Exhibit 10.17
FARMERS & MERCHANTS BANK OF CENTRAL CALIFORNIA
AMENDED AND RESTATED
EXECUTIVE INDEXED RETIREMENT AGREEMENT
This Amended and Restated Agreement (the "Agreement") is adopted this 7th
day of March 2006, by and between FARMERS & MERCHANTS BANK OF CENTRAL
CALIFORNIA, a state-chartered commercial bank located in Lodi, California, or
its successors (the "Company") and ____________________ (the "Executive").
INTRODUCTION
As part of a program to attract, retain and reward a select group of the
Company's executive officers by providing a potentially higher level of
retirement income, the Company provided the Executive with an Executive Indexed
Retirement Agreement dated as of ________________ (the Prior Agreement"). The
purpose of this Agreement is to amend and restate the Prior Agreement in its
entirety as of the date hereof.
AGREEMENT
The Executive and the Company agree as follows:
ARTICLE 1
DEFINITIONS
Whenever used in this Agreement, the following words and phrases shall have
the meanings specified:
1.1 "Adjustment Rate" means the figure equal to one minus the Company's
highest marginal tax rate for the current calendar year.
1.2 "Change of Control" means a change, after January 1, 2005, of
control of the Holding Company. Such a Change of Control will be deemed to have
occurred immediately before any of the following occur: (i) individuals, who
were members of the Board of Directors of the Holding Company immediately prior
to a meeting of the shareholders of the Holding Company which meeting involved a
contest for the election of directors, do not constitute a majority of the Board
of Directors of the Holding Company following such election or meeting, (ii) an
acquisition, directly or indirectly, of more than 35% of the outstanding shares
of any class of voting securities of the Holding Company by any Person, (iii) a
merger (in which the Holding Company is not the surviving entity), consolidation
or sale of all, or substantially all, of the assets of the Holding Company, or
(iv) there is a change, during any period of one year, of a majority of the
Board of Directors of the Holding Company as constituted as of the beginning of
such period, unless the election of each director who is not a director at the
beginning of such period was approved by a vote of at least a majority of the
directors then in office who were directors at the
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beginning of such period. If the events or circumstances described in (i)-(iv),
above, shall occur to or be applicable to the Company, then such Change of
Control shall be deemed for all purposes of this agreement to also be a "Change
of Control" of the Holding Company. For purposes of this agreement, the term
"Person" shall mean and include any individual, corporation, partnership, group,
association or other "person", as such term is used in Section 14(d) of the
Securities Exchange Act of 1934, other than the Holding Company, the Company,
any other wholly owned subsidiary of the Company or any employee benefit plan(s)
sponsored by the Company or other subsidiary of the Holding Company.
1.3 "Disability" means when an Executive (i) is unable to engage in
any substantial gainful activity by reason of any medical determinable physical
or mental impairment which can be expected to result in death or can be expected
to last for a continuous period of not less than 12 months, or (ii) is by reason
of any medical determinable physical or mental impairment which can be expected
to result in death or can be expected to last for a continuous period of not
less than 12 months, receiving income replacement benefits for a period of not
less than three months under an accident and health plan covering employees of
Company. Disability shall be determined by a physician acceptable to both the
Company and the Executive.
1.4 "Normal Retirement Age" means the Executive's sixty-fifth (65th)
birthday.
1.5 "Retirement Date" means the day on or after Executive's Normal
Retirement Age when Executive's Employment is Terminated.
1.6 "Plan Year" means each calendar year from January 1 through
December 31. In the year of implementation, it shall commence with the date of
this Agreement and end on December 31, 2003.
1.7 "Retirement Account" means the account maintained on the books of
the Company as described in Section 2.2.
1.8 "Simulated Investments" mean investments specified by the Company
for use in measuring the Retirement Benefit. Subject to Article 2, the Company
can change the Simulated Investments only with the Executive's written
agreement. The Simulated Investments shall be of equal initial amounts.
1.9 "Simulated Investment Earnings" means the after-tax rate of return
on a Simulated Investment. If the Simulated Investment is a life insurance
policy, the Simulated Investment Earnings shall track cash surrender value and
not include receipt of the policy's death benefit.
1.10 "Termination of Employment" or "Employment is Terminated" means
the Executive ceases to be employed by the Company for any reason, voluntary or
involuntary, other than (A) death or (B) a leave of absence approved by the
Company.
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1.11 "Termination for Cause" means the Company terminating the
Executive's employment for conviction of a felony resulting in a material
economic adverse effect on the Company.
1.12 "Year of Employment" means any calendar year in which the
Executive completes at least 1,400 hours of employment with the Company.
1.13 "Pool Policies" means those Company-owned life insurance policies
listed in Appendix C.
1.14 "Earnings on Pool Policies" means 100% of the amount determined by
subtracting the value (the calculation of which is to be performed in accordance
with Sections 2.1.1 and 2.1.2) of Simulated Invested Number Two on the Pool
Polices from Simulated Investment Number One on the Pool Policies and dividing
the difference by the Adjustment Rate.
1.15 "Executive's Pro-Rata Share of Earnings on Pool Policies" means
the amount calculated by (1) dividing Executive's current year Forecasted
Retirement Contribution amount listed in Appendix D by the sum of all Forecasted
Retirement Contributions for such year for all Company executives who have
Executive Indexed Retirement Agreements, and (2) multiplying such resulting
percentage by the Earnings on Pool Polices for the current year.
1.16 "Forecasted Retirement Contribution" means the amounts listed in
Appendix D.
1.17 "Holding Company" means Farmers & Merchants Bancorp.
ARTICLE 2
RETIREMENT ACCOUNT
2.1 Simulated Investments. The Company shall establish two Simulated
Investments in the amount of $______________ (reflecting the initial cash
surrender values of the life insurance policies described in Appendix A) as of
__________, 200_, as follows:
2.1.1 Simulated Investment Number One shall track the cash
surrender value of specified life insurance policies as described in
Appendix A.
2.1.2 Simulated Investment Number Two shall track the value of a
simulated investment account comprised of both principal and
accumulated net after-tax interest earnings. Pre-tax interest earnings
equal the current 5-year Treasury Xxxx rate, which shall initially be
set at 4.30%, which shall continue through December 31, 2003. Each
January 1 thereafter the rate shall be reset based on the average
5-year Treasury Xxxx rate for the previous month of December according
to Bloomberg or such other nationally recognized reporting service.
Simulated Investment Number Two assumes the income tax rate to be the
Company's highest marginal tax rate for the current calendar year
(which is 42.046%, using a Federal rate of 35% and a State franchise
tax rate of 10.84%), and assumes that interest (net of tax) shall be
compounded on an annual basis at the end of each Plan Year.
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2.2 Retirement Account. The Company shall establish a Retirement
Account on its books for the Executive. The amount to be added to the
Retirement Account each year after the date hereof until Termination of
Employment, but not beyond Normal Retirement Age, will be the greater of (A) one
percent (1%) of Simulated Investment Number One as of December 31st of the
preceding year or (B) the lesser of:
(i) the sum of: (1) one hundred percent (100%) of the sum determined
by subtracting the current year's increase in the value of
Simulated Investment Number Two from the current year's increase
in the value of Simulated Investment Number One and dividing the
difference by the Adjustment Rate, plus (2) the Executive's
Pro-Rata Share of Earnings on Pool Policies for the current year;
or
(ii) the Forecasted Retirement Contribution for the current year as
stated in Appendix D.
2.3 Interest on Retirement Account Balances. After the establishment of
the rabbi trust contemplated by Section 12.9(d), interest will be credited on
any undistributed balances on the last day of each calendar month at a rate
equivalent to the pre-tax investment earnings rate for such month achieved in
the rabbi trust.
2.4 Statement of Accounts. The Company shall provide to the Executive,
within sixty (60) days after each calendar year end, a statement setting forth
the Executive's Retirement Account balance.
2.5 Accounting Device Only. The Retirement Account and Simulated
Investments are solely devices for measuring amounts to be paid under this
Agreement. Neither they nor the rabbi trust (contemplated by Section 12.9(d))
are a trust fund of any kind. The Executive is a general unsecured creditor of
the Company for the payment of benefits.
ARTICLE 3
NORMAL RETIREMENT
Upon the Executive attaining his or her Retirement Date, the Company shall
pay, or cause to be paid, the Executive's Retirement Account balance as elected
on Appendix B.
ARTICLE 4
EARLY TERMINATION OF EMPLOYMENT
4.1 Less than Five Years of Employment. Except in the event of (A) a
Change of Control or (B) Disability, if the Executive's Employment is Terminated
prior to Normal Retirement Age and without completing five (5) Years of
Employment (measured from the date of Executive's
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employment by the Company), the Company shall not pay any benefit to the
Executive under this Agreement.
4.2 Five or More Years of Employment. Upon the Executive's Termination
of Employment (other than Termination for Cause) prior to Normal Retirement Age
and after completing five (5) Years of Employment (measured from the date of
Executive's employment by the Company), the Company shall pay, or cause to be
paid, the Executive's Retirement Account balance as elected on Appendix B.
4.3 Termination for Cause. If the Executive's Employment is
Terminated for Cause, the Company shall not pay any benefit to the Executive
under this Agreement.
ARTICLE 5
DISABILITY BENEFIT
Upon the Executive's Termination of Employment following a Disability, the
Company shall pay, or cause to be paid, the Executive's Retirement Account
balance as elected on Appendix B.
ARTICLE 6
CHANGE OF CONTROL
6.1 Change of Control Benefit. Upon a Change of Control prior to the
Executive's Termination of Employment, the Executive shall be entitled to
receive a benefit in the amount of:
(a) the balance in his/her Retirement Account, including all accrued
interest pursuant to Section 2.3, plus
(b) the sum of the present value of each of the post Change of
Control remaining annual Forecasted Retirement Contributions
provided for in Appendix D.
For purposes of calculating the amount under Section 6.1(b), the present value
factor shall be the Treasury Xxxx rate (as of the date that is five business day
prior to the anticipated date of the Change of Control) for the number of years
(rounded down to the nearest whole number) remaining on Appendix D for
Executive. Immediately prior to a Change of Control, the Company shall transfer
to the rabbi trust established under Section 12.9(d) any additional amounts
required so that the Executive's Retirement Account balance is equal to the
amount calculated under this Section. The Company shall pay the benefit to the
Executive as elected on Appendix B.
6.2 Gross-Up Payment. In connection with a Change of Control, the
Executive shall be entitled to a "Gross-Up Payment" under the terms and
conditions set forth herein, and such payment shall include the Excise Tax
reimbursement due pursuant to subsection (a) and any federal and state tax
reimbursements due pursuant to subsection (b).
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(a) In the event that any payment or benefit (as those terms are
defined within the meaning of Internal Revenue Code Section
280G(b)(2)) paid, payable, distributed or distributable to a
Executive (hereinafter referred to as "Payments") pursuant to the
terms of this Agreement or otherwise in connection with or
arising out a Change of Control would be subject to the Excise
Tax imposed by Section 4999 of the Internal Revenue Code or any
interest or penalties are incurred by the Executive with respect
to such Excise Tax, then the Executive will be entitled to
receive an additional payment ("Gross-Up Payment") in an amount
equal to the total Excise Tax, interest and penalties imposed on
the Executive as a result of the Payment and the Excise Taxes on
any federal and state tax reimbursements as set forth in
subsection (b).
(b) If the Company is obligated to pay the Executive pursuant to
subsection a), the Company also shall pay the Executive an amount
equal to the "total presumed federal and state taxes" that could
be imposed on the Executive with respect to the Excise Tax
reimbursements due to the Executive pursuant to subsection a) and
the federal and state tax reimbursements due to the Executive
pursuant to this subsection. For purposes of the preceding
sentence, the "total presumed federal and state taxes" that could
be imposed on the Executive shall be conclusively calculated
using a combined tax rate equal to the sum of the (A) the highest
individual income tax rate in effect under (i) Federal tax law
and (ii) the tax laws of the state in which the Executive resides
on the date that the payment is computed and (B) the hospital
insurance portion of FICA.
(c) No adjustments will be made in this combined rate for the
deduction of state taxes on the federal return, the loss of
itemized deductions or exemptions, or for any other purpose for
paying the actual taxes.
(d) It is further intended that in the event that any payments would
be subject to other "penalty" taxes (in addition to the Excise
Tax in subsection (a)) imposed by Congress or the Internal
Revenue Service that these taxes would also be included in the
calculation of the Gross-Up Payment, including any federal and
state tax reimbursements pursuant to subsection (b).
(e) An initial determination as to whether a Gross-Up Payment is
required pursuant to this Agreement and the amount of such
Gross-Up Payment shall be made at the Company's expense by an
accounting firm appointed by the Company prior to any Change of
Control. The accounting firm shall provide its determination,
together with detailed supporting calculations and documentation
to the Company and the Executive prior to submission of the
proposed change of control to the Holding Company's shareholders,
Board of Directors or appropriate regulators for approval. If the
accounting firm determines that no Excise Tax is payable by the
Executive with respect to a Payment or Payments, it shall furnish
the Executive with an opinion reasonably acceptable to the
Executive that no Excise Tax will be imposed with respect to any
such Payment or Payments. Within ten (10) days of the delivery of
the determination to the Executive, the Executive shall have the
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right to dispute the determination. The existence of the dispute
shall not in any way affect the Executive's right to receive the
Gross-Up Payment in accordance with the determination. Upon the
final resolution of a dispute, the Company or its successor shall
promptly pay to the Executive any additional amount required by
such resolution. If there is no dispute, the determination shall
be binding, final and conclusive upon the Company and the
Executive, except to the extent that any taxing authority
subsequently makes a determination that the Excise Tax or
additional Excise Tax is due and owing on the payments made to
the Executive. If any taxing authority determines that the Excise
Tax or additional Excise Tax is due and owing, the entity
acquiring control of the Company shall pay the Excise Tax and any
penalties assessed by such taxing authority.
(f) Notwithstanding anything contained in this Section to the
contrary, in the event that according to the determination, an
Excise Tax will be imposed on any Payment or Payments, the
Company or its successor shall pay to the applicable government
taxing authorities as Excise Tax withholding, the amount of the
Excise Tax that the Company has actually withheld from the
Payment or Payments.
Payment of these amounts will be made subject to the terms of the Executive's
Employment Agreement, or in the absence of such an agreement, immediately prior
to the purchaser assuming control of the Company or Holding Company.
ARTICLE 7
DEATH BENEFITS
7.1 General Rule. The Company shall not pay any benefit under this
Agreement upon Executive's death except to the extent set forth in this Article.
7.2 Lump Sum Election. If Executive dies after (A) completing five (5)
Years of Employment (measured from the date of Executive's employment by the
Company) and (B) making an election on Appendix B for Executive's beneficiary to
receive upon Executive's death a lump sum payment equal to the balance of
Executive's Retirement Account, the Company shall pay to such beneficiary the
amount of Executive's Retirement Account balance as of the month ending
immediately following Executive's death.
7.3 Installment Election. If Executive dies after beginning to receive
installment payments of the balance of Executive's Retirement Account pursuant
to an election on Appendix B, such installment payments shall cease effective as
of the month ending immediately following Executive's death and Company shall
have no further obligation to Executive or his/her heirs or designees under this
Agreement.
7.4 Split Dollar. Notwithstanding anything to the contrary in this
Article, a death benefit may be provided according to the terms of a separate
Split Dollar Agreement entered into by the Company and the Executive.
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ARTICLE 8
BENEFICIARIES
8.1 Beneficiary Designations. The Executive shall designate a
beneficiary by filing a written designation with the Company. The Executive may
revoke or modify the designation at any time by filing a new designation.
However, designations will only be effective if signed by the Executive and
received by the Company during the Executive's lifetime. The Executive's
beneficiary designation shall be deemed automatically revoked if the beneficiary
predeceases the Executive or if the Executive names a spouse as beneficiary and
the marriage is subsequently dissolved. If the Executive dies without a valid
beneficiary designation, all payments shall be made to the Executive's estate.
8.2 Facility of Payment. If a benefit is payable to a minor, to a
person declared incompetent, or to a person incapable of handling the
disposition of his or her property, the Company may pay such benefit to the
guardian, legal representative or person having the care or custody of such
minor, incompetent person or incapable person. The Company may require proof of
incompetence, minority or guardianship as it may deem appropriate prior to
distribution of the benefit. Such distribution shall completely discharge the
Company from all liability with respect to such benefit.
ARTICLE 9
GENERAL LIMITATIONS
9.1 Suicide or Misstatement. The Company shall not pay any benefit
under this Agreement if the Executive commits suicide within three years after
the date of this Agreement. In addition, the Company shall not pay any benefit
under this Agreement if the Executive has made any material misstatement of fact
provided to the Company, or on any application for any benefits provided by the
Company to the Executive, which causes the Company financial harm.
ARTICLE 10
CLAIMS AND REVIEW PROCEDURES
10.1.1 Initiation - Written Claim. The claimant initiates a claim by
submitting to the Company a written claim for the benefits.
10.1.1 Initiation - Written Claim. The claimant initiates a claim
by submitting to the Company a written claim for the benefits.
10.1.2 Timing of Company Response. The Company shall respond to
such claimant within 90 days after receiving the claim. If the Company
determines that special circumstances require additional time for
processing the claim, the Company can extend the
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response period by an additional 90 days by notifying the claimant in
writing, prior to the end of the initial 90-day period that an additional
period is required. The notice of extension must set forth the special
circumstances and the date by which the Company expects to render its
decision.
10.1.3 Notice of Decision. If the Company denies part or all of
the claim, the Company shall notify the claimant in writing of such denial.
The Company shall write the notification in a manner calculated to be
understood by the claimant. The notification shall set forth:
(a) The specific reasons for the denial,
(b) A reference to the specific provisions of this Agreement
on which the denial is based,
(c) A description of any additional information or material
necessary for the claimant to perfect the claim and an explanation of
why it is needed,
(d) An explanation of this Agreement's review procedures and
the time limits applicable to such procedures, and
(e) A statement of the claimant's right to bring a civil
action under ERISA Section 502(a) following an adverse benefit
determination on review.
10.2 Review Procedure. If the Company denies part or all of the claim,
the claimant shall have the opportunity for a full and fair review by the
Company of the denial, as follows:
10.2.1 Initiation - Written Request. To initiate the review, the
claimant, within 60 days after receiving the Company's notice of denial,
must file with the Company a written request for review.
10.2.2 Additional Submissions - Information Access. The claimant
shall then have the opportunity to submit written comments, documents,
records and other information relating to the claim. The Company shall also
provide the claimant, upon request and free of charge, reasonable access
to, and copies of, all documents, records and other information relevant
(as defined in applicable ERISA regulations) to the claimant's claim for
benefits.
10.2.3 Considerations on Review. In considering the review, the
Company shall take into account all materials and information the claimant
submits relating to the claim, without regard to whether such information
was submitted or considered in the initial benefit determination.
10.2.4 Timing of Company Response. The Company shall respond in
writing to such claimant within 60 days after receiving the request for
review. If the Company determines that special circumstances require
additional time for processing the claim, the Company can extend the
response period by an additional 60 days by notifying the claimant in
writing, prior to the end of the initial 60-day period that an additional
period is required. The notice of extension must set forth the special
circumstances and the date by which the Company expects to render its
decision.
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10.2.5 Notice of Decision. The Company shall notify the claimant
in writing of its decision on review. The Company shall write the
notification in a manner calculated to be understood by the claimant. The
notification shall set forth:
(a) The specific reasons for the denial,
(b) A reference to the specific provisions of this Agreement
on which the denial is based,
(c) A statement that the claimant is entitled to receive,
upon request and free of charge, reasonable access to, and copies of,
all documents, records and other information relevant (as defined in
applicable ERISA regulations) to the claimant's claim for benefits,
and
(d) A statement of the claimant's right to bring a civil
action under ERISA Section 502(a).
ARTICLE 11
AMENDMENTS AND TERMINATION
This Agreement may be amended or terminated only by a written agreement
signed by the Company and the Executive.
This Agreement is intended to be consistent with the provisions of Section
409A of the Internal Revenue Code. On the date of this Agreement the Internal
Revenue Service continues to issue guidance on such Section. Company reserves
the right to change this Agreement, including reducing any Executive's interest
in this Agreement, in order to make such Agreement compliant with Section 409A.
ARTICLE 12
MISCELLANEOUS
12.1 Binding Effect. This Agreement shall bind the Executive and the
Company and their beneficiaries, survivors, successors, executors,
administrators and transferees.
12.2 No Guarantee of Employment. This Agreement is not an employment
policy or contract. It does not give the Executive the right to remain an
employee of the Company, nor does it interfere with the Company's right to
discharge the Executive. It also does not require the Executive to remain an
employee nor interfere with the Executive's right to terminate employment at any
time.
12.3 Applicable Law. The Agreement and all rights hereunder shall be
governed by the laws of the State of California except to the extent preempted
by the laws of the United States of America.
12.4 Reorganization. The Company shall not merge or consolidate into
or with another company, or reorganize, or sell substantially all of its assets
to another company, firm or person
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unless such succeeding or continuing company, firm or person agrees to assume
and discharge the obligations of the Company under this Agreement. Upon the
occurrence of such event, the term "Company" as used in this Agreement shall be
deemed to refer to the successor or survivor company.
12.5 Non-Transferability. Benefits under this Agreement cannot be
sold, transferred, assigned, pledged, attached or encumbered in any manner,
whether by the Executive or Executive's beneficiary or estate.
12.6 Tax Withholding. The Company shall withhold any taxes that are
required to be withheld from the benefits provided under this Agreement.
12.7 Unfunded Arrangement. The Executive is a general unsecured
creditor of the Company for the payment of benefits under this Agreement. The
benefits represent the mere Company promise to pay, or cause the rabbi trust to
pay, such benefits. The Company will derive all funding for the benefits from
its general assets. The Executive's rights are not subject in any manner to
anticipation, alienation, transfer, assignment, pledge, encumbrance, attachment,
or garnishment by the Executive's creditors. The Retirement Account, any
Simulated Investment and the rabbi trust (contemplated by Section 12.9(d)) are
not, either individually or collectively, a trust fund of any kind. Any
insurance on the Executive's life or any other asset held in connection with
this Agreement is a general asset of the Company to which the Executive has no
preferred or secured claim.
12.8 Entire Agreement. This Agreement, along with its Appendices,
constitutes the entire agreement between the Company and the Executive as to the
subject matter hereof and supersedes all prior agreements and understanding of
the parties in connection therewith, including the Prior Agreement. No rights
are granted to the Executive by virtue of this Agreement other than those
specifically set forth herein.
12.9 Administration. The Company shall have powers which are necessary
to administer this Agreement, including but not limited to:
(a) Establishing and revising the method of accounting for the
Agreement;
(b) Maintaining a record of benefit payments; and
(c) Establishing rules and prescribing any forms necessary or
desirable to administer the Agreement.
(d) Establishing a rabbi trust for the Agreement and depositing
amounts required under Section 2.2 into such trust. In the event a rabbi
trust is established, Company shall (A) immediately transfer to the rabbi
trust an amount equal to Executive's then Retirement Account and (B)
monthly thereafter transfer the applicable increase in the Retirement
Account calculated pursuant to Section 2.2. The Company shall also transfer
to the rabbi trust any amounts required under Sections 6.1 or 6.2 in
connection with any Change of Control at the times provided for in such
Sections.
12.10 Named Fiduciary. The Company shall be the named fiduciary and
plan
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administrator under this Agreement. The named fiduciary may delegate to others
certain aspects of the management and operation responsibilities of the
Agreement including the employment of advisors and the delegation of ministerial
duties to qualified individuals.
12.11 Intent. To the extent that this Agreement may be construed to be
a plan maintained to provide deferred compensation, it is intended to be limited
to a "select group of management or highly compensated employees" within the
meaning of Section 201(2) of ERISA. This Agreement is intended to be exempt from
the participation, vesting, funding, and fiduciary requirements of Title 1 of
ERISA, to the fullest extent permitted under the law. This Agreement shall at
all times be "unfunded" within the meaning of ERISA.
IN WITNESS WHEREOF, the Executive and a duly authorized Company officer have
signed this Agreement.
EXECUTIVE: COMPANY:
------------------------------- FARMERS & MERCHANTS BANK OF
EXECUTIVE CENTRAL CALIFORNIA
BY:
-------------------------------------
President and C.E.O.
BY:
-------------------------------------
Chairman of the Board
BY:
-------------------------------------
Chairman of the Personnel Committee
of the Board
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