Corporation intends that the Severance Agreements, as amended, will qualify for the short-term deferral exemption under Section 409A. If the Severance and SERP Agreements are subject to, but do not comply with Section 409A, the Executive would incur an excise tax equal to 20% of the amounts payable under the Severance Agreements, plus interest in certain cases.

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Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit Number
10.1	Severance Compensation Agreement with Donald L. Grill dated July 24, 2008.
10.2	Severance Compensation Agreement with Ronald L. Justice dated July 24, 2008.
10.3	Severance Compensation Agreement with Dennis E. Leyder dated July 24, 2008.
10.4	Severance Compensation Agreement with Douglas J. Kelley dated July 24, 2008.
10.5	Severance Compensation Agreement with Holly J. Pingatore dated July 24, 2008.

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SIGNATURES

     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.

FENTURA FINANCIAL, INC.           (Registrant)
By:	/s/ Donald L. Grill
	Donald L. Grill, President and Chief Executive
	Officer

Dated: July 30, 2008

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EXHIBIT INDEX

Exhibit Number
10.1	Severance Compensation Agreement with Donald L. Grill dated July 24, 2008.
10.2	Severance Compensation Agreement with Ronald L. Justice dated July 24, 2008.
10.3	Severance Compensation Agreement with Dennis E. Leyder dated July 24, 2008.
10.4	Severance Compensation Agreement with Douglas J. Kelley dated July 24, 2008.
10.5	Severance Compensation Agreement with Holly J. Pingatore dated July 24, 2008.

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EX-10.1

EXHIBIT 10.1

Severance Compensation Agreement

     This Severance Compensation Agreement (the “Agreement”), has been made on July 24, 2008 by Fentura Financial, Inc., a Michigan corporation (the “Company”), The State Bank, (the “Bank”) and Donald L. Grill, an individual (the “Executive”).

Background Statement:

     The Executive is a principal officer of the Bank and the Company and his continued services are important to the Bank, its depositors and customers, and the Company’s shareholders. The Bank and the Company believe it is in their best interests that the Executive continue to render services to the Bank and the Company if a Change in Control is threatened or occurs, free from the distractions and vexations which might result if his personal economic security is made uncertain as a result of an impending Change in Control.

     1. Definitions. The following words and phrases have the following meanings:

a)

“Cause” means (i) the willful and continuing failure by the Executive to substantially perform his duties with the Bank or the Company (other than any such failure resulting from the Executive’s death or Disability) and which is not remedied in a reasonable period of time after receipt by Executive of written notice from the Bank specifying the duties the Executive has failed to perform, or (ii) the willful and continued engaging by Executive in gross misconduct that is materially injurious to the Bank or the Company and which is not ceased within a reasonable period of time after receipt by Executive of written notice from the Bank specifying the misconduct and the injury, or (iii) an adjudication of the Executive’s guilt of any crime involving a serious and substantial breach of the Executive’s fiduciary duties to the Bank. No act or failure to act on the Executive’s part shall be considered “willful” unless done, or omitted to be done, by him in bad faith and without reasonable belief that his action or omission was in the best interest of the Bank or the Company.

b)

“Change in Control” means (i) the acquisition, directly, indirectly and/or beneficially, by any person or group, of more than fifty percent (50%) of the voting securities of the Company or the Bank, (ii) the occurrence of any event at any time during any two (2) year period which results in a majority

of the Board of Directors of the Company or the Bank being comprised of individuals who were not members of such Board at the commencement of that two (2) year period (the “Incumbent Board”); provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s or the Bank’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding for this purpose any such individual whose initial assumption of the office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Incumbent Board, (iii) a sale of all or substantially all of the assets of the Company or the Bank to another entity, or (iv) a merger or reorganization of the Company or the Bank with another entity.

c)	“Compensation” means with respect to the period under consideration, the aggregate of all amounts paid by the Company and the Bank to and includable in the Executive’s earnings as base salary, bonuses, commissions, fees and any other compensation, but excluding contributions made to any welfare and pension benefit plans by the Bank and/or Company at its or their sole expense.
d)	“Disability” means any physical or mental impairment which meets the definition of disability found in the long-term or short-term disability policy insuring the Executive at the time disability is alleged or if no such policy is in effect at that time, any physical or mental impairment that, on the basis of qualified medical opinion of three (3) medical doctors, has rendered Executive wholly and permanently unable to engage in the regular and continuous occupation or employment for remuneration or profit of a nature similar to his employment with the Bank for a period of six (6) consecutive months or more.
e)	“Good Reason” means any of the following, as determined by the Executive in his discretion: (i) a material diminution of the Executive’s duties, responsibilities, or authority with the Bank or the Company immediately prior to a Change in Control, or a change adverse to Executive in Executive’s reporting responsibilities, titles, terms of employment (including bonus, compensation, fringe benefits and vacation entitlement) or (ii) the Bank or the Company requiring Executive to be based anywhere other than within fifty (50) miles of his present office location, or (iii) a material breach of this Agreement including the failure by the Company to obtain the assumption of this Agreement as contemplated in Section 6 hereof. Upon the occurrence of any event referenced above, Executive shall, within ninety (90) of any occurrence, provide the Bank and the Company notice of the existence of the condition. Upon receiving notice, the Bank and the Company shall

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have no more than thirty (30) days to remedy the condition. Executive shall have two years from the date of the initial existence of a violation of one of the above events to terminate his employment under this section.

     2. Income Protection Benefits. If the Executive is an employee of the Bank or the Company when a Change in Control occurs, and the Executive’s employment with the Bank, the Company and all affiliates of the Company is thereafter terminated without Cause, or by the Executive for Good Reason, then:

a) The Company and the Bank shall pay to the Executive, in a lump sum in cash within 30 days after the date of termination of employment the aggregate of the following amounts:

i)	that portion of the Executive’s annual base salary and director’s fees through the date of termination not theretofore paid, and
ii)	the product of (x) the sum of all commissions and bonuses of any kind paid or payable to Executive in the calendar year immediately preceding the year in which termination of employment occurs multiplied by (y) a fraction, the numerator of which is the number of days in the current calendar year through the date of termination, and the denominator of which is 365, and
iii)	a separate lump-sum amount equal to 21/2 times the sum of the highest amount of the Executive’s annual Compensation in the five calendar years immediately preceding Executive’s termination.
iv)	any compensation previously deferred by the Executive (together with any accrued interest o earnings thereon), and
v)	any accrued vacation pay.

b)

The Executive shall have the right within 90 days following termination of employment to exercise any stock options awarded him prior to the termination of his employment.

c)

The Bank and/or the Company shall provide to the Executive, at its expense, hospital and medical insurance coverage of the same or equivalent scope as he was covered by immediately prior to termination of his employment for a period of 5 years after Executive’s termination of employment. If, however, the Bank or the Company determines that such continued coverage would be taxable as includible in income, the Bank or the Company, within 30 days after the date of termination of employment, shall provide to Executive a

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lump sum payment equal to the value 5 years of continued hospital and medical insurance coverage of the same or equivalent scope as Executive was covered by immediately prior to termination of his employment.

     3. Maximum Benefits upon Change in Control. If it is determined, in the opinion of the Company’s independent accountants, in consultation, if necessary, with the Company’s legal counsel, that any amount paid under this Agreement in connection with a Termination Upon Change in Control, either separately or in conjunction with any other payments, benefits and entitlements received by the Executive in respect of a Change in Control hereunder or under any other plan or agreement under which the Executive participates or to which he is a party, would constitute an “excess Parachute Payment” within the meaning of Section 280G of the Internal Revenue Code of 1986, and would thereby be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then in such event, the Company shall pay to the Executive a “grossing-up” amount equal to the amount of such Excise Tax, plus all federal and state income or other taxes with respect to the payment of the amount of such Excise Tax, including all such taxes with respect to any such grossing—up amount. If, at a later date, the Internal Revenue Service assesses a deficiency against the Executive for the Excise Tax which is greater than that which was determined at the time such amounts were paid, then the Company shall pay to the Executive the amount of such unreimbursed Excise Tax, plus any interest, penalties and reasonable professional fees or expenses incurred by the Executive as a result of such assessment, including all such taxes with respect to any such additional amount. The highest marginal tax rate applicable to individuals at the time of the payment of such amounts will be used for purposes of determining the federal and state income and other taxes with respect thereto. The Company shall withhold from any amounts paid under this Agreement the amount of any Excise Tax or other federal, state or local taxes then required to be withheld. Computations of the amount of any grossing-up supplemental compensation paid under this Section

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shall be conclusively made by the Company’s independent accountants, or other independent accountants retained by the Company, in consultation, if necessary with the Company’s independent legal counsel. If, after the Executive receives any gross-up payments or other amount pursuant to this Section, the Executive receives any refund with respect to the Excise Tax, the Executive shall promptly pay the Company the amount of such refund within ten (10) days of receipt by the Executive, on a grossed-up basis. If the Company deems it necessary or advisable to contest or appeal any assessment, or determination made by the Internal Revenue Service relating to the imposition of an Excise Tax as described herein (an “Excise Tax Contest/Appeal”), the Executive covenants and agrees to reasonably cooperate with the Company in connection with the Excise Tax Contest/Appeal; provided, however, that the Company shall be responsible for all professional costs and expenses incurred by the Executive in connection with such Excise Tax Contest/Appeal.

     4. Term. Unless earlier terminated by mutual agreement of the Company and the Executive, this Agreement shall terminate upon the earliest of (a) the termination of the Executive’s employment with the Bank and the Company for any reason prior to a Change in Control; or (b) five (5) years from the date of a Change in Control. Obligations under Section 2 of this Agreement created prior to termination shall survive termination.

     5. Termination Prior To Change in Control. Notwithstanding anything in this agreement to the contrary, if a Change in Control occurs and (i) if the Executive’s employment with the Company or the Bank is terminated prior to the date on which Change in Control occurs, and if the termination of employment (a) was at the request or suggestion of a 3rd party who has taken steps reasonably calculated to effect the Change in Control or (b) otherwise arose in connection with or in anticipation of the Change in Control, or (ii) Executive has terminated his employment with Company and/or Bank for Good Reason prior to Change in Control, then Executive shall be entitled

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to the Income Protection Benefits and all other rights and privileges provided by this Agreement.

     6. Successors, Binding Agreements.

a)	Any purchaser, successor or assign (whether direct or indirect), to or of all, substantially all, or any material part of the business, properties and assets of the Bank and/or the Company shall be bound by the terms of this Agreement, and the Bank and the Company shall require any such purchaser, successor or assign, by agreement in form and substance satisfactory to Executive, expressly, absolutely and unconditionally to assume and agree to perform this Agreement in the same manner and to the same extent that the Bank and the Company would be required to perform if no such succession or assignment had taken place.
b)	The Bank and the Company each hereby guarantee the timely payment and performance, when due, of the other’s obligations under this Agreement.
c)	This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal and legal representatives, executives, administrators, successors, heirs, distributees, devisees and legatees.

     7. Exemption from Section 409A. The Agreement and transactions under this Agreement are intended to be structured in accordance with applicable laws, rules and regulations including, but not limited to, the short-term deferral exemption under Section 409A of the Internal Revenue Code and any applicable regulations thereunder.

     8. Notices. Notices under this Agreement shall be in writing and shall be deemed given when hand delivered or three (3) days after being mailed by United States registered or certified mail, return receipt requested, postage prepaid, as follows:

If to the Company
or the Bank: Fentura Financial, Inc.
175 N. Leroy St.

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	PO Box 725 Fenton, MI 48430-0725
If to the Executive:	Mr. Donald L. Grill 14655 S. Fowlerville Rd. Perry, MI 48872-9594

     or to such other address as either party may designate.

     9. At Will Employment Preserved. This Agreement is intended only to provide an economic benefit for Executive if his employment with the Bank or the Company is terminated under the circumstances described herein. Even though this economic benefit may be payable, Executive’s employment with the Bank and the Company shall continue to be “at will,” and the Bank, the Company or the Executive may terminate Executive’s employment with the Bank or the Company at any time, with or without cause. Further, the existence of this Agreement and the economic benefits herein provided shall not contradict, override, supersede or in any way detract from or affect the “at will” employment status of any other employee of the Bank or the Company. The employment terms set forth in the Bank’s employee handbook or employee manual, as they may be in effect from time to time, shall control.

     10. Miscellaneous.

a)	Modification; Waiver. This Agreement may be modified, waived or discharged only in, and limited to the extent specifically set forth in, a written document signed by the Executive and the Company.
b)	Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.
c)	Governing Law. This Agreement shall be governed in all respects according to the laws of the State of Michigan.

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d) Entire Agreement. This Agreement contains the entire understanding of the parties concerning the Executive’s severance compensation opportunities. This Agreement supersedes and controls over the Executive’s March 20, 1997 and March 16, 2007 Severance Compensation Agreements with the Company and the Bank. This Agreement does not supersede Executive’s Fentura Financial, Inc. Confidentiality and Shareholder Protection Agreement dated July 9, 2003.

COMPANY: Fentura Financial, Inc., a Michigan corporation
By:	/s/ Forrest A. Shook
	Forrest A. Shook, Chairman
BANK: The State Bank
By:	/s/ Brian P. Petty
	Brian P. Petty, Chairman
EXECUTIVE:
/s/ Donald L. Grill
Donald L. Grill

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EX-10.2

EXHIBIT 10.2

Severance Compensation Agreement

     This Severance Compensation Agreement (the “Agreement”), has been made on July 24, 2008 by Fentura Financial, Inc., a Michigan corporation (the “Company”), West Michigan Community Bank, (the “Bank”) and Ronald L. Justice, an individual (the “Executive”).

Background Statement:

     The Executive is a principal officer of the Bank and the Company and his continued services are important to the Bank, its depositors and customers, and the Company’s shareholders. The Bank and the Company believe it is in their best interests that the Executive continue to render services to the Bank and the Company if a Change in Control is threatened or occurs, free from the distractions and vexations which might result if his personal economic security is made uncertain as a result of an impending Change in Control.

     1. Definitions. The following words and phrases have the following meanings:

a)

“Cause” means (i) the willful and continuing failure by the Executive to substantially perform his duties with the Bank or the Company (other than any such failure resulting from the Executive’s death or Disability) and which is not remedied in a reasonable period of time after receipt by Executive of written notice from the Bank specifying the duties the Executive has failed to perform, or (ii) the willful and continued engaging by Executive in gross misconduct that is materially injurious to the Bank or the Company and which is not ceased within a reasonable period of time after receipt by Executive of written notice from the Bank specifying the misconduct and the injury, or (iii) an adjudication of the Executive’s guilt of any crime involving a serious and substantial breach of the Executive’s fiduciary duties to the Bank. No act or failure to act on the Executive’s part shall be considered “willful” unless done, or omitted to be done, by him in bad faith and without reasonable belief that his action or omission was in the best interest of the Bank or the Company.

b)

“Change in Control” means (i) the acquisition, directly, indirectly and/or beneficially, by any person or group, of more than fifty percent (50%) of the voting securities of the Company or the Bank, (ii) the occurrence of

	any event at any time during any two (2) year period which results in a majority of the Board of Directors of the Company or the Bank being comprised of individuals who were not members of such Board at the commencement of that two (2) year period (the “Incumbent Board”); provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s or the Bank’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding for this purpose any such individual whose initial assumption of the office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Incumbent Board, (iii) a sale of all or substantially all of the assets of the Company or the Bank to another entity, or (iv) a merger or reorganization of the Company or the Bank with another entity.
c)	“Compensation” means with respect to the period under consideration, the aggregate of all amounts paid by the Company and the Bank to and includable in the Executive’s earnings as base salary, bonuses, commissions, fees and any other compensation, but excluding contributions made to any welfare and pension benefit plans by the Bank and/or Company at its or their sole expense.
d)	“Disability” means any physical or mental impairment which meets the definition of disability found in the long-term or short-term disability policy insuring the Executive at the time disability is alleged or if no such policy is in effect at that time, any physical or mental impairment that, on the basis of qualified medical opinion of three (3) medical doctors, has rendered Executive wholly and permanently unable to engage in the regular and continuous occupation or employment for remuneration or profit of a nature similar to his employment with the Bank for a period of six (6) consecutive months or more.
e)	“Good Reason” means any of the following, as determined by the Executive in his discretion: (i) a material diminution of the Executive’s duties, responsibilities, or authority with the Bank or the Company immediately prior to a Change in Control, or a change adverse to Executive in Executive’s reporting responsibilities, titles, terms of employment (including bonus, compensation, fringe benefits and vacation entitlement) or (ii) the Bank or the Company requiring Executive to be based anywhere other than within fifty (50) miles of his present office location, or (iii) a material breach of this Agreement including the failure by the Company to obtain the assumption of this Agreement as contemplated in Section 6 hereof. Upon the occurrence of any event referenced above, Executive shall, within ninety (90) of any occurrence,

2

provide the Bank and the Company notice of the existence of the condition. Upon receiving notice, the Bank and the Company shall have no more than thirty (30) days to remedy the condition. Executive shall have two years from the date of the initial existence of a violation of one of the above events to terminate his employment under this section.

     2. Income Protection Benefits. If the Executive is an employee of the Bank or the Company when a Change in Control occurs, and the Executive’s employment with the Bank, the Company and all affiliates of the Company is thereafter terminated without Cause, or by the Executive for Good Reason, then:

a) The Company and the Bank shall pay to the Executive, in a lump sum in cash within 30 days after the date of termination of employment the aggregate of the following amounts:

i)	that portion of the Executive’s annual base salary and director’s fees through the date of termination not theretofore paid, and
ii)	the product of (x) the sum of all commissions and bonuses of any kind paid or payable to Executive in the calendar year immediately preceding the year in which termination of employment occurs multiplied by (y) a fraction, the numerator of which is the number of days in the current calendar year through the date of termination, and the denominator of which is 365, and
iii)	a separate lump-sum amount equal to 21/2 times the sum of the highest amount of the Executive’s annual Compensation in the five calendar years immediately preceding Executive’s termination.
iv)	any compensation previously deferred by the Executive (together with any accrued interest o earnings thereon), and
v)	any accrued vacation pay.

b)

The Executive shall have the right within 90 days following termination of employment to exercise any stock options awarded him prior to the termination of his employment.

c)

The Bank and/or the Company shall provide to the Executive, at its expense, hospital and medical insurance coverage of the same or equivalent scope as he was covered by immediately prior to termination of his employment for a period of 5 years after Executive’s termination of employment. If, however, the Bank or the Company determines that such continued coverage would be taxable as includible in income, the Bank or

3

the Company, within 30 days after the date of termination of employment, shall provide to Executive a lump sum payment equal to the value 5 years of continued hospital and medical insurance coverage of the same or equivalent scope as Executive was covered by immediately prior to termination of his employment.

     3. Maximum Benefits upon Change in Control. If the Bank’s usual certified public accountants determine that any payment by the Bank or the Company to or for the benefit of the Executive (whether paid or payable pursuant to the terms of this Agreement or otherwise) (the “Payment”) would be nondeductible by the Bank or the Company for Federal Income Tax purposes because of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code), then the aggregate present value of amounts payable to or for the benefit of the Executive pursuant to this Agreement (the “Agreement Payments”) shall be reduced (but not below zero) to the Reduced Amount. The “Reduced Amount” means an amount expressed in present value, determined in accordance with Section 280G(d)(4) of the Code, which maximizes the present value of all Agreement Payments without causing any Payment to be nondeductible by the Bank or the Company because of Section 280G of the Code.

     4. Term. Unless earlier terminated by mutual agreement of the Company and the Executive, this Agreement shall terminate upon the earliest of (a) the termination of the Executive’s employment with the Bank and the Company for any reason prior to a Change in Control; or (b) five (5) years from the date of a Change in Control. Obligations under Section 2 of this Agreement created prior to termination shall survive termination.

     5. Termination Prior To Change in Control. Notwithstanding anything in this agreement to the contrary, if a Change in Control occurs and (i) if the Executive’s employment with the Company or the Bank is terminated prior to the date on which Change in Control occurs, and if the termination of employment (a) was at the request or suggestion of a 3rd party who has taken steps reasonably calculated to effect the Change in Control or (b) otherwise arose

4

in connection with or in anticipation of the Change in Control, or (ii) Executive has terminated his employment with Company and/or Bank for Good Reason prior to Change in Control, then Executive shall be entitled to the Income Protection Benefits and all other rights and privileges provided by this Agreement.

     6. Successors, Binding Agreements.

a)	Any purchaser, successor or assign (whether direct or indirect), to or of all, substantially all, or any material part of the business, properties and assets of the Bank and/or the Company shall be bound by the terms of this Agreement, and the Bank and the Company shall require any such purchaser, successor or assign, by agreement in form and substance satisfactory to Executive, expressly, absolutely and unconditionally to assume and agree to perform this Agreement in the same manner and to the same extent that the Bank and the Company would be required to perform if no such succession or assignment had taken place.
b)	The Bank and the Company each hereby guarantee the timely payment and performance, when due, of the other’s obligations under this Agreement.
c)	This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal and legal representatives, executives, administrators, successors, heirs, distributees, devisees and legatees.

     7. Exemption from Section 409A. The Agreement and transactions under this Agreement are intended to be structured in accordance with applicable laws, rules and regulations including, but not limited to, the short-term deferral exemption under Section 409A of the Internal Revenue Code and any applicable regulations thereunder.

     8. Notices. Notices under this Agreement shall be in writing and shall be deemed given when hand delivered or three (3) days after being mailed by United States registered or

5

certified mail, return receipt requested, postage prepaid, as follows:

If to the Company	Fentura Financial, Inc.
or the Bank:	175 N. Leroy St.
	PO Box 725
	Fenton, MI 48430-0725
If to the Executive:	Mr. Ronald L. Justice
	6440 Lahring Rd.
	Gaines, MI 48436

     or to such other address as either party may designate.

     9. At Will Employment Preserved. This Agreement is intended only to provide an economic benefit for Executive if his employment with the Bank or the Company is terminated under the circumstances described herein. Even though this economic benefit may be payable, Executive’s employment with the Bank and the Company shall continue to be “at will,” and the Bank, the Company or the Executive may terminate Executive’s employment with the Bank or the Company at any time, with or without cause. Further, the existence of this Agreement and the economic benefits herein provided shall not contradict, override, supersede or in any way detract from or affect the “at will” employment status of any other employee of the Bank or the Company. The employment terms set forth in the Bank’s employee handbook or employee manual, as they may be in effect from time to time, shall control.

     10. Miscellaneous.

a)	Modification; Waiver. This Agreement may be modified, waived or discharged only in, and limited to the extent specifically set forth in, a written document signed by the Executive and the Company.
b)	Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

6

c)

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

d)

Entire Agreement. This Agreement contains the entire understanding of the parties concerning the Executive’s severance compensation opportunities. This Agreement supersedes and controls over the Executive’s March 20, 1997, Severance Compensation Agreement with the Company and the Bank. This Agreement does not supersede Executive’s Fentura Financial, Inc. Confidentiality and Shareholder Protection Agreement dated July 16, 2003.

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

7

EX-10.3

EXHIBIT 10.3

Severance Compensation Agreement

     This Severance Compensation Agreement (the “Agreement”), has been made on July 24, 2008 by Fentura Financial, Inc., a Michigan corporation (the “Company”), The State Bank, (the “Bank”) and Dennis E. Leyder, an individual (the “Executive”).

Background Statement:

     The Executive is a principal officer of the Bank and the Company and his continued services are important to the Bank, its depositors and customers, and the Company’s shareholders. The Bank and the Company believe it is in their best interests that the Executive continue to render services to the Bank and the Company if a Change in Control is threatened or occurs, free from the distractions and vexations which might result if his personal economic security is made uncertain as a result of an impending Change in Control.

     1. Definitions. The following words and phrases have the following meanings:

a)

“Cause” means (i) the willful and continuing failure by the Executive to substantially perform his duties with the Bank or the Company (other than any such failure resulting from the Executive’s death or Disability) and which is not remedied in a reasonable period of time after receipt by Executive of written notice from the Bank specifying the duties the Executive has failed to perform, or (ii) the willful and continued engaging by Executive in gross misconduct that is materially injurious to the Bank or the Company and which is not ceased within a reasonable period of time after receipt by Executive of written notice from the Bank specifying the misconduct and the injury, or (iii) an adjudication of the Executive’s guilt of any crime involving a serious and substantial breach of the Executive’s fiduciary duties to the Bank. No act or failure to act on the Executive’s part shall be considered “willful” unless done, or omitted to be done, by him in bad faith and without reasonable belief that his action or omission was in the best interest of the Bank or the Company.

b)

“Change in Control” means (i) the acquisition, directly, indirectly and/or beneficially, by any person or group, of more than fifty percent (50%) of the voting securities of the Company or the Bank, (ii) the occurrence of any event at any time during any two (2) year period which results in a majority of the Board of Directors of the Company or the Bank being

	comprised of individuals who were not members of such Board at the commencement of that two (2) year period (the “Incumbent Board”); provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s or the Bank’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding for this purpose any such individual whose initial assumption of the office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Incumbent Board, (iii) a sale of all or substantially all of the assets of the Company or the Bank to another entity, or (iv) a merger or reorganization of the Company or the Bank with another entity.
c)	“Compensation” means with respect to the period under consideration, the aggregate of all amounts paid by the Company and the Bank to and includable in the Executive’s earnings as base salary, bonuses, commissions, fees and any other compensation, but excluding contributions made to any welfare and pension benefit plans by the Bank and/or Company at its or their sole expense.
d)	“Disability” means any physical or mental impairment which meets the definition of disability found in the long-term or short-term disability policy insuring the Executive at the time disability is alleged or if no such policy is in effect at that time, any physical or mental impairment that, on the basis of qualified medical opinion of three (3) medical doctors, has rendered Executive wholly and permanently unable to engage in the regular and continuous occupation or employment for remuneration or profit of a nature similar to his employment with the Bank for a period of six (6) consecutive months or more.
e)	“Good Reason” means any of the following, as determined by the Executive in his discretion: (i) a material diminution of the Executive’s duties, responsibilities, or authority with the Bank or the Company immediately prior to a Change in Control, or a change adverse to Executive in Executive’s reporting responsibilities, titles, terms of employment (including bonus, compensation, fringe benefits and vacation entitlement) or (ii) the Bank or the Company requiring Executive to be based anywhere other than within fifty (50) miles of his present office location, or (iii) a material breach of this Agreement including the failure by the Company to obtain the assumption of this Agreement as contemplated in Section 6 hereof. Upon the occurrence of any event referenced above, Executive shall, within ninety (90) of any occurrence, provide the Bank and the Company notice of the existence of the condition. Upon receiving notice, the Bank and the Company shall have

- 2 -

no more than thirty (30) days to remedy the condition. Executive shall have two years from the date of the initial existence of a violation of one of the above events to terminate his employment under this section.

     2. Income Protection Benefits. If the Executive is an employee of the Bank or the Company when a Change in Control occurs, and the Executive’s employment with the Bank, the Company and all affiliates of the Company is thereafter terminated without Cause, or by the Executive for Good Reason, then:

a) The Company and the Bank shall pay to the Executive, in a lump sum in cash within 30 days after the date of termination of employment the aggregate of the following amounts:

i)	that portion of the Executive’s annual base salary and director’s fees through the date of termination not theretofore paid, and
ii)	the product of (x) the sum of all commissions and bonuses of any kind paid or payable to Executive in the calendar year immediately preceding the year in which termination of employment occurs multiplied by (y) a fraction, the numerator of which is the number of days in the current calendar year through the date of termination, and the denominator of which is 365, and
iii)	a separate lump-sum amount equal to 2 times the sum of the highest amount of the Executive’s annual Compensation in the five calendar years immediately preceding Executive’s termination.
iv)	any compensation previously deferred by the Executive (together with any accrued interest o earnings thereon), and
v)	any accrued vacation pay.

b)

The Executive shall have the right within 90 days following termination of employment to exercise any stock options awarded him prior to the termination of his employment.

c)

The Bank and/or the Company shall provide to the Executive, at its expense, hospital and medical insurance coverage of the same or equivalent scope as he was covered by immediately prior to termination of his employment for a period of 4 years after Executive’s termination of employment. If, however, the Bank or the Company determines that such continued coverage would be taxable as includible in income, the Bank or the Company, within 30 days after the date of termination of employment,

- 3 -

shall provide to Executive a lump sum payment equal to the value 4 years of continued hospital and medical insurance coverage of the same or equivalent scope as Executive was covered by immediately prior to termination of his employment.

     3. Maximum Benefits upon Change in Control. If the Bank’s usual certified public accountants determine that any payment by the Bank or the Company to or for the benefit of the Executive (whether paid or payable pursuant to the terms of this Agreement or otherwise) (the “Payment”) would be nondeductible by the Bank or the Company for Federal Income Tax purposes because of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code), then the aggregate present value of amounts payable to or for the benefit of the Executive pursuant to this Agreement (the “Agreement Payments”) shall be reduced (but not below zero) to the Reduced Amount. The “Reduced Amount” means an amount expressed in present value, determined in accordance with Section 280G(d)(4) of the Code, which maximizes the present value of all Agreement Payments without causing any Payment to be nondeductible by the Bank or the Company because of Section 280G of the Code.

     4. Term. Unless earlier terminated by mutual agreement of the Company and the Executive, this Agreement shall terminate upon the earliest of (a) the termination of the Executive’s employment with the Bank and the Company for any reason prior to a Change in Control; or (b) five (5) years from the date of a Change in Control. Obligations under Section 2 of this Agreement created prior to termination shall survive termination.

     5. Termination Prior To Change in Control. Notwithstanding anything in this agreement to the contrary, if a Change in Control occurs and (i) if the Executive’s employment with the Company or the Bank is terminated prior to the date on which Change in Control occurs, and if the termination of employment (a) was at the request or suggestion of a 3rd party who has taken steps reasonably calculated to effect the Change in Control or (b) otherwise arose

- 4 -

in connection with or in anticipation of the Change in Control, or (ii) Executive has terminated his employment with Company and/or Bank for Good Reason prior to Change in Control, then Executive shall be entitled to the Income Protection Benefits and all other rights and privileges provided by this Agreement.

     6. Successors, Binding Agreements.

a)	Any purchaser, successor or assign (whether direct or indirect), to or of all, substantially all, or any material part of the business, properties and assets of the Bank and/or the Company shall be bound by the terms of this Agreement, and the Bank and the Company shall require any such purchaser, successor or assign, by agreement in form and substance satisfactory to Executive, expressly, absolutely and unconditionally to assume and agree to perform this Agreement in the same manner and to the same extent that the Bank and the Company would be required to perform if no such succession or assignment had taken place.
b)	The Bank and the Company each hereby guarantee the timely payment and performance, when due, of the other’s obligations under this Agreement.
c)	This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal and legal representatives, executives, administrators, successors, heirs, distributees, devisees and legatees.

     7. Exemption from Section 409A. The Agreement and transactions under this Agreement are intended to be structured in accordance with applicable laws, rules and regulations including, but not limited to, the short-term deferral exemption under Section 409A of the Internal Revenue Code and any applicable regulations thereunder.

     8. Notices. Notices under this Agreement shall be in writing and shall be deemed given when hand delivered or three (3) days after being mailed by United States registered or

- 5 -

certified mail, return receipt requested, postage prepaid, as follows:

If to the Company	Fentura Financial, Inc.
or the Bank:	175 N. Leroy St.
	PO Box 725
	Fenton, MI 48430-0725
If to the Executive:	Mr. Dennis E. Leyder
	16184 Pine Lake Forest Drive
	Linden, MI 48451

     or to such other address as either party may designate.

     9. At Will Employment Preserved. This Agreement is intended only to provide an economic benefit for Executive if his employment with the Bank or the Company is terminated under the circumstances described herein. Even though this economic benefit may be payable, Executive’s employment with the Bank and the Company shall continue to be “at will,” and the Bank, the Company or the Executive may terminate Executive’s employment with the Bank or the Company at any time, with or without cause. Further, the existence of this Agreement and the economic benefits herein provided shall not contradict, override, supersede or in any way detract from or affect the “at will” employment status of any other employee of the Bank or the Company. The employment terms set forth in the Bank’s employee handbook or employee manual, as they may be in effect from time to time, shall control.

     10. Miscellaneous.

a)	Modification; Waiver. This Agreement may be modified, waived or discharged only in, and limited to the extent specifically set forth in, a written document signed by the Executive and the Company.
b)	Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

- 6 -

c)

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

d)

Entire Agreement. This Agreement contains the entire understanding of the parties concerning the Executive’s severance compensation opportunities. This Agreement supersedes and controls over the Executive’s March 9, 2006, Severance Compensation Agreement with the Company and the Bank. This Agreement does not supersede Executive’s Fentura Financial, Inc. Confidentiality and Shareholder Protection Agreement dated July 15, 2003.

COMPANY: Fentura Financial, Inc., a Michigan corporation
By:	/s/ Forrest A. Shook
	Forrest A. Shook, Chairman
BANK: The State Bank
By:	/s/ Brian P. Petty
	Brian P. Petty, Chairman
EXECUTIVE:
/s/ Dennis E. Leyder
Dennis E. Leyder

- 7 -

EX-10.4

EXHIBIT 10.4

Severance Compensation Agreement

     This Severance Compensation Agreement (the “Agreement”), has been made on July 24, 2008 by Fentura Financial, Inc., a Michigan corporation (the “Company”), The State Bank, (the “Bank”) and Douglas J. Kelley, an individual (the “Executive”).

Background Statement:

     The Executive is a principal officer of the Bank and the Company and his continued services are important to the Bank, its depositors and customers, and the Company’s shareholders. The Bank and the Company believe it is in their best interests that the Executive continue to render services to the Bank and the Company if a Change in Control is threatened or occurs, free from the distractions and vexations which might result if his personal economic security is made uncertain as a result of an impending Change in Control.

     1. Definitions. The following words and phrases have the following meanings:

a)

“Cause” means (i) the willful and continuing failure by the Executive to substantially perform his duties with the Bank or the Company (other than any such failure resulting from the Executive’s death or Disability) and which is not remedied in a reasonable period of time after receipt by Executive of written notice from the Bank specifying the duties the Executive has failed to perform, or (ii) the willful and continued engaging by Executive in gross misconduct that is materially injurious to the Bank or the Company and which is not ceased within a reasonable period of time after receipt by Executive of written notice from the Bank specifying the misconduct and the injury, or (iii) an adjudication of the Executive’s guilt of any crime involving a serious and substantial breach of the Executive’s fiduciary duties to the Bank. No act or failure to act on the Executive’s part shall be considered “willful” unless done, or omitted to be done, by him in bad faith and without reasonable belief that his action or omission was in the best interest of the Bank or the Company.

b)

“Change in Control” means (i) the acquisition, directly, indirectly and/or beneficially, by any person or group, of more than fifty percent (50%) of the voting securities of the Company or the Bank, (ii) the occurrence of any event at any time during any two (2) year period which results in a majority of the Board of Directors of the Company or the Bank being

	comprised of individuals who were not members of such Board at the commencement of that two (2) year period (the “Incumbent Board”); provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s or the Bank’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding for this purpose any such individual whose initial assumption of the office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Incumbent Board, (iii) a sale of all or substantially all of the assets of the Company or the Bank to another entity, or (iv) a merger or reorganization of the Company or the Bank with another entity.
c)	“Compensation” means with respect to the period under consideration, the aggregate of all amounts paid by the Company and the Bank to and includable in the Executive’s earnings as base salary, bonuses, commissions, fees and any other compensation, but excluding contributions made to any welfare and pension benefit plans by the Bank and/or Company at its or their sole expense.
d)	“Disability” means any physical or mental impairment which meets the definition of disability found in the long-term or short-term disability policy insuring the Executive at the time disability is alleged or if no such policy is in effect at that time, any physical or mental impairment that, on the basis of qualified medical opinion of three (3) medical doctors, has rendered Executive wholly and permanently unable to engage in the regular and continuous occupation or employment for remuneration or profit of a nature similar to his employment with the Bank for a period of six (6) consecutive months or more.
e)	“Good Reason” means any of the following, as determined by the Executive in his discretion: (i) a material diminution of the Executive’s duties, responsibilities, or authority with the Bank or the Company immediately prior to a Change in Control, or a change adverse to Executive in Executive’s reporting responsibilities, titles, terms of employment (including bonus, compensation, fringe benefits and vacation entitlement) or (ii) the Bank or the Company requiring Executive to be based anywhere other than within fifty (50) miles of his present office location, or (iii) a material breach of this Agreement including the failure by the Company to obtain the assumption of this Agreement as contemplated in Section 6 hereof. Upon the occurrence of any event referenced above, Executive shall, within ninety (90) of any occurrence, provide the Bank and the Company notice of the existence of the condition. Upon receiving notice, the Bank and the Company shall have

-2-

no more than thirty (30) days to remedy the condition. Executive shall have two years from the date of the initial existence of a violation of one of the above events to terminate his employment under this section.

     2. Income Protection Benefits. If the Executive is an employee of the Bank or the Company when a Change in Control occurs, and the Executive’s employment with the Bank, the Company and all affiliates of the Company is thereafter terminated without Cause, or by the Executive for Good Reason, then:

a) The Company and the Bank shall pay to the Executive, in a lump sum in cash within 30 days after the date of termination of employment the aggregate of the following amounts:

i)	that portion of the Executive’s annual base salary and director’s fees through the date of termination not theretofore paid, and
iv)	the product of (x) the sum of all commissions and bonuses of any kind paid or payable to Executive in the calendar year immediately preceding the year in which termination of employment occurs multiplied by (y) a fraction, the numerator of which is the number of days in the current calendar year through the date of termination, and the denominator of which is 365, and
v)	a separate lump-sum amount equal to the sum of the highest amount of the Executive’s annual Compensation in the five calendar years immediately preceding Executive’s termination.
iv)	any compensation previously deferred by the Executive (together with any accrued interest o earnings thereon), and
v)	any accrued vacation pay.

b)

The Executive shall have the right within 90 days following termination of employment to exercise any stock options awarded him prior to the termination of his employment.

c)

The Bank and/or the Company shall provide to the Executive, at its expense, hospital and medical insurance coverage of the same or equivalent scope as he was covered by immediately prior to termination of his employment for a period of 2 years after Executive’s termination of employment. If, however, the Bank or the Company determines that such continued coverage would be taxable as includible in income, the Bank or the Company, within 30 days after the date of termination of employment,

-3-

shall provide to Executive a lump sum payment equal to the value 2 years of continued hospital and medical insurance coverage of the same or equivalent scope as Executive was covered by immediately prior to termination of his employment.

     3. Maximum Benefits upon Change in Control. If the Bank’s usual certified public accountants determine that any payment by the Bank or the Company to or for the benefit of the Executive (whether paid or payable pursuant to the terms of this Agreement or otherwise) (the “Payment”) would be nondeductible by the Bank or the Company for Federal Income Tax purposes because of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code), then the aggregate present value of amounts payable to or for the benefit of the Executive pursuant to this Agreement (the “Agreement Payments”) shall be reduced (but not below zero) to the Reduced Amount. The “Reduced Amount” means an amount expressed in present value, determined in accordance with Section 280G(d)(4) of the Code, which maximizes the present value of all Agreement Payments without causing any Payment to be nondeductible by the Bank or the Company because of Section 280G of the Code.

     4. Term. Unless earlier terminated by mutual agreement of the Company and the Executive, this Agreement shall terminate upon the earliest of (a) the termination of the Executive’s employment with the Bank and the Company for any reason prior to a Change in Control; or (b) five (5) years from the date of a Change in Control. Obligations under Section 2 of this Agreement created prior to termination shall survive termination.

     5. Termination Prior To Change in Control. Notwithstanding anything in this agreement to the contrary, if a Change in Control occurs and (i) if the Executive’s employment with the Company or the Bank is terminated prior to the date on which Change in Control occurs, and if the termination of employment (a) was at the request or suggestion of a 3rd party who has taken steps reasonably calculated to effect the Change in Control or (b) otherwise arose

-4-

in connection with or in anticipation of the Change in Control, or (ii) Executive has terminated his employment with Company and/or Bank for Good Reason prior to Change in Control, then Executive shall be entitled to the Income Protection Benefits and all other rights and privileges provided by this Agreement.

     6. Successors, Binding Agreements.

a)	Any purchaser, successor or assign (whether direct or indirect), to or of all, substantially all, or any material part of the business, properties and assets of the Bank and/or the Company shall be bound by the terms of this Agreement, and the Bank and the Company shall require any such purchaser, successor or assign, by agreement in form and substance satisfactory to Executive, expressly, absolutely and unconditionally to assume and agree to perform this Agreement in the same manner and to the same extent that the Bank and the Company would be required to perform if no such succession or assignment had taken place.
b)	The Bank and the Company each hereby guarantee the timely payment and performance, when due, of the other’s obligations under this Agreement.
c)	This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal and legal representatives, executives, administrators, successors, heirs, distributees, devisees and legatees.

     7. Exemption from Section 409A. The Agreement and transactions under this Agreement are intended to be structured in accordance with applicable laws, rules and regulations including, but not limited to, the short-term deferral exemption under Section 409A of the Internal Revenue Code and any applicable regulations thereunder.

     8. Notices. Notices under this Agreement shall be in writing and shall be deemed given when hand delivered or three (3) days after being mailed by United States registered or

-5-

certified mail, return receipt requested, postage prepaid, as follows:

If to the Company	Fentura Financial, Inc.
or the Bank:	175 N. Leroy St.
	PO Box 725
	Fenton, MI 48430-0725
If to the Executive:	Mr. Douglas J. Kelley
	346 S. Clark St.
	Chesaning, MI 48616

     or to such other address as either party may designate.

     9. At Will Employment Preserved. This Agreement is intended only to provide an economic benefit for Executive if his employment with the Bank or the Company is terminated under the circumstances described herein. Even though this economic benefit may be payable, Executive’s employment with the Bank and the Company shall continue to be “at will,” and the Bank, the Company or the Executive may terminate Executive’s employment with the Bank or the Company at any time, with or without cause. Further, the existence of this Agreement and the economic benefits herein provided shall not contradict, override, supersede or in any way detract from or affect the “at will” employment status of any other employee of the Bank or the Company. The employment terms set forth in the Bank’s employee handbook or employee manual, as they may be in effect from time to time, shall control.

     10. Miscellaneous.

a)	Modification; Waiver. This Agreement may be modified, waived or discharged only in, and limited to the extent specifically set forth in, a written document signed by the Executive and the Company.
b)	Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

-6-

c)

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

d)

Entire Agreement. This Agreement contains the entire understanding of the parties concerning the Executive’s severance compensation opportunities. This Agreement supersedes and controls over the Executive’s March 9, 2006, Severance Compensation Agreement with the Company and the Bank. This Agreement does not supersede Executive’s Fentura Financial, Inc. Confidentiality and Shareholder Protection Agreement dated July 18, 2003.

COMPANY:
Fentura Financial, Inc., a Michigan corporation
By:	/s/ Forrest A. Shook
	Forrest A. Shook, Chairman
BANK: The State Bank
By:	/s/ Brian P. Petty
	Brian P. Petty, Chairman
EXECUTIVE:
/s/ Douglas J. Kelley
Douglas J. Kelley

-7-

EX-10.5

EXHIBIT 10.5

Severance Compensation Agreement

     This Severance Compensation Agreement (the “Agreement”), has been made on July 24, 2008 by Fentura Financial, Inc., a Michigan corporation (the “Company”), The State Bank, (the “Bank”) and Holly J. Pingatore, an individual (the “Executive”).

Background Statement:

     The Executive is a principal officer of the Bank and the Company and his continued services are important to the Bank, its depositors and customers, and the Company’s shareholders. The Bank and the Company believe it is in their best interests that the Executive continue to render services to the Bank and the Company if a Change in Control is threatened or occurs, free from the distractions and vexations which might result if his personal economic security is made uncertain as a result of an impending Change in Control.

     1. Definitions. The following words and phrases have the following meanings:

a)

“Cause” means (i) the willful and continuing failure by the Executive to substantially perform his duties with the Bank or the Company (other than any such failure resulting from the Executive’s death or Disability) and which is not remedied in a reasonable period of time after receipt by Executive of written notice from the Bank specifying the duties the Executive has failed to perform, or (ii) the willful and continued engaging by Executive in gross misconduct that is materially injurious to the Bank or the Company and which is not ceased within a reasonable period of time after receipt by Executive of written notice from the Bank specifying the misconduct and the injury, or (iii) an adjudication of the Executive’s guilt of any crime involving a serious and substantial breach of the Executive’s fiduciary duties to the Bank. No act or failure to act on the Executive’s part shall be considered “willful” unless done, or omitted to be done, by him in bad faith and without reasonable belief that his action or omission was in the best interest of the Bank or the Company.

b)

“Change in Control” means (i) the acquisition, directly, indirectly and/or beneficially, by any person or group, of more than fifty percent (50%) of the voting securities of the Company or the Bank, (ii) the occurrence of any event at any time during any two (2) year period which results in a majority of the Board of Directors of the Company or the Bank being

	comprised of individuals who were not members of such Board at the commencement of that two (2) year period (the “Incumbent Board”); provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s or the Bank’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding for this purpose any such individual whose initial assumption of the office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Incumbent Board, (iii) a sale of all or substantially all of the assets of the Company or the Bank to another entity, or (iv) a merger or reorganization of the Company or the Bank with another entity.
c)	“Compensation” means with respect to the period under consideration, the aggregate of all amounts paid by the Company and the Bank to and includable in the Executive’s earnings as base salary, bonuses, commissions, fees and any other compensation, but excluding contributions made to any welfare and pension benefit plans by the Bank and/or Company at its or their sole expense.
d)	“Disability” means any physical or mental impairment which meets the definition of disability found in the long-term or short-term disability policy insuring the Executive at the time disability is alleged or if no such policy is in effect at that time, any physical or mental impairment that, on the basis of qualified medical opinion of three (3) medical doctors, has rendered Executive wholly and permanently unable to engage in the regular and continuous occupation or employment for remuneration or profit of a nature similar to his employment with the Bank for a period of six (6) consecutive months or more.
e)	“Good Reason” means any of the following, as determined by the Executive in his discretion: (i) a material diminution of the Executive’s duties, responsibilities, or authority with the Bank or the Company immediately prior to a Change in Control, or a change adverse to Executive in Executive’s reporting responsibilities, titles, terms of employment (including bonus, compensation, fringe benefits and vacation entitlement) or (ii) the Bank or the Company requiring Executive to be based anywhere other than within fifty (50) miles of his present office location, or (iii) a material breach of this Agreement including the failure by the Company to obtain the assumption of this Agreement as contemplated in Section 6 hereof. Upon the occurrence of any event referenced above, Executive shall, within ninety (90) of any occurrence, provide the Bank and the Company notice of the existence of the condition. Upon receiving notice, the Bank and the Company shall have

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no more than thirty (30) days to remedy the condition. Executive shall have two years from the date of the initial existence of a violation of one of the above events to terminate his employment under this section.

     2. Income Protection Benefits. If the Executive is an employee of the Bank or the Company when a Change in Control occurs, and the Executive’s employment with the Bank, the Company and all affiliates of the Company is thereafter terminated without Cause, or by the Executive for Good Reason, then:

a) The Company and the Bank shall pay to the Executive, in a lump sum in cash within 30 days after the date of termination of employment the aggregate of the following amounts:

i)	that portion of the Executive’s annual base salary and director’s fees through the date of termination not theretofore paid, and
vi)	the product of (x) the sum of all commissions and bonuses of any kind paid or payable to Executive in the calendar year immediately preceding the year in which termination of employment occurs multiplied by (y) a fraction, the numerator of which is the number of days in the current calendar year through the date of termination, and the denominator of which is 365, and
vii)	a separate lump-sum amount equal to the sum of the highest amount of the Executive’s annual Compensation in the five calendar years immediately preceding Executive’s termination.
iv)	any compensation previously deferred by the Executive (together with any accrued interest o earnings thereon), and
v)	any accrued vacation pay.

b)

The Executive shall have the right within 90 days following termination of employment to exercise any stock options awarded him prior to the termination of his employment.

c)

The Bank and/or the Company shall provide to the Executive, at its expense, hospital and medical insurance coverage of the same or equivalent scope as he was covered by immediately prior to termination of his employment for a period of 2 years after Executive’s termination of employment. If, however, the Bank or the Company determines that such continued coverage would be taxable as includible in income, the Bank or the Company, within 30 days after the date of termination of employment,

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shall provide to Executive a lump sum payment equal to the value 2 years of continued hospital and medical insurance coverage of the same or equivalent scope as Executive was covered by immediately prior to termination of his employment.

     3. Maximum Benefits upon Change in Control. If the Bank’s usual certified public accountants determine that any payment by the Bank or the Company to or for the benefit of the Executive (whether paid or payable pursuant to the terms of this Agreement or otherwise) (the “Payment”) would be nondeductible by the Bank or the Company for Federal Income Tax purposes because of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code), then the aggregate present value of amounts payable to or for the benefit of the Executive pursuant to this Agreement (the “Agreement Payments”) shall be reduced (but not below zero) to the Reduced Amount. The “Reduced Amount” means an amount expressed in present value, determined in accordance with Section 280G(d)(4) of the Code, which maximizes the present value of all Agreement Payments without causing any Payment to be nondeductible by the Bank or the Company because of Section 280G of the Code.

     4. Term. Unless earlier terminated by mutual agreement of the Company and the Executive, this Agreement shall terminate upon the earliest of (a) the termination of the Executive’s employment with the Bank and the Company for any reason prior to a Change in Control; or (b) five (5) years from the date of a Change in Control. Obligations under Section 2 of this Agreement created prior to termination shall survive termination.

     5. Termination Prior To Change in Control. Notwithstanding anything in this agreement to the contrary, if a Change in Control occurs and (i) if the Executive’s employment with the Company or the Bank is terminated prior to the date on which Change in Control occurs, and if the termination of employment (a) was at the request or suggestion of a 3rd party who has taken steps reasonably calculated to effect the Change in Control or (b) otherwise arose

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in connection with or in anticipation of the Change in Control, or (ii) Executive has terminated his employment with Company and/or Bank for Good Reason prior to Change in Control, then Executive shall be entitled to the Income Protection Benefits and all other rights and privileges provided by this Agreement.

     6. Successors, Binding Agreements.

a)	Any purchaser, successor or assign (whether direct or indirect), to or of all, substantially all, or any material part of the business, properties and assets of the Bank and/or the Company shall be bound by the terms of this Agreement, and the Bank and the Company shall require any such purchaser, successor or assign, by agreement in form and substance satisfactory to Executive, expressly, absolutely and unconditionally to assume and agree to perform this Agreement in the same manner and to the same extent that the Bank and the Company would be required to perform if no such succession or assignment had taken place.
b)	The Bank and the Company each hereby guarantee the timely payment and performance, when due, of the other’s obligations under this Agreement.
c)	This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal and legal representatives, executives, administrators, successors, heirs, distributees, devisees and legatees.

     7. Exemption from Section 409A. The Agreement and transactions under this Agreement are intended to be structured in accordance with applicable laws, rules and regulations including, but not limited to, the short-term deferral exemption under Section 409A of the Internal Revenue Code and any applicable regulations thereunder.

     8. Notices. Notices under this Agreement shall be in writing and shall be deemed given when hand delivered or three (3) days after being mailed by United States registered or

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certified mail, return receipt requested, postage prepaid, as follows:

If to the Company	Fentura Financial, Inc.
or the Bank:	175 N. Leroy St.
	PO Box 725
	Fenton, MI 48430-0725
If to the Executive:	Ms. Holly J. Pingatore
	4130 Julie Kim Lane
	Goodrich, MI 48438

     or to such other address as either party may designate.

     9. At Will Employment Preserved. This Agreement is intended only to provide an economic benefit for Executive if his employment with the Bank or the Company is terminated under the circumstances described herein. Even though this economic benefit may be payable, Executive’s employment with the Bank and the Company shall continue to be “at will,” and the Bank, the Company or the Executive may terminate Executive’s employment with the Bank or the Company at any time, with or without cause. Further, the existence of this Agreement and the economic benefits herein provided shall not contradict, override, supersede or in any way detract from or affect the “at will” employment status of any other employee of the Bank or the Company. The employment terms set forth in the Bank’s employee handbook or employee manual, as they may be in effect from time to time, shall control.

     10. Miscellaneous.

a)	Modification; Waiver. This Agreement may be modified, waived or discharged only in, and limited to the extent specifically set forth in, a written document signed by the Executive and the Company.
b)	Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

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c)

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

d)

Entire Agreement. This Agreement contains the entire understanding of the parties concerning the Executive’s severance compensation opportunities. This Agreement supersedes and controls over the Executive’s March 9, 2006, Severance Compensation Agreement with the Company and the Bank. This Agreement does not supersede Executive’s Fentura Financial, Inc. Confidentiality and Shareholder Protection Agreement dated July 18, 2003.

COMPANY: Fentura Financial, Inc., a Michigan corporation
By:	/s/ Forrest A. Shook
	Forrest A. Shook, Chairman
BANK: The State Bank
By:	/s/ Brian P. Petty
	Brian P. Petty, Chairman
EXECUTIVE:
/s/ Holly J. Pingatore
Holly J. Pingatore

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