Document:

bm20091105_10qex10-39.htm

    
      EXECUTIVE EMPLOYMENT
AGREEMENT

      

      THIS
EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") was initially made and entered
into effective as of June 26, 2002 (the "Effective Date"), by and between Bell
Microproducts Inc., a California corporation (the "Company"), and Robert J.
Sturgeon, (the "Executive"), and is hereby amended and restated effective
as of the last date signed below.

      

      RECITALS:

      

      WHEREAS, Executive desires to
obtain employment with the Company and the Company desires to employee Executive
subject to the terms and conditions contained in this Agreement.

      

      NOW, THEREFORE, in
consideration of the foregoing and the mutual covenants contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties agree as follows:

      

      AGREEMENTS:

      

      1. Employment Duties.
The Company shall employ Executive in the capacity of Vice President, Operations
and Chief Information Officer for the Company, with such powers and duties in
that capacity as may be established from time to time by the Company in its
discretion. Executive will devote his best efforts, attention and energies to
the Company's business. During Executive's employment, he will not engage in any
other business activities, regardless of whether such activity is pursued for
profits, gains, or other pecuniary advantage. However, nothing in this Agreement
shall prevent Executive from being engaged in business activities outside the
Company so long as such activities require no active participation by Executive
that in any way interferes with Executive's duties and responsibilities to the
Company, competes with the business of the Company, or creates an actual or
apparent conflict of interest with Executive's employment by the
Company.  Executive understands and agrees that he will inform the
Company of any current outside business activities in which he is engaged as of
the execution of this Agreement, and in the future will inform the Company of
any additional outside business activities in which he seeks to engage in
advance of such engagement.

      

      2. Term of Employment.
Unless his employment is earlier terminated in accordance with Sections 12, 13,
14, or 15 of this Agreement or as provided in this Section, Executive shall be
employed on the Effective Date and shall continue employment through June 26,
2005 (the "Initial Term"). This Agreement, and Executive's employment under this
Agreement, shall automatically be extended for consecutive twelve (12) month
periods (each such period referenced as a "Subsequent Term") unless at any time
during the six months prior to the expiration of the Initial Term or any
Subsequent Term, either the Company or Executive provides the other with written
notice of its or his election not to extend the Agreement and Executive's
employment under this Agreement ("Notice of Non-renewal"). In the event either
Executive or the Company provides a Notice of Nonrenewal under this Section, the
Company shall pay Executive his base salary and prorated auto allowance through
his last date of employment (payable on the next payroll date) as well as a
pro-rated bonus, if any, earned under the terms of the Management Incentive Plan
(with the latter paid out at the same time as active employees, but no later
than March 15 following the calendar year in which the Company's fiscal year to
which the bonus relates ends). Executive shall not be entitled to any other
payments or benefits of any kind except as provided in applicable benefit plan
documents, stock option and/or restricted stock agreements, or as provided in
Section 14 of this Agreement.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      3. Compensation. All
compensation paid to Executive under this Agreement is subject to applicable
withholding and deductions.

      

      a. Base Salary. As
compensation for services rendered hereunder, Executive shall receive an annual
base salary of two hundred forty-three thousand dollars ($243,000.00), less
applicable withholding and deductions, at a rate payable in equal installments
according to Company's normal payroll practices. Such salary shall be subject to
review and change by the Company, in its sole discretion.

      

      b. Incentive Bonus
Compensation. On an annual basis, the Company's Board of Directors, in
its sole discretion, upon the recommendation of the Company's Chief Executive
Officer, shall establish Executive's annual target incentive and performance
metrics. The Executive will receive an incentive bonus based on Executive's
achievement of the performance metrics in accordance with the Company's
Management Incentive Plan that the Company in its discretion may establish. Any
such bonuses shall be paid out no later than March 15 following the calendar
year in which the Company's fiscal year to which the bonus relates
ends.

      

      c. Business Expenses. In
accordance with the Company's policy governing travel and other expenses, the
Company will reimburse Executive for approved and reasonable business expenses
incurred by Executive in connection with the performance of his duties, provided
that Executive properly submits to the Company receipts verifying such
expenses.

      

      d. Employee Benefits.
Executive will be eligible to participate in such group health, life or
disability plans and other benefit plans that Company may maintain from
time-to-time for all employees, provided that Executive meets the respective
eligibility requirements and subject to the terms and conditions of such plans
as they exist from time to time.

      

      e. Financial Planning/Tax
Preparation Allowance. Executive shall be entitled to an allowance of up
to $1,500 per calendar year as reimbursement for personal financial planning and
tax preparation. To receive the reimbursement, Executive will be required to
submit supporting receipts that support the reimbursement.

      

      4. Noncompetition. As a
condition to and in consideration of the terms of this Agreement, Executive
agrees that, during Executive's employment, and, if and only if severance
benefits are being paid out under Section 14 hereof, also for a period of six
(6) months following the termination of Executive's employment, Executive will
not, on Executive's behalf or on behalf of any other person or entity, directly
or indirectly, as an employee, proprietor, agent, partner, officer, director or
otherwise, participate or engage in, manage, work for, broker for, operate,
control, render advice or assistance to or be connected in any way with any
other person or entity engaged in a business which is in direct competition with
the Company's principal business (as defined and discussed in Company's
documents filed with the Securities Exchange Commission from time to time) or
any other business in which the Company or any Subsidiary was engaged at any
point during Executive's employment or other relationship with the Company.
It is
expressly understood by the parties hereto that the only remedy for a breach of
the noncompetition provisions of this Agreement following Executive's employment
shall be ceasing to provide further severance benefits pursuant to Section 14
hereof.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      5. Non-solicitation. As
a condition to and in consideration of the terms of this Agreement, Executive
agrees that, during Executive's employment, and for a period of twelve (12)
months following the termination of Executive's employment, Executive will not,
on Executive's behalf or on behalf of any other person or entity:

      

      a. Directly
or indirectly solicit, on Executive's own behalf, or on behalf of another, any
potential or existing customers, clients, accounts, vendors, licensors or
licensees of the Company or any Subsidiary; or

      

      b. Directly
or indirectly attempt to hire, or influence or solicit, or attempt to influence
or solicit, any employee of the Company, or of any Subsidiary, to leave or
terminate his or her employment, or to work for any other person or entity. For
purposes of this Section, "employee" shall mean any current employee, and any
former employee who was employed with the Company or any Subsidiary at any time
during the last twelve (12) months of Executive's employment.

      

      6. Confidential
Information. During Executive's employment with the Company, and at all times
after Executive's resignation or the termination of Executive's employment for
any reason, whether voluntary or involuntary, Executive shall not directly or
indirectly use or disclose any trade secret, proprietary or confidential
information of the Company or any Subsidiary for the benefit of any person or
entity other than the Company or any Subsidiary without prior written approval
of the Company's Chief Executive Officer. For purposes of this Agreement, in
addition to all materials and information protected by applicable statute or
law, the parties acknowledge that confidential information shall include any
information relating to the Company or any Subsidiary, whether in print, on
computer disc or tape or otherwise, which is public information and not
generally known by individuals outside the Company or any Subsidiary, including
but not limited to information relating to research, development, technology,
and/or processes; marketing, purchasing, sales, and/or servicing information,
techniques, plans, proposals or reports; all financial information, reports and
statements; information relating to sales and other financial strategies, plans
and/or goals; information relating to proprietary rights and data, ideas,
know-how, inventions, and/or trade secrets; information regarding current or
potential clients or customers, client or customer lists and other client or
customer information; information regarding active and inactive accounts of the
Company or any Subsidiary; information relating to vendors, licensors or
licensees of the Company or any Subsidiary; information provided by a client or
vendor; personnel or employee information; and information relating to the
Company's or any Subsidiary's methods of operation.

      

      7. Work Product and
Inventions. Executive agrees that the Company shall be entitled to all of
the benefits, profits, results and work product arising from or incident to all
work, services, advice and activities of Executive, including without limitation
all rights in inventions (as set forth below), trademark or trade name
creations, and copyrightable materials. Executive shall not, during the term of
Executive's employment with the Company, be interested, directly or indirectly,
in any manner, including, but not limited to, as partner, officer, advisor, or
in any other capacity in any other business similar to, or in competition with,
the Company's or any Subsidiary's business.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      Executive
will communicate promptly and fully to the Company all inventions, discoveries,
improvements or designs conceived or reduced to practice by Executive during the
period of Executive's employment with the Company (alone or jointly with
others), and, except as provided in this Section, Executive will and hereby does
assign to the Company and/or its nominees all of Executive's right, title and
interest in such inventions, discoveries, improvements or designs and all of
Executive's right, title and interest in any patents, patent applications or
copyrights based thereon without obligation on the part of the Company or any
Subsidiary to make any further compensation, royalty or payment to Executive.
Executive further agrees to assist the Company and/or its nominee (without
charge but at no expense to Executive) at any time and in every proper way to
obtain and maintain for its and/or their own benefit, patents for all such
inventions, discoveries and improvements and copyrights for all such
designs.

      

      This
Section does not obligate Executive to assign to the Company any invention,
discovery, improvement or design for which no equipment, supplies, facility or
trade secret, confidential or proprietary information of the Company or any
Subsidiary was used and which was developed entirely on Executive's own time,
and (a) which does not relate (i) directly to the business of the Company or any
Subsidiary, or (ii) to the Company's or any Subsidiary's actual or demonstrably
anticipated research or development, or (b) which does not result from any work
performed by Executive for the Company or any Subsidiary.

      

      8. Exempt Inventions.
Identified below by descriptive title are all of the inventions, if any, in
which Executive possessed any right, title or interest prior to Executive's
employment with the Company or execution of this Agreement which are not subject
to the terms hereof:

      

      None.

      

      9. Copyrights. Executive
acknowledges that any documents, drawings, computer software or other work of
authorship prepared by Executive within the scope of Executive's employment is a
"work made for hire" under U.S. copyright laws and that, accordingly, the
Company exclusively owns all copyright rights in such works of authorship. For
purposes of this Section, "scope of employment" means that the work of
authorship (a) relates to any subject matter pertaining to Executive's
employment, (b) relates to or is directly or indirectly connected with the
existing or reasonably foreseeable business, products, projects or confidential
information of the Company or any Subsidiary, or (c) involves the use of any
time, material or facility of the Company or any Subsidiary.

       

      10. Return of Property.
Executive shall, immediately upon Executive's resignation or the termination of
Executive's employment for any reason, whether voluntary or involuntary, deliver
to the Company all documents, materials and other items, whether on computer
disc or tape or otherwise, including all copies thereof, belonging to the
Company or any Subsidiary, or in any way related to the business of the Company
or any Subsidiary, or the services Executive performed for the Company or any
Subsidiary, including but not limited to, any documents, materials or items
containing trade secret, proprietary, or confidential information, documents in
any way relating to any inventions or copyrights, client or customer
information, information relating to the Company's or any Subsidiary's processes
or procedures and any other documents, materials or items of any sort relating
to the Company or any Subsidiary. Executive shall not retain any copies or
summaries of any kind of documents and materials covered by this
Section.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      11. Injunctive Relief.
The parties recognize that irreparable damage will result to the Company if
Executive violates or threatens to violate the terms of Sections 4 (but only
during Executive's employment), 5, 6, 7, 8, 9, or 10, and that the damages would
be difficult to prove and quantify, and it is therefore agreed that, in the
event of a breach of Section 4, 5,6, 7, 8, 9, or 10, the Company shall be
entitled to injunctive relief, in addition to all other legal and equitable
remedies available to it.

      

      12. Death or Inability to
Perform Job Duties.

      

      a. Executive's
employment shall terminate automatically in the event of Executive's
death.  In such event, Executive's estate shall receive Executive's
base salary and prorated auto allowance through Executive's last date of
employment as well as a pro-rated bonus, if any, earned under the terms of the
Management Incentive Plan. Executive's estate shall not be entitled to any other
payments or benefits of any kind except as provided in applicable benefit plan
documents, stock option and/or restricted stock agreements.

      

      b. If, due
to mental or physical disability, Executive is unable to perform the essential
functions of Executive's job, with or without reasonable accommodation, for a
total of ninety (90) days within any twelve (12) month period, then the Company
may terminate Executive.  Executive shall, in such event, receive his
base salary and pro-rated auto allowance through his last date of employment
(payable on the next payroll date) as well as a pro-rated bonus, if any, earned
under the terms of the Management Incentive Plan (with the latter paid out at
the same time as active employees, but no later than March 15 following the
calendar year in which the Company's fiscal year to which the bonus relates
ends). Executive shall not be entitled to any other payments or benefits of any
kind except as provided in applicable benefit plan documents, stock option
and/or restricted stock agreements. Nothing in this Section shall limit the
Company's right to terminate Executive's employment under any other section of
this Agreement.

      

      13. Termination of Executive's
Employment by the Company for Cause. The Company may terminate
Executive's employment "for cause" at any time. As used herein, "for cause"
shall mean (i) any act of personal dishonesty taken by the Executive in
connection with his responsibilities as an employee and intended to result in
substantial personal enrichment of the Executive, (ii) the conviction of a
felony, (iii) a willful act by the Executive which constitutes gross misconduct
and which is injurious to the Company, and (iv) following delivery to the
Executive of a written demand for performance from the Company which describes
the basis for the Company's belief that the Executive has not substantially
performed his duties, continued violations by the Executive of the Executive's
obligations to the Company which are demonstrably willful and deliberate on the
Executive's part.

      

      In the
event the Company terminates Executive's employment for cause, Executive shall
receive his base salary and pro-rated auto allowance through his last date of
employment (payable on the next payroll date) as well as a pro-rated bonus, if
any, earned under the terms of the Management Incentive Plan (with the latter
paid out at the same time as active employees, but no later than March 15
following the calendar year in which the Company's fiscal year to which the
bonus relates ends). Executive shall not be entitled to any other payments or
benefits of any kind except as provided in applicable benefit plan documents,
stock option and/or restricted stock agreements.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      14. Termination of Executive's
Employment by the Company without Cause. In the event the Company
exercises its right to terminate Executive's employment without cause under this
Section, the Company will pay Executive his base salary and pro-rated auto
allowance through his last date of employment as well as a pro-rated bonus, if
any, earned under the terms of the Management Incentive Plan. In addition, the
Company shall pay Executive a severance payment of an amount equal to six (6)
months of his then current base salary, less applicable withholding and
deductions. This payment will be paid as part of the Company's normal payroll
processing during the six (6) month period. However, in order to receive the
severance payment under this Section, Executive must first execute a waiver and
release of claims agreement in the form prescribed by the Company (the
"Release"). In order to receive any severance payments or benefits set forth in
this Section, the Release must become effective within fifty-two (52) days
following Executive's employment termination date or such earlier date as
required by the Release (such deadline, the "Release Deadline"). No severance
payments or benefits pursuant to this Agreement will be paid or provided until
the Release becomes effective. Any severance payments or benefits to which
Executive is entitled during such fifty-two (52) day period shall be paid by the
Company to Executive in cash and in full arrears on the fifty-third (53rd) day
following Executive's employment termination date or such later date as is
required to avoid the imposition of additional taxes under Internal Revenue Code
Section 409A. Executive shall not be entitled to any other payments or benefits
of any kind except as provided in applicable benefit plan documents, stock
option and/or restricted stock agreements. This Section shall also apply if
Executive voluntarily terminates his employment after the Company downgrades
Executive position title, materially downgrades Executive's responsibility, or
reduces Executive's salary or annual target incentive. In the event that
Executive's employment termination would trigger severance benefits under both
this Agreement and Executive's Management Retention Agreement with the Company,
Executive shall only receive severance benefits under the Management Retention
Agreement and not under this Agreement.

      

      15. Termination of Employment by
Executive. Executive may terminate his own employment with the Company
with or without cause upon thirty (30) days prior written notice to the Company.
Executive shall be required to perform Executive's job duties and will be paid
his base salary through his last date of employment. At the option of the
Company, the Company may require Executive to terminate employment at any time
during the thirty (30) day notice period. In such event, Company will pay
Executive his base salary for the remainder of the thirty (30) day notice
period. Executive shall, in addition, receive his pro-rated auto allowance
through his last date of employment as well as a pro-rated bonus, if any, earned
under the terms of the Management Incentive Plan. Executive shall not be
entitled to any other payments or benefits of any kind except as provided in
applicable benefit plan documents, stock option and/or restricted stock
agreements, or pursuant to the penultimate sentence of Section 14
hereof.

      

      16. Code Section
409A.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      a. To the
extent that any taxable reimbursements of expenses are provided under Section 3,
they shall be made in accordance with Internal Revenue Code Section 409A,
including the following provisions:

      

      i. The
amount of any such expense reimbursement provided during one of Executive's tax
years shall not affect any expenses eligible for reimbursement in any other
taxable year;

      

      ii. The
reimbursement of the eligible expense shall be made no later than the last day
of Executive's tax year that immediately follows the year in which the expense
was incurred; and

      

      iii. Executive's
right to any reimbursement shall not be subject to liquidation or exchange for
another benefit or payment.

      

      b. Notwithstanding
anything to the contrary in this Agreement, no severance payments or benefits
payable to Executive, if any, pursuant to this Agreement that, when considered
together with any other severance payments or separation benefits, is considered
deferred compensation under Section 409A (together, the "Deferred Payments")
will be payable until Executive has a "separation from service" within the
meaning of Section 409A. Similarly, no severance payable to Executive, if any,
pursuant to this Agreement that otherwise would be exempt from Section 409A
pursuant to Treasury Regulation Section 1.409A-l (b)(9) will be payable until
Executive has a "separation from service" within the meaning of Section
409A.

      

      c. Further,
if Executive is a "specified employee" within the meaning of Section 409A at the
time of separation from service (other than due to death), any Deferred Payments
that otherwise are payable within the first six (6) months following Executive's
separation from service will become payable on the first payroll date that
occurs on or after the date six (6) months and one (1) day following the date of
Executive's separation from service. All subsequent Deferred Payments, if any,
will be payable in accordance with the payment schedule applicable to each
payment or benefit. Notwithstanding anything herein to the contrary, in the
event of Executive's death following Executive's separation from service but
prior to the six (6) month anniversary of Executive's separation from service
(or any later delay date), then any payments delayed in accordance with this
paragraph will be payable in a lump sum as soon as administratively practicable
after the date of Executive's death and all other Deferred Payments will be
payable in accordance with the payment schedule applicable to each payment or
benefit. Each payment and benefit payable under the Agreement is intended to
constitute a separate payment for purposes of Section 1.409A2(b)(2) of the
Treasury Regulations.

      

      d. Any
severance payment that satisfies the requirements of the "short-term deferral"
rule set forth in Section 1.409A-l(b)(4) of the Treasury Regulations will not
constitute Deferred Payments for purposes of the Agreement. Any severance
payment that qualifies as a payment made as a result of an involuntary
separation from service pursuant to Section 1.409A-l(b)(9)(iii) of the Treasury
Regulations that does not exceed the Section 409A Limit will not constitute
Deferred Payments for purposes of the Agreement. For purposes of this paragraph,
"Section 409A Limit" will mean the lesser of two (2) times: (i) Executive's
annualized compensation based upon the annual rate of pay paid to Executive
during the Company's taxable year preceding the Company's taxable year of
Executive's separation from service as determined under Treasury Regulation
Section 1.409A-l(b)(9)(iii)(A)(l) and any Internal Revenue Service guidance
issued with respect thereto; or (ii) the maximum amount that may be taken into
account under a qualified plan pursuant to Section 401(a)(l7) of the Code for
the year in which Executive's employment is terminated.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      e. The
foregoing provisions are intended to comply with the requirements of Section
409A so that none of the severance payments and benefits to be provided under
the Agreement will be subject to the additional tax imposed under Section 409A,
and any ambiguities herein will be interpreted to so comply. Executive and the
Company agree to work together in good faith to consider amendments to the
Agreement and to take such reasonable actions which are necessary, appropriate
or desirable to avoid imposition of any additional tax or income recognition
prior to actual payment to Executive under Section 409A.

      

      17. Severability and
Interpretation. In the event that any provision of this Agreement is held
invalid by a court of competent jurisdiction, the remaining provisions shall
nonetheless be enforceable according to their terms. Any provision held
overbroad or unreasonable as written shall be deemed amended to narrow its
application to the extent necessary to make the provision enforceable under
applicable law, and shall be enforced as amended. This Agreement shall be
construed without regard to any presumption or other rule requiring construction
hereof against the party causing this Agreement to be drafted.

      

      18. Survival.
Notwithstanding any provision of this Agreement to the contrary, the provisions
of Sections 4,5,6, 7,8,9, 10, and 11 shall survive the termination of this
Agreement and shall survive Executive's resignation or the termination of his
employment, whether voluntary or involuntary, and with or without
cause.

      

      19. Notices.
All notices or other communications required or permitted hereunder shall be in
writing and shall be personally delivered or provided by facsimile (with
confirmation of transmission) to the party receiving such notice or shall be
delivered by Federal Express or similar overnight courier, addressed to the
party to whom such notice is intended to be given as follows:

       

                   a. Company:

       

      Bell
Microproducts Inc.

      1941
Ringwood Avenue

      San Jose,
California 95131-1721

      Attn: Sr.
VP of Human Resources

      Facsimile:
(408) 467-2760

      

      
        	
                b.  

              	
                Executive:

              

      

      

      at the
last address known to the Company

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      All
notices shall be deemed given on the day when actually delivered personally or
by facsimile, or on the next business day after the date dispatched, if
delivered by Federal Express or other overnight courier.

      

      Either
party may, by written notice hereunder, designate a change of address. Any
notice, if mailed properly addressed, postage prepaid, by registered or
certified mail, shall be deemed dispatched on the registered date or the date
stamped on the certified mail receipt, and shall be deemed received on the fifth
business day thereafter, or when it is actually received, whichever is
sooner.

      

      20. Amendments. This
Agreement expresses the entire understanding of the parties and supersedes all
prior agreements concerning the same subject matter. It may not be
changed orally.  Any change or modification must be made in writing
and signed by the parties.

      

      21. Governing Law. The
validity, enforceability, construction, and interpretation of this Agreement
shall be governed by the laws of the State of California, without reference to
its conflict of laws provisions.

      

      22. Waiver by the
Company. Any waiver by the Company or Executive of any of its/his rights
under this Agreement shall be made in a writing signed by the party seeking to
effect the waiver of its/his rights and specifically designated as a waiver of a
right or rights under this Agreement. Neither the Company's nor Executive's
failure to enforce a breach of this Agreement shall act as a waiver or otherwise
prevent the Company or Executive from enforcing the Agreement as to such breach
or any other breach.

      

      23. Successors and
Assigns. This Agreement shall be binding upon and inure to the benefit of
the Company and its successors and assigns.

      

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      IN WITNESS WHEREOF, the
parties have executed this Agreement on the day and year set forth
below.

      

      
        	 
      	 
      	
                BELL
      MICROPRODUCTS INC.

              
	 
      	 
      	
                By:

              	
                /s/
      Richard J. Jacquet

              
	 
      	 
      	
                Its:

              	
                Senior
      Vice President, Human Resources

              
	 
      	 
      	
                Date:

              	
                12/17/2009

              
	 
      	 
      	 
      

      

      

      
        	 
      	 
      	
                Robert
      Sturgeon

              
	 
      	 
      	
                By:

              	
                /s/
      Robert J. Sturgeon

              
	 
      	 
      	 
      	
                Executive

              
	 
      	 
      	
                Date:

              	
                12/17/2009Southern Michigan Bancorp, Inc. Exhibit 10.3 to Form 10-K - 03-26-10

EXHIBIT 10.3

RETENTION  AGREEMENT

                    THIS RETENTION AGREEMENT (the "Agreement") is made by SOUTHERN MICHIGAN BANCORP, INC., a Michigan corporation (the "Corporation"), and DANICE CHARTRAND ("Executive"). The parties agree as follows.

                    WHEREAS, Executive is a key executive of the Corporation; and

                    WHEREAS, the Corporation operates a wholly-owned commercial banking subsidiary, Southern Michigan Bank & Trust ("SMB Bank"), which is engaged in the general business of banking (the "Bank"); and

                    WHEREAS, the Corporation has determined that it is in the best interests of the Corporation and its shareholders to encourage Executive to continue providing services to the Corporation and to ensure Executive's continued dedication and objectivity in the event of any threat or occurrence of, or negotiation or other action that could lead to, or create the possibility of, a Change in Control (as hereafter defined) of the Corporation, without concern as to whether Executive might be hindered or distracted by personal uncertainties and risks created by any such possible Change in Control, and to encourage Executive's full attention and dedication to the Corporation and the Bank, the Board of Directors has authorized the Corporation to enter into this Agreement; and

                    WHEREAS Executive is willing to serve in the employ of the Corporation and the Bank on a full-time basis as provided in this Agreement;

                    NOW, THEREFORE, the parties agree as follows.

          1.           Effective Date and Term.  This Agreement will take effect as of March 25, 2010 ("Effective Date"). This Agreement shall remain in effect until the end of the calendar year following that in which either party gives the other Notice (as defined in Section 11) of intention to terminate this Agreement; provided, however, that:

(A)           except for termination as provided above pursuant to Notice from Executive to the Corporation, this Agreement will not terminate during an "Active Change in Control Proposal Period" (as defined in Section 7), even if the Corporation has given Executive Notice of intention to terminate this Agreement;

(B)           except for termination as provided above pursuant to Notice from Executive to the Corporation, upon the occurrence of a "Change in Control" (as defined in Section 6) the term of this Agreement shall automatically be extended until the second anniversary of the effective date of the Change in Control, even if the Corporation has given Notice of intention to terminate this Agreement; and

(C)           termination of this Agreement shall not affect the obligations of either party accrued before termination of this Agreement, or Executive's obligations under Sections 8 or 9 with respect to a termination of the Employment occurring before termination of this Agreement.

          2.           Employment.  Executive presently serves as (A) Chief Financial Officer of the Corporation and the Bank (the "principal position"); and (B) in such positions with "Affiliates" (defined for purposes of this Agreement as any organizations controlling, controlled by or under common control with the Corporation) as reasonably requested by the Corporation, provided that the duties of such positions are consistent with Executive's responsibilities in her principal position (together, the "Employment"). As used in this Agreement, the term "Corporation" includes the Bank, unless the context clearly requires otherwise.

                    Executive will serve the Corporation and the Bank well and faithfully during the Employment and will devote her best reasonable full-time business efforts to the Employment, except that Executive may engage in civic and professional activities, investment oversight, and service on boards of directors as long as such activities do not constitute a conflict of interest or impair Executive's performance of the duties of the Employment.  Executive's employment is terminable at will at any time by either Executive or the Corporation, subject to the terms of this Agreement.

          3.          Severance Pay Entitlement.  Except as provided by Section 6(c), Executive will not be entitled to Severance Pay if her Employment terminates before the occurrence of a Change in Control (as defined in Section 6).  However, if, within two (2) years after a Change in Control:  (A) the Company terminates Executive's Employment other than for "Cause" (as defined in (a) below) or due to "Permanent Disability" (as defined in (b) below), or (B) Executive terminates her Employment for Good Reason (as defined in (c) below), the Corporation will pay Executive Severance Pay (as defined in Section 4 below).  Executive will not be entitled to Severance Pay under any circumstances if the Corporation terminates her Employment for Cause or due to Disability, or if Executive resigns other than for Good Reason, even if such termination of the Employment occurs within two (2) years after a Change in Control.

          (a)           Termination by Corporation for Cause.  The Corporation may terminate the Employment without Severance Pay for "Cause," defined as removal by order of a regulatory agency having jurisdiction over the Corporation or the Bank, or Executive's willful and repeated failure to perform her duties under this Agreement, which failure has not been cured within thirty (30) days after the Corporation gives Notice thereof to Executive; it being expressly agreed that negligence or bad judgment shall not constitute Cause so long as such act or omission is without intent of personal profit and is reasonably believed by Executive to be in or not adverse to the best interests of the Corporation.

          (b)           Termination by Corporation due to Disability.  The Corporation may terminate the Employment without Severance Pay due to Executive's "Permanent Disability," as defined and provided for in this Section 3(b).  If Executive has been unable by reason of physical or mental disability to properly perform her duties hereunder for a period of one hundred eighty (180) days, the Corporation may give Executive Notice of its intention to terminate the Employment due to Permanent Disability.  If Executive wishes to contest the existence of Permanent Disability, she must give the Corporation Notice of her disagreement within ten (10) days after receipt of the Notice from the Corporation, and she must promptly submit to examination by three

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physicians in the Coldwater, Michigan area who are reasonably acceptable to both Executive and the Corporation (with consultation from other physicians as determined by those three).  If (A) within sixty (60) days after receipt by Executive of the Notice from the Corporation, two of such physicians shall issue their written statement to the effect that in their opinion, based on their diagnosis, Executive is capable of resuming her employment and devoting her full time and energy to discharging her duties within sixty (60) days after the date of such statement, and (B) Executive does in fact within such sixty (60) day period resume the Employment and properly perform her duties hereunder, then the Employment shall not be terminated due to Permanent Disability.  It is understood that the Corporation has the right to terminate the Employment due to Executive's disability without meeting the standards in this Section 3(b), but in that event the termination shall be deemed to be a termination of the Employment by the Corporation without Cause.

          (c)          Termination by Executive for Good Reason After a Change in Control.  Executive may terminate the Employment for "Good Reason" after the occurrence of a Change in Control if there is a material negative change to the employment relationship between Executive and the Corporation because: (A) Executive is removed from her principal position; or (B) the status, authority or responsibility of Executive's principal position is materially diminished; or (C) Executive's Base Salary as then in effect is materially reduced; or (D) Executive's bonus opportunity is materially reduced; or (E) the overall value to Executive of the fringe benefit programs in which she participates (other than equity plans) is materially reduced from the overall value of the fringe benefit programs applicable to Executive immediately before the Change in Control; or (F) any requirement of the Corporation that Executive be based anywhere other than in Branch County or contiguous counties or any substantial increase in the business travel required of Executive; or (G) any material breach by the Corporation or the Bank or any successor of their obligations to Executive under this Agreement.

          Executive may not terminate the Employment for "Good Reason" unless:

          i.          Executive notifies the Board in writing, within ninety (90) days after Executive becomes aware of the act or omission constituting Good Reason that the act or omission in question constitutes Good Reason and explaining why Executive considers it to constitute Good Reason;

          ii.          the Corporation fails, within thirty (30) days after Notice from Executive under (i) above, to revoke the action or correct the omission and make Executive whole; and

          iii.          Executive gives notice of termination within ninety (90) days after expiration of the thirty (30) day period under (ii) above.

          4.          Severance Pay.  The Corporation will pay and provide Executive with the payments and benefit continuation provided in this Section 4 ("Severance Pay") if Executive's Employment is terminated during the term of this Agreement in a manner that constitutes a "separation from service" as that term is defined by Section 409A of the Internal Revenue Code

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and the termination occurs under circumstances entitling Executive to Severance Pay as provided in Section 3.

          (a)            Amount and Duration of Severance Pay.  Subject to the other provisions of this Section, Severance Pay will consist of:

          i.          Salary Continuation.  Continuation of Executive's Salary for fifty-two (52) weeks following the week in which the Employment terminates (the "Severance Pay Period"), subject to required payroll withholding; and

          ii.          Health Coverage Continuation.  Reimbursement by the Corporation of expenses incurred by Executive to continue Executive's then current employee and dependent health, dental, and prescription drug coverage under COBRA during the Severance Pay Period, provided (A) that Executive elects and remains eligible for COBRA continuation coverage; (B) that Executive continues to pay the normal employee contribution for such coverage; (C) that the Corporation's obligation to provide coverage will end if Executive becomes eligible for comparable coverage from a new employer; and (D) that reimbursements under this Section will be made within thirty (30) days after Executive submits documentation of the reimbursable expense, but may not be made after the last day of the calendar year following the calendar year in which Executive's Employment terminates; and

          iii.          Outplacement Assistance.  Reimbursement of up to $2,500 of outplacement assistance from an outplacement assistance firm selected by Executive and approved by the Corporation (whose approval shall not be unreasonably withheld).  Expenses must be incurred under this Section by the last day of the second calendar year following the calendar year in which Executive's Employment terminates.  Such expenses will be reimbursed within thirty (30) days after Executive submits documentation of the expenses, provided that payments may not be made after the last day of the third calendar year following the calendar year in which Executive's Employment  terminates.

          Executive will receive the Salary continuation provided in Section 4(a)(i) notwithstanding any other earnings that Executive may have, and subject to offset only as provided in Section 4(c). If Executive dies during the Severance Pay Period, Salary continuation under Section 4(a)(i) will continue for the remainder of the Severance Pay Period for the benefit of Executive's designated beneficiary (or Executive's estate if Executive fails to designate a beneficiary), and health coverage continuation under Section 4(a)(ii) will continue for Executive's eligible dependants for the remainder of the Severance Pay Period provided that such dependants remain eligible for COBRA coverage and continue to pay the Corporation an amount equal to the normal employee contribution for health care coverage subject to the conditions in Sections 4(a)(ii) (A) and (B).

          (b)           Conditions to Severance Pay.  To be eligible for Severance Pay, Executive must meet the following conditions: (i) Executive must comply with

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Executive's obligations under this Agreement that continue after termination of the Employment; and (ii) Executive must resign upon written request by Corporation from all positions with or representing the Corporation or any Affiliate, including but not limited, to membership on boards of directors; and (iii) Executive must provide the Corporation for a period of thirty (30) days after the Employment termination date with consulting services regarding matters within the scope of Executive's former duties upon request by the Corporation's Chief Executive Officer; provided, however, that Executive will only be required to provide those services by telephone at Executive's reasonable convenience and without substantial interference with Executive's other activities or commitments.

          (c)           Reductions to Severance Pay.  The Severance Pay due to Executive under Section 4(a)(i) for any week will be reduced (but not below 0) by: (i) any disability benefits to which Executive is entitled for that week under any disability insurance policy or program of the Corporation or any Affiliate (including but not limited to worker's disability compensation); (ii) any severance pay payable to Executive under any other agreement or Corporation policy; and (iii) any payment due to Executive under the Federal Worker Adjustment and Retraining Notification Act or any comparable state statute or local ordinance.

          5.          Section 280G and 409A.  If it is determined that any amount paid under this Agreement, either separately or in conjunction with any other payments, benefits and entitlements received by Executive hereunder or under any other plan or agreement under which Executive participates or to which she is a party, would constitute an "Excess Parachute Payment" within the meaning of Section 280G of the Internal Revenue Code of 1986 ("Code"), and would thereby be subject to the excise tax imposed by Section 4999 of the Code, then in such event the payments to Executive under Section 4 will be reduced to the extent necessary to eliminate any "Excess Parachute Payment."

                    This Agreement is intended to be exempt from Section 409A of the Code as an involuntary separation pay plan as that term is understood under Treasury Regulation §1.409A-1(b)(9) and shall be interpreted and operated consistently with those intentions.  The preceding sentence is not to be interpreted to require the reduction in any benefits under this Agreement to avoid the application of Section 409A of the Code to this Agreement.

          6.          Definition of Change in Control.  As used in this Agreement, the term "Change in Control" means any of the occurrences listed in (a) below, subject to (b) and (c) below.

          (a)           A Change in Control shall be deemed to have occurred if:

          i.          Any person or group (as such terms are used in connection with Sections 13(d) and 14(d) of the Securities Exchange Act) becomes the "beneficial owner" (as defined in Rule 13(d)(3) and 13(d)(5) under the Exchange Act), directly or indirectly, of securities of the Corporation representing fifty percent (50%) or more of the combined voting power of the Corporation's then outstanding securities;

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          ii.          A merger, consolidation, sale of assets, reorganization, or proxy contest is consummated and, as a consequence of which, members of the Corporation's Board of Directors in office immediately prior to such transaction or event constitute less than a majority of the Board of Directors thereafter;

          iii.          During any period of twenty-four (24) consecutive months, individuals who at the beginning of such period constitute the Board of Directors of the Corporation (including for this purpose any new director whose election or nomination for election by the Corporation's stockholders was approved by a vote of at least one-half of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board of Directors; or

          iv.          A merger, consolidation or reorganization is consummated with any other corporation pursuant to which the shareholders of the Corporation immediately prior to the merger, consolidation or reorganization do not immediately thereafter directly or indirectly own more than fifty percent (50%) of the combined voting power of the voting securities entitled to vote in the election of directors of the merged, consolidated or reorganized entity.

          (b)           Notwithstanding the foregoing, no trust department or designated fiduciary or other trustee of such trust department of the Corporation or a subsidiary of the Corporation, or other similar fiduciary capacity of the Corporation with direct voting control of the stock shall be treated as a person or group within the meaning of subsection (a)(i) hereof. Further, no profit-sharing, employee stock ownership, employee stock purchase and savings, employee pension, or other employee benefit plan of the Corporation or any of its subsidiaries, and no trustee of any such plan in its capacity as such trustee, shall be treated as a person or group within the meaning of subsection (a)(i) hereof.

          (c)           Notwithstanding anything contained in this Agreement to the contrary, if Executive's Employment is terminated prior to a Change in Control and Executive reasonably demonstrates that such termination was at the request of or in response to a third party who has indicated an intention or taken steps reasonably calculated to effect a Change in Control (a "Third Party"), and who subsequently effectuates a Change in Control, then for all purposes of this Agreement, the date of a Change in Control shall mean the date immediately prior to the date of such termination of Executive's Employment.

          7.           Definition of "Active Change in Control Proposal Period."  As used in this Agreement the term "Active Change in Control Proposal Period" shall mean any period:

(A)           during which the Board of Directors of the Corporation has authorized solicitation by the Corporation of offers for a transaction which, if consummated, would constitute a Change in Control; or

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(B)           during which the Corporation has received a proposal for a transaction which, if consummated, would constitute a Change in Control, and the Board of Directors has not determined to reject such proposal without any counter-offer or further discussions; or

(C)           during which any proxy solicitation or tender offer with regard to the securities of the Corporation is ongoing, if the intent of such proxy solicitation or tender offer is to cause the Corporation to solicit offers for or enter into a transaction that would constitute a Change in Control.

          8.          Confidentiality, Return of Property.  Executive has obtained and may obtain confidential information concerning the business, operations, financial affairs, organizational and personnel matters, policies, procedures and other non-public matters of Corporation and its Affiliates, and those of third parties that is not generally disclosed to persons not employed by Corporation or its subsidiaries. Such information (referred to herein as the "Confidential Information") may have been or may be provided in written form or orally.  Executive shall not disclose to any other person the Confidential Information at any time during or after termination of the Employment, except that during the Employment Executive may use and disclose Confidential Information as reasonably required by the Employment. Upon termination of the Employment, Executive will deliver to the Corporation any and all property owned or leased by the Corporation or any Affiliate and any and all Confidential Information (in whatever form) including without limitation all customer lists and information, financial information, business notes, business plans, documents, keys, credit cards and other Corporation-provided equipment. Executive's commitments in this Section will continue in effect after termination of the Employment and after termination of this Agreement. The parties agree that any breach of Executive's covenants in this Section would cause the Corporation irreparable harm, and that injunctive relief would be appropriate.

          9.          Inventions, Discoveries and Improvements.  Executive hereby agrees to assign and transfer to the Corporation, its successors and assigns, her entire right, title and interest in and to any and all inventions, discoveries, trade secrets and improvements thereto which she may discover to develop, either solely or jointly with others, during her Employment hereunder and for a period of one (1) year after termination of such Employment, which would relate in any way to the business of the Corporation or any Affiliate of the Corporation, together with all rights to letters patent, copyrights or trademarks which may be granted with respect thereto.  Immediately upon making or developing any invention, discovery, trade secret or improvement thereto, Executive shall notify the Corporation thereof and shall execute and deliver to the Corporation, without further compensation, such documents as may be necessary to assign and transfer to the Corporation her entire right, title and interest in and to such invention, discovery, trade secret or improvement thereto, and to prepare or prosecute applications for letters patent with respect to the same in the name of the Corporation. Executive's obligations under this Section 9 shall continue in effect, as to inventions, discoveries and improvements covered by this Section 9, notwithstanding any termination of the Employment or this Agreement.

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          10.           Successors; Binding Agreement.

          (a)          This Agreement shall not be terminated by any merger or consolidation of the Corporation whereby the Corporation is or is not the surviving or resulting corporation or as a result of any transfer of all or substantially all of the assets of the Corporation.  In the event of any such merger, consolidation, or transfer of assets, the provisions of this Agreement shall be binding upon the surviving or resulting corporation or the person or entity to which such assets are transferred.

          (b)          The Corporation agrees that concurrently with any merger, consolidation or transfer of assets constituting a Change in Control, it will cause any successor or transferee unconditionally to assume, by written instrument delivered to Executive (or her beneficiary or estate), all of the obligations of the Corporation hereunder.  Failure of the Corporation to obtain such assumption prior to the effective date of any Change in Control shall be a material breach of the Corporation's obligations to Executive under this Agreement.

          (c)          This Agreement shall inure to the benefit of and be enforceable by Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.  If Executive shall die while any amounts would be payable to Executive hereunder had Executive continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to such person or persons appointed in writing by Executive to receive such amounts or, if no person is so appointed, to Executive's estate.

          11.          Notice.  For purposes of this Agreement, all Notices and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given when delivered or received by facsimile transmission or five (5) days after deposit in the United States mail, certified and return receipt requested, postage prepaid, addressed as follows:

	
If to the Corporation:
	
51 West Pearl Street

Coldwater, MI 49036

	 	 
	
If to Executive:
	
290 Grand Street

Coldwater, MI 49036

Either party may change its address for Notices by Notice to the other party.

          12.          Amendment and Waiver.  No provisions of this Agreement may be amended, modified, waived or discharged unless the waiver, modification, or discharge is authorized by the Corporation's Board of Directors, or a committee of the Board of Directors, and is agreed to in a writing signed by Executive and by the Chief Executive Officer of the Corporation.  No waiver by either party at any time of any breach or non-performance of this Agreement by the other party shall be deemed a waiver of any prior or subsequent breach or non-performance.

          13.           Severability.  The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, which will remain in full force and effect.  If a court of competent jurisdiction ever determines

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that any provision of this Agreement (including, but not limited to, all or any part of the noncompetition covenant in this Agreement) is unenforceable as written, the parties intend that the provision shall be deemed narrowed or revised in that jurisdiction (as to geographic scope, duration, or any other matter) to the extent necessary to allow enforcement of the provision.  The revision shall thereafter govern in that jurisdiction, subject only to any allowable appeals of that court decision.

          14.          Dispute Resolution.

          (a)           Arbitration.  The Corporation and Executive agree that the sole and exclusive method for resolving any dispute between them arising out of or relating to this Agreement shall be arbitration under the procedures set forth in this Section; provided, however, that nothing in this Section prohibits a party from seeking preliminary or permanent judicial injunctive relief, or from seeking judicial enforcement of the arbitration award.  The arbitrator shall be selected pursuant to the Rules for Commercial Arbitration of the American Arbitration Association.  The arbitrator shall hold a hearing at which both parties may appear, with or without counsel, and present evidence and argument. Pre-hearing discovery shall be allowed in the discretion of and to the extent deemed appropriate by the arbitrator, and the arbitrator shall have subpoena power. The procedural rules for an arbitration hearing under this Section shall be the rules of the American Arbitration Association for Commercial Arbitration hearings and any rules as the arbitrator may determine. The hearing shall be completed within ninety (90) days after the arbitrator has been selected and the arbitrator shall issue a written decision within sixty (60) days after the close of the hearing.  The hearing shall be held in Coldwater, Michigan.  The award of the arbitrator shall be final and binding and may be enforced by and certified as a judgment of the Circuit Court for Branch County, Michigan or any other court of competent jurisdiction.  One-half of the fees and expenses of the arbitrator shall be paid by the Corporation and one-half by Executive, except that the fees and expenses of the Arbitrator incurred by Executive shall be reimbursed in full by the Corporation with respect to any arbitration initiated after the date of a Change in Control. The attorney fees and expenses incurred by the parties shall be paid by each party, except that the Corporation shall reimburse Executive's reasonable attorney fees incurred with regard to any arbitration proceeding initiated after a Change in Control unless the arbitrator finds that Executive's claims or defenses in such proceeding lack merit and were asserted in bad faith.  Any such reimbursement will be made within thirty (30) days after Executive submits documentation of such expenses, provided that no payment will be made after the last day of the calendar year following the calendar year in which the expense was incurred.

          15.           Entire Agreement.  No agreements or representations, oral or otherwise, express or implied, with respect to Executive's Employment with the Corporation or any of the subjects covered by this Agreement have been made by either party that are not set forth expressly in this Agreement, and this Agreement supersedes any pre-existing agreements on the subjects covered by this Agreement.

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          16.           Governing Law.  The validity, interpretation, and construction of this Agreement are to be governed by Michigan laws, without regard to choice of law rules.  The parties agree that any judicial action involving a dispute arising under this Agreement will be filed, heard and decided in the Branch County Circuit Court.  The parties agree that they will subject themselves to the personal jurisdiction and venue of the court, regardless of where Executive or the Corporation may be located at the time any action may be commenced. The parties agree that the location specified above is a mutually convenient forum and that each of the parties conducts business in Branch County.

          17.           Counterparts.  This Agreement may be signed in original or by fax in counterparts, each of which shall be deemed an original, and together the counterparts shall constitute one complete document.

The parties made this Agreement effective as of the Effective Date in Section 1.

SOUTHERN MICHIGAN BANCORP, INC.

	
By:
	 
	 	 

	 	 	 	
DANICE CHARTRAND

	
Its:
	 
	 	 
	 	 	 	 
	 	
"Corporation"
	 	
"Executive"

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