Exhibit 10.8
The Middlefield Banking Company
Director Retirement Agreement
This Agreement is made as of December 1, 2001, by and between The
Middlefield Banking Company, an Ohio-chartered bank located in Middlefield, Ohio
("Middlefield Bank") and Xxxxxx Xxxxxxxx (the "Director").
To encourage the Director to remain a member of Middlefield Bank's
board of directors, Middlefield Bank is willing to provide retirement benefits
to the Director. Middlefield Bank will pay the benefits from its general assets.
None of the conditions or events included in the definition of the term "golden
parachute payment" that is set forth in section 18(k)(4)(A)(ii) of the Federal
Deposit Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal Deposit
Insurance Corporation Rule 359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)] exists or,
to the best knowledge of Middlefield Bank, is contemplated insofar as
Middlefield Bank is concerned.
Agreement
In consideration of the foregoing premises and other good and valuable
consideration, the receipt and acceptance of which are hereby acknowledged, the
Director and Middlefield Bank hereby agree as follows:
Article 1
Definitions
Whenever used in this Agreement, the following words and phrases shall
have the meanings specified:
1.1 "Accrual Balance" means the amount reflected in Schedule A of this
Agreement, which is the amount required by generally accepted accounting
principles to be accrued by Middlefield Bank to account for benefits that may
become payable to the Director under this Agreement.
1.2 "Change in Control" means that any of the following events occur:
(a) Middlefield Banc Corp., the parent company of
Middlefield Bank, merges into or consolidates with another
corporation, or merges another corporation into Middlefield Banc
Corp., and as a result less than a majority of the combined voting
power of the resulting corporation immediately after the merger or
consolidation is held by persons who were the holders of Middlefield
Banc Corp.'s voting securities immediately before the merger or
consolidation, or
(b) a report on Schedule 13D, Schedule TO, or another form
or schedule (other than Schedule 13G), is filed or is required to be
filed under Sections 13(d) or 14(d) of the Securities Exchange Act of
1934, if the schedule discloses that the filing person or persons
acting in concert has or have become the beneficial owner of 15% or
more of a class of Middlefield Banc Corp.'s voting securities (but
this clause (b) shall not apply to beneficial ownership of voting
shares held by Middlefield Bank or another subsidiary of Middlefield
Banc Corp. in a fiduciary capacity), or
(c) during any period of two consecutive years, individuals
who constitute Middlefield Banc Corp.'s board of directors at the
beginning of the two-year period cease for any reason to constitute at
least a majority thereof; provided, however, that -- for purposes of
this clause (c) -- each director who is first elected by the board (or
first nominated by the board for election by stockholders) by a vote
of at least two-thirds ( ) of the directors who were directors at the
beginning of the period shall be deemed to have been a director at the
beginning of the two-year period, or
(d) Middlefield Banc Corp. sells to a third party
substantially all of Middlefield Banc Corp.'s assets. For purposes of
this Agreement, sale of substantially all of Middlefield Banc Corp.'s
assets includes sale of Middlefield Bank.
1.3 "Code" means the Internal Revenue Code of 1986, as amended.
1.4 "Disability" means, if the Director is covered by a
Company-sponsored disability policy, total disability as defined in such policy,
without regard to any waiting period. If the Director is not covered by such a
policy, Disability means the Director suffers a sickness, accident or injury
that -- in the judgment of a physician satisfactory to Middlefield Bank --
prevents the Director from performing substantially all of the Director's normal
duties for Middlefield Bank. As a condition to receiving any Disability
benefits, Middlefield Bank may require the Director to submit to such physical
or mental evaluations and tests as Middlefield Bank's board of directors deems
appropriate.
1.5 "Early Termination" means Termination of Service on or after
reaching age 55 but before Normal Retirement Age and after having served as a
director for at least five years (including each year of board service before
the Effective Date of this Agreement), but Early Termination does not include
Termination of Service as a result of death, Disability, or Termination for
Cause, or Termination of Service within 12 months after a Change in Control.
1.6 "Early Termination Date" means the month, day and year in which
Early Termination occurs.
1.7 "Effective Date" means December 1, 2001.
1.8 "Normal Retirement Age" means the Director's 73rd birthday.
1.9 "Normal Retirement Date" means the later of the Normal Retirement
Age or Termination of Service.
1.10 "Person" means an individual, corporation, partnership, trust,
association, joint venture, pool, syndicate, sole proprietorship, unincorporated
organization or other entity.
1.11 "Plan Year" means each 12-month period from December 1 through
November 30.
1.12 "Termination for Cause" is defined in Section 3.1 of this
Agreement.
1.13 "Termination of Service" means that the Director ceases to be a
member of Middlefield Bank's board of directors for any reason whatsoever. If
the Director ceases to be a member of Middlefield Bank's board of directors but
continues to serve on the board of directors of Middlefield Banc Corp.,
Termination of Service shall be deemed to have occurred instead when the
Director ceases also to be a member of the board of directors of Middlefield
Banc Corp. For purposes of this Agreement, if there is a dispute over the
service status of the Director or the date of the Director's Termination of
Service, Middlefield Bank shall have the sole and absolute right to decide the
dispute, unless a Change in Control shall have occurred.
Article 2
Lifetime Benefits
2.1 Normal Retirement Benefit. Upon Termination of Service on or after
Normal Retirement Age, and provided the Director has served as a director of
Middlefield Bank for at least five years (including each year of board service
before the Effective Date of this Agreement), Middlefield Bank shall pay to the
Director the benefit described in this Section 2.1 instead of any other benefit
under this Agreement.
2.1.1 Amount of Benefit. The annual benefit under this
Section 2.1 is an amount in cash equal to 25% of the final average
annual board fees paid to the Director by Middlefield Bank in the
three years preceding the director's retirement on the Normal
Retirement Date. For this purpose, board fees include retainers and
other regular fees paid or payable in cash for the Director's service
on or attendance at meetings of the board of directors of Middlefield
Bank and committees of the board of directors, including board fees
that may be deferred under any plan for elective deferrals that may be
adopted by Middlefield Bank in the future. If the Director is serving
as Chairman of the Board on the Normal Retirement Date, board fees
shall also include any additional cash compensation paid or payable
for service as Chairman of
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the Board. Board fees shall not include the value of non-cash
compensation, the value of life insurance benefits or other fringe
benefits, or expense reimbursement. In its sole discretion,
Middlefield Bank's board of directors may increase the annual benefit
under this Section 2.1.1, but it shall have no obligation to do so.
Any increase shall require recalculation of Schedule A.
2.1.2 Payment of Benefit. Middlefield Bank shall pay this
annual benefit to the Director in 12 equal monthly installments.
Commencing the month after the Director's Normal Retirement Date, the
benefit is payable on the first day of each month. The benefit shall
be paid to the Director for 120 months.
2.1.3 Section 2.4 Has Priority Over Other Sections. The
Director's entitlement to benefits arising out of Termination of
Service within 12 months after a Change in Control shall be governed
exclusively by Section 2.4, even if the Director reaches Normal
Retirement Age within 12 months after the Change in Control.
2.2 Early Termination Benefit. Provided the Director has reached age
55 and has served as a director for at least five years (including each year of
board service before the Effective Date of this Agreement), Middlefield Bank
shall pay to the Director the benefit described in this Section 2.2 for Early
Termination instead of any other benefit under this Agreement, except as
provided in Article 3.
2.2.1 Amount of Benefit. The benefit under this Section 2.2
is the Early Termination Benefit set forth in Schedule A for the Plan
Year ending immediately before the Early Termination Date (except
during the first Plan Year, the benefit is the amount set forth for
Plan Year 1). In its sole discretion, Middlefield Bank's board of
directors may increase the benefit under this Section 2.2.1, but it
shall have no obligation to do so. Any increase shall require
recalculation of Schedule A.
2.2.2 Payment of Benefit. Middlefield Bank shall pay this
annual benefit to the Director in 12 equal monthly installments.
Commencing the month after the Director's Normal Retirement Age, the
benefit is payable on the first day of each month. The benefit shall
be paid to the Director for 120 months.
2.2.3 Section 2.4 Has Priority Over Other Sections. The
Director's entitlement to benefits arising out of Termination of
Service within 12 months after a Change in Control shall be governed
exclusively by Section 2.4.
2.3 Disability Benefit. If the Director terminates service because of
Disability before his or her Normal Retirement Age, Middlefield Bank shall pay
to the Director the benefit described in this Section 2.3 instead of any other
benefit under this Agreement, regardless of whether the Director has accrued
five years of service or has reached age 55.
2.3.1 Amount of Benefit. The benefit under this Section 2.3
is the Accrual Balance for the Plan Year ending immediately before the
date on which Termination of Service because of Disability occurred
(except during the first Plan Year, the benefit is the Accrual Balance
at the end of Plan Year 1). In its sole discretion, Middlefield Bank's
board of directors may increase the benefit under this Section 2.3.1,
but it shall have no obligation to do so. Any increase shall require
recalculation of Schedule A.
2.3.2 Payment of Benefit. Middlefield Bank shall pay the
benefit to the Director in a single lump sum within 3 days after the
Director's Termination of Service.
2.3.3 Section 2.4 Has Priority Over Other Sections. The
Director's entitlement to benefits arising out of Termination of
Service within 12 months after a Change in Control shall be governed
exclusively by Section 2.4, even if Termination of Service is a result
of Disability occurring within 12 months after the Change in Control.
2.4 Change in Control Benefit. Unless the Director's service
terminates under Article 3 of this Agreement, if the Director's service with
Middlefield Bank terminates within 12 months after a Change in Control,
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Middlefield Bank shall pay to the Director the benefit described in this Section
2.4 instead of any other benefit under this Agreement, regardless of whether the
Director has accrued five years of service or has reached age 55.
2.4.1 Amount of Benefit. The benefit under this Section 2.4
is the Accrual Balance for the Plan Year ending immediately before the
date on which Termination of Service occurs (except during the first
Plan Year, the benefit is the Accrual Balance at the end of Plan Year
1). In its sole discretion, Middlefield Bank's board of directors may
increase the benefit under this Section 2.4.1, but it shall have no
obligation to do so. Any increase shall require recalculation of
Schedule A.
2.4.2 Payment of Benefit. Middlefield Bank shall pay this
benefit to the Director in a single lump sum within 3 days after the
Director's Termination of Service.
2.4.3 Section 2.4 Has Priority Over Other Sections. The
Director's entitlement to benefits arising out of Termination of
Service within 12 months after a Change in Control shall be governed
exclusively by Section 2.4.
2.5 Petition for Payment of Vested Normal Retirement Benefit, Vested
Early Termination Benefit or Vested Disability Benefit. A Director who is
entitled to the Normal Retirement Benefit provided by Section 2.1 or the Early
Termination Benefit provided by Section 2.2 may petition the board of directors
to have the Accrual Balance amount corresponding to that particular benefit paid
in a single lump sum after (a) deduction of any Normal Retirement Benefits or
Early Termination Benefits already paid and (b) addition of interest at the rate
of 7.5% on the Accrual Balance not yet paid for the period from Termination of
Service to payment of the lump sum amount. The board of directors shall have
sole and absolute discretion about whether to pay the remaining Accrual Balance
in a lump sum. If payment of the remaining Accrual Balance is paid in a lump
sum, Middlefield Bank shall have no further obligations under this Agreement.
2.6 Payout of Normal Retirement Benefit or Early Termination Benefit
after a Change in Control. If a Change in Control occurs when the Director is
receiving benefits provided by Sections 2.1 or 2.2 of this Agreement,
Middlefield Bank shall pay the remaining benefits to the Director in a single
lump sum within three days after the Change in Control. The lump-sum payment
shall be an amount equal to the Schedule A Accrual Balance remaining unpaid.
2.7 Contradiction in Terms of Agreement and Schedule A. Schedule A
attached hereto is incorporated by reference in this Agreement and made a part
hereof. But if there is a contradiction between the terms of this Agreement and
Schedule A concerning the amount due the Director under Article 2 hereof, the
amount of the benefit due the Director shall be determined by this Agreement
without regard to Schedule A.
2.8 Medical Benefits. Provided health insurance coverage can be
obtained by Middlefield Bank on terms it, in its sole judgment, considers
commercially reasonable, Middlefield Bank shall obtain and maintain health
insurance coverage for the Director after Termination of Service for the
lifetime of the Director and the Director's surviving spouse.
2.9 No Death Benefits. No benefits shall be payable under this
Agreement after the Director's death.
Article 3
General Limitations
3.1 Termination for Cause. Notwithstanding any provision of this
Agreement to the contrary, Middlefield Bank shall not pay any benefit under this
Agreement if Middlefield Banc Corp.'s board of directors or a duly authorized
committee of the board of directors determines at any time that the Director
will not be nominated by the board or committee for reelection as a Director of
Middlefield Banc Corp. after the expiration of his current term, or if the
Director is removed as a director of Middlefield Bank, in either case because of
the Director's --
(a) gross negligence or gross neglect of duties,
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(b) commission of a felony, or commission of a misdemeanor
involving moral turpitude, or
(c) fraud, disloyalty, dishonesty, or willful violation of
any law or significant policy of Middlefield Bank committed in
connection with the Director's service and resulting in an adverse
effect on Middlefield Bank or Middlefield Banc Corp.
Middlefield Bank's board of directors or the duly authorized committee
of the board of directors shall have the sole and absolute right to determine
whether the bases set forth in this Section 3.1 for denial of benefits under
this Agreement exist. Benefits may be denied under this Section 3.1 regardless
of whether the Director continued to serve as a Director after the board or
committee made its determination not to nominate the Director for reelection,
and regardless of whether stockholders nominated the Director for reelection or
reelected the Director for an additional term.
3.2 Removal. If the Director is removed from service or permanently
prohibited from participating in the conduct of Middlefield Bank's affairs by an
order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance
Act [12 U.S.C. 1818(e)(4) or (g)(1)], all obligations of Middlefield Bank under
this Agreement shall terminate as of the effective date of the order.
3.3 Insolvency. If the Superintendent of the Ohio Division of
Financial Institutions appoints a conservator or receiver for Middlefield Bank
under Ohio Revised Code chapter 1125, all obligations under this Agreement shall
terminate as of the date of such appointment.
Article 4
Claims and Review Procedures
4.1 Claims Procedure. Middlefield Bank shall notify in writing any
person or entity making a claim for benefits under this Agreement (the
"Claimant") of his or her eligibility or noneligibility for benefits under the
Agreement. Middlefield Bank shall send the written notice to the Claimant within
90 days after Claimant's written application for benefits. If Middlefield Bank
determines that the Claimant is not eligible for benefits or full benefits, the
notice shall state (a) the specific reasons for such denial, (b) a specific
reference to the provisions of the Agreement on which the denial is based, (c) a
description of any additional information or material necessary for the Claimant
to perfect his or her claim, and a description of why it is needed, and (d) an
explanation of the Agreement's claims review procedure and other appropriate
information concerning the steps to be taken if the Claimant wishes to have the
claim reviewed. If Middlefield Bank determines that there are special
circumstances requiring additional time to make a decision, Middlefield Bank
shall notify the Claimant of the special circumstances and the date by which a
decision is expected to be made, and may extend the time for up to an additional
90 days.
4.2 Review Procedure. If Middlefield Bank determines that the Claimant
is not eligible for benefits, or if the Claimant believes that he or she is
entitled to greater or different benefits, the Claimant shall have the
opportunity to have the claim reviewed by Middlefield Bank by filing a petition
for review with Middlefield Bank within 60 days after receipt of the notice
issued by Middlefield Bank. The petition shall state the specific reasons the
Claimant believes entitle him or her to benefits or to greater or different
benefits. Within 60 days after receipt by Middlefield Bank of the petition,
Middlefield Bank shall give the Claimant (and counsel, if any) an opportunity to
present his or her position to Middlefield Bank verbally or in writing, and the
Claimant (or counsel) shall have the right to review the pertinent documents.
Middlefield Bank shall notify the Claimant of Middlefield Bank's decision in
writing within the 60-day period, stating specifically the basis of its decision
and identifying the specific provision(s) of the Agreement on which the decision
is based. If because of the need for a hearing the 60-day period is not
sufficient, the decision may be deferred for up to another 60 days at the
election of Middlefield Bank, but notice of this deferral shall be given to the
Claimant.
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Article 5
Miscellaneous
5.1 Amendment and Termination. This Agreement may be amended or
terminated only by a written agreement signed by Middlefield Bank and the
Director.
5.2 Binding Effect. This Agreement shall bind the Director and
Middlefield Bank, and their beneficiaries, survivors, executors, successors,
administrators and transferees.
5.3 No Guarantee of Service. This Agreement is not a contract for
services. It does not give the Director the right to remain a Director of
Middlefield Bank, nor does the Agreement interfere with the rights of
Middlefield Bank's stockholder(s) not to re-elect the Director or the right of
the stockholder(s) or the board to remove an individual as a director of
Middlefield Bank. The Agreement also does not require the Director to remain a
director nor interfere with the Director's right to terminate service at any
time.
5.4 Non-Transferability. Benefits under this Agreement cannot be sold,
transferred, assigned, pledged, attached, or encumbered in any manner.
5.5 Successors; Binding Agreement. By an assumption agreement in form
and substance satisfactory to the Director, Middlefield Bank will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business or assets of Middlefield
Bank or Middlefield Banc Corp. to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that Middlefield Bank would
be required to perform this Agreement if no such succession had occurred.
Failure of Middlefield Bank to obtain such assumption agreement before
effectiveness of such succession shall be a breach of this Agreement and shall
entitle the Director to the Change in Control Benefit provided in Section 2.4.
5.6 Tax Withholding. Middlefield Bank shall withhold any taxes that
are required to be withheld from the benefits provided under this Agreement.
5.7 Applicable Law. The Agreement and all rights hereunder shall be
governed by the internal substantive laws of the State of Ohio, without regard
to principles of conflict of laws.
5.8 Unfunded Arrangement. The Director is a general unsecured creditor
of Middlefield Bank for the payment of benefits under this Agreement. The
benefits represent the mere promise by Middlefield Bank to pay such benefits.
The rights to benefits are not subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors. Any insurance on the Director's life is a general
asset of Middlefield Bank to which the Director has no preferred or secured
claim.
5.9 Entire Agreement. This Agreement constitutes the entire agreement
between Middlefield Bank and the Director as to the subject matter hereof. No
rights are granted to the Director by virtue of this Agreement other than those
specifically set forth herein.
5.10 Administration. Middlefield Bank shall have powers which are
necessary to administer this Agreement, including but not limited to--
(a) Interpreting the provisions of the Agreement,
(b) Establishing and revising the method of accounting for
the Agreement,
(c) Maintaining a record of benefit payments, and
(d) Establishing rules and prescribing any forms necessary
or desirable to administer the Agreement.
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5.11 Named Fiduciary. Middlefield Bank shall be the named fiduciary
and plan administrator under this Agreement. The named fiduciary may delegate to
others certain aspects of the management and operation responsibilities of the
plan including the employment of advisors and the delegation of ministerial
duties to qualified individuals.
5.12 Severability. If for any reason any provision of this Agreement
is held invalid, such invalidity shall not affect any other provision of this
Agreement not held invalid, and each such other provision shall continue in full
force and effect to the full extent consistent with the law. If any provision of
this Agreement is held invalid in part, such invalidity shall in no way affect
the rest of such provision not held invalid, and the rest of such provision
together with all other provisions of this Agreement shall continue in full
force and effect to the full extent consistent with the law.
5.13 Headings. The headings of Sections herein are included solely for
convenience of reference and shall not affect the meaning or interpretation of
any provision of this Agreement.
5.14 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed, certified or registered mail, return receipt
requested, with postage prepaid, to the following addresses or to such other
address as either party may designate by like notice.
(a) If to Middlefield Bank, to: Board of Directors
The Middlefield Banking Company
00000 Xxxx Xxxx Xxxxxx
Xxxxxxxxxxx Xxxx, Xxxx 00000-0000
(b) If to the Director, to:
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----------------------------------------
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and to such other or additional person or persons as either party shall have
designated to the other party in writing by like notice.
In Witness Whereof, the Director and a duly authorized officer of
Middlefield Bank have signed this Agreement as of the day and year first written
above.
Director The Middlefield Banking Company
By:
----------------------------------- ------------------------------
Its:
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Schedule A Dated as of January 8, 2002
The Middlefield Banking Company Director Retirement Agreement
Xxxxxx Xxxxxxxx
Benefit for Termination
Director's Accrual Balance at Disability Early Termination of Service within 12
Plan year Age at the end 7.5% Discount Rate at Benefit, payable Benefit, payable at months after a Change in
Plan ending of the Plan the end of the Plan in a single Normal Retirement Control, payable in a
year November 30, Year Year /(1)/ lump sum Age for 10 Years /(2)/ single lump sum
---- ------------ --------------- --------------------- ---------------- ---------------------- ------------------------
1 2002 71 $ 7,485 $ 7,485 $1,277 $ 7,485
2 2003 72 $15,551 $15,551 $2,463 $15,551
3 2004 73 $24,243 $24,243 $3,562 $24,243
May 2005 73 /(3)/ $28,236 $28,236 $3,997 $28,236
(1) The Accrual Balance assumes payment at the beginning of each month
during retirement. Assumes retirement in May, 2005 after attaining the
Normal Retirement Age of 73 and at least five years of service. The
Accrual Balance assumes that the Director retires from director
service in May, 2005 when his term as a director of Middlefield Banc
Corp. expires at the 2005 Annual Meeting of Shareholders of
Middlefield Banc Corp. The Normal Retirement Benefit is an amount in
cash equal to 25% of the final average annual board fees in the three
years preceding the director's retirement on the Normal Retirement
Date. For purposes of illustration, the Normal Retirement Annual
Benefit required by Agreement Section 2.1 is assumed to be $3,997,
calculated as shown by the attached Director Fee Analysis. The Normal
Retirement Benefit required by Agreement Section 2.1 is shown in this
Schedule A solely for illustrative purposes. The actual Normal
Retirement Benefit required by Agreement Section 2.1 will be
determined pursuant to Agreement Section 2.1. Board fees include
retainers and other regular fees paid or payable in cash for the
Director's service on or attendance at meetings of the board of
directors and committees of the board of directors, including elective
deferrals. If the Director is serving as Chairman of the Board on the
Normal Retirement Date, board fees also include any additional cash
compensation paid or payable for service as Chairman of the Board.
Estimated assuming annual board fee increases of 5.00% commencing in
2002.
(2) Early Retirement Benefits are payable if the Director has five years
of service and has reached age 55.
(3) The age shown is not the age at the end of the Plan Year, but instead
is the Director's age at assumed retirement in May, 2005.
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