EXHIBIT 10.5
SOUTHERN MICHIGAN BANK & TRUST
DEFERRED COMPENSATION AGREEMENT
THIS AGREEMENT is made this
_________ day of ___________________, 2003, by and between Southern
Michigan Bank & Trust (the "Company"), and [NAME OF EXECUTIVE]
(the "Executive").
INTRODUCTION
To encourage the Executive to
remain an employee of the Company, the Company is willing to
provide to the Executive a deferred compensation opportunity. The
Company will pay the Executive's benefits from the Company's
general assets. This Agreement between the Executive and the
Company modifies the terms of the Executive's participation in the
Plan, replaces all benefits which otherwise were payable under the
Plan, and supercedes all previous Agreements under this Plan.
AGREEMENT
The Executive and the Company
agree as follows:
Article 1
Definitions
Whenever used in this
Agreement, the following words and phrases shall have the meanings
specified:
1.1 " Change of
Control " means the transfer of shares of the Company's voting
common stock such that one entity or one person acquires (or is
deemed to acquire when applying Section 318 of the Code) more than
50 percent of the Company's outstanding voting common stock
followed within twelve (12) months by the Executive's Termination
of Employment for reasons other than death, Disability or
retirement.
1.2 " Code " means
the Internal Revenue Code of 1986, as amended. References to a Code
section shall be deemed to be to that section as it now exists and
to any successor provision.
1.3 " Compensation "
means the total annual base salary paid to the Executive during a
Plan Year.
1.4 " Deferral
Account " means the Company's accounting of the Executive's
accumulated Deferrals plus accrued interest.
1.5 " Deferrals "
means the amount of the Executive's Compensation, which the
Executive elects to defer according to this Agreement.
1.6 " Disability "
means the Participant's suffering a sickness, accident or injury
which has been determined by the carrier of any individual or group
disability insurance policy covering the Participant, or by the
Social Security Administration, to be a disability rendering the
Participant totally and permanently disabled. The Participant must
submit proof to the Company of the carrier's or Social Security
Administration's determination upon the request of the Company.
1.7
"Early Retirement Date" means the Executive
attaining age 60.
1.8 " Effective Date
" means January 1, 2004.
1.9 " Election Form "
means the Form attached as Exhibit 1.
1.10 " Normal
Retirement Age " means the Executive's 65th birthday.
1.11 " Normal
Retirement Date " means the later of the Normal Retirement
Age or Termination of Employment.
1.12 " Plan Year "
means the calendar year.
1.13 " Termination of
Employment " means that the Executive ceases to be employed by
the Company for any reason whatsoever other than by reason of a
leave of absence, which is approved by the Company. For purposes of
this Agreement, if there is a dispute over the employment status of
the Executive or the date of the Executive's Termination of
Employment, the Company shall have the sole and absolute right to
decide the dispute.
1.14 "Years of
Service" means the total number of twelve-month periods during
which the Executive is employed on a full-time basis by the
Company, inclusive of any approved leaves of absence.
Article 2
Deferral Election
2.1 Initial Election
. The Executive shall make an initial deferral election under this
Agreement by filing with the Company a signed Election Form within
thirty (30) days after the Effective Date of this Agreement. The
Election Form shall set forth the amount of Compensation
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to be deferred and shall be effective to defer only Compensation
earned after the date the Election Form is received by the
Company.
2.2
Election Changes
2.2.1
Generally . The Executive
may modify the amount of Compensation to be deferred annually by
filing a new Election Form with the Company prior to the beginning
of the Plan Year in which the Compensation is to be deferred. The
modified deferral election shall not be effective until the
calendar year following the year in which it received and approved
by the Company.
2.2.2 Hardship . If
an unforeseeable financial emergency arising from the death of a
family member, divorce, sickness, injury, catastrophe or similar
event outside the control of the Executive occurs, the Executive,
by written instructions to the Company, may reduce future deferrals
under this Agreement.
Article 3
Deferral Account
3.1
Establishing and Crediting . The Company shall
establish a Deferral Account on its books for the Executive and
shall credit to the Deferral Account the following amounts:
3.1.1 Deferrals .
The Compensation deferred by the Executive as of the time the
Compensation would have otherwise been paid to the Executive.
3.1.2 Interest . On
the first day of each month and immediately prior to the payment of
any benefits, interest on the account balance since the preceding
credit under this Section 3.1.2, if any, at an annual rate,
compounded monthly, equal to the Merrill Lynch 10+ year high
quality corporate bond rate as published in the Wall Street
Journal on the first business day following January 1.
3.2
Statement of Accounts. The Company shall provide to the
Executive, within one hundred twenty (120) days after each
Anniversary Date, a statement setting forth the Deferral Account
balance.
3.3
Accounting Device Only . The Deferral Account is
solely a device for measuring amounts to be paid under this
Agreement. The Deferral Account is not a trust fund of any kind.
The Executive is a general unsecured creditor of the Company for
the payment of benefits. The benefits represent the mere Company
promise to pay such benefits. The Executive's rights are not
subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment, or garnishment by the
Executive's creditors.
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Article 4
Lifetime Benefits
4.1
Normal Retirement Benefit . If the Executive's
Termination of Employment occurs after the Early Retirement Date
for reasons other than death or Disability, the Company shall pay
to the Executive the benefit in this Section 4.1.
4.1.1
Amount of Benefit . The
benefit under this Section 4.1 is the Deferral Account balance at
the Executive's Termination of Employment Date.
4.1.2 Payment of
Benefit . The Company shall pay the benefit to the Executive in
the manner elected by the Executive on the Form of Benefit
Election, attached as Exhibit II. The Company shall continue to
credit interest under Section 3.1.2 on the remaining account
balance, if applicable, during any installment period.
4.2
Early Termination Benefit. If the Executive's
Termination of Employment occurs before the Early Retirement Date
for reasons other than death and Disability, the Company shall pay
to the Executive the benefit in this Section 4.2.
4.2.1 Amount of
Benefit. The benefit under this Section 4.2 is the Deferral
Account balance at the Executive's Termination of Employment
Date.
4.2.2 Payment of
Benefit. The Company shall pay the benefit to the Executive in
a lump sum within 90 days after the Executive's Termination of
Employment.
4.3
Disability Benefit . If the Executive terminates
employment due to Disability prior to Normal Retirement Age, the
Company shall pay to the Executive the benefit described in this
Section 4.3 in lieu of any other benefit under this Agreement.
4.3.1 Amount of
Benefit . The benefit under this Section 4.3 is the Deferral
Account balance at the Executive's Termination of Employment.
4.3.2 Payment of
Benefit . The Company shall pay the benefit to the Executive in
the manner elected by the Executive on the Form of Benefit
Election, attached as Exhibit II. The Company shall continue to
credit interest under Section 3.1.2 on the remaining account
balance, if applicable, during any installment period.
4.4
Change of Control Benefit . Upon a Change of Control,
followed within twelve (12) months by the Executive's Termination
of Employment for reasons other than death, Disability or
retirement, the Company shall pay to the Executive the benefit
described in this Section 4.4 in lieu of any other benefit under
this Agreement.
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4.4.1 Amount of
Benefit . The benefit under this Section 4.4 shall be the
Deferral Account balance on the Executive's Termination of
Employment.
4.4.2 Payment of
Benefit . The Company shall pay the benefit to the Executive in
the manner elected by the Executive on the Form of Benefit
Election, attached as Exhibit II. The Company shall continue to
credit interest under Section 3.1.2 on the remaining account
balance, if applicable, during any installment period.
4.5
Hardship Distribution . Upon the Board of Director's
determination (following petition by the Executive) that the
Executive has suffered an unforeseeable financial emergency as
described in Section 2.2.2, the Company shall distribute to the
Executive all or a portion of the Deferral Account balance as
determined by the Company, but in no event shall the distribution
be greater than is necessary to relieve the financial hardship.
Article 5
Death Benefits
5.1
Death During Active Service . If the Executive dies
while in the active service of the Company, the Company shall pay
to the Executive's beneficiary the benefit described in this
Section 5.1 in lieu of any other benefit under this Agreement.
5.1.1 Amount of
Benefit . The benefit under Section 5.1 is the Deferral Account
balance at the date of the Executive's death.
5.1.2 Payment of
Benefit . The Company shall pay the benefit to the beneficiary
in the form of a lump sum amount payable within 90 days of the
death of the Executive.
5.1.3 Supplemental Death
Benefit. The Company shall pay to the beneficiary a
Supplemental Death Benefit. This Supplemental Death Benefit will be
the Estimated Deferral Account balance at the Executive's Normal
Retirement Age divided by 180, payable monthly for 180 months. The
Estimated Deferral Account balance will be calculated by taking the
Deferral Account balance on the date of death plus the average
monthly contribution made over the previous 12 months, projected at
the current plan interest rate (not to exceed 7%), to the
Executive's Normal Retirement Age. This amount will not exceed the
net death benefit paid to the bank under the Executive's bank owned
life insurance policy(s). This benefit will commence within 90 days
of the receipt of the death benefit by the bank.
5.2
Death During Benefit Period . If the Executive
dies after benefit payments have commenced under this Agreement but
before receiving all such payments, the Company shall pay the
remaining benefits to the Executive's beneficiary at the same time
and in the same amounts they would have been paid to the Executive
had the Executive survived.
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