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                                                                    EXHIBIT 10.5

                       THE FARMERS & MERCHANTS STATE BANK
                            307-11 N. DEFIANCE STREET
                              ARCHBOLD, OHIO 43502

May 7, 2004

PERSONAL AND CONFIDENTIAL

Mr. Paul S. Siebenmorgen
2189 Scarlet Oak Drive
Avon, IN 46123

Dear Paul:

This letter will confirm the terms of your employment with The Farmers &
Merchants State Bank , (the "Bank") as its Senior Executive Vice President. We
understand that you will start your employment with the Bank on a date to be
mutually agreed upon, pending conclusion of background checks by regulatory
agencies. Your initial compensation will be comprised of an annualized base
salary of $150,000 and you will be eligible for a cash bonus at the end of 2004
of $20,000.

In connection with your agreement to join the Bank as its Senior Executive Vice
President, the Board of Directors will grant to you, $30,000 of Farmers &
Merchants Bancorp, Inc. common stock. Our attorneys will provide the appropriate
documentation to convey this grant promptly after you arrive at the Bank. We
have advised you that the stock grant will be subject to certain restrictions
upon resale, as required by federal and state securities laws. Therefore, you
will generally not be able to sell the stock granted to you for at least several
years, and then only upon compliance with certain securities laws.

At the present time we do not have an option plan. The Board has undertaken to
study the desirability of such a plan, in the near future. If the Board does
implement such a plan it would be our intent that you would participate in the
plan as a senior level executive.

The Board has indicated its intent to provide you with certain protection in the
event of a change in control of Farmers & Merchants Bancorp, Inc. similar to
that provided to its other senior officers. This will be accomplished during
your initial year of employment with the Bank.

The Bank will provide you with its customary benefits available to all
employees, at levels commensurate with your status as a senior executive. You
will have four weeks of paid vacation time annually, life insurance, health
benefits and participation in the 401k plan of the Bank, subject to its terms.
In addition, you will be provided a corporate

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membership at the Orchard Hills Country Club in order to assist you in carrying
out your duties as a senior executive of the Bank.

The Bank will reimburse you for your reasonable moving expenses, including costs
associated with travel to locate housing for you and your family. The Board asks
that you obtain two competitive estimates in connection with retaining a moving
company.

The Board has asked that I indicate to you its intent to name you as President
and CEO and a director of Farmers & Merchants Bancorp, Inc. and the Bank in
February of 2005 and to make a compensation adjustment at that time to increase
your base annual salary to $175,000. Of course, this is subject to the Board's
determination, at that time, to proceed with appointing you as the successor
CEO, and will be based on the Board's and your mutual agreement to do so.

Paul, on behalf of the entire Board of Directors and all of the employees of the
Bank, I extend our welcome to you and Marilyn to our Bank family.

Very truly yours,

/s/ Jack C. Johnson

Jack C. Johnson
Chairman of the Compensation Committee

I acknowledge receipt of this letter and agree to its terms.

/s/ Paul S. Siebenmorgen                    Dated: ------------------, 2004
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Paul S. Siebenmorgen<PAGE>

                                                                   EXHIBIT 10.30

                             STOCK OPTION AGREEMENT
                                 Director Option

                                                   Dated as of:  _______________

      To:   __________________

      Pursuant to the 1997 Stock Option Plan ("1997 Plan") of Somanetics
Corporation (the "Company") and with the approval of the Compensation Committee
of the Company's Board of Directors, in accordance with the 1997 Plan, the
Company hereby grants to you an option (the "Option") to purchase ____________
(____) Common Shares, par value $.01 per share, of the Company (the "Shares") at
$_____ per Share, upon the terms and conditions contained in this Stock Option
Agreement and in the 1997 Plan, a copy of which is attached to, and made a part
of, this Stock Option Agreement.

      1.    The Option is intended to be a Nonqualified Option, as defined in
the 1997 Plan.

      2.    The Option herein granted may not be transferred by you otherwise
than by will or by the laws of descent and distribution, and during your
lifetime the Option is exercisable only by you.

      3.    (a)   Subject to the other terms of this Option and the 1997 Plan,
you may exercise the Option in whole or in part at any time until the expiration
of this Option.

            (b)   The Option shall expire (to the extent not previously
exercised) on the earlier of (i) [ten years from date of option], and (ii) the
date you cease to be a director of the Company because of termination for cause.

      4.    The Option shall be exercised by giving a written notice of
exercise to the Treasurer of the Company. Such notice shall specify the number
of Shares to be purchased and shall be accompanied by payment in full of the
aggregate option price for the number of Shares purchased and by the
representation required by Paragraph 14 of the 1997 Plan if the Shares to be
issued under the 1997 Plan have not been registered under the Securities Act of
1933. Such exercise shall be effective only upon the actual receipt of such
written notice and no rights or privileges of a shareholder of the Company in
respect of any of the Shares issuable upon the exercise of any part of the
Option shall inure to you, or any other person entitled to exercise the Option,
unless and until certificates representing such Shares shall have been issued.
If at the time of exercise, the Board of Directors allows for payment of all or
any part of the exercise price to be made by promissory note, the interest rate
for the promissory note will be a market rate.

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      5.    It is understood and agreed that nothing contained in the 1997 Plan
or in this Agreement, nor any action taken by the Committee, shall confer upon
you any right with respect to the continuation of your employment by, or other
service to, the Company or any subsidiary, nor interfere in any way with the
right of the Company or a subsidiary to terminate your employment or other
service at any time.

                                                  Very truly yours,

                                                  SOMANETICS CORPORATION,
                                                  a Michigan corporation

                                                  By _________________________

                                                  Its __________________________

The above is agreed to and accepted.

_________________________________

Dated: __________________________

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                                                                   EXHIBIT 10.31

                             STOCK OPTION AGREEMENT
                         (Non-Qualified Officer Option)

                                            Dated as of:  _______

To: ________________

      Pursuant to the 1997 Stock Option Plan ("1997 Plan") of Somanetics
Corporation (the "Company") and with the approval of the Compensation Committee
of the Company's Board of Directors, in accordance with the 1997 Plan, the
Company hereby grants to you an option (the "Option") to purchase __________
(_____) Common Shares, par value $.01 per share, of the Company (the "Shares")
at $_____ per Share, upon the terms and conditions contained in this Stock
Option Agreement and in the 1997 Plan, a copy of which is attached to, and made
a part of, this Stock Option Agreement.

      1.    The Option is intended to be a Nonqualified Option, as defined in
the 1997 Plan.

      2.    The Option herein granted may not be transferred by you otherwise
than by will or by the laws of descent and distribution, and during your
lifetime the Option is exercisable only by you.

      3. (a) Subject to the other terms of this Option and the 1997 Plan, you
may exercise the Option in accordance with the following schedule:

      (i) Between the date of this Option and [one year from date of option],
none of the Shares may be purchased.

      (ii) Commencing [one year from date of option], one-third (1/3) of the
Shares may be purchased.

      (iii) Commencing [two years from date of option], an additional one-third
(1/3) of the Shares may be purchased.

      (iv) Commencing [three years from date of option], the final one-third
(1/3) of the Shares may be purchased.

Notwithstanding anything in this Option to the contrary, the Option shall be
exercisable to purchase all of the Shares immediately, to the extent not already
purchased, (i) ten (10) business days before the consummation of a "Transaction"
as defined in Paragraph 16 of the 1997 Plan, and (ii) upon the acquisition by
any person, entity or group (as defined pursuant to Section 13(d) of the
Securities Exchange Act of 1934, as amended) of 51% or more of the Company's
outstanding voting securities.

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        (b) The Option shall expire (to the extent not previously exercised) on
[ten years from date of option]. Notwithstanding any other term or provision of
this Option to the contrary, the portion of this Option, if any, which is
exercisable at the date of termination of your employment, consultation or other
service by or to the Company or a subsidiary may be exercised until the
expiration date set forth in the preceding sentence notwithstanding the
termination of your employment, consultation or other service by or to the
Company or a subsidiary by your death or due to your permanent disability and
notwithstanding your ceasing to be an employee, director, consultant or advisor
of or to the Company or a subsidiary because of your retirement, resignation or
any other cause, except that all rights to exercise this Option shall terminate
if you cease to be an employee, director, consultant or advisor of or to the
Company or a subsidiary because of termination for cause.

      4. The Option shall be exercised by giving a written notice of exercise to
the Treasurer of the Company. Such notice shall specify the number of Shares to
be purchased and shall be accompanied by payment in full of the aggregate option
price for the number of Shares purchased and by representation required by
Paragraph 14 of the 1997 Plan if the Shares to be issued under the 1997 Plan
have not been registered under the Securities Act of 1933. Such exercise shall
be effective only upon the actual receipt of such written notice and no rights
or privileges of a shareholder of the Company in respect of any of the Shares
issuable upon the exercise of any part of the Option shall inure to you, or any
other person entitled to exercise the Option, unless and until certificates
representing such Shares shall have been issued. If at the time of exercise, the
Board of Directors allows for payment of all or any part of the exercise price
to be made by promissory note, the interest rate for the promissory note will be
a market rate.

      5. It is understood and agreed that nothing contained in the 1997 Plan or
in this Agreement, nor any action taken by the Committee, shall confer upon you
any right with respect to the continuation of your employment by the Company or
any subsidiary, nor interfere in any way with the right of the Company or a
subsidiary to terminate your employment at any time.

                                               Very truly yours,

                                               SOMANETICS CORPORATION,
                                               a Michigan corporation

                                               By ______________________________

                                               Its _____________________________

The above is agreed to and accepted.
___________________________________

Dated:_____________________________

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