[k33932k3393201.gif]

2008 Management Incentive Plan (MIP) Effective January 1, 2008

 

--------------------------------------------------------------------------------

 

[k33932k3393202.gif]

Compensation Philosophy The corporation recognizes that an equitable
compensation philosophy helps to attract, motivate, and retain the most critical
resource — employees. Our compensation programs are based on a commitment to
equitable pay for all positions using the factors of market value, internal
comparisons and results achieved. Performance is the most important component in
advancement decisions and is measured by the execution of set goals through
accepted behaviors which lead to the achievement of the corporate Vision.
Managers work within set guidelines to determine increases and incentive awards,
carefully considering performance when allocating available funds. The corporate
compensation programs, merit increases and incentive bonuses are determined
without regard to race, color, religion, gender, sexual orientation, national
origin, citizenship, age, disability or status as a disabled veteran, other
veteran, recently separated veteran, or Vietnam-era veteran. Corporate Vision
The corporate Vision directs the strategies that are used to design compensation
plans. .. We must earn the right to be an independent bank by increasing
shareholder value . We will achieve this goal by growing profitability and more
quickly than our market competitors .. We will deliver extraordinary value to
our clients . We will have a solutions based sales and sales management process
while being committed to internal and external service excellence .. We will
attract, retain and develop the very best people in our markets . We will hold
our people accountable and reward them for both individual and team behaviors
and results .. We will share information and communicate honestly and openly
with each other across all areas of our company . We will be a learning
organization with a collaborative, boundaryless environment .. We will
continuously improve our company while operating effectively, cost efficiently
and prudently managing our risks .. We will be the leading bank in the Midwest
Incentive Compensation Committee An incentive compensation design committee —
comprised of representatives Executive Management, HR Corporate Compensation
Committee, Human Resources and the Financial Management Group — developed the
incentive plan. They defined component categories, established goals, created
payout formulas and developed reporting and tracking systems. The incentive
compensation committee is accountable for interpretation of the performance plan
and resolves any discrepancies or exceptions.

 

--------------------------------------------------------------------------------

 

[k33932k3393203.gif]

Ethics & Professional Standards Eligibility for payment under this program is
conditioned on demonstrating the highest level of professionalism and ethics,
while adhering to the Citizens Republic Bancorp Code of Conduct and other
performance standards. Records It is understood that all incentives are
considered earned income and are subject to all federal, state and local tax
laws and any voluntary payroll deductions such as 401(k) contributions. All
appropriate records necessary for tax purposes will be maintained by the Human
Resource Payroll department. Incentives payable but not received under this
program will still be awarded in the event of the death of a participant.
Participants of record with incentive payable but not received, whose
beneficiary is unable to be located within one year of a distribution will
forfeit their distribution to the Bank. General Provisions & Eligibility
Requirements Eligible participants include Senior Vice Presidents and above and
certain other officers based upon corporate responsibilities who are not
participants in another established incentive plan with payment amounts
determined by performance in relation to goal. Staff members become eligible to
participate in the plan by virtue of promotion or new hire.         . Awards
will be pro-rated based on months served for participants with less than
12 months of service in a plan year. Some new hire participant awards may be
guaranteed based on offer letter. To be eligible for incentive payment,
participants must meet the following requirements: . Be actively employed at the
time of the incentive payment .. A participant who terminates employment prior
to the plan year end is not eligible to receive an award. . Not be on corrective
action (written or termination warning) at the end of the plan year nor at the
time of payment .. Results and payouts will not be prorated . Be performing at a
minimum performance level of “Productive” The discretion of management, CEO and
the incentive compensation committee is the final factor in the determination of
eligibility and for final determination of payment award. Special Rules . The
Plan is effective beginning January 1, 2008 and is subject to change at any time
prior to the actual payment, per the Bank’s sole and absolute discretion. . The
Plan is not intended to be a contract, and no participant shall have any
contractual right to payment or employment for a particular term under the Plan.
. The Plan will be administered in accordance with Citizens EEO/Affirmative
Action Policy. . The Management Incentive Plan is administered by the
Compensation and Human Resources Committee of the Corporation.

 

--------------------------------------------------------------------------------

 

[k33932k3393204.gif]

.. The Administrator has complete authority to interpret Plan provisions, revise
the Plan and make all of the determinations they deem appropriate for fair
administration of the Plan. o The Administrator reserves the right to terminate
this Plan or to revise any aspect of this Plan at any time, including individual
payouts, without prior notification to participants. o Any exceptions to the
Plan must be approved by the Plan Administrator. . While all attempts will be
made to follow the incentive formulas and metrics, subjective adjustments
occasionally can and will be made both upwards and downwards based on management
discretion which will require CEO approval. .. Adjustments will be considered
based on value of an individual’s contribution to performance during the year
and not based on comparison to prior year awards, comparison to peer’s incentive
levels, attitude, effort, etc. .. Subjective adjustments will be the exception
and not the rule. Management will however reserve the right to make these
subjective adjustments if necessary to be equally fair to shareholders and plan
participants. . The incentive award for the Chairman, President and CEO will be
determined by the Compensation and Human Resources Committee. . A special award
fund (Discretionary) equal to 15% of the aggregate incentive award will be
available for individual awards as determined by the President and CEO. Awards
from this fund are made to staff members who are not participants in the
Management Incentive Plan. .. Awards for the Discretionary Fund will be made
only in recognition of exemplary achievements. .. Distribution of all available
amounts in this fund is not mandatory. (see discretionary award guidelines) .
This Plan supersedes in their entirety any previous compensation plan(s),
letters, or arrangements with respect to any and all compensation or incentive
pay plans. All other agreements are void and have no further effect. . This
document and is contents are confidential and proprietary to Citizens Bank and
shall remain the property of Citizens Bank. .. Neither this document nor its
contents may be discussed, disclosed, or revealed to anyone outside the Company.
The participant is responsible for maintaining the security of this document. .
A participant is responsible for immediately communicating any incentive
underpayments or overpayments to the Human Resources Compensation team.
        .. Failure to communicate any errors on a timely basis may result in
corrective action up to and including termination.

 

--------------------------------------------------------------------------------

 

[k33932k3393205.gif]

Plan Objectives The objectives of the plan are to: . Ensure achievement of
strategic goals and align with the financial goals of the bank: .. Profitable
revenue growth, Deposit growth, Efficient use of capital, NIE management, Credit
Quality . Be a “win-win” program for our company, shareholders and participants.
. Strengthen links between pay and performance. . Allow for changes and/or
modifications which support our corporate and line of business strategies.
Targeted Incentive Pool Determination Base Salary x Participation Rate x Service
Factor = Targeted Incentive Pool The participant’s Base Salary at plan year end
is used in the calculation. Participation Rates are determined at start of plan
year and approved by the Human Resources Compensation Committee. Participation
Rates are stated as % of base salary and are based on job function and value to
the corporation. The participation rate for individual positions is benchmarked
from market data research provided by various surveys and consultants. The
Service Factor is equal to the number of months the participant is employed with
the corporation (or holds an eligible position) during the plan year divided by
12 and stated as a percentage. Example: 100% is equal to 12 months, 50% is equal
to 6 months. Level Participation Determination

 

--------------------------------------------------------------------------------

 

[k33932k3393206.gif]

Corporate Level Incentive Components The Management Incentive Plan Corporate
components consist of Primary and Secondary Factors: . Primary Factors: Total
Revenue, Net Income after Taxes, Total Deposits, Non Performing Assets, Expense
Management. .. All components are independent .. The results of each Corporate
Level component will be placed against the payout tier structure at the end of
the plan year to determine the weighted average payout for Corporate Level
performance. (See payout tier structure at end of document) . Secondary Factors:
A Revenue and Net Income Peer Ranking vs. Peer Group factor may be utilized to
determine the FINAL weighted average factor for the Corporate Component portion
of the payout.

 

--------------------------------------------------------------------------------

 

[k33932k3393207.gif]

Line of Business & Individual Level Incentive Goal Setting & Results Each
manager is accountable for establishing goals and providing year end results for
their participating staff: . Management will be provided an automated goal
planning and scoring template for each participant. . They will make the
determination, with input from the participant, on the type of goals
(quantifiable vs. qualitative) to be assigned based on the level of
participation (line of business results vs. individual results) of the
participant. Each level of participation allows for both goal types. . Goal
setting should provide the measure, the goal/desired outcome and an assigned
weighting for each goal so that the total of all weightings in the assigned
participation levels equals 100%. . At plan year end, managers will be asked to
provide results and actual outcomes for all goals, to score each participant on
the core corporate competencies and to provide payout percentages based on
defined payout ranges. Automated goal planning and scoring templates will be
provided for each participant. Quantifiable Goals: . Includes items such as
growth, financial measures, service levels, etc... — Items typically numerical
in nature and measurable. . Goals should be set at levels that are challenging
to reach at 100%. . The results for each measurable goal will be placed against
a corporate payout tier structure at the end of the plan year to determine a
weighted average result. Qualitative Goals: . Goals that are not quantifiable,
but are measurable on the 1-4 rating scale. . Includes items such as audits,
surveys, specific special projects/initiatives, solutions/strategies,
implementations, etc... — Non-numerical. . Goals should be set at levels that
are challenging to reach. . The results for each goal/initiative will be placed
against a corporate payout tier structure on a 1-4 rating scale at the end of
the plan year to determine a weighted average Individual result. Individual
Level Performance Modifier: All participants will be rated on the Core Corporate
Competencies to establish a performance multiplier: . Performance for the full
plan year should be considered when rating each participant. . A performance
modifier of 0% to 150% will be assigned based on an overall average rating for
the participant. . A performance modifier with results exceeding 100% (average
rating of 3.00 or higher) should be reserved for truly extraordinary
performance. See a SAMPLE of the Line of Business & Individual Level Goal
Planning & Scoring Template beginning on page 9.

 

--------------------------------------------------------------------------------

 

[k33932k3393208.gif]

MIP Incentive Calculation (Targeted Incentive Pool x Weighted Avg. Corporate
Result) + (Targeted Incentive Pool x Weighted Avg. Line of Business Result) +
(Targeted Incentive Pool x Weighted Avg. Individual Result) x Performance Factor
= Calculated MIP Incentive $        Earned Award Payments All awards earned
under the Management Incentive Plan will be paid as soon as practical following
approvals by the Compensation and Human Resources Committee in February
following the plan year end. Discretionary Award Guidelines . Objectives: To
recognize and promote exemplary individual performance or initiative. . Eligible
Participants: All staff members are eligible except staff members who are in
established incentive plans with payment amounts determined by performance in
relation to established goals. . Nomination Process: Managers nominate staff
member(s) according to established guidelines. They must obtain concurrence and
approval from their Leadership Team member. . Monetary Guidelines: Range of $500
to $3000. Larger amounts can be given in exceptional circumstances. .
Guidelines: Discretionary awards can be given in recognition for one or more of
the following performance criteria: Earnings: • Expense reduction • Revenue
enhancement Innovation: · Continuous improvement efforts • Innovative delivery
alternatives • Foresight and planning to prevent crises Achievement: •
Unique/specialized skills or knowledge of value to the company, i.e., Key
Performers • Sustained high performance • Exemplary performance during unusual
circumstances or specific events • Special projects completed in an exceptional
manner, with value added • Extraordinary client service

 

--------------------------------------------------------------------------------

 

[k33932k3393209.gif]

SAMPLE — Line of Business & Individual Level Goal Planning & Scoring Template

 

--------------------------------------------------------------------------------

 

[k33932k3393210.gif]

INDIVIDUAL LEVEL OVERALL

 

--------------------------------------------------------------------------------

 

[k33932k3393211.gif]

1-4 Rating Guideline (Applied separately against each qualitative goal) Both
rating definitions/guidelines and performance must be taken into consideration
when assigning a final rating: Example: . A (4) “Role Model” rating translates
to meeting the performance requirement stated for a (4) AND performing within
the guidelines for a (4) rating. (ie. Actively shares best practices, Helps team
exceed goals, etc...). . If both performance AND rating guidelines are not met,
the rating should be lowered until the results meet the required level of
standard. Component Rating — 1 — Needs Improvement Definition: Did not achieve
goals set; does not demonstrate competency expectations at this level.
Performance improvement is priority. • Does not meet minimum stated goal set •
Does not learn from repeated mistakes • Requires significant guidance from
supervisor to complete related task or demonstrate competency • Few if any
examples in event file demonstrating the competency • No appropriate strength
competency comment • Many examples in event file of not demonstrating competency
• Requires significant guidance from supervisor to demonstrate competency
Component Rating — 2 — Productive Definition: Meets goals set within minimum to
exceeds standard range; a solid performer with some guidance, demonstrates
potential to develop full competency and willingness to become skilled at all
elements of performance. • Meets goals within minimum to exceeds standard •
Demonstrates understanding of process • Learns from mistakes • Requires some
guidance from supervisor to complete related tasks • Some examples in event file
demonstrating the competency • Several specific examples of strengths
demonstrating competency • Requires some guidance from supervisor to demonstrate
competency • Assists others to achieve competency when asked Component Rating —
3 — Accomplished Definition: Exceeds goals while demonstrating strong values and
competencies; demonstrates full knowledge of competency and independently
applies it. Expresses positive attitude and demonstrates willingness to expand
role. · Meets goals at or above exceeds standard • Has very few mistakes and
demonstrates ability to learn from those mistakes • Works without assistance to
achieve goal

 

--------------------------------------------------------------------------------

 

[k33932k3393212.gif]

· Demonstrates best practice process to achieve goal • Has shared best practices
• Many examples in event file demonstrating the competency • Many specific
examples of strengths demonstrating competency • Seldom requires guidance from
supervisor to demonstrate competency • Regularly shares best practices and
assists others within team to achieve this competency Component Rating — 4 —
Role Model Definition: Exceptional performance in every measurable aspect;
innovative, insightful and perceptive. Inspires others through extraordinary
attitude and ability to leverage expert knowledge to others in the team. Sets
example that every staff member should follow. • Always above exceeds standard •
Results are consistently among industry best • Normally mistake free • Actively
shares best practices • Helps team exceed goals • Numerous examples in event
file demonstrating the competency • Numerous specific examples of strengths
demonstrating competency • Rarely requires guidance from supervisor to
demonstrate competency • Always shares best practices and assists others within
team to achieve this competency • Responsible for team increasing performance on
this competency

 

--------------------------------------------------------------------------------

 

[k33932k3393213.gif]

Payout Tier Structures

 

--------------------------------------------------------------------------------

 

[k33932k3393214.gif]

LINE OF BUSINESS LEVEL QUANTIFIABLE GOALS LINE OF BUSINESS INDIVIDUAL LEVEL
QUALITATIVE GOALS INDIVIDUAL LEVEL PERFORMANCE MODIFIER