Document:

Southern Michigan Exhibit 10.1 to Form 8-K - 12/19/07

EXHIBIT 10.1

SOUTHERN MICHIGAN BANK & TRUST

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

SOUTHERN MICHIGAN BANK & TRUST

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

ARTICLE 1

Establishment of Plan

1.1          Establishment of Plan.

          Southern Michigan Bank & Trust ("Employer") hereby adopts the Southern Michigan Bank & Trust Supplemental Executive Retirement Plan, a supplemental nonqualified plan for a select group of management personnel employed by Employer and any subsidiary of Employer. This plan is intended to be a plan described in Sections 201(2), 301(a)(3), and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). This plan is a nonqualified supplemental executive retirement program that is not subject to the limitations applicable to benefits provided through an employee benefit plan established under Section 401(a) of the Internal Revenue Code of 1986 ("Code").

1.2          Effective Date.

          The "Effective Date" of this plan is January 1, 2008, unless a provision of this plan specifies a different effective date. Each plan provision applies until the effective date of an amendment of that provision.

1.3          Application to Former Participants.

          Except to the extent it amends a provision of the plan that applies to former Participants or expressly states that it is applicable to former Participants, an amendment to this plan (including changes included in any restatement of the plan) shall not apply to a former Participant. If a former Participant returns to employment with the Employer after the effective date of an amendment and is designated as eligible to participate by Employer, the Participant's rights under the plan shall be determined by the plan provisions as amended and in effect at that time.

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ARTICLE 2

Definitions

2.1          Defined Terms.

          Defined terms are found at the following locations:

	
 
	
Term
	
Location

	
 
	
 
	
 

	
 
	
Accrued Benefit
	
2.2

	
 
	
Administrator
	
2.3

	
 
	
Agent for Service of Process
	
2.4

	
 
	
Beneficiary
	
2.5

	
 
	
Code
	
1.1

	
 
	
 
	
 

	
 
	
Effective Date
	
1.2

	
 
	
Employee
	
2.6

	
 
	
Employer
	
2.7

	
 
	
ERISA
	
1.1

	
 
	
Normal Retirement Date
	
2.8

	
 
	
 
	
 

	
 
	
Participant
	
3.1

	
 
	
Plan Year
	
2.9

	
 
	
Retirement Plan
	
2.10

	
 
	
Employer
	
1.1

	
 
	
Spouse
	
2.11

	
 
	
 
	
 

	
 
	
Surviving Spouse
	
2.12

2.2          Accrued Benefit.

          "Accrued Benefit" means the Participant's Accrued Benefit as defined in the Retirement Plan.

2.3          Administrator.

          "Administrator" means Southern Michigan Bank & Trust.

2.4          Agent for Service of Process.

          "Agent for Service of Process" means the Administrator or the individual designated by the Administrator to accept service of process on behalf of the plan.

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2.5          Beneficiary.

          "Beneficiary" means the individual, trust, or other entity designated by the Participant to receive any benefits payable under this plan after the Participant's death. A Participant may designate or change a Beneficiary by filing a signed designation with the Administrator in the form approved by the Administrator. The Participant's will is not effective for this purpose.

          If a designation has not been properly completed and filed with the Administrator or is ineffective for any other reason, the Beneficiary shall be the Participant's Surviving Spouse. If there is no effective designation and the Participant does not have a Surviving Spouse, the remaining benefits, if any, shall be paid to the Participant's estate.

2.6          Employee.

          "Employee" means an individual employed by the Employer who receives compensation for personal services performed for the Employer that is subject to withholding for federal income tax purposes.

2.7          Employer.

          "Employer" means Southern Michigan Bank & Trust and any subsidiary of Southern Michigan Bank & Trust.

2.8          Normal Retirement Date.

          "Normal Retirement Date" means the date the Participant attains age 65.

2.9          Plan Year.

          "Plan Year" means the 12-month period beginning each January 1.

2.10          Retirement Plan.

          "Retirement Plan" means the Southern Michigan Bank & Trust Pension Plan, a qualified, tax-exempt defined benefit pension plan established and maintained by Employer under Code Section 401(a).

2.11          Spouse.

          "Spouse" means the husband or wife to whom the Participant is married on the date the benefit is scheduled to be paid or payment is scheduled to begin. The legal existence of the

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spousal relationship shall be governed by the law of the state or other jurisdiction of domicile of the Participant.

2.12          Surviving Spouse.

          "Surviving Spouse" means the Spouse of the Participant at the time of the Participant's death who survives the Participant. If the Participant and Spouse die under circumstances that prevent ascertainment of the order of their deaths, it shall be presumed for this plan that the Participant survived the Spouse.

ARTICLE 3

Participation

3.1          Designation as Participant.

          Only management and highly compensated employees shall be eligible to participate in this plan. Employer shall designate the eligible Employees who shall become Participants ("Participant") and shall specify the date of participation for each Participant.

3.2          Termination of Participation.

          A Participant's status as a Participant shall continue until the earlier of termination of employment or termination of the Participant's status as a Participant by Employer. A former Participant may resume participation in the plan only upon redesignation as a Participant and as of the date specified by Employer. Transfer of employment to Employer or a subsidiary of Employer shall not be treated as a termination of employment, and participation in this plan shall continue unless the Participant's status as a Participant is terminated by Employer.

ARTICLE 4

Amount of Benefits

4.1          Determination of Benefit.

          The amount of the benefit to which each Participant is entitled is calculated by first determining the amount of the Participant's benefit payable under the Retirement Plan, without regard to the 2006-1 Amendment, effective December 31, 2006, which "froze" the accrued benefit under the Retirement Plan for certain participants. From this amount, the amount of the Participant's actual benefit payable under the Retirement Plan will be subtracted. The remainder is the benefit payable under this plan.

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4.2          Date of Determination.

          All benefit calculations shall be made at the time the Participant's employment terminates.

4.3          Duplication of Benefits.

          There shall be no duplication of benefits between this plan and the Retirement Plan. If the Retirement Plan should be amended to provide additional benefits that are substantially the same as benefits under this plan, this plan shall abate or terminate to that extent and the Participants shall receive the additional benefits under the Retirement Plan in lieu of the corresponding benefits provided under this plan.

ARTICLE 5

Vesting

          The benefit provided with respect to Participants under this plan shall become nonforfeitable at the same time as the Participant's Accrued Benefit under the Retirement Plan becomes nonforfeitable.

ARTICLE 6

Payment of Benefits

6.1          Form, Manner, and Time of Payment.

          Subject to the restriction in Section 6.2, Participant's benefit under this plan will be paid upon the Participant's termination of employment for any reason other than death as the Participant elects in writing in a form acceptable to Employer from the following optional forms of benefit:

          (a)          Lump Sum. A lump sum of cash. 

          (b)          Qualified Joint and Survivor Annuity. A monthly annuity for the life of the Participant with a survivor benefit payable for the life of the Participant's Spouse that is either 50% or 100% of the annuity payable during the joint lives of the Participant and the Participant's Spouse.

          (c)          Life Annuity with Period Certain. A monthly annuity, payable until the later of the death of the Participant or until a period certain that does not extend beyond the Participant's life expectancy equal to 60 or 120 monthly payments to the Participant or the Participant's

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Beneficiary.

          (d)          Joint and Survivor Annuity. A monthly annuity for the life of the Participant and thereafter for the life of the Participant's Beneficiary in which the monthly payments made to the Beneficiary are reduced to 50% or 100% of the Participant's annuity benefit.

6.2          Delay in Payment. 

          Notwithstanding any other timing provision in Section 6.1, if, at the time the Participant would begin receiving payment, the Participant is a "specified employee" as defined by Section 409A of the Internal Revenue Code, then no payments will be made before the date that is six months after the Participant's termination of employment. Payments to which the Participant would otherwise have been entitled during that six months will be accumulated and paid on the first day after six months following the date of the Participant's termination of employment. All payments that would otherwise be made more than six months following the date of the Participant's termination of employment will be made in accordance with the general timing provisions described above.

6.3          Actuarial Equivalence.

          Any form of payment payable under this plan pursuant to Section 6.1 shall be the actuarial equivalent of the Normal Form of Retirement Benefit under the Retirement Plan. For this purpose, actuarial equivalence will be calculated using the factors set forth in the Retirement Plan.

6.4          Death.

          (a)          Death Prior to Termination of Employment. If a married Participant dies while employed with Employer the Participant's benefit will be paid to the Participant's Surviving Spouse as the Participant elects in writing in a form acceptable to Employer from the following optional forms of benefit:

                    (i)          Qualified Preretirement Survivor Annuity. An annuity equal to the same benefit that would have been payable had the Participant retired with an immediate Qualified Joint and Survivor Annuity with a 50% survivor benefit on the day before the Participant's date of death.

                    (ii)          Lump Sum. A lump sum of cash. 

          (b)          Payment to Spouse. If a married Participant's benefit is payable as a Qualified Joint and Survivor Annuity and the Participant dies, payment shall continue to the Participant's Surviving Spouse. No further benefits shall be payable following the death of a Participant with no Surviving Spouse.

          (b)          Payment to Beneficiary. If a benefit is payable as a Life Annuity with Period

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Certain or a Joint and Survivor Annuity and the Participant dies prior to payment of all amounts due under this plan, payment of all remaining benefits shall be made to the Participant's Beneficiary.

ARTICLE 7

General Provisions

7.1          Amendment; Termination.

          Employer's Board of Directors shall have the right at any time to amend this plan prospectively or retroactively, or to terminate this plan, provided that an amendment or termination may not reduce or revoke the accrued benefits of Participants as of the end of the Plan Year preceding the Plan Year in which the amendment or termination is adopted.

          Upon termination of this plan, the accrued benefits of affected Participants shall become nonforfeitable. Each Participant's vested accrued benefits shall be distributed in accordance with the provisions of this plan.

7.2          Employment Relationship.

          Nothing in this plan shall be construed as creating a contract of employment between the Employer and any Participant or otherwise conferring upon any Participant or other person a legal right to continuation of employment or any rights other than those specified in this plan. This plan shall not limit or affect the right of the Employer to discharge or retire a Participant.

7.3          Rights Not Assignable.

          Except for designation of a Beneficiary, amounts promised under this plan shall not be subject to assignment, conveyance, transfer, anticipation, pledge, alienation, sale, encumbrance, or charge, whether voluntary or involuntary, by the Participant or any Beneficiary of the Participant, even if directed under a qualified domestic relations order or other divorce order. An interest in an amount promised shall not provide collateral or security for a debt of a Participant or Beneficiary or be subject to garnishment, execution, assignment, levy, or to another form of judicial or administrative process or otherwise. Any attempt to assign, convey, transfer, anticipate, pledge, alienate, sell, encumber, charge, or otherwise dispose of benefits payable, before actual receipt of the benefits, or a right to receive benefits, shall be void and shall not be recognized.

7.4          Unsecured Obligation.

          The right to a benefit under this plan constitutes merely the unsecured promise of Employer to pay benefits from Employer's general assets. Nothing contained in this plan, and no

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action taken pursuant to the provisions of this plan, shall create or be construed to create a trust of any kind, a fund, or any fiduciary relationship between Employer and any Participant, Beneficiary, or any other person. Any reserve or fund established by Employer in connection with this plan shall be and shall remain, until paid to any Participant or Beneficiary, solely the property and rights of Employer, subject to the rights and claims of Employer's general creditors. No Participant, Beneficiary, or any other person other than Employer shall have any right, title, or interest in or to such funds or other assets. Any right to a benefit under this plan shall be no greater than the claim of any other unsecured general creditor of Employer.

7.5          No Trust or Fiduciary Relationship.

          Nothing contained in this plan shall be deemed to create a trust or fiduciary relationship of any kind for the benefit of any Participant or Beneficiary.

7.6          Construction; Interpretation.

          The singular includes the plural, and the plural includes the singular, unless the context clearly indicates the contrary. Capitalized terms (except those at the beginning of a sentence or part of a heading) have the meaning specified in this plan. If a capitalized term is not defined in this plan, the term shall have, for purposes of this plan, the stated definition of that term in the Retirement Plan as amended from time to time.

          All questions or issues regarding interpretation or application of the provisions of this plan, including, but not limited to, questions of eligibility for benefits, the amount of benefits, and forfeiture, payment, or termination of benefits, will be resolved by Employer's Board of Directors, whose determination shall be final and binding, unless arbitrary or capricious.

7.7          Governing Law.

          This plan shall be interpreted, construed, enforced, and performed in accordance with applicable federal law and, to the extent not preempted by federal law, in accordance with the laws of the State of Michigan.

7.8          Unfunded Plan.

          This shall be an unfunded plan within the meaning of ERISA. Benefits provided herein constitute only an unsecured contractual promise to pay in accordance with the terms of this plan by the Employer.

8pb_8k1213ex101.htm

    EXHIBIT
      10.1

     

    

     

    EMPLOYMENT
      AGREEMENT

     

    This
      Employment Agreement (“Agreement”) is made and entered into as of this 18th day
      of December, 2007, but effective as of January 1, 2005 (the “Effective Date”),
      by and among Peoples Bancorp (“Peoples”), the holding company of Peoples Federal
      Savings Bank of DeKalb County (the “Bank”), the Bank and Maurice F. Winkler, III
      (“Executive”), with reference to the following:

     

    This
      Agreement amends and restates the prior Employment Agreement between the Bank,
      Peoples and the Executive dated November 19, 2006 (the “Prior
      Agreement”).  It has been amended and restated for compliance with the
      final regulations under 409A of the Internal Revenue Code of 1986, as amended
      (the “Code”), effective as of January 1, 2005.

     

    WHEREAS,
      Executive is currently employed by the Bank, which is a wholly owned subsidiary
      of Peoples;

     

    WHEREAS,
      Peoples and the Bank desire to provide for the employment of the Executive
      by
      the Bank;

     

    WHEREAS,
      the Executive is willing to commit himself to serving the Bank on the terms
      and
      conditions herein provided;

     

    NOW,
      THEREFORE, IN CONSIDERATION OF the recitals set forth above and the mutual
      promises, covenants, agreements, conditions and undertakings hereinafter set
      forth, the adequacy and receipt of which consideration is hereby acknowledged,
      the parties hereto agree as follows:

     

    
      	
              1.

            	
              Term.

            

    

     

    This
      Agreement shall have a term of three (3) years, commencing on December 18,
      2007
      (the “Term”). Where used herein, “Term” shall refer to the entire period of
      employment of Executive by the Bank from and after the Effective Date of this
      Agreement, whether for the period provided above and as extended or terminated
      earlier as hereinafter provided.

     

    
      	
              2.

            	
              Position
                and Duties.

            

    

     

    (a)           During
      the Term, Executive shall be employed on a full-time basis to serve as President
      and Chief Executive Officer of the Bank and perform the duties customarily
      performed by such officer of a savings association, including the general
      supervision and operation of the business and affairs of the Bank, and reporting
      to the applicable regulatory authorities regarding the activities of the Bank,
      subject to the direction of and the powers vested by law in the Board of
      Directors of the Bank (the “Board”) and the Bank’s shareholder, Peoples. Except
      as provided for herein, the duties and position of Executive as President and
      Chief Executive Officer hereunder may be changed only by the mutual written
      agreement of the parties hereto. The parties may mutually agree to extend
      Executive’s full-time status for additional 12-month periods following December
      18, 2007.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b)           During
      the Term hereof, Executive shall perform the services herein contemplated to
      be
      performed by Executive faithfully, diligently and to the best of Executive’s
      ability in compliance with instructions and policies of the Board, the Bank’s
      Federal Charter and Bylaws and with all applicable laws and
      regulations.

     

    
      	
              3.

            	
              Compensation.

            

    

     

    (a)           Base
      Salary.  For executive’s services rendered hereunder, the Bank
      shall pay or cause to be paid a base salary to Executive at the rate of $143,312
      per annum, payable in conformity with the Bank’s normal payroll periods and
      procedures. During the Term, Executive’s base salary shall be reviewed at least
      once every twelve (12) months and shall be increased (but not reduced) at any
      time, and from time to time, as shall be substantially consistent with increases
      in base salary generally awarded in the ordinary course of business to other
      executives of the Bank, provided that Executive’s Base Salary shall be increased
      by a percentage no less than the annual increase of the cost of living index
      for
      the Fort Wayne, Indiana metropolitan area. Any increase in base salary shall
      not
      serve to limit or reduce any other obligation to the Executive under this
      Agreement. The term “Base Salary” as utilized in this Agreement shall refer to
      base salary as so increased.

     

    (b)           Discretionary
      Bonus. In addition to Executive’s Base Salary provided for under Paragraph
      3(a) above, the Executive shall participate in an equitable manner with all
      other senior management executives of the Bank in discretionary bonuses that
      the
      Board may award from time to time to the Bank’s senior management executives. No
      other compensation provided for in this Agreement shall be deemed a substitute
      for the Executive’s right to participate in such discretionary
      bonuses.

     

    (c)           Stock
      Awards. The Executive shall be eligible for consideration for stock option
      grants by Peoples pursuant to any stock option plan adopted or maintained by
      Peoples, for so long as Executive shall be employed by the Bank.

     

    (d)           Other
      benefits. The Executive will eligible to participate in or receive benefits
      under any employee benefit plans of the Bank which are available to senior
      executives and key management employees of the Bank, subject to and on a basis
      consistent with the terms, conditions and overall administration of such plans
      and arrangements. Nothing paid to Executive under any such plan or arrangement
      will be deemed to be in lieu of other compensation to which the Executive is
      entitled under this Agreement.

     

    
      	
              4.

            	
              Vacation
                and Sick Leave.

            

    

     

    During
      the Term hereof, Executive shall be entitled to paid vacation and paid sick
      leave, the amount and term of which shall be determined in accordance with
      the
      policies of the Bank as in effect from time to time, but in no event shall
      the
      vacation period be less than four weeks per year.

     

    
      	
              5.

            	
              Group
                Medical, Life Insurance and Other
                Benefits.

            

    

     

    The
      Executive shall participate in any plan that the Bank maintains for the benefit
      of its executives if the plan relates to (i) pension, profit sharing or other
      retirement benefits, (ii)

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    medical
      insurance or the reimbursement of medical or dependent care expenses, or (iii)
      other group benefits, including disability and life insurance
      plans.

     

    
      	
              6.

            	
              Business
                Expenses.

            

    

     

    Executive
      shall be entitled to reimbursement by the Bank for any and all ordinary and
      necessary business expenses reasonably incurred by Executive in the performance
      of Executive’s duties and in acting for the Bank during the Term of this
      Agreement, provided that Executive furnishes to the Bank, for review and
      approval by the Chairman of the Board, adequate records and other documentation
      as may be required for the substantiation of such expenditures as a business
      expense of the Bank

     

    
      	
              7.

            	
              Termination
                for Cause.

            

    

     

    (a)           The
      Board may for cause terminate Executive’s employment at any time during the Term
      of this Agreement. In such event, all rights of Executive under this Agreement
      shall terminate and Executive shall have no right to receive compensation or
      other benefits for any period after the effective date of such termination
      for
      cause. Termination for cause shall be defined as the Executive’s dishonesty,
      incompetence, willful misconduct, breach of fiduciary duty involving personal
      profit, intentional failure to perform stated duties, willful violation of
      any
      law, rule or regulation (other than traffic violations or similar offenses)
      or
      final cease-and-desist order, or material breach of any provision of this
      Agreement.

     

    (b)           Notwithstanding
      the foregoing, no termination for cause shall be effective with respect to
      the
      Executive unless and until there shall have been delivered to him a copy of
      a
      resolution, finding that in the good faith opinion of the Board of Directors
      of
      the Bank (the “Board”), the Executive’s actions and/or failure to act justifies
      termination for cause and specifying the particulars thereof in detail.
      Reasonable notice shall be provided to the Executive and he shall receive an
      opportunity, together with counsel, to be heard before the Board. The Executive
      shall not have the right to receive compensation or other benefits for any
      period after a termination for cause, except that benefits previously vested
      or
      accrued shall be unaffected by such termination.

     

    
      	
              8.

            	
              Events
                of Termination; Payments to
                Executive.

            

    

     

    The
      provisions of this Paragraph 8 shall apply upon the occurrence of an Event
      of
      Termination (as herein defined).

     

    (a)           As
      used in this Agreement, an “Event of Termination” shall mean and include any one
      or more of the following (other than such an event which occurs within 12 months
      following a Change in Control, in which case any benefits due to Executive
      under
      Paragraph 9 shall be made as provided in Paragraph 9): (i) the termination
      by
      the Bank of the Executive’s employment hereunder for any reason other than for
      cause (as defined in Paragraph 7 hereinabove) during the Term; or (ii) the
      Executive’s resignation or constructive termination from the Bank’s employ, upon
      any (A) material change in the Executive’s function, duties, or
      responsibilities, which change would cause the Executive’s position to become
      one of lesser responsibility, importance, or scope from the position and
      attributes thereof (and any such material change shall be deemed a continuing
      breach of this Agreement), (B) relocation of the

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    principal
      place at which Executive’s duties are to be performed to a location outside a
      thirty (30) mile radius around the principal location at which Executive’s
      duties are performed immediately prior to the termination of employment, (C)
      material reduction in the benefits and perquisites to the Executive from those
      being provided as of the Effective Date of this Agreement except for any changes
      that are generally applicable to senior executives and key management employees
      or expressly contemplated by this Agreement (any such reduction to be deemed
      a
      continuing breach of this Agreement), or (D) or any other material breach of
      this Agreement by the Bank, which events remain uncorrected for at least 30
      days
      after the Executive provides the Bank notice of such occurrence. Upon the
      occurrence of any event described in clauses (A), (B), (C) or (D) above, the
      Executive shall have the right to elect to terminate his employment under this
      Agreement by resignation upon not less than sixty (60) days prior written notice
      given within a reasonable period of time not to exceed 90 days after the later
      of the (i) occurrence of the event giving rise to said right to elect
      termination or (ii) actual knowledge of such event by the Executive. In the
      case
      of a continuing breach, the Executive may give such sixty (60) days prior notice
      at any time. Executive’s sixty (60) days prior notice of his Date of Termination
      shall be referred to as “Notice of Termination.” The date specified in
      Executive’s Notice of Termination to the Bank satisfying the 60 days’ prior
      notice requirement shall be the “Date of Termination.” Notwithstanding the
      foregoing, if the Bank cures the violation set forth within clauses (A), (B),
      (C) or (D) within 30 days after the Notice of Termination is received by the
      Bank, such Notice of Termination shall be deemed revoked by the
      Executive.

     

    (b)           Upon
      the occurrence of an Event of Termination, on the Date of Termination, as
      defined in this Paragraph 8, the Bank shall pay the Executive, or, in the event
      of his subsequent death, his beneficiary or beneficiaries as he may have
      designated, or his estate, if no beneficiary designation has been made, or
      if no
      beneficiaries survive the Executive, as severance pay or liquidated damages,
      or
      both, a sum equal to (i) the amount of Base Salary of the Executive for each
      year or portion thereof during the remaining Term of this Agreement, plus (ii)
      bonuses based on the last bonus received for each year or portion thereof
      remaining in the Term of this Agreement, as well as (iii) the value of any
      health and/or medical benefits as provided under Paragraph 5 and retirement
      benefits under Paragraph 5 of this Agreement for each year or portion thereof
      remaining in the Term of this Agreement, provided, however, that if the Bank
      is
      not in compliance with its minimum capital requirements or if such payments
      would cause the Bank’s capital to be reduced below its minimum capital
      requirements, such payments shall be deferred until such time as the Bank is
      in
      capital compliance. Such salary, bonus, retirement benefit, and health payments
      shall be made in a lump sum within ten (10) days of the Date of
      Termination.

     

    (c)           The
      payments provided under this Paragraph 8 upon an Event of Termination shall
      be
      in lieu of any other payments or damages recoverable in any causes of action
      by
      Executive related to this Agreement. As a condition to receipt of payments
      hereunder, the Executive shall execute a Release and Settlement Agreement
      pursuant to which the Executive shall waive any and all claims resulting from
      employment at or termination from the Bank other than payments or benefits
      which
      are expressly provided for in this Agreement.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    9.           Termination
      as a Result of a Change of Control.

     

    (a)           Change
      of Control. For purposes of this Agreement and except as provided in
      Paragraph 11(c) below relating to supervisory transactions, the term “Change of
      Control” shall mean the occurrence of any of the following events:

     

    (i)           a
      change in the ownership of the Bank or Peoples, which shall occur on the date
      that any one person, or more than one person acting as a group, acquires
      ownership of stock of the Bank or Peoples that, together with stock held by
      such
      person or group, constitutes more than fifty percent (50%) of the total fair
      market value or total voting power of the stock of the Bank or
      Peoples.  Such acquisition may occur as a result of a merger of
      Peoples or the Bank into another entity which pays consideration for the shares
      of capital stock of the merging Holding Company or Bank.  However, if
      any one person, or more than one person acting as a group, is considered to
      own
      more than fifty percent (50%) of the total fair market value or total voting
      power of the stock of the Bank or Peoples, the acquisition of additional stock
      by the same person or persons is not considered to cause a change in the
      ownership of the Bank or Peoples (or to cause a change in the effective control
      of the Bank or Peoples (within the meaning of subsection (ii)).  An
      increase in the percentage of stock owned by any one person, or persons acting
      as a group, as a result of a transaction in which the Bank or Peoples acquires
      its stock in exchange for property will be treated as an acquisition of stock
      for purposes of this subsection.  This subsection applies only when
      there is a transfer of stock of the Bank or Peoples (or issuance of stock of
      the
      Bank or Peoples) and stock in the Bank or Peoples remains outstanding after
      the
      transaction.

     

    (ii)           a
      change in the effective control of the Bank or Peoples, which shall occur only
      on either of the following dates:

     

    
      	
               

            	
              (1)

            	
              the
                date any one person, or more than one person acting as a group acquires
                (or has acquired during the 12 month period ending on the date of
                the most
                recent acquisition by such person or persons) ownership of stock
                of the
                Bank or Peoples possessing thirty percent (30%) or more of the total
                voting power of the stock of the Bank or
                Peoples.

            

    

     

    
      	
               

            	
              (2)

            	
              the
                date a majority of members of Peoples’ board of directors is replaced
                during any 12 month period by directors whose appointment or election
                is
                not endorsed by a majority of the members of Peoples’ board of directors
                before the date of the appointment or election; provided, however,
                that
                this provision shall not apply if another corporation is a majority
                shareholder of Peoples.

            

    

     

    If
      any
      one person, or more than one person acting as a group, is considered to
      effectively control the Bank or Peoples, the acquisition of additional control
      of the Bank or Peoples by the same person or persons is not considered to cause
      a change in the effective control of the Bank or

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    Peoples
      (or to cause a change in the ownership of the Bank or Peoples within the meaning
      of subsection (i) of this section).

     

    (iii)           a
      change in the ownership of a substantial portion of the Bank’s assets, which
      shall occur on the date that any one person, or more than one person acting
      as a
      group, acquires (or has acquired during the 12 month period ending on the date
      of the most recent acquisition by such person or persons) assets from the Bank
      that have a total gross fair market value equal to or more than forty percent
      (40%) of the total gross fair market value of all of the assets of the Bank
      immediately before such acquisition or acquisitions.  For this
      purpose, gross fair market value means the value of the assets of the Bank,
      or
      the value of the assets being disposed of, determined without regard to any
      liabilities associated with such assets.  No change in control occurs
      under this subsection (iii) when there is a transfer to an entity that is
      controlled by the shareholders of the Bank immediately after the
      transfer.  A transfer of assets by the Bank is not treated as a change
      in the ownership of such assets if the assets are transferred to –

     

    
      	
               

            	
              (1)

            	
              a
                shareholder of the Bank (immediately before the asset transfer) in
                exchange for or with respect to its
                stock;

            

    

     

    
      	
               

            	
              (2)

            	
              an
                entity, 50 percent or more of the total value or voting power of
                which is
                owned, directly or indirectly, by the
                Bank.

            

    

     

    
      	
               

            	
              (3)

            	
              a
                person, or more than one person acting as a group, that owns, directly
                or
                indirectly, 50 percent or more of the total value or voting power
                of all
                the outstanding stock of the Bank;
                or

            

    

     

    
      	
               

            	
              (4)

            	
              an
                entity, at least 50 percent of the total value or voting power of
                which is
                owned, directly or indirectly, by a person described in paragraph
                (iii).

            

    

     

    For
      purposes of this subsection (iii) and except as otherwise provided in paragraph
      1) above, a person’s status is determined immediately after the transfer of the
      assets.

     

    (iv)           For
      purposes of this section, persons will not be considered to be acting as a
      group
      solely because they purchase or own stock of the same corporation at the same
      time, or as a result of the same public offering.  Persons will be
      considered to be acting as a group if they are owners of a corporation that
      enters into a merger, consolidation, purchase or acquisition of stock, or
      similar business transaction with the Bank or Peoples; provided, however, that
      they will not be considered to be acting as a group if they are owners of an
      entity that merges into the Bank or Peoples where the Bank or Peoples is the
      surviving corporation.

     

    (b)           Severance
      Payment. If Executive’s employment with the Bank is terminated by the Bank
      or by the Executive for any reason other than for cause, as defined in Section
      7(a), within 12 months following a Change of Control, Executive shall be
      entitled to receive as his sole and exclusive remedy a lump sum severance
      payment equal to 2.99 years of Executive’s Base Salary, as provided for in
      Paragraph 3(a) of this Agreement, plus the amount of any bonus

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    compensation
      earned by Executive during the 2.99 years immediately preceding the Change
      of
      Control, the present value of unpaid health benefits and retirement benefits
      under Paragraph 5 assuming those benefits continue to be paid until Executive
      reaches the age of 65, less any amounts required to be deducted by the Bank
      for
      federal and state taxes or other applicable requirements. The severance payment
      hereunder shall be paid to Executive in a lump sum upon the effectiveness of
      Executive’s termination of employment from the Bank and the termination of this
      Agreement. In the event a severance payment is paid to Executive under this
      Paragraph 9(b), this Agreement shall be terminated and the Bank shall have
      no
      further obligation to Executive under this Agreement, except as provided
      herein.

     

    (c)           Notwithstanding
      the preceding paragraphs of this Paragraph 9, the payments or benefits to be
      made or afforded to Executive under this Agreement when aggregated with any
      other “golden parachute” amounts (defined under Section 280G of the Internal
      Revenue Code of 1986, as amended (the “Code”) as compensation that becomes
      payable or accelerated due to a Change in Control payable under any other plans,
      agreements or policies of Peoples or the Bank, shall be reduced to the highest
      amount permissible under Sections 280G and 4999 of the Code before the Executive
      becomes subject to the excess parachute payment excise tax under Section 4999
      of
      the Code and Peoples or the Bank loses all or part of its compensation deduction
      for such payments. The Executive shall determine the allocation of the reduction
      required hereby among the benefits to which the Executive is
      entitled.

     

    (d)           Compliance
      with Law and Regulation. The parties hereto expressly acknowledge and agree
      that any payments made to Executive pursuant to this Agreement or otherwise
      are
      subject to and conditioned upon compliance with 12 U.S.C. Section 1828(k) and
      any regulations promulgated there under.

     

    
      	
              10.

            	
              Other
                Termination.

            

    

     

    (a)           Disability.
      In the event of the Executive’s disability, Executive’s employment
      hereunder may be terminated by written notice from the Bank to Executive. In
      the
      event that Executive’s employment is terminated under this Paragraph 10(a),
      Executive shall receive the difference between any disability payments provided
      by the Bank’s insurance plans and his Base Salary as set forth in Paragraph 3(a)
      hereof which he would have received during the remaining Term of this Agreement,
      plus the amount of any bonus compensation payable to Executive under Section
      3(b) hereof for any number of years or portions thereof remaining in the Term
      of
      this Agreement, prorated as appropriate. Such termination shall not affect
      any
      rights which Executive may have pursuant to any insurance or other death
      benefit, retirement or stock award plans or arrangements of the Bank, or any
      stock option plans or options thereunder, which rights shall continue to be
      governed by the provisions of such plans and arrangements. For purposes of
      this
      section, “disability” shall mean any medically determinable physical or mental
      impairment which can be expected to result in death or to last for a continuous
      period of not less than 12 months and which (i) renders Executive unable to
      engage in any substantial gainful activity or (ii) entitles Executive to income
      replacement benefits for a period of not less than three months under an
      accident and benefit plan covering employees of the Bank, as reasonably
      determined by a duly licensed physician selected in good faith by the
      Bank.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    (b)           Death.
      If Executive’s employment is terminated by reason of Executive’s death,
      this Agreement shall terminate without further obligations of the Bank to
      Executive (or Executive’s heirs or legal representatives) under this Agreement,
      other than for payment of (i) Executive’s Base Salary which he was receiving at
      the time of death, prorated through the date of termination; (ii) the amount
      of
      any bonus compensation payable to Executive at the time of his death under
      Section 3(b) above, prorated through the date of termination; (iii) any
      compensation previously deferred by Executive; (iv) any accrued vacation and/or
      sick leave pay; and (v) any amounts due pursuant to the terms of any applicable
      welfare benefit plan. All of the foregoing amounts shall be paid to Executive’s
      estate or beneficiary, as applicable, in a lump sum in cash within thirty (30)
      days after the date of termination or earlier as required by applicable
      law.

     

    
      	
              11.

            	
              Regulatory
                Provisions.

            

    

     

    (a)           Suspension
      and Removal Orders. If Executive is suspended and/or temporarily prohibited
      from participating in the conduct of the Bank’s affairs by notice served under
      Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act (12 U.S.C.
      Section 181 8(e)(3) and (g)(1)), the Bank’s obligations under this Agreement
      shall be suspended as of the date of service, unless stayed by appropriate
      proceedings. If the charges in the notice are dismissed, the Bank may in its
      discretion: (i) pay Executive all or part of the compensation withheld while
      its
      obligations under this Agreement were suspended; and (ii) reinstate (in whole
      or
      in part) any of its obligations which were suspended. If Executive is removed
      and/or permanently prohibited from participating in the conduct of the Bank’s
      affairs by an order issued under Section 8(e)(4) or 8(g)(1) of the Federal
      Deposit Insurance Act (12 U.S.C. Section 181 8(e)(4) or (g)(1)), all obligations
      of the Bank under this Agreement shall terminate as of the effective date of
      the
      order, but vested rights of the parties shall not be affected.

     

    (b)           Termination
      by Default. If the Bank is in default (as defined in Section 3(x)(1) of the
      Federal Deposit Insurance Act (12 U.S.C. Section 1813(x)(1)), all obligations
      under this Agreement shall terminate as of the date of default, but vested
      rights of the parties shall not be affected.

     

    (c)           Supervisory
      Assistance or Merger. All obligations under this Agreement shall be
      terminated, except to the extent that it is determined that continuation of
      the
      Agreement is necessary for the continued operation of the Bank: (i) by the
      Director of the Office of Thrift Supervision (the “Director”) or his or her
      designee, at the time that the Federal Deposit Insurance Corporation or the
      Office of Thrift Supervision enters into an agreement to provide assistance
      to
      or on behalf of the Bank under the authority contained in Section 13(c) of
      the
      Federal Deposit Insurance Act (12 U.S.C. Section 1823(c)); or (ii) by the
      Director or his or her designee, at the time that the Director or his or her
      designee approves a supervisory merger to resolve problems related to the
      operation of the Bank or when the Bank is in an unsafe or unsound condition.
      All
      rights of the parties that have already vested, however, shall not be affected
      by such action.

     

    
      	
              12.

            	
              Payments
                to Specified Employees.

            

    

     

    (a)           To
      the extent the Executive is a “specified employee” (as defined below) as of a
      separation from service, payments due to the Executive under this Agreement
      upon
      a separation from service that represent payment of deferred compensation that
      is subject to Section 409A of

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    the
      Code
      shall begin no sooner than six months after the Executive’s separation from
      service; provided, however, that any payments not made during the six month
      period described in this Section 12(a) shall be made in a single lump sum as
      soon as administratively practicable after the expiration of such six month
      period; provided, further, that, to the extent this Agreement provides for
      payment of deferred compensation only upon an involuntary separation from
      service or pursuant to a window program, the six month delay required under
      this
      Section 12(a) shall not apply to the portion of any payment resulting from
      the
      Executive’s “involuntary separation from service” (as defined in Treasury Reg.
      Section 1.409A-1(n) and including a “separation from service for good
      reason,” as defined in Treasury Reg. Section 1.409A-1(n)(2)) that (i) is
      payable no later than the last day of the second year following the year in
      which the separation from service occurs, and (ii) does not exceed two times
      the
      lesser of (1) the Executive’s annualized compensation for the year prior to the
      year in which the separation from service occurs, or (2) the dollar limit
      described in Section 401(a)(17) of the Code.

     

    (b)           To
      the extent any life, health, disability or other welfare benefit coverage
      provided to the Executive under this Agreement would be taxable to the
      Executive, the taxable amount of such coverage shall not exceed the applicable
      dollar amount under Section 402(g)(1)(B) of the Code determined as of the
      year in which the Executive’s separation from service occurs.  The
      intent of the foregoing sentence is to permit Peoples and the Bank to treat
      the
      provision of such benefits as a limited payment under Treasury Reg.
      Section 1.409A-1(a)(9)(v)(D) so as to avoid application of the six month
      delay rule for specified employees.  For purposes of this Agreement,
      any reference to severance of employment or termination of employment shall
      mean
      a “separation from service” as defined in Treasury Reg.
      Section 1.409A-1(h).

     

    (c)           For
      purposes of this Agreement, the term “specified employee” shall have the meaning
      set forth in Treasury Reg. Section 1.409A-1(i) and shall include, without
      limitation, (1) an officer of the Bank or Peoples having annual compensation
      greater than $130,000 (as adjusted for inflation under the Code), (2) a five
      percent owner of the Bank or Peoples, or (3) a one percent owner of the Bank
      or
      Peoples having annual compensation of more than $150,000.  The
      determination of whether the Executive is a “specified employee” shall be made
      by the Bank in good faith applying the applicable Treasury
      regulations.

     

    
      	
              13.

            	
              Disclosure
                or Use of Trade Secrets/Non-Compete
                Agreement.

            

    

     

    During
      the Term hereof, Executive will have access to and become acquainted with what
      Executive and the Bank acknowledge are trade secrets of the Bank. Executive
      shall not use or disclose any trade secrets or, directly or indirectly, cause
      them to be used or disclosed in any manner, during the Term hereof or for a
      period of one (1) year after the termination of this Agreement, except as may
      be
      required or requested by the Bank, by court order or under applicable law or
      regulation. While Executive is employed by the Bank and for a period of one
      year
      after termination of Executive’s employment by the Bank for cause or by the
      Executive, Executive shall not directly or indirectly engage in any bank or
      bank-related business which competes with the business of the Bank as conducted
      during Executive’s employment by the Bank for any financial institution,
      including, but not limited to, banks, savings associations and credit unions
      within a 50-mile radius of Auburn, Indiana.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    14.           Return
      of Documents.

     

    Executive
      expressly agrees that all manuals, documents, files, reports, studies or other
      materials used and/or developed by Executive for the Bank during the Term of
      this Agreement or prior thereto while Executive was employed by the Bank are
      solely the property of the Bank, and that Executive has no right, title or
      interest therein. Upon termination of this Agreement, Executive or Executive’s
      representative shall promptly deliver possession of all such materials
      (including any copies thereof) to the Bank.

     

    
      	
              15.

            	
              Notices.

            

    

     

    All
      notices, demands or other communications hereunder shall be in writing and
      shall
      be deemed to have been duly given if delivered in person, or sent by United
      States mail, certified or registered, with return receipt requested, if to
      Executive, addressed to Executive at the last residence address of Executive
      as
      shown in the records of the Bank, and if to the Bank, addressed to the Chairman
      of the Board at the Bank’s principal office.

     

    
      	
              16.

            	
              Governing
                Law and Jurisdiction.

            

    

     

    This
      Agreement shall be governed by and interpreted in accordance with the laws
      of
      the State of Indiana. Each of the parties hereto consents to the jurisdiction
      of
      the Indiana or federal courts, as the case may be, for the enforcement of this
      Agreement and matters pertaining to the transactions and activities contemplated
      hereby.

     

    
      	
              17.

            	
              Attorneys’
                Fees.

            

    

     

    In
      the
      event that a dispute arises with respect to this Agreement, the prevailing
      party
      in such dispute shall be entitled to recover all expenses, including, without
      limitation, reasonable attorneys' fees, incurred in connection with such
      dispute.

     

    
      	
              18.

            	
              Benefit
                of Agreement.

            

    

     

    This
      Agreement shall be binding upon and shall inure to the benefit of the parties
      hereto and their respective successors and assigns; provided, however, that
      Executive may not assign any interest in this Agreement without the prior
      written consent of the Bank.

     

    
      	
              19.

            	
              Captions.

            

    

     

    Captions
      and paragraph heading used in this Agreement are for convenience only and shall
      not be used in interpreting or construing this Agreement.

     

    
      	
              20.

            	
              Entire
                Agreement.

            

    

     

    This
      Agreement contains the entire agreement of the parties with respect to the
      employment of Executive by the Bank, and it expressly
      supersedes any and all other agreements, either oral or written, relating
      thereto.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    21.           Severability.

     

    Should
      any provision of this Agreement for any reason be declared invalid, void or
      unenforceable by a court of competent jurisdiction, the validity and binding
      effect of any remaining portions of this Agreement shall remain in full force
      and effect as if this Agreement had been executed with such invalid, void or
      unenforceable provisions eliminated; provided, however, that the remaining
      provisions still reflect the intent of the parties to this
      Agreement.

     

    
      	
              22.

            	
              Amendments.

            

    

     

    This Agreement
      may not be amended or modified except by a written agreement signed by Executive
      and the Bank. This Agreement and any amendment thereof may be executed in
      counterparts.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
      day
      and year first above written.

     

    
      	 	
              PEOPLES
                BANCORP

            
	 	 	 	 	 
	 	 	 	
              By:

            	 /s/
              G. R. Gatton
	 	 	 	 	
              G.
                Richard Gatton

              Chairman
                of the Board

            
	 	 	 	 	 
	 	 	
              PEOPLES
                FEDERAL SAVINGS BANK OF DEKALB COUNTY

            
	 	 	 	 	 
	 	 	 	
              By:

            	 /s/
              G. R. Gatton
	 	 	 	 	
              G.
                Richard Gatton

              Chairman
                of the Board

            
	 	 	 	 	 
	 	 	
              EXECUTIVE

            
	 	 	 	 	 
	 	 	 	 	 /s/
              M. F. Winkler III
	 	 	 	 	
              Maurice
                F. Winkler, III

            

    

    
 

     

     

     

    12

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