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                                                                   EXHIBIT 10.16

                           THE SPORTSMAN'S GUIDE, INC.

                             1999 STOCK OPTION PLAN

         1. PURPOSE. The purpose of this Plan is to advance the interests of The
Sportsman's Guide, Inc., a Minnesota corporation (the "Company") by providing an
opportunity to selected key employees of the Company to purchase stock of the
Company through the exercise of options granted under this Plan. By encouraging
such stock ownership, the Company seeks to attract, retain and motivate key
employees of training, experience and ability, and to encourage the judgment,
initiative and efforts of such employees for the successful conduct of the
Company's business. It is intended that these purposes will be effected by the
granting of stock options as provided herein which will qualify as "incentive
stock options" under the provisions of Section 422 (or its successor provisions)
of the Internal Revenue Code of 1986 (the "Code"), and options which do not
qualify as incentive stock options under the Code ("nonqualified options").

         2. STOCK SUBJECT TO THE PLAN. The total number of shares that may be
subject to options granted under this Plan shall not exceed 600,000 shares of
the Common Stock of the Company, $.01 par value ("Common Stock"). Shares subject
to an option which for any reason expires or is terminated unexercised as to
such shares may again be the subject of an option under the Plan. The shares
delivered upon exercise of options granted under this Plan may be either
authorized but unissued shares or issued shares reacquired by the Company.

         3. ADMINISTRATION. The Plan shall be administered by the Compensation
Committee of the Board of Directors of the Company or such other committee
designated by the Board (the "Committee") consisting of two or more directors
who shall be appointed by and shall serve at the pleasure of the Board. Subject
to the provisions of this Plan, the Committee shall have full power to construe
and interpret the Plan and to establish, amend and rescind rules and regulations
for its administration. The Committee shall recommend to the Board of Directors
the individuals to whom and the times at which options shall be granted, the
designation of each option as an incentive stock option or a nonqualified
option, and the number of shares subject to each option. Any such construction,
rule determination or other action taken by the Committee pursuant to the Plan
shall be binding and conclusive upon the approval by the Board of Directors.

         Actions by a majority of the Committee at a meeting at which a quorum
is present, or actions approved in writing by all of the members of the
Committee, shall be the valid acts of the Committee. No member of the Board of
Directors or the Committee shall be liable for any action or determination made
in good faith with respect to the Plan or any option granted under it.

         4. ELIGIBLE EMPLOYEES. Options may be granted by the Board of Directors
to such key employees of the Company, including members of the Board of
Directors who are also employees of the Company, as are selected by the
Committee. The maximum number of shares subject to options which may be granted
to any individual shall be the total number of shares available under the Plan.

         5. TERMS AND CONDITIONS OF OPTIONS. All options granted under this Plan
shall be evidenced by stock option agreements in such form and not inconsistent
with the Plan as the Com-

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mittee shall approve from time to time, which agreements shall include, but not
be limited to, the following terms and conditions:

               (a) Price. The purchase price per share of stock payable upon the
exercise of each option granted hereunder shall not be less than the fair market
value of the stock on the date the option is granted. If at the time of grant of
an incentive stock option the optionee owns stock possessing more than 10% of
the combined voting power of all classes of stock of the Company, such purchase
price per share shall not be less than 110% of the fair market value of the
stock on the date the option is granted. Such fair market value shall be
determined in accordance with procedures established by the Committee conforming
to regulations issued by the Internal Revenue Service with regard to incentive
stock options.

               (b) Number of Shares. Each option agreement shall specify the
number of shares to which it pertains.

               (c) Exercise of Options. Each option shall be exercisable for the
full amount or for any part thereof and at such intervals or in such
installments as the Board of Directors may determine at the time it grants such
option. No option shall be exercisable with respect to any shares later than ten
years after the date of grant of the option. If at the time of grant of an
incentive stock option the optionee owns stock possessing more than 10% of the
combined voting power of all classes of stock of the Company, such option shall
be exercisable no later than five years after the date of grant.

               (d) Notice of Exercise and Payment. An option shall be
exercisable by delivery of a written notice to the Secretary of the Company
specifying the number of shares for which it is exercised. If the shares are not
at the time registered under the Securities Act of 1933, the optionee shall
include with such notice a letter, in form and substance satisfactory to the
Company, confirming that the shares are being purchased for the optionee's own
account for investment and not with a view to distribution. The exercise price
and any withholding obligations under applicable tax laws shall be paid in full
at the time of delivery of the notice of exercise, either by (i) cashier's,
certified or personal check, (ii) if permitted by a vote of the Board of
Directors by delivery and assignment to the Company of shares of Common Stock or
(iii) by a combination of (i) and (ii). The value of the Company stock for such
purpose shall be its fair market value as of the date the option is exercised.

               (e) Non-Transferability. No option shall be transferable by the
optionee otherwise than by will or the laws of descent and distribution, and
each option shall be exercisable during the lifetime of the optionee only by him
or her, except that the Committee may, in its discretion, authorize options
granted under this Plan to be on terms which permit the optionee to transfer the
option to family members of the optionee, trusts for the benefit of such family
members, family limited partnerships or other persons or entities.

               (f) Termination of Options. Each option shall terminate and may
no longer be exercised if the optionee ceases for any reason to be an employee
of the Company, except that:

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                    (i) If the optionee's employment shall have terminated for
                    any reason other than cause, disability (as defined below)
                    or death, the optionee may at any time within a period of
                    three months after such termination of employment exercise
                    the option to the extent the option was exercisable by the
                    optionee on the date of termination of employment.

                    (ii) If the optionee's employment shall have been terminated
                    because of disability within the meaning of Section 22(e)(3)
                    of the Code, the optionee may at any time within a period of
                    one year after such termination of employment exercise the
                    option to the extent the option was exercisable by the
                    optionee on the date of termination of employment.

                    (iii) If the optionee dies at a time when the option was
                    exercisable by the optionee, the optionee's estate, personal
                    representative or beneficiary to whom it has been
                    transferred pursuant to Section 5(e) hereof may, within six
                    months following the death, exercise the option to the
                    extent the option might have been exercised at the time of
                    the optionee's death.

                    (iv) No option may be exercised to any extent by anyone
                    after the expiration date of the option.

               (g)  Rights as Shareholder. The optionee shall have no rights as
a shareholder with respect to any shares covered by an option until the date of
issuance of a stock certificate to the optionee for such shares.

         6.    TREATMENT OF CERTAIN INCENTIVE STOCK OPTIONS. To the extent that
the aggregate fair market value (determined as of the date the option is
granted) of shares with respect to which one or more incentive stock options
first become exercisable by an optionee in any calendar year exceeds $100,000,
taking into account shares subject to incentive stock options under this Plan
and shares subject to incentive stock options under all other plans of the
Company or other entities referenced in Section 422(d)(1) of the Code, the
options shall be treated as nonqualified stock options.

         7.    STOCK DIVIDENDS; STOCK SPLITS; COMBINATIONS; RECAPITALIZATIONS.
Appropriate adjustment shall be made in the maximum number of shares of Common
Stock subject to the Plan and in the number, kind and option price of shares
covered by outstanding options granted hereunder to give effect to any stock
dividends or other distribution, stock splits, stock combinations,
recapitalizations and other similar changes in the capital structure of the
Company after the effective date of the Plan.

         8.    MERGER; SALE OF ASSETS; DISSOLUTION. In the event of a change of
the Common Stock resulting from a merger or similar reorganization as to which
the Company is the surviving corporation, the number and kind of shares which
thereafter may be optioned and sold under the Plan and the number and kind of
shares then subject to options granted hereunder and the price per share thereof
shall be appropriately adjusted in such a manner as the Committee may deem
equitable to prevent substantial dilution or enlargement of the rights available
or granted here-

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under. If the Company at any time should dissolve, sell all or substantially all
of its assets, undergo a reorganization, or merge or consolidate with any
corporation and the Company is not the surviving corporation, then (unless in
the case of a reorganization, merger or consolidation the surviving corporation
assumes the optionees' rights under the Plan or issues substantially equivalent
substitute rights in place thereof) each optionee shall be notified by the
Company of his or her right to exercise all outstanding options (both vested and
unvested) prior to any such dissolution, sale, reorganization, merger or
consolidation. The failure to exercise such outstanding options within 30 days
of such notification shall cause the options to be terminated.

         Notwithstanding the foregoing, in the case of an incentive stock
option, no adjustment shall be made pursuant to Section 7 or 8 hereof which
would cause the Plan to violate Section 424(a) of the Code or any successor
provisions thereto, without the written consent of the optionee adversely
affected thereby.

          9. AMENDMENT OR TERMINATION OF PLAN. The Board of Directors may at any
time amend or terminate the Plan or alter or amend any outstanding stock option
agreements under the Plan in any manner it deems advisable, provided that no
such action shall adversely affect or impair any then outstanding option without
the consent of the optionee holding such option.

         10. EFFECT OF THE PLAN ON EMPLOYMENT RELATIONSHIP. The establishment of
the Plan shall in no way, now or hereafter, reduce, enlarge or modify the
employment relationship between the Company and the optionee, except that any
options granted under the Plan shall be subject to the provisions of any
employment agreement between the Company and the optionee. Nothing contained in
the Plan shall be construed as conferring upon any optionee any right to
continued employment with the Company or to give any employee any right to
participate in the Plan or to receive options. The granting of options under the
Plan shall be entirely discretionary with the Board of Directors.

         11. EFFECTIVE DATE; DURATION OF PLAN. This Plan was adopted by the
Board of Directors as of February 11, 1999, subject to approval by the
shareholders of the Company, and shall become effective upon shareholder
approval. The Plan shall remain in effect until discontinued by the Board of
Directors, except that no incentive stock option may be granted under the Plan
after May 10, 2009.

         12. DEFINITIONS.

             (a) The term "key employees" means those executive, administrative,
operational or managerial employees of the Company who are determined by the
Committee to be eligible for options under this Plan.

             (b) The term "optionee" means a key employee to whom an option is
granted under this Plan.

As approved by shareholders effective May 10, 1999.

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                                                                   EXHIBIT 10(b)

                         SOUTHERN MICHIGAN BANCORP, INC.

                             2000 STOCK OPTION PLAN

         1.   Purpose. The purpose of the Southern Michigan Bancorp, Inc. 2000
Stock Option Plan (this "Plan") is to advance the interests of Southern Michigan
Bancorp, Inc., a Michigan corporation (the "Corporation"), and its subsidiaries
by providing a larger personal and financial interest in the success of the
Company and its subsidiaries to employees and directors upon whose judgment,
interest and special efforts the Company and its subsidiaries are dependent for
the successful conduct of its and their operations and to enable the Company and
its subsidiaries to attract and retain key employees and directors.

         2.   Participants. Options may be granted under this Plan to any
employee or director of the Company and its subsidiaries. The employees and
directors of the Company and its subsidiaries to whom options are granted and
the terms of such options shall be determined by the Board of Directors. A
grantee may hold more than one option. Nothing contained in this Plan, nor in
any option granted pursuant to this Plan, shall confer upon any employee or
director any right to the continuation of his or her employment or directorship
nor limit in any way the right of the Company or its subsidiaries to terminate
such employment or directorship at any time. As used herein, the term
"subsidiary" shall mean any present or future entity that is controlled by the
Company, directly or through one or more intermediaries.

         3.   Effectiveness and Termination of Plan. This Plan shall become
effective upon approval thereof by the shareholders of the Company at a meeting
held, among other things, for such purpose. The adoption date of this Plan shall
be March 20, 2000, the date of its adoption by the Board of Directors of the
Company. This Plan shall terminate on the earliest of: (i) ten (10) years from
its adoption date; (ii) when all shares of Common Stock (as defined in Section 4
hereof) that may be issued under this Plan shall have been issued through
exercise of options granted under this Plan; or (iii) at any earlier time that
the Board of Directors may determine. Any option outstanding under this Plan at
the time of its termination shall remain in effect in accordance with its terms
and conditions and those of this Plan.

         4.   Common Stock. The aggregate number of shares of common stock,
$2.50 par value per share, of the Company (the "Common Stock") that may be
issued under this Plan shall consist of 110,000 shares, subject to further
adjustment as provided in Section 7 hereof. Such number of shares may be set
aside out of the authorized but unissued shares of Common Stock of the Company
not reserved for any other purpose or out of shares of Common Stock acquired by
the Company. All or any shares of Common Stock subjected under this Plan to an
option that, for any reason, is canceled, terminates, lapses or expires
unexercised as to such shares may again be subjected to an option under this
Plan.

         5.   Types of Options and Terms and Conditions.

              (a)  Options granted under this Plan shall be in the form of: (i)
incentive stock options ("Incentive Stock Options") as defined in Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"); or (ii) options not
qualifying under Section 422 of the Code ("Nonstatutory Stock Options"), all in
such amounts as determined by the Board of Directors.

              (b)  Options may be granted at any time and from time to time
prior to the termination of this Plan. Except as hereinafter provided, all
options granted pursuant to this Plan shall be subject to the following terms
and conditions:

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              (i)   Price. The purchase price of the shares of Common Stock
         issuable upon exercise of options granted under this Plan shall be not
         less than 100% of the fair market value of the Common Stock on the date
         of the grant of the option. For purposes of this Plan, "fair market
         value" of the Common Stock shall mean: (A) the mean between the closing
         high bid and low asked prices as reported by the National Association
         of Securities Dealers Automated Quotation System (or, if not so
         reported, by the system then regarded as the most reliable source of
         such quotation); or (B) if the Common Stock is quoted in the domestic
         over-the-counter market, but there are not reported quotations on the
         given date, the value determined pursuant to (A) above using the
         reported quotations on the last previous date on which so reported; or
         (C) if neither of the foregoing clauses apply, the price determined in
         good faith by the Board of Directors.

         The purchase price shall be paid in full at the time of such purchase,
         in: (A) cash; (B) shares of Common Stock of the Company valued at the
         fair market value of the Common Stock on the date of purchase; or (C)
         any combination of cash and Common Stock. Notwithstanding the
         foregoing, the Board of Directors may, in order to prevent any possible
         violation of law, require the purchase price to be paid in cash and
         further provide that the right to deliver Common Stock in payment of
         the purchase price may be limited or denied in any Option Agreements
         (as defined in Section 11 hereof). The purchase price shall be subject
         to adjustment, but only as provided in Section 7 hereof.

              (ii)  Duration and Exercise of Options. Options may be granted for
         terms of up to but not exceeding ten (10) years from the date the
         particular option is granted. Options shall be exercisable as provided
         by the Board of Directors at the time of grant thereof.

              (iii) Termination of Employment or Service as a Director. Upon the
         termination of the grantee's employment or service as a director, his
         or her rights to exercise an option shall be only as follows:

                    (1)  Death, Disability or Retirement. If the grantee's
              employment or service as a director is terminated by reason of
              death or disability (as described in Section 22(e)(3) of the
              Code), the grantee or the grantee's estate may, within one (1)
              year following such termination, exercise the option with respect
              to only such number of shares of Common Stock as to which the
              right of exercise had accrued on or before the last day on which
              the grantee was either an employee or director of the Company or
              any subsidiary. If the grantee's employment or service as a
              director is terminated by reason of retirement, the grantee or the
              grantee's estate (in the event of the grantee's death after such
              termination) may, within three (3) months following such
              termination, exercise the option with respect to only such number
              of shares of Common Stock as to which the right of exercise had
              accrued on or before the last day on which the grantee was either
              an employee or director of the Company or any subsidiary. For
              purposes of this Plan, "retirement" shall mean termination of
              employment or service as a director with the Company and/or its
              subsidiaries on or after the grantee's 65th birthday or the
              grantee's 60th birthday if the grantee has completed ten (10)
              years of service with the Company and/or its subsidiaries.

                    (2)  Other Reasons. If the grantee ceases to be an employee
              or director for any reason other than those provided above under
              "Death, Disability or Retirement," the grantee or the grantee's
              estate (in the event of the grantee's death after such
              termination) may, within the one (1) month period following such
              termination, exercise the option with respect to only such number
              of shares of Common Stock as to which the right of exercise had
              accrued on or before the last day on which the grantee was either
              an employee or director of the Company or any subsidiary.

                    (3)  General. Notwithstanding the foregoing, no option shall
              be exercisable in whole or in part: (A) after the termination date
              provided in the option; or (B) except as provided in the

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              second paragraph of Section 10, for one (1) year following the
              date the option was granted. A grantee's "estate" shall mean the
              grantee's legal representatives upon the grantee's death or any
              person who acquires the right under the laws of descent and
              distribution to exercise an option by reason of the grantee's
              death.

              (iv)  Transferability of Option. Except as otherwise provided
         herein, options shall be transferable only by will or the laws of
         descent and distribution and shall be exercisable during the grantee's
         lifetime only by him or her. An option and all rights thereunder shall
         terminate immediately if the holder attempts to or does sell, assign,
         transfer, pledge, hypothecate or otherwise dispose of the option or any
         rights thereunder to any person except as permitted herein.

              (v)  Other Terms and Conditions. Options may also contain such
         other provisions, which shall not be inconsistent with any of the
         foregoing terms, as the Board of Directors shall deem appropriate.

              (c)  Incentive Stock Options granted pursuant to this Plan shall
be subject to all the terms and conditions included in subsection (b) and to the
following terms and conditions:

              (i)   No Incentive Stock Option shall be granted to an individual
         who is not an employee of the Company or a "subsidiary corporation" as
         defined in Section 424(f) of the Code;

              (ii)  No Incentive Stock Option shall be granted to an employee
         who owns stock possessing more than 10% of the total combined voting
         power of all classes of stock of the Company unless the grant complies
         with the requirements of Section 422(c)(5) of the Code;

              (iii) The aggregate fair market value (determined as of the date
         the option is granted) of the shares of Common Stock with respect to
         which Incentive Stock Options are exercisable for the first time by any
         grantee during any calendar year (under all plans of the Company) shall
         not exceed $100,000 or such other amount as may subsequently be
         specified by the Code; provided that, to the extent that such
         limitation is exceeded, any excess options (as determined by the Code)
         shall be deemed to be Nonstatutory Stock Options; and

              (iv)  No Incentive Stock Option may be granted under this Plan if
         such grant, together with any applicable prior grants that are
         Incentive Stock Options within the meaning of Section 422(b) of the
         Code, would exceed any maximum established under the Code for incentive
         stock options that may be granted to an individual employee.

         6.   Rights of a Shareholder. A recipient of an option shall have no
rights as a shareholder with respect to any shares issuable or transferable upon
exercise thereof until the date of issuance of a stock certificate for such
shares. Except as otherwise provided pursuant to Section 7 hereof, no adjustment
shall be made for dividends or other rights for which the record date is prior
to the date of such stock certificate.

         7.   Adjustment of and Changes in Common Stock. In the event that the
shares of Common Stock of the Company, as presently constituted, shall be
changed into or exchanged for a different number or kind of shares of stock or
other securities of the Company or of another corporation (whether by reason of
merger, consolidation, recapitalization, reclassification, split-up, combination
of shares, or otherwise) or if the number of such shares of Common Stock shall
be increased through the payment of a stock dividend or a dividend on the shares
of Common Stock of rights or warrants to purchase securities of the Company
shall be made, then there shall be substituted for or added to each share of
Common Stock theretofore appropriated or thereafter subject or that may become
subject to an option under this Plan, the number and kind of shares of stock or
other securities into which each outstanding share of Common Stock of the
Company shall be so changed, or for

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which each such share shall be exchanged, or to which each such share shall be
entitled, as the case may be, and references herein to the Common Stock shall be
deemed to be references to any such stock or other securities as appropriate.
Outstanding options shall also be appropriately amended as to price and other
terms as may be necessary to reflect the foregoing events. In the event there
shall be any other change in the number or kind of the outstanding shares of the
Common Stock of the Company, or of any stock or other securities into which such
Common Stock shall have been changed or for which it shall have been exchanged,
then if the Board of Directors shall, in its sole discretion, determine that
such change equitably requires an adjustment in any option theretofore granted
or that may be granted under this Plan, such adjustments shall be made in
accordance with such determination. Fractional shares resulting from any
adjustment in options pursuant to this Section 7 may be settled in cash or
otherwise as the Board of Directors shall determine. Notice of any adjustment
shall be given by the Company to each holder of an option that shall have been
so adjusted and such adjustment (whether or not such notice is given) shall be
effective and binding for all purposes of this Plan. Any options granted or
which may be granted pursuant to this Plan, and which such options are or are
intended to be Incentive Stock Options within the meaning of Section 422 of the
Code, shall, to the extent it is reasonably feasible to do so (determined in the
sole discretion of the Board of Directors), be adjusted or modified pursuant to
this Section 7 in a manner which will allow such options to continue to be
classified as Incentive Stock Options within the meaning of Section 422 of the
Code or successor legislation.

         8.   Securities Act Requirements. No option granted pursuant to this
Plan shall be exercisable in whole or in part, and the Company shall not be
obligated to sell any shares of Common Stock subject to any such option, if such
exercise and sale would, in the opinion of counsel for the Company, violate the
Securities Act of 1933 (or other Federal or State statutes having similar
requirements), as in effect at that time. Each option shall be subject to the
further requirement that, if at any time the Board of Directors shall determine
in its discretion that the listing or qualification of the shares of Common
Stock subject to such option under any securities exchange requirements or under
any applicable law, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition of, or in connection with, the
issue of shares thereunder, such option may not be exercised in whole or in part
unless such listing, qualification, consent or approval shall have been effected
or obtained free of any conditions not acceptable to the Board of Directors.

         9.   Withholding. Appropriate provision (which may, in accordance with
rules determined by the Board of Directors, include the election by the grantee
to have the Company withhold from the Common Stock to be issued upon exercise of
an option a number of shares having an aggregate fair market value that would
satisfy the withholding amount due or to deliver to the Company shares of Common
Stock already owned having such aggregate fair market value to satisfy the
withholding amount) shall be made for all taxes required to be withheld from
shares of Common Stock issued under this Plan under the applicable laws or other
regulations of any governmental authority, whether federal, state or local, and
domestic or foreign. To that end, the Company may at any time take such steps as
it may deem necessary or appropriate (including sale or retention of shares) to
provide for payment of such taxes.

         10.   Administration and Amendment of Plan. The Board of Directors from
time to time may adopt rules and regulations for carrying out this Plan. The
interpretation and construction by the Board of Directors of any provision of
this Plan or any option granted pursuant hereto shall be final and conclusive.
No member of the Board of Directors shall be liable for any action or
determination made in good faith with respect to this Plan or any option granted
pursuant thereto. The Board of Directors may from time to time make such changes
in and additions to this Plan as it may deem proper and in the best interests of
the Company, without further action on the part of the shareholders of the
Company except as required by law, regulation or by the rules of the principal
trading market of the Company's Common Stock at that time; provided, however,
that, unless the shareholders of the Company shall have first approved thereof:
(i) except as provided in Section 7 hereof, the total number of shares of Common
Stock subject to this Plan shall not be increased and the minimum purchase price
shall not be changed; (ii) no option shall be exercisable more than ten (10)
years after the date it is granted; and (iii) the expiration date of this Plan
shall not be extended.

<PAGE>   5

         The Board of Directors shall have the power, in the event of any
disposition of substantially all of the assets of the Company, its dissolution
or of any consolidation or merger of the Company with and into any other
corporation, to amend all outstanding options to permit the exercise of all such
options prior to the effectiveness of any such transaction and to terminate such
options as of such effectiveness. If the Board of Directors shall exercise such
power, all options then outstanding and subject to such requirement shall be
deemed to have been amended to permit the exercise thereof in whole or in part
by the grantee at any time or from time to time as determined by the Board of
Directors prior to the effectiveness of such transaction and such options shall
be deemed to terminate upon such effectiveness.

         11.  Miscellaneous.

              (a)   Separate Plan. This Plan is separate and independent from
any other stock option plan or similar plan of the Company.

              (b)   Option Agreements. Options granted hereunder shall be
evidenced by option agreements ("Option Agreements") containing such terms and
conditions as the Board of Directors shall establish from time to time
consistent with this Plan. Option Agreements need not be identical but each
Option Agreement shall contain, without limitation, language including the
substance of the following provisions:

              (i)   Number of Shares and Exercise Price. Each Option Agreement
         shall state the number of shares to which it pertains and the exercise
         price therefor.

              (ii)  Exercise of Options. Options may be exercised only in
         accordance with the terms of each Option Agreement which shall include
         the period of time during which the option may be exercised.

              (iii) Method of Exercise and Payment of Purchase Price. An option
         may be exercised, as to all or part of the shares covered by the
         option, by the grantee delivering to the Board of Directors: (A) a
         written notice identifying the option being exercised, stating the
         number of shares being purchased and enclosing payment to the Company
         of the purchase price for the number of shares being exercised; and (B)
         such items as the Company may reasonably request. If the option is
         being exercised by any person or persons other than the grantee, the
         written notice exercising the option shall be accompanied by
         appropriate proof of the right of such person or persons to exercise
         the option.

              (iv)  Additional Terms and Conditions. The Board of Directors may
         specify such additional terms and conditions as it deems appropriate.

              (c)   Loans.  Subject to the sole discretion of the Board of
Directors, the Company may loan the grantee funds to finance the exercise of any
option.

              (d)   Governing Law.  This Plan and the Option Agreements shall be
interpreted and enforced in accordance with the laws of the State of Michigan.

         IN WITNESS WHEREOF, this Plan has been executed by the Company on the
20th day of March, 2000.

                                  SOUTHERN MICHIGAN BANCORP, INC.

                                  By:   /s/ James T. Grohalski
                                        ----------------------------------------
                                        James T. Grohalski
                                  Its:  President and Chief Executive Officer

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