Exhibit 10.2
ISABELLA BANK CORPORATION
AND RELATED COMPANIES
DEFERRED COMPENSATION PLAN
FOR DIRECTORS
July 1, 2008

 

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TABLE OF CONTENTS

         
Section 1. Purpose
    1  
Section 2. Definitions
    1  
Section 3. Enrollment/Establishment of Account
    4  
Section 4. Allocations to Account
    4  
Section 5. Vesting
    5  
Section 6. Commencement of Distribution
    5  
Section 7. Manner and Form of Distribution
    8  
Section 8. Payout/Suspensions for Unforeseeable Financial Emergency
    10  
Section 9. Death Benefit
    11  
Section 10. Unsecured Unfunded Plan
    12  
Section 11. Plan Amendment and Termination
    12  
Section 12. Expenses
    14  
Section 13. Nonassignability
    14  
Section 14. Director/Employee Status
    14  
Section 15. Administration
    15  
Section 16. Claims Procedure
    15  
Section 17. No Rights as a Shareholder
    17  
Section 18. Legality of Issuance
    17  
Section 19. Binding Effect
    18  
Section 20. Incompetency
    18  
Section 21. Construction
    18  

 

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ISABELLA BANK CORPORATION
AND RELATED COMPANIES
DEFERRED COMPENSATION PLAN
FOR DIRECTORS
     Isabella Bank Corporation (AIsabella@) has established a nonqualified plan
of deferred compensation benefits for participating Directors effective
January 1, 2006, pursuant to Section 409A of the Internal Revenue Code. The Plan
is intended to postpone taxation of such deferred compensation benefits until
those benefits are paid to the Directors as provided in the Plan. The Plan has
been restated and the provisions of the restated Plan shall be effective on and
after July 1, 2008, unless otherwise provided herein.
     Section 1. Purpose.
     The Plan is intended to provide participating Directors with the
opportunity to have the payment and the related taxation of compensation
postponed as set forth in the Plan, in order to reward the individuals who
contribute to the success of the Company.
     Section 2. Definitions.
     The following words and phrases shall, when used in this Plan, have the
following respective meanings unless their context clearly indicates otherwise:
     2.01 Administrator or Plan Administrator means Isabella which may, from
time to time in its sole discretion, appoint a person or persons to assist in
the administration of the Plan.
     2.02 Beneficiary means the person(s) or entity designated by Participant to
receive any undistributed deferred compensation benefits which become payable in
the event of Participant’s death.
     2.03 Board of Directors means Company’s governing body according to law and
Company’s governing documents.
     2.04 Change of Control means a sale which results in a change in the
ownership of Company, a change in the effective control of Company, or a change
in the ownership of a substantial portion of Company=s assets. The change shall
not be deemed a AChange of Control@ for purposes of this Plan unless the change
(whether made in a single transaction or in successive multiple transactions)
effectively transfers the controlling interest of the Company to an unrelated
third party(ies) (as defined under the attribution rules of Code Sections 318
and 414) and said change results in the unrelated third party(ies) owning more
than fifty percent (50%) of the fair market value or the total voting power of
the stock of the Company. In addition to the foregoing, the Change of Control
must satisfy the provisions of Q & A-11 through 14 of IRS Notice 2005-1 and IRS
Reg. 1.409A-3(i)(5) and subsequent guidance.
     2.05 Claimant means a Participant or a Beneficiary who files a claim for
benefits under Section 16 below.

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     2.06 Code means the Internal Revenue Code of 1986, as amended.
     2.07 Committee or Administrative Committee means the committee described in
Section 15.
     2.08 Company means Isabella Bank Corporation and Isabella Bank or their
respective successor or successors, and any other entity whose Board of
Directors authorizes participation in this Plan where Isabella by its Board of
Directors has approved such participation.
     2.09 Deferred Compensation Account means the bookkeeping account maintained
on behalf of Participant to record Company contributions made pursuant to
Section 4.01.
     2.10 Director means any elected or appointed member of the Board of
Directors of the Company, without regard to said member’s status as an employee
of the Company. This Section 2.10 shall be effective January 1, 2006.
     2.11 Disability means the Participant is unable to engage in any
substantial gainful activity by reason of any medically determinable or physical
or mental impairment which can be expected to result in death or can be expected
to last for a continuous period of not less than 12 months.
     2.12 Disability Retirement Date means the date of Participant=s separation
from service as a Director of the Company on account of Participant=s
Disability.
     2.13 Distribution Event means a distributable event as set forth in
Section 6 below.
     2.14 Effective Date means July 1, 2008, the date on which the provisions of
this restated Plan became effective.
     2.15 Final Valuation Date means the Valuation Date immediately following
the date of the Distribution Event.
     2.16 Normal Retirement Age means Participant=s attainment of age 70.
     2.17 Normal Retirement Date means the date Participant attains Normal
Retirement Age, without regard to Participant=s continued service as a Director
of the Company.
     2.18 Participant means any Director of the Company who (1) is receiving a
Director=s salary, retainer or board fees, and (2) has elected to participate in
the Plan by providing written notice of said participation to the Company, in
the form prescribed by the Company.
     2.19 Payment Date means the first day of the first month after the
Valuation Date that immediately follows the earliest Distribution Event;
provided, however, in the case of a

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distribution to a Participant who is a “key employee” (as defined in Code
Section 416(i) without regard to Code Section 416(i)(5)) on account of the
Participant’s Severance From Service, Payment Date means the first day of the
seventh month after the Valuation Date that immediately follows the Distribution
Event.
     2.20 Plan means the Isabella Bank Corporation and Related Companies
Deferred Compensation Plan for Directors, as amended from time to time.
     2.21 Plan Year means the consecutive 12-month period beginning on January 1
and ending on December 31.
     2.22 Retirement means with respect to a Participant, separation from
service with all participating Companies for any reason other than death or
Disability on or after the attainment of Normal Retirement Age.
     2.23 Severance From Service means the date on which the Participant has
severed from service with the Company and all participating Companies for any
reason other than Retirement, death or Disability. Whether a person has severed
from service with the Company for purposes of this Plan is based on whether the
facts and circumstances indicate that the Company and the Participant reasonably
anticipate that either: (i) the Participant will perform no further services
after the specified severance date; or (ii) the level of bona fide services that
the Participant would perform for the Company after the specified severance date
was permanently decreased to not more than 20% of the average level of bona fide
services performed over the consecutive 36-month period that immediately
precedes the specified severance date or, if the Participant has been providing
services to the Company for less than 36 months, then over the full period
during which the Participant provided services to the Company.
     2.24 Similar Arrangement means an agreement, method, program or other
arrangement sponsored by the Company with respect to which deferrals are treated
as having been deferred under a single plan under IRS Reg. 1.409A-1(c)(2).
     2.25 Stock Account means the bookkeeping account maintained on behalf of
Participant to record Company contributions made pursuant to Section 4.02.
     2.26 Unforeseeable Financial Emergency means an unforeseeable emergency
that is caused by an event beyond the control of the Participant that would
result in severe financial hardship to the Participant resulting from (i) a
sudden and unexpected illness or accident of the Participant, the Participant=s
spouse, or a dependent (as defined in Code Section 152(a)) of the Participant,
(ii) a loss of the Participant=s property due to casualty, or (iii) such other
similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant, all as determined in the sole
discretion of the Committee, in accordance with applicable law.
     2.27 Valuation Dates means March 1, June 1, September 1 and December 1.

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     Section 3. Enrollment/Establishment of Accounts.
     3.01 Enrollment. As a condition to participation, each Director who is
eligible to participate in the Plan effective as of the first day of a Plan Year
shall complete, execute and return to the Committee an election form and a
Beneficiary designation form, prior to the first day of such Plan Year, or such
other earlier deadline as may be established by the Committee in its sole
discretion. In addition, the Committee shall establish from time to time such
other enrollment requirements as it determines, in its sole discretion, are
necessary.
     3.02 Initial Participation. A Director who first becomes eligible to
participate in this Plan after the first day of a Plan Year may become a
Participant by submitting a completed enrollment form to the Committee within
thirty (30) days after the date the Director first becomes eligible to
participate in the Plan, or within such other earlier deadline as may be
established by the Committee, in its sole discretion, in order to participate
for that Plan Year. Such person=s participation in this Plan shall not commence
earlier than the date determined by the Committee pursuant to this Section 3.02
and such person shall not be permitted to defer under this Plan any portion of
his Director’s salary, retainer or fees that are paid with respect to services
performed prior to his participation commencement date, except to the extent
permissible under Code Section 409A and related Treasury guidance or
Regulations.
     3.03 Annual Enrollment. Each eligible Director who elects to participate in
the Plan after the initial participation date described in Section 3.02 above,
shall commence said participation on the January 1 as of which the Committee
determines, in its sole discretion, that the Director has met all enrollment
requirements set forth in Section 3.01 of this Plan, including returning all
required documents to the Committee within the specified time period.
Notwithstanding the foregoing, the Committee shall process the Participant=s
deferral election as soon as administratively practicable after such deferral
election is submitted to and accepted by the Committee.
     If a Director fails to meet all requirements contained in this Section 3
within the period required, the Director shall not be eligible to participate in
the Plan during the Plan Year for which the election is made.
     3.04 Accounts. Company agrees to create a Deferred Compensation Account and
a Stock Account as described in Section 4 below to be maintained on the books of
Company in the name of each Participant.
     Section 4. Allocations to Account.
     4.01 Participant Contributions. Each Participant may defer all or any
portion (subject to a minimum required deferral percentage of at least 25%) of
his Director=s salary, retainer and fees that are earned for the year from any
participating Company commencing after the date of said election as he may
specify in written notice to the Company. Such amounts so deferred shall be paid
only as provided in the Plan. Participant may change the amount of, or suspend,
future deferrals with respect to the Director=s salary, fees and retainers
earned for years

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commencing after the date of change or suspension as he may specify by written
notice to the Company; provided such change is made prior to January 1 of the
calendar year in which the amount to be deferred is earned.
     4.02 Contribution to Deferred Compensation and Stock Accounts. For each
Participant electing to participate in this Plan, the Company for which the
Participant has made a deferral election shall maintain a Deferred Compensation
Account and a Stock Account. Each Participant shall be furnished with a
quarterly statement of his Accounts.
          The deferred salary, retainers and fees of each Participant shall be
credited as a dollar amount to the Participant=s Deferred Compensation Account
on the date the amount would otherwise be paid to the Participant, and effective
on and after July 1, 2008, shall be converted into actual Isabella common stock
on each Valuation Date by (1) dividing the Deferred Compensation Account balance
of each Participant by the total amount credited to all Deferred Compensation
Accounts under the Plan as of the Valuation Date and then (2) multiplying this
amount by the total number of shares of Isabella common stock purchased under
the Plan as of said Valuation Date. The number of shares of stock for full
shares so determined shall be credited to each Participant=s Stock Account, and
the aggregate fair market value of the stock on said Valuation Date shall be
charged to the Participant=s Deferred Compensation Account. Any credit balance
remaining in the Participant=s Deferred Compensation Account after such charge
shall remain in the Deferred Compensation Account until the next Valuation Date
to be converted into additional shares of Isabella stock.
          Additional credits will be made to each Participant=s Deferred
Compensation Account in dollar amounts equal to the cash dividends (or the fair
market value of dividends paid in property) the Participant would have received
from time to time had he been the owner on the record dates with respect to the
stock, said credit to be based on the number of shares of Isabella common stock
credited to his Stock Account on said dates. In the case of a stock dividend or
stock split, additional credits will be made to each Participant=s Stock Account
based on the number of full shares of Isabella common stock the Participant
would have received had he been the owner on the record dates with respect to
the number of shares of Isabella common stock credited to his Stock Account on
said dates.
     Section 5. Vesting.
     Subject to satisfying the distribution events set forth in Section 6 below,
Participant’s interest in his Deferred Compensation Account and his Stock
Account shall be 100% vested and nonforfeitable at all times.
     Section 6. Commencement of Distribution.
     6.01 Distribution Dates. The manner and form in which distributions will be
made from the Plan shall be determined in accordance with Section 7 below. No
amount standing from time to time to the credit of the Participant in his
Deferred Compensation Account or his Stock Account shall be assignable or
alienable by Participant, nor may any such payment be used

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as collateral or in any other fashion by Participant prior to payment by the
Company. Subject to Section 6.03 below, no amount standing from time to time to
the credit of Participant in his Deferred Compensation Account or his Stock
Account shall be payable to Participant (or to Participant=s Beneficiary) until
the earliest of the following distribution dates:

  (a)   Participant’s Normal Retirement Date;     (b)   Participant’s Disability
Retirement Date;     (c)   Participant=s death;     (d)   an Unforeseeable
Financial Emergency;     (e)   a Change of Control; or     (f)   Participant=s
Severance From Service.

          6.02 Time of Distribution.

  (a)   When the amounts credited to Participant=s Deferred Compensation Account
and Stock Account become payable pursuant to Sections 6.01(a), (b), (c), (d) or
(f) above, distribution of such benefit shall begin on the Payment Date, or as
soon as administratively practicable thereafter, but in no event more than
30 days after the Payment Date.     (b)   When the amounts credited to a
Participant’s Deferred Compensation Account become payable pursuant to
Section 6.01(e) above, distribution of said benefit shall be made as set forth
below.

  (i)   Form of Payment. All payments shall consist of shares of Isabella common
stock and shall be paid in one lump sum.     (ii)   Time of Payment. All
payments shall be made not later than 75 days after the date on which the Change
of Control event has occurred.     (iii)   Special Rule for Plan Termination. If
the Plan is terminated during the 30-day period preceding the 12-month period
following the occurrence of a Change of Control Event, then Plan benefit
payments shall occur in accordance with Plan Section11(b).

  (c)   Notwithstanding the foregoing, Participant may elect a delayed
distribution date. The delayed distribution date may be a specific future date
or the attainment of a specified age by the Participant (not to exceed

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the Participant=s attainment of age 75), so long as the election of the delayed
distribution date:

  (i)   does not take effect for at least twelve (12) months after the date on
which the election is made;     (ii)   postpones the payment for a period of not
less than five (5) years from the date the payment would otherwise have been
made; and     (iii)   for a payment previously elected at a specified time or
pursuant to a fixed schedule, the election to delay is requested at least twelve
(12) months prior to the scheduled payment date in the most current election
form on file with the Committee.

     6.03 Accelerating the Time of Payment. Notwithstanding the distribution
dates set forth in Section 6.01 above, an early distribution of Isabella common
stock may be made as soon as administratively possible after the occurrence of
any of the following events in accordance with IRS Reg. 1.409A-3(j)(4) and
subsequent guidance:

  (a)   to fulfill the requirements of a domestic relations order;     (b)   as
necessary to comply with a certificate of divestiture as defined in Code
Section 1043(b)(2);     (c)   to make payment of certain employment and/or
income taxes;     (d)   a de minimis cashout amount not exceeding the amount set
forth in Code Section 402(g);     (e)   in accordance with an Unforeseeable
Financial Emergency as described in Section 8 below; or     (f)   certain Plan
terminations as described in Section 11 below.

In the case of an accelerated payment due to subsection 6.03(a) above, a payment
under the Plan may be made to an individual other than the Participant to the
extent necessary to fulfill the terms of a domestic relations order that is
issued by a court of competent jurisdiction. The Plan’s rules regarding changes
in the time and form of payment do not apply to changes in the time and form of
payment that are required by such a domestic relations order, so long as the
payment that is made pursuant to the domestic relations order will be made to
the alternate payee who is named in the domestic relations order and not to the
Participant. The Plan will make such a payment at the time and in the form
specified in the domestic relations order. If the domestic relations order
requires that the alternate payee be given an election as to the time and form
of payment, the Plan will follow such an alternate payee’s election of a time
and form of payment so long as the alternate payee makes said election in
accordance with the Plan’s rules and

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procedures relating to time and form of payment elections. The Plan may make
such a payment to someone other than a Participant pursuant to a domestic
relations order only with regard to deferrals resulting from Compensation paid
for services that were rendered after December 31, 2004, and investment gains
and losses thereon. The Participant to whom the domestic relations order relates
must pay to the Company whatever amount is charged by the Company for processing
the domestic relations order and making the payment to someone other than the
Participant. This payment to the Company cannot be deducted from the amount
credited to the Participant’s Plan Account.
     6.04 Delaying Payments Under Certain Circumstances. A payment may be
delayed in accordance with IRS Reg. 1.409A-2(b)(7) (and such other guidance
published after the Effective Date) under the following circumstances as
described in the Regulation:

  (a)   Payments subject to Code Section 162(m) where the Company reasonably
anticipates that its deduction with respect to such payment would be limited or
eliminated by the application of Code Section 162(m).     (b)   Payments that
would violate a loan covenant or similar contractual requirement of the Company,
where such violation would cause material harm to the Company and the Company
entered into the agreement or covenant for legitimate business reasons and not
to avoid restrictions under Code Section 409A;     (c)   Payments that would
violate Federal securities laws or other applicable laws; or     (d)   Such
other events and conditions as permitted by applicable law.

     Any missed or delayed payments shall be made to the Participant (or to his
Beneficiary) on the earliest date as of which the Company reasonably anticipates
that the payment will not cause the harm to be avoided by the application of
this Section 6.04.
     Section 7. Manner and Form of Distribution.
     7.01 Manner of Payment. Upon the occurrence of a Distribution Event, the
Participant shall receive a distribution of Isabella common stock as described
below.

  (a)   The entire balance in his Deferred Compensation Account maintained with
a participating Company, if any, remaining after the Final Valuation Date shall
be converted to the extent possible into stock as set forth in Section 4.02
above and credited to the Participant=s Stock Account. The aggregate value
thereof shall then be charged to the Participant=s Deferred Compensation
Account. In the event a credit balance remains in the Participant=s Deferred
Compensation Account after such charge, an additional amount shall be credited,
as a Company contribution, to the

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      Participant=s Deferred Compensation Account, such additional contribution
to equal the amount that, when added to the remaining credit balance prior to
the contribution, is sufficient to convert the balance of the Deferred
Compensation Account into a single share of stock as set forth in this
Section 7.01(a). Said single share of stock shall then be credited to the
Participant=s Stock Account and charged to the Participant=s Deferred
Compensation Account as set forth in this Section 7.01(a). The Valuation Date
for purposes of all conversions made under this Section 7.01(a) shall be the
Participant=s Final Valuation Date.     (b)   Distribution of the balance in the
Participant=s Stock Account maintained with the participating Company as of the
date of the Distribution Event, shall be made in shares of Isabella common
stock.     (c)   Notwithstanding any provision of the Plan to the contrary, no
cash distribution shall be made either directly or indirectly from the Plan
including, but not limited to, the Participant receiving cash from the Company
by exercising a Aput option@ right, if any. Consequently, pursuant to the Plan
there shall exist no liquidation feature of any kind on the part of any
participating Company. Therefore, Participants shall have no mechanism other
than the marketplace to ultimately sell their respective shares of Isabella
common stock to obtain cash. A participating Company is under no obligation to,
has no intention to, and shall not repurchase the Isabella shares earned under
the Plan.

     7.02 Form of Distribution. Participant=s benefit payable from the Plan
shall be distributed in common stock of Isabella in a single lump sum, unless
(1) the Participant elects, on his initial election form, to receive his benefit
in installments, or (2) the Participant changes his election of the form of
distribution from a lump sum to installment payments of said stock, by
submitting an amended election form to the Committee in accordance with the
procedures set forth in Section 6.02 above; provided, however, payments of stock
made pursuant to Section 6.01(e) shall be made in a single lump sum.
     Installment payments made under this Section 7.02 shall be equal annual
installments payable over a period of ten (10), fifteen (15) or twenty
(20) years, said installment payments to be treated as a single payment pursuant
to IRS Reg. 1.409A-2(b)(2)(iii) and future guidance; provided, however, pursuant
to IRS Reg. 1.409A-2(j)(1) and any other applicable law, if Participant dies
before all installment payments have been made, all remaining payments shall be
aggregated and distributed to Participant’s Beneficiary in a single payment of
Isabella in common stock as set forth in Section 9.01 below. The installment
payments to which the Participant would have been entitled during the first six
(6) months following the date of his Severance From Service shall be aggregated
and paid as of the first day of the seventh month following the date of his
Severance From Service. The six (6) month postponement that is imposed by this
Section 7.02 shall not apply to (1) a payment due pursuant to a domestic
relations order; (2) a payment that is necessary to comply with a certificate of
divestiture as defined in Code Section

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1043(b)(2); or (3) a payment of employment taxes that is described in IRS Reg.
1.409A-3(h)(2)(v).
     Notwithstanding the foregoing, the Committee shall interpret all provisions
relating to changing the form of benefit payment under this Section 7.02 in a
manner that is consistent with Code Section 409A and other applicable tax law,
including but not limited to Treasury guidance or Regulations issued after the
Effective Date.
     Section 8. Payout/Suspensions for Unforeseeable Financial Emergency.

  (a)   If the Participant experiences an Unforeseeable Financial Emergency, the
Participant may petition the Committee to suspend deferrals to the extent deemed
necessary by the Committee to satisfy the Unforeseeable Financial Emergency. If
suspension of deferrals is not sufficient to satisfy the Participant=s
Unforeseeable Financial Emergency, or if suspension of deferrals is not required
under Code Section 409A and other applicable tax law, the Participant may
further petition the Committee to receive a partial or full payout from the
Plan. The Participant shall receive a payout from the Plan only to the extent
such payout is deemed necessary by the Committee to satisfy the Participant=s
Unforeseeable Financial Emergency, plus amounts necessary to pay taxes
reasonably anticipated as a result of the distribution.         Deferrals made
under the Plan may also be suspended if the Participant is required under IRS
Regulation 1.401(k) — 1(d)(3) to cancel all deferral elections to be eligible to
receive a hardship distribution under an arrangement subject to Code
Section 401(k).         Any subsequent election to resume deferral elections
under the Plan after the termination of a deferral election due to an
Unforeseeable Emergency shall not be effective until January 1 of the Plan Year
following the date of said election, provided the Participant reenrolls in the
Plan in accordance with Section 3.02 above.     (b)   The payout for an
Unforeseeable Financial Emergency shall not exceed the lesser of (i) the vested
balance in the Participant=s Accounts, calculated as of the close of business on
or about the date on which the amount becomes payable, as determined by the
Committee in its sole discretion, or (ii) the amount necessary to satisfy the
Unforeseeable Financial Emergency, plus amounts necessary to pay taxes
reasonably anticipated as a result of the distribution. Notwithstanding the
foregoing, a Participant may not receive a payout from the Plan to the extent
that the Unforeseeable Financial Emergency is or may be relieved (i) through
reimbursement or compensation by insurance or otherwise, (ii) by liquidation of
the Participant=s assets, to the extent the liquidation of such

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      assets would not itself cause severe financial hardship or (iii) by
suspension of deferrals under this Plan, if the Committee, in its sole
discretion, determines that suspension is required by Code Section 409A and
other applicable tax law.     (c)   If the Committee, in its sole discretion,
approves a Participant=s petition for suspension, the Participant=s deferrals
under this Plan shall be suspended as of the date of such approval. If the
Committee, in its sole discretion, approves a Participant=s petition for
suspension and payout, the Participant=s deferrals under this Plan shall be
suspended as of the date of such approval and the Participant shall receive a
distribution from the Plan in a single payment of Isabella common stock within
sixty (60) days of the date of such approval.     (d)   Notwithstanding the
foregoing, the Committee shall interpret all provisions relating to suspension
and/or payout under this Section 8 in a manner that is consistent with Code
Section 409A and other applicable tax law, including but not limited to Treasury
guidance and Regulations issued after the Effective Date.

     Section 9. Death Benefit.
     9.01 Beneficiary Designation. Participant may designate a Beneficiary to
receive any benefit payable to Participant from this Plan in the event of
Participant’s death prior to the complete distribution of benefits payable under
the Plan. The benefit (or if applicable, the remaining benefit) shall be
aggregated and distributed in a single payment of Isabella common stock.
     9.02 Payment of Death Benefit. The death benefit payable under the Plan
shall be paid in accordance with the rules described in Section 9.02(a) through
(e) below.

  (a)   The designation of a Beneficiary shall be effective when made on a form
supplied by the Committee, signed by Participant and actually received and
approved in writing by the Committee.     (b)   No Beneficiary shall have any
rights under this Plan until the death of Participant. Participant may revoke a
Beneficiary designation at any time prior to Participant’s demise and designate
an alternative death benefit Beneficiary. Participant may designate primary and
contingent Beneficiaries. A contingent Beneficiary designation will become
effective only after the death of any and all primary Beneficiaries.     (c)  
If more than one Beneficiary is named in either category (primary or
contingent), benefits will be paid according to the following rules:

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  (i)   Beneficiaries may be designated to share equally or to receive specific
percentages of the amount distributed; and     (ii)   If a Beneficiary dies
before Participant dies, only surviving Beneficiaries will be eligible to
receive any benefits in the event of the death of the Participant. If more than
two Beneficiaries are originally named to receive different percentages of the
benefit, surviving Beneficiaries will share in the same proportion to each other
as indicated in the original designation.

  (d)   A person, trust, estate or any other legal entity may be designated as a
Beneficiary.     (e)   If a Beneficiary has not been designated, or if a
Beneficiary designation is ineffective for any reason, Participant’s estate
shall be the Beneficiary.

     Section 10. Unsecured Unfunded Plan.
     Participant=s Deferred Compensation Account and Stock Account shall be
bookkeeping accounts only, and Company shall not be required in any way to fund
the Accounts. Company shall have no obligation to set aside, earmark, or entrust
any fund, policy or money with which to pay its obligation under this Plan.
Participant, or any successor in interest, shall be and remain a general
creditor of Company with respect to amounts deferred under this Plan in the same
manner as any other unsecured creditor who has a general claim for an unpaid
liability. Company shall be the sole owner and beneficiary of any assets
acquired for its general account under this Plan. Company shall not make any
loans or extend credit to Participant, or any successor in interest, which shall
be offset by benefits payable under this Plan.
     Notwithstanding the foregoing, Isabella may enter into a trust agreement
(“Trust Agreement”), whereby Isabella may agree to contribute to a trust
(“Trust”) sums for the purpose of accumulating assets to fund benefit payments
to Participants under the Plan. Isabella may contribute amounts to the Trust
from time to time as determined by Isabella’s Board of Directors. Such Trust
Agreement shall be substantially in the form of the model trust agreement set
forth in Revenue Procedure 92-64, or any subsequent Internal Revenue Service
Revenue Procedure, and shall include provisions required in such model trust
agreement that all assets of the Trust shall be subject to the creditors of
Company in the event of insolvency.
     Section 11. Plan Amendment and Termination.
     Isabella may amend or terminate the Plan by action of its Board of
Directors at any time in its sole discretion without the consent of Participant
or his Beneficiary. No amendment or termination shall adversely affect the
benefit to which Participant or his Beneficiary is entitled under the Plan prior
to the date of such amendment or termination. In the event of Plan termination,
all amounts credited to Participant’s Deferred Compensation Account and Stock

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Account shall be paid after said Plan termination to Participant or his
Beneficiary at the time and in the form set forth in Sections 6 and 7 above.
     In the event of Plan termination, all amounts credited to Plan Accounts
shall be retained by the Company and paid pursuant to Participant elections that
have been made in accordance with the Plan. Notwithstanding the foregoing, Plan
Accounts shall be paid to Plan Participants on Plan termination if, and only if,
at least one of the three circumstances described in (a), (b) and (c) below is
true as to the Plan.

  (a)   General Rule. Payment of all benefits shall occur on Plan termination if
the Company meets all of the requirements listed in (1), (2), (3) and (4) below.

  (1)   The Company and all participating Companies terminate and liquidate all
Similar Arrangements with regard to which the Participant made deferrals if said
Arrangements would be combined with the Plan under the plan aggregation rules of
IRS Reg. 1.409A-1(c)(2). All such terminations shall be effective as of the
effective date of the termination of this Plan. All liquidations under this Plan
shall be distributed in one lump sum of Isabella common stock.     (2)   No
payments in liquidation of the Plan (other than those otherwise payable under
the terms of the Plan and all Similar Arrangements maintained by the Company and
all participating Companies absent termination of the Plan and the Arrangements)
are made within 12 months following the termination of the Plan and the Similar
Arrangements, and all payments on liquidation of the Plan are completed within
24 months after the termination of the Plan and those Similar Arrangements.    
(3)   The Company and all participating Companies do not adopt any new plan or
arrangement that would be combined with the Plan under the plan aggregation
rules of IRS Reg.1.409A-1(c)(2) for a period of three years following the date
of Plan termination, if the same individual participated in both the Plan and
the new arrangement at any time during said three-year period.     (4)   The
termination and liquidation does not occur proximate to a downturn in the
financial health of the Company or any of the participating Companies.

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  (b)   Change of Control Rule. If the Plan is terminated during the 30-day
period preceding or the 12-month period following a Change of Control event,
then (i) all Isabella common stock credited to the Participant’s Stock Account
shall be distributed to Participant within this period in one lump sum, and
(ii) the Company shall, within the period, also terminate all Similar
Arrangements and pay in one lump sum all amounts credited to all accounts under
all such Arrangements within said period. A Change of Control event shall have
occurred for purposes of this Section 11(b), only if it has occurred as defined
in Code Section 409A(a)(2)(v) and the related regulations.     (c)   Dissolution
or Bankruptcy. The Plan may be terminated upon a dissolution of the Company that
is taxed under Code Section 331, or with the approval of a bankruptcy court
pursuant to 11 USC Section 503(b)(1)(A), provided that in either case the
amounts deferred under the Plan are included in each of the respective
Participant’s gross income by the latest of (1) the calendar year in which the
Plan termination occurs, (2) the calendar year in which the amount is no longer
subject to a substantial risk of forfeiture, or (3) the first calendar year in
which the payment is administratively practicable.

     Section 12. Expenses.
     Company shall pay all costs, charges and expenses relating to the
establishment and operation of the Plan.
     Section 13. Nonassignability.
     Except as provided in Section 6.03 above, the benefits payable under the
Plan and the right to receive future benefits under the Plan may not be
anticipated, alienated, pledged, encumbered or subject to any charge or legal
process, and if any attempt is made to do so, or if a person eligible for any
benefits becomes bankrupt, the interests under the Plan of the person affected
may be terminated by the Administrator which, in its sole discretion, may cause
the same to be held or applied for the benefit of one or more dependents of such
person or make any other disposition of such benefits that it deems appropriate.
     Section 14. Director/Employee Status.
     The Plan does not, and will not, give any Participant the right to continue
as a Director or employee of a Company, nor will the Plan confer any right to
any benefit under the Plan unless such right has specifically accrued under the
terms of the Plan.

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     Section 15. Administration.
     The Boards of Directors of the participating Companies shall appoint an
impartial Administrative Committee consisting of individuals who are not
participants in the Plan. The Administrative Committee shall have the sole and
exclusive discretionary authority to construe and interpret the terms and
provisions of this Plan, make factual determinations and decide all questions of
eligibility and the amount and time of any benefit payment. Such interpretations
shall be final and binding on all persons. No member of the Administrative
Committee shall, in any event, be liable to any person for any action taken or
omitted in connection with the interpretation, construction or administration of
this Plan, so long as such action or omission to act be made in good faith. In
no event, however, shall the provisions of Section 10 or any other provisions in
this Plan prevent the Participant from seeking legal recourse for any claim he
may have under this Plan.
     Benefits under the Plan shall be paid only if the Committee decides in its
sole discretion that the Claimant is entitled to them. The Committee shall have
the authority to adopt, alter and repeal such administrative rules, guidelines
and practices governing this Plan as it shall, from time to time, deem
advisable. It may delegate such ministerial functions as necessary for the
operation of the Plan to its agents, including, but not limited to:

  (a)   maintenance of rules determining eligibility for participation and
benefits;     (b)   maintenance of records and bookkeeping, including but not
limited to the amount payable by each participating Company to its respective
Participants;     (c)   calculation and payment of benefits;     (d)   making
recommendations to the Administrator with respect to Plan administration; and  
  (e)   establishing and carrying out a funding policy and method consistent
with the objectives of the Plan.

     The Committee=s interpretations and determinations shall be final and
binding on all persons and parties concerned. The Committee may make such
provision to withhold any taxes which it is required to withhold from any
applicable benefit payment. Participant, however, shall be responsible for the
payment of all individual tax liabilities relating to any such payment.
     Section 16. Claims Procedure.
     16.01 Presentation of Claim. Any Claimant may deliver to the Committee a
written claim for a determination with respect to the amounts distributable to
such Claimant from the Plan. If such a claim relates to the contents of a notice
received by the Claimant, the claim must be made within sixty (60) days after
such notice was received by the Claimant. All other claims

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must be made within 180 days of the date on which the event that caused the
claim to arise occurred. The claim must state with particularity the
determination desired by the Claimant.
     16.02 Notification of Decision. The Committee shall consider a Claimant=s
claim within a reasonable time, but no later than ninety (90) days after
receiving the claim. If the Committee determines that special circumstances
require an extension of time for processing the claim, written notice of the
extension shall be furnished to the Claimant prior to the termination of the
initial ninety (90) day period. In no event shall such extension exceed a period
of ninety (90) days from the end of the initial period. The extension notice
shall indicate the special circumstances requiring an extension of time and the
date by which the Committee expects to render the benefit determination. The
Committee shall notify the Claimant in writing:

  (a)   that the Claimant=s requested determination has been made, and that the
claim has been allowed in full; or     (b)   that the Committee has reached a
conclusion contrary, in whole or in part, to the Claimant=s requested
determination, and such notice must set forth in a manner calculated to be
understood by the Claimant:

  (i)   the specific reason(s) for the denial of the claim, or any part of it;  
  (ii)   specific reference(s) to pertinent provisions of the Plan upon which
such denial was based;     (iii)   a description of any additional material or
information necessary for the Claimant to perfect the claim, and an explanation
of why such material or information is necessary;     (iv)   an explanation of
the claim review procedure set forth in Section 16.03 below; and     (v)   a
statement of the Claimant=s right to bring a civil action following an adverse
benefit determination on review.

     16.03 Review of a Denied Claim. On or before sixty (60) days after
receiving a notice from the Committee that a claim has been denied, in whole or
in part, a Claimant (or the Claimant=s duly authorized representative) may file
with the Committee a written request for a review of the denial of the claim.
The Claimant (or the Claimant=s duly authorized representative):

  (a)   may, upon request and free of charge, have reasonable access to, and
copies of, all documents, records and other information relevant to the claim
for benefits;     (b)   may submit written comments or other documents; and/or

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  (c)   may request a hearing, which the Committee, in its sole discretion, may
grant.

     16.04 Decision on Review. The Committee shall render its decision on review
promptly, and no later than sixty (60) days after the Committee receives the
Claimant=s written request for a review of the denial of the claim. If the
Committee determines that special circumstances require an extension of time for
processing the claim, written notice of the extension shall be furnished to the
Claimant prior to the termination of the initial sixty (60) day period. In no
event shall such extension exceed a period of sixty (60) days from the end of
the initial period. The extension notice shall indicate the special
circumstances requiring an extension of time and the date by which the Committee
expects to render the benefit determination. In rendering its decision, the
Committee shall take into account all comments, documents, records and other
information submitted by the Claimant relating to the claim, without regard to
whether such information was submitted or considered in the initial benefit
determination. The decision must be written in a manner calculated to be
understood by the Claimant, and it must contain:

  (a)   specific reasons for the decision;     (b)   specific reference(s) to
the pertinent Plan provisions upon which the decision was based;     (c)   a
statement that the Claimant is entitled to receive, upon request and free of
charge, reasonable access to and copies of, all documents, records and other
information relevant to the Claimant=s claim for benefits; and     (d)   a
statement of the Claimant=s right to bring a civil action.

     16.05 Legal Action. A Claimant=s compliance with the foregoing provisions
of this Section 16 is a mandatory prerequisite to a Claimant=s right to commence
any legal action with respect to any claim for benefits under this Plan.
     Section 17. No Rights as a Shareholder.
     No Participant shall have any voting or other rights or privileges of a
shareholder of Isabella common stock by reason of crediting shares of stock to
the Participant=s Stock Account.
     Section 18. Legality of Issuance.
     No shares of Isabella common stock shall be issued under this Plan unless
and until Isabella has determined that all applicable provisions of state and
federal law have been satisfied.

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     Section 19. Binding Effect.
     This Plan shall be binding upon and inure to the benefit of the parties to
the Plan and upon the successors and assigns of each participating Company, and
upon the heirs and legal representatives of the Participant.
     Section 20. Incompetency.
     If Company shall find that any person to whom any payment is payable under
this Plan is unable to care for his affairs because of illness or accident, or
is a minor, any payment due (unless a prior claim therefore shall have been made
by a duly appointed guardian, a committee or other legal representative) may be
paid to the spouse, a child, a parent, a brother or sister, or a custodian
determined pursuant to the Uniform Gift to Minors Act, or to any person deemed
by the Company to have incurred expense for such person otherwise entitled to
payment as the Company may determine. Any such payment shall be a complete
discharge of the liabilities of the Company under this Plan.
     Section 21. Construction.
     This Plan shall be construed under the laws of the State of Michigan and
Code Section 409A and the Treasury guidance and Regulations promulgated
thereunder. The invalidity or unenforceability of any one or more provision of
the Plan shall not affect the validity or enforceability of the Plan, which
shall remain in full force and effect to the extent permitted by law. If any
provisions of this Plan shall be held illegal or invalid for any reason, said
legality or invalidity shall not affect the remaining parts of this Plan, and
this Plan shall be construed and enforced as if said illegal and invalid
provision had not been included in the Plan.

                                      ISABELLA BANK CORPORATION
 
                   
Dated:
    , 2008         By:    
 
                   
 
                  Dennis P. Angner, President/CEO

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