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                                                                    EXHIBIT 10.7


                              EMPLOYMENT AGREEMENT

         This Agreement, made this 1st day of May, 2002, by and between STURGIS
BANK & TRUST COMPANY, a Michigan savings bank ("STURGIS"), and RONALD W. SCHESKE
of Sturgis, Michigan ("Employee").

         W I T N E S S E T H:

         WHEREAS, STURGIS desires to employ Employee and Employee desires to be
employed by STURGIS upon the terms and conditions set forth herein.

         1. Employment. STURGIS hereby employs Employee as Senior Vice President
and Employee hereby accepts employment by STURGIS upon the terms and conditions
herein set forth. The primary place of employment shall be at STURGIS' principal
offices, Sturgis, Michigan, or at such other location as STURGIS may designate.

         2. Term. The term of this Agreement shall commence as of May 1, 2002
for a term of one (1) year, subject to renewal on an annual basis, unless sooner
terminated as hereinafter set forth.

         3. Duties. Employee will, during the term hereof:

         (A) Faithfully and diligently do and perform all such acts and duties
and furnish such services as the Board of Directors of STURGIS shall direct, and
do and perform all acts in the ordinary course of STURGIS' business, with such
limits as the Board of STURGIS may prescribe, necessary and conducive to
STURGIS' best interests; and,

         (B) Devote his full time, energy, and skill to the business of STURGIS
and to the promotion of STURGIS' best interests, except for vacations and
absences made necessary because of illness.

         4. Compensation.

         (A) Subject to the provisions of Paragraphs 6 and 7 hereof, STURGIS
shall pay to Employee for all services to be performed by Employee during the
term of this Agreement:

         (i) a salary at the rate of Eighty-Five Thousand ($85,000.00) Dollars
         per annum, payable in periodic payments in accordance with STURGIS'
         practices for other executive, managerial, and supervisory employees,
         as such practices may be determined from time to time. The Board of
         Directors of STURGIS ("Board of Directors") will review such fixed
         salary annually and, in its discretion, may grant increases or
         decreases thereof based upon Employee's performance; and

         (ii) any additional or special compensation, such as incentive pay or
         bonuses,

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         based upon Employee's performance, as the Board of Directors in its
         discretion, may from time to time determine.

All such payments will be subject to such deductions as may be required to be
made pursuant to law, government regulation or order, or by agreement with, or
consent of, Employee.

         (B) In addition to the salary payments set forth above, STURGIS agrees
that during the term of this Agreement:

         (i) Employee shall be entitled to reimbursement by STURGIS for all
         reasonable expenses actually and necessarily incurred by him on its
         behalf in the course of his employment hereunder, for which he shall
         submit vouchers in a form satisfactory to STURGIS and which are
         approved by STURGIS in its sole discretion;

         (ii) STURGIS shall reimburse Employee for automobile expenses incurred
         by Employee on behalf of STURGIS upon a mutually agreeable basis.

         5. Benefits. Employee shall be entitled to participate in such life
insurance, medical, pension, retirement, and stock option plans and other
programs, including sick leave, as may be approved from time to time by STURGIS
for the benefit of its employees. Employee also shall be entitled to no less
than four (4) weeks of vacation under STURGIS' current policy, as amended. The
said vacation shall not be carried over from year to year.

         6. Termination. Employee's employment with STURGIS shall terminate by
reason of Employee's death, or total and/or permanent disability (as defined for
social security purposes) or for cause. STURGIS shall have the sole discretion
to determine whether the conditions constituting a termination for cause have
occurred. In the event of a termination of employment pursuant to this paragraph
6, all obligations of STURGIS hereunder shall terminate.

         A. In addition to the foregoing, STURGIS' Board of Directors may
terminate the Employee's employment at any time, but any termination by STURGIS'
Board of Directors other than termination for cause, shall not prejudice the
Employee's right to compensation or other benefits under the contract. The
Employee shall have no right to receive compensation or other benefits for any
period after termination for cause. Termination for cause shall include
termination because of the Employee's personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule, or
regulation, (other than traffic violations or similar offenses) or final
cease-and-desist order, or material breach of any provision of this contract.

         B. If the Employee is suspended and/or temporarily prohibited from
participating in the conduct of STURGIS' affairs by a notice served under
section 8(e)(3) or (g)(1) of (the) Federal Deposit Insurance Act (12 U.S.C.
1818(e)(3) and (g)(1)

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STURGIS' obligations under the contract shall be suspended as of the date of
service unless stayed by appropriate proceedings. If the charges in the notice
are dismissed, STURGIS may in its discretion (i) pay the Employee all or part of
the compensation withheld while its contract obligations were suspended and (ii)
reinstate (in whole or in part) any of its obligations which were suspended.

         C. If the Employee is removed and/or permanently prohibited from
participating in the conduct of STURGIS' affairs by an order issued under
section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C.
1818(e)(4) or (g)(1)), all obligations of STURGIS under the contract shall
terminate as of the effective date of the order, but vested rights of the
contracting parties shall not be affected.

         D. If STURGIS is in default (as defined in section 3(x)(1) of the
Federal Deposit Insurance Act), all obligations under the contract shall
terminate as of the date of default, but this paragraph D. shall not affect any
vested rights of the contracting parties.

         E. All obligations under the contract shall be terminated, except to
the extent determined that continuation of the contract is necessary (for the
continued operation of STURGIS :)

         (i) by the Director or his or her designee, at the time the Federal
         Deposit Insurance Corporation or the Michigan Financial Institutions
         Bureau enters into an agreement to provide assistance to or on behalf
         of STURGIS under the authority contained in section 13(c) of the
         Federal Deposit Insurance Act; or

         (ii) by the Director or his or her designee, at the time the Director
         or his or her designee approves a supervisory merger to resolve
         problems related to operation of STURGIS or when STURGIS is determined
         by the Director to be in an unsafe or unsound condition.

         Any rights of the parties that have already vested, however, shall not
be affected by such action.

         F. Upon thirty (30) days written notice by Employee to STURGIS, the
Employee may terminate this Agreement forfeiting all of his rights including
vested rights unless Employee terminates such employment with good reason (as
defined in the Agreement).

         7. Change In Control. If within five (5) years after a change in
control (as defined in this Agreement) STURGIS shall terminate Employee without
cause (as defined in this Agreement) or Employee shall voluntarily terminate
such employment with good reason (as defined in this Agreement) STURGIS shall,
within ninety (90) days of the termination make a lump sum cash payment to him
equal to one (1) year's salary in accordance with Internal Revenue Code section
280(G), as amended. Employee shall not be paid any compensation under this
agreement other than that specified in this paragraph.


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         8. Definitions. For purposes of this Agreement:

         (A) "Cause" shall include in its meaning:

         (i) Employee's conviction of any criminal violation involving
         dishonesty, fraud, or breach of trust;

         (ii) Employee's willful engagement in any misconduct in the performance
         of his duty that materially injures STURGIS;

         (iii) Employee's performance of any act which, if known to the
         customers, clients or stockholders of STURGIS would materially and
         adversely impact on the business of STURGIS;

         (iv) Employee's willful and substantial nonperformance of his duties
         and such nonperformance continues more than ten (10) days after STURGIS
         has given written notice of such nonperformance and of its intention to
         terminate Employee's employment because of such nonperformance; or,

         (v)  Employee's willful violation of paragraphs 9 or 10 herein.

         (B) "Good Reason" shall exist if, without Employee's express written
consent:

         (i)  STURGIS shall assign to Employee duties of a nonexecutive nature
         or for which Employee is not reasonably equipped by his skills and
         experience;

         (ii) STURGIS shall reduce the salary of Employee, or materially reduce
         the amount of paid vacations to which he is entitled, or his fringe
         benefits and perquisites;

         (iii) STURGIS shall require Employee to relocate his principal business
         office or his principal place of residence outside the Sturgis,
         Michigan Marketing Area (the "Area"), or assign to Employee duties that
         would reasonably require such relocation;

         (iv) STURGIS shall require Employee, or assign duties to Employee which
         would reasonably require him to spend more than ninety (90) normal
         working days away from the Area during any consecutive twelve (12)
         month period;

         (v) STURGIS shall fail to provide office facilities, secretarial
         services, and other administrative services to Employee which are
         substantially equivalent to the facilities and services provided to
         Employee on the date hereof; or,

         (vi) STURGIS shall terminate incentive and benefit plans or
         arrangements, or reduce or limit Employee's participation therein
         relative to the level of participation of other executives of similar
         rank, to such an extent as to materially


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         reduce the aggregate value of Employee's incentive compensation and
         benefits below their aggregate value of the date hereof.

         (C) "Change in Control", (except as provided in subparagraph (v)),
shall be deemed to occur on the earliest of:

         (i) The Acquisition by any entity, person, or group of beneficial
         ownership, as that term is defined in Rule 13d-3 under the Securities
         Exchange Act of 1934, of more than fifty percent (50%) of the
         outstanding capital stock of STURGIS entitled to vote for the election
         of directors ("Voting Stock");

         (ii) The commencement by any entity, person, or group (other than
         STURGIS or a subsidiary of STURGIS) of a tender offer or an exchange
         offer for more than twenty-five percent (25%) of the outstanding Voting
         Stock of STURGIS;

         (iii) The effective time of (1) a merger or consolidation of STURGIS
         with one or more other corporations as a result of which the holders of
         the outstanding Voting Stock of STURGIS immediately prior to such
         merger hold less than fifty percent (50%) of the Voting Stock of the
         surviving or resulting corporation, or (2) a transfer of substantially
         all of the property of STURGIS other than to an entity of which STURGIS
         owns at least eighty percent (80%) of the Voting Stock.

         (iv) The election to the Board of Directors of STURGIS without the
         recommendation or approval of the incumbent Board of Directors of
         STURGIS, of the lesser of three directors or directors constituting a
         majority of the number of Directors of STURGIS then in office.

         9. Restrictive Covenant. During the term of this Agreement, and for a
period of one (1) year following the termination of Employee's employment with
STURGIS pursuant to this Agreement including termination occasioned by the
expiration of this Agreement, and in consideration for payments made on an
installment basis to Employee pursuant to Internal Revenue Code Section 280(G)
as amended, Employee shall not:

         (A) Within a geographic radius of seventy-five (75) miles from Sturgis,
Michigan, engage in, or work for, manage, operate, control or participate in the
ownership, management, operation or control of, or be connected with, or have
any financial interest in, any individual, partnership, firm, corporation or
institution engaged in the same or similar activities to those now or hereafter
carried on by STURGIS;

         (B) Interfere with the relationship of STURGIS and any of its
employees, agents or representatives; and,

         (C) Directly or indirectly divert or attempt to divert from STURGIS any
business in which STURGIS has been actively engaged during the term hereof, nor
interfere with the relationships of STURGIS with its dealers, distributors,
sources of supply or customers.


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Any breach of the covenant not to compete by Employee will result in the
forfeiture by Employee and all other persons of any and all rights to unpaid
benefits and payments at the time of breach and in such event STURGIS shall have
no further obligation to pay any amounts related thereto.

         10. Nondisclosure of Confidential Information. Employee acknowledges
that STURGIS may disclose certain confidential information to Employee during
the term of this Agreement to enable him to perform his duties hereunder.
Employee hereby covenants and agrees that he will not, without the prior written
consent of STURGIS, during the term of this Agreement or at any time thereafter,
disclose or permit to be disclosed to any third party by any method whatsoever
any of the confidential information of STURGIS. For purposes of this Agreement,
"confidential information" shall include, but not be limited to, any and all
records, notes, memoranda, data, ideas, techniques, programs, computer software,
writings, research, personnel information, customer information, STURGIS'
financial information, plans, or any other information of whatever nature in the
possession or control of STURGIS which has not been published or disclosed to
the general public, or which gives to STURGIS an opportunity to obtain an
advantage over competitors who do not know of or use it. Employee further agrees
that if his employment hereunder is terminated for any reason, he will leave
with STURGIS and will not take originals or copies of any and all records,
papers, programs, computer software and documents and all matter of whatever
nature which bears secret or confidential information of STURGIS.

         The foregoing paragraph shall not be applicable if and to the extent
Employee is required to testify in a judicial or regulatory proceeding pursuant
to an order of a judge or administrative law judge issued after Employee and his
legal counsel urge that the aforementioned confidentiality be preserved.

         Employee agrees, without charge to STURGIS or at STURGIS' expense, to
execute, acknowledge and deliver to STURGIS all such papers, including trademark
registrations, and assignments thereof, as may be necessary, and at all times to
assist STURGIS, its successors, assigns and nominees in every proper way to
patent or register said programs, ideas, discoveries, improvements,
copyrightable material or trademarks in any and all countries and to vest title
thereto in STURGIS, its parent, subsidiaries, successors, assigns or nominees.

         Employee will promptly report to STURGIS all discoveries, inventions,
or improvements of whatever nature conceived or made by him at any time he was
employed by STURGIS, its parent, subsidiaries or successors. All such
discoveries, inventions and improvements which are applicable in any way to
STURGIS' business shall be the sole and exclusive property of STURGIS.

The covenants set forth in this paragraph which are made by Employee are in
consideration of the employment, or continuing employment of, and the
compensation paid to, Employee during his employment by STURGIS. The foregoing
covenants will


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not prohibit Employee from disclosing confidential or other information to other
employees of STURGIS or to third parties to the extent that such disclosure is
necessary to the performance of his duties under this Agreement.

         11. Additional Remedies. It is expressly understood and agreed that
although Employee and STURGIS consider the restrictions contained in this
Agreement to be reasonable for the purpose of preserving the going business
value and goodwill of STURGIS, if a final judicial determination is made by a
court having jurisdiction that the time or territory or any other restriction
contained in this Agreement is an unenforceable restriction against the
Employee, provisions of such restrictions shall not be rendered void but shall
be deemed amended to apply as to such maximum time and territory and to such
other extent as such court may judicially determine or indicate to be
reasonable. Alternatively, if the court referred to above finds that any
restriction contained in this Agreement is unenforceable, and such restriction
cannot be amended so as to make it enforceable, such findings shall not effect
the enforceability of any of the other restrictions contained herein.

         The Employee acknowledges and agrees that STURGIS' remedy at law for a
breach or threatened breach of any of the provisions of this Agreement would be
inadequate and, in recognition of this fact, in the event of a breach or a
threatened breach by the Employee of any of the provisions, it is agreed that,
in addition to its remedy at law, STURGIS shall be entitled, without posting any
bond, to obtain equitable relief, and the Employee agrees not to oppose STURGIS'
request for equitable relief in the form of specific performance, temporary
restraining order, temporary or permanent injunction, or any other equitable
remedy which may then be available. The Employee acknowledges that the granting
of a temporary injunction, temporary restraining order or permanent injunction
merely prohibiting a breach or threatened breach would not be an adequate
remedy, and consequently agrees upon any such breach or threatened breach to the
granting of injunctive relief. Nothing herein contained shall be construed as
prohibiting STURGIS from pursuing any other remedies available to it for such
breach or threatened breach.

         12. Nonassignment. This Agreement is personal to Employee and shall not
be assigned by him. Employee shall not delegate, encumber, alienate, transfer or
otherwise dispose of his rights and duties hereunder. STURGIS may assign this
Agreement without Employee's consent to any other entity who, in connection with
such assignment, acquires all or substantially all of STURGIS' assets or into or
with which STURGIS is merged or consolidated.

         13. Waiver. The waiver by STURGIS of a breach by Employee of any
provision of this Agreement shall not be construed as a waiver of any subsequent
breach by Employee.

         14. Severability. If any clause, phrase, provision or portion of this
Agreement or the application thereof to any person or circumstance shall be
invalid or unenforceable under any applicable law, such event shall not affect
or render invalid or unenforceable the


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remainder of this Agreement and shall not affect the application of any clause,
provision, or portion hereof to other persons or circumstances.

         15. Benefit. The provisions of this Agreement shall inure to the
benefit of STURGIS, its successors and assigns, and shall be binding upon
STURGIS and Employee, its and his heirs, personal representatives and
successors, including without limitation Employee's estate and the executors,
administrators, or trustees of such estate.

         16. Relevant Law. This Agreement shall be construed and enforced in
accordance with the laws of the United States and State of Michigan.

         17. Notices. All notices, requests, demands and other communications in
connection with this Agreement shall be made in writing and shall be deemed to
have been given when delivered by hand or 48 hours after mailing at any general
or branch United States Post Office, by registered or certified mail, postage
prepaid, addressed as follows, or to such other address as shall have been
designated in writing by the addressee:

         (A)      If to STURGIS:

                  ----------------------------
                  Attn:  Chairman of the Board
                  119-125 East Chicago Road
                  Sturgis, Michigan  49091

         (B)      If to Employee:

                  ----------------------------
                  Ronald W. Scheske
                  1208 Parkside Circle
                  Sturgis, Michigan  49091

         18. Entire Agreement. This Agreement sets forth the entire
understanding of the parties and supersedes all prior agreements including the
Agreement effective September 20, 1988, arrangements, and communications,
whether oral or written, pertaining to the subject matter hereof; and this
Agreement shall not be modified or amended except by written agreement of
STURGIS and Employee.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first set forth above.


                           STURGIS BANK & TRUST COMPANY

                           /s/ Leonard L. Eishen
                           -------------------------------
                           By: Leonard L. Eishen


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                                            Its:     President

ATTEST:
/s/ Joyce Waltke
-----------------------
Joyce Waltke, Secretary



                                            EMPLOYEE:

                                            /s/ Ronald W. Scheske
                                            ------------------------------
                                            Ronald W. Scheske



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