Exhibit 10.26

THE MIDDLEFIELD BANKING COMPANY

EXECUTIVE VARIABLE BENEFIT DEFERRED COMPENSATION AGREEMENT

This EXECUTIVE VARIABLE BENEFIT DEFERRED COMPENSATION AGREEMENT (this
“Agreement”) is entered into as of this 9th day of July, 2018, by and between
The Middlefield Banking Company, an Ohio-chartered bank (the “Bank”), and James
R. Heslop, II, Executive Vice President and Chief Operating Officer of the Bank
(the “Executive”).

WHEREAS, the Bank and the Executive entered into an Amended Executive Deferred
Compensation Agreement dated as of May 8, 2008, with contributions made solely
by the Bank and benefits payable out of the Bank’s general assets,

WHEREAS, the Amended Executive Deferred Compensation Agreement does not provide
for employer contributions to continue after age 65 because Section 2.1 of the
Amended Executive Deferred Compensation Agreement states “The Annual
Contribution shall not be made by the Bank for the Plan Year in which the
Executive attains Normal Retirement Age or for any year thereafter.”

WHEREAS, this Agreement does not supersede the May 8, 2008 Amended Executive
Deferred Compensation Agreement,

WHEREAS, 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 the Bank, is contemplated insofar as the
Bank is concerned, and

WHEREAS, the parties hereto intend that this Agreement shall be considered an
unfunded arrangement maintained primarily to provide supplemental retirement
benefits for the Executive (who is a key employee and member of a select group
of management), and to be considered a top hat plan for purposes of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”). The Executive is
fully advised of the Bank’s financial status.

NOW THEREFORE, in consideration of these premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Executive and the Bank hereby agree as follows.

ARTICLE 1

DEFINITIONS

1.1    “Account Balance” means the Bank’s accounting of Annual Contributions
made by the Bank, plus accrued interest.

1.2    “Annual Contribution” means the amount credited to the Account Balance
after the end of each Plan Year for which the Performance Goals are achieved.
The Annual Contribution will be conditional on achievement of the Performance
Goals. The Annual Contribution amount in any Plan Year shall not be less than 5%
or more than 15% of the Executive’s Base Annual Salary. The Annual Contribution
amount shall be changed no more frequently than annually.

 

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1.3    “Base Annual Salary” means compensation of the type required to be
reported as salary according to Securities and Exchange Commission Rule
229.402(c) (17 CFR 229.402(c)), specifically column (c) of that rule’s Summary
Compensation Table (or any successor provision), but excluding fees or any other
form of compensation payable on account of service as a director. Base Annual
Salary shall be calculated before reduction for amounts voluntarily deferred or
contributed by the Executive pursuant to qualified plans.

1.4    “Beneficiary” means each designated person, or the estate of the deceased
Executive, entitled to benefits, if any, upon the death of the Executive,
determined according to Article 5.

1.5    “Beneficiary Designation Form” means the form established from time to
time by the Plan Administrator that the Executive completes, signs, and returns
to the Plan Administrator to designate one or more Beneficiaries.

1.6    “Change in Control” shall mean a change in control as defined in Internal
Revenue Code section 409A and rules, regulations, and guidance of general
application thereunder issued by the Department of the Treasury, applying the
percentage threshold specified in each of paragraphs (a) through (c) of this
section 1.6 or the related percentage threshold specified in section 409A and
rules, regulations, and guidance of general application thereunder, whichever is
greater –

(a)    Change in ownership: a change in ownership of Middlefield Banc Corp.
(“Banc Corp.”), an Ohio corporation of which the Bank is a wholly owned
subsidiary, occurs on the date any one person or group accumulates ownership of
Banc Corp. stock constituting more than 50% of the total fair market value or
total voting power of Banc Corp. stock,

(b)    Change in effective control: (x) any one person or more than one person
acting as a group acquires within a 12-month period ownership of Banc Corp.
stock possessing 30% or more of the total voting power of Banc Corp., or (y) a
majority of Banc Corp.’s board of directors is replaced during any 12-month
period by directors whose appointment or election is not endorsed in advance by
a majority of Banc Corp.’s board of directors, or

(c)    Change in ownership of a substantial portion of assets: a change in
ownership of a substantial portion of Banc Corp.’s assets occurs if in a
12-month period any one person or more than one person acting as a group
acquires from Banc Corp. assets having a total gross fair market value equal to
or exceeding 40% of the total gross fair market value of all of Banc Corp.’s
assets immediately before the acquisition or acquisitions. For this purpose,
gross fair market value means the value of Banc Corp.’s assets, or the value of
the assets being disposed of, determined without regard to any liabilities
associated with the assets.

1.7    “Code” means the Internal Revenue Code of 1986, as amended, and rules,
regulations, and guidance of general application issued thereunder by the
Department of the Treasury.

1.8    “Effective Date” means January 1, 2018.

 

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1.9    “Intentional” for purposes of this Agreement, no act or failure to act on
the Executive’s part will be considered intentional if it was due primarily to
an error in judgment or negligence. An act or failure to act on the Executive’s
part is intentional if it is not in good faith and if it is without a reasonable
belief that the action or failure to act is in the Bank’s best interests. Any
act or failure to act based upon authority granted by resolutions duly adopted
by the board of directors or based upon the advice of counsel for the Bank is
conclusively presumed to be in good faith and in the Bank’s best interests.

1.10    “Performance Goals” means the performance criteria set forth in Schedule
A attached to this Agreement and incorporated herein by this reference, which
criteria have been established by the Bank’s board of directors. The Performance
Goals may be changed by the board of directors no more frequently than annually.
If the performance criteria are changed, a new Schedule A shall be substituted
for and shall supersede the old Schedule A, and the new Schedule A shall be
deemed to be incorporated by reference herein and to be a part of this
Agreement. A change in Performance Goals shall not become effective for the Plan
Year in which the change is made unless the change is made on or before March 31
of the Plan Year. The Plan Administrator shall have sole authority to determine
whether the Performance Goals have been achieved for any Plan Year. The Plan
Administrator’s determination that the Performance Goals for a Plan Year have or
have not been achieved shall be conclusive and binding.

1.11    “Plan Administrator” or “Administrator” means the plan administrator
described in Article 8.

1.12    “Plan Year” means the calendar year. The first Plan Year shall begin on
the Effective Date and end on December 31, 2018.

1.13    “Separation from Service” means separation from service as defined in
Treasury Regulation 1.409A-1(h), other than because of the Executive’s death.

1.14    “Termination with Cause” and “Cause” shall have the same definition
specified in any effective severance or employment agreement existing on the
date hereof or hereafter entered into between the Executive and the Bank or
between the Executive and Banc Corp. If the Executive is not a party to a
severance or employment agreement containing a definition, Termination with
Cause means the Bank terminates the Executive’s employment because of –

(a)    the Executive’s gross negligence or gross neglect of duties or
intentional and material failure to perform stated duties after written notice
thereof, or

(b)    disloyalty or dishonesty by the Executive in the performance of duties or
breach of the Executive’s fiduciary duties for personal profit, in any case
whether in the Executive’s capacity as a director or officer, or

(c)    intentional wrongful damage by the Executive to the business or property
of the Bank or its affiliates, including without limitation the reputation of
the Bank, which in the judgement of the Bank causes material harm to the Bank or
affiliates, or

(d)    a willful violation by the Executive of any applicable law or significant
policy of the Bank or an affiliate that, in the Bank’s judgement, results in an
adverse effect on the Bank or the affiliate, regardless of whether the violation
leads to criminal prosecution or conviction. For purposes of this Agreement
applicable

laws include any statute, rule, regulatory order, statement of policy, or final
cease-and-desist order of any governmental agency or body having regulatory
authority over the Bank, or

 

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(e)    the occurrence of any event that results in the Executive being excluded
from coverage, or having coverage limited for the Executive as compared to other
executives of the Bank, under the Bank’s blanket bond or other fidelity or
insurance policy covering its directors, officers, or employees, or

(f)    the Executive is removed from office or permanently prohibited from
participating in the Bank’s affairs by an order issued under section 8(e)(4) or
section 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or
(g)(1), or

(g)    conviction of the Executive for or plea of no contest to a felony or
conviction of or plea of no contest to a misdemeanor involving moral turpitude,
or the actual incarceration of the Executive for 45 consecutive days or more.

ARTICLE 2

DEFERRAL ACCOUNT

2.1    Annual Contribution. The Bank shall establish an Account Balance on its
books. Within three months after the end of each Plan Year the Bank shall credit
the Annual Contribution to the Account Balance provided the Performance Goals
were achieved for the Plan Year. Contributions to the Account Balance by the
Executive are prohibited. Discretionary contributions by the Bank are likewise
prohibited.    However, if the Performance Goals are achieved for the Plan Year
in which the Executive has a Separation from Service or dies, the Bank shall
make a final contribution in an amount equal to the Annual Contribution
multiplied by a percentage. The percentage shall equal the number of days in the
Plan Year before the Executive’s Separation from Service or death divided by
365.

2.2    Interest. At the end of each Plan Year and until the first to occur of
(x) the Executive’s death, or (y) the Executive’s Separation from Service,
interest is to be credited on the Account Balance at an annual rate of interest
for that Plan Year, compounded monthly on the first day of the month, equal to
the prime interest rate as published in The Wall Street Journal. After the
Executive’s Separation from Service, interest shall be credited on the Account
Balance at an annual rate equal to the yield on a 10-year corporate bond rated
Aa by Moody’s, rounded to the nearest  1⁄4%.

2.3    Statement of Account. Within 120 days after the end of each Plan Year,
the Bank shall provide to the Executive a statement of the Account Balance at
the end of the Plan Year. Each annual statement of the Account Balance shall
supersede the previous year’s statement of the Account Balance.

2.4    Accounting Device Only. The Account Balance is solely a device for
measuring amounts to be paid under this Agreement. The Account Balance is not a
trust fund of any kind. The Executive is a general unsecured creditor of the
Bank for the payment of benefits. The benefits represent the mere promise by the
Bank to pay benefits. The Executive’s rights are not subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment, or garnishment by the Executive’s creditors.

 

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ARTICLE 3

BENEFITS DURING LIFETIME

3.1    Separation from Service. Unless the Executive dies or a Change in Control
occurs before Separation from Service, when the Executive has a Separation from
Service the Bank shall pay to the Executive the Account Balance as of the end of
the month in which the Executive has a Separation from Service. Beginning on the
first day of the seventh month after the Executive has a Separation from
Service, the Account Balance shall be paid to the Executive in 120 substantially
equal monthly installments with each subsequent payment to be made on the first
day of each subsequent month. The Bank shall credit interest according to the
formula of section 2.2, compounded monthly, until the Account Balance is paid in
full. If the Executive’s Separation from Service is a Termination with Cause, no
benefits shall be paid under this Agreement and this Agreement shall terminate.

3.2    Change in Control. If a Change in Control occurs before the Executive’s
Separation from Service, instead of any other benefit payable under this
Agreement the Bank shall pay to the Executive the entire Account Balance in a
single lump sum on the date of the Change in Control. Payment of the
Change-in-Control benefit shall fully discharge the Bank from all obligations
under this Agreement, except the legal fee reimbursement obligation under
section 9.11.

3.3    Payout of Separation from Service Benefit after a Change in Control. If
when a Change in Control occurs the Executive is receiving or is entitled to
receive the benefit under section 3.1, the Bank shall pay the remaining benefits
to the Executive in a single lump sum on the later of (x) the date of the Change
in Control or (y) the first day of the seventh month after the month in which
the Executive’s Separation from Service occurs. The lump-sum payment due to the
Executive as a result of a Change in Control shall be an amount equal to the
Account Balance remaining unpaid.

3.4    One Benefit Only. Despite anything to the contrary in this Agreement, the
Executive and Beneficiary are entitled to one benefit only under this Agreement,
which shall be determined by the first event to occur that is dealt with by this
Agreement. Except as provided in section 3.3, later occurrence of events dealt
with by this Agreement shall not entitle the Executive or Beneficiary to other
or additional benefits under this Agreement.

3.5    Savings Clause Relating to Compliance with Code Section 409A. Despite any
contrary provision of this Agreement, if when the Executive’s employment
terminates the Executive is a specified employee, as defined in Code section
409A, and if any payments under Article 3 of this Agreement will result in
additional tax or interest to the Executive because of section 409A, the
Executive shall not be entitled to the payments under Article 3 until the
earliest of (x) the date that is at least six months after termination of the
Executive’s employment for reasons other than the Executive’s death, (y) the
date of the Executive’s death, or (z) any earlier date that does not result in
additional tax or interest to the Executive under section 409A.

ARTICLE 4

DEATH BENEFITS

After the Executive’s death, the Bank shall pay to the Executive’s Beneficiary
the Account Balance as of the date of the Executive’s death. The Account Balance
shall be paid to the Executive’s Beneficiary in a single lump sum, 90 days after
the date of the Executive’s death. However, if the Executive dies after
termination of this Agreement under Article 6, the Executive’s Beneficiary shall
be entitled to no benefits under this Agreement.

 

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ARTICLE 5

BENEFICIARIES

5.1    Beneficiary Designations. The Executive shall have the right to designate
at any time a Beneficiary to receive any benefits payable under this Agreement
after the Executive’s death. The Beneficiary designated under this Agreement may
be the same as or different from the beneficiary designation under any other
benefit plan of the Bank in which the Executive participates.

5.2    Beneficiary Designation Change. The Executive shall designate a
Beneficiary by completing and signing the Beneficiary Designation Form and
delivering it to the Plan Administrator or its designated agent. 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. The Executive shall have the right to
change a Beneficiary by completing, signing, and otherwise complying with the
terms of the Beneficiary Designation Form and the Plan Administrator’s rules and
procedures, as in effect from time to time. Upon the acceptance by the Plan
Administrator of a new Beneficiary Designation Form, all Beneficiary
designations previously filed shall be cancelled. The Plan Administrator shall
be entitled to rely on the last Beneficiary Designation Form filed by the
Executive and accepted by the Plan Administrator before the Executive’s death.

5.3    Acknowledgment. No designation or change in designation of a Beneficiary
shall be effective until received, accepted, and acknowledged in writing by the
Plan Administrator or its designated agent.

5.4    No Beneficiary Designation. If the Executive dies without a valid
beneficiary designation or if all designated Beneficiaries predecease the
Executive, the Executive’s spouse shall be the designated Beneficiary. If the
Executive has no surviving spouse, the benefits shall be paid to the Executive’s
estate.

5.5    Facility of Payment. If a benefit is payable to a minor, to a person
declared incapacitated, or to a person incapable of handling the disposition of
his or her property, the Bank may pay the benefit to the guardian, legal
representative, or person having the care or custody of the minor, incapacitated
person, or incapable person. The Bank may require proof of incapacity, minority,
or guardianship as it may deem appropriate before distribution of the benefit.
Distribution shall completely discharge the Bank from all liability for the
benefit.

ARTICLE 6

GENERAL LIMITATIONS

6.1    Termination with Cause. Despite any contrary provision of this Agreement,
the Bank shall not pay any benefit under this Agreement and this Agreement shall
terminate if Separation from Service is a Termination with Cause.

6.2     Removal. Despite any contrary provision of this Agreement, if the
Executive is removed from office or permanently prohibited from participating in
the 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 the Bank under this Agreement shall terminate as of the effective date of the
order.

 

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6.3    Default. Despite any contrary provision of this Agreement, if the Bank is
in “default” or “in danger of default”, as those terms are defined in section
3(x) of the Federal Deposit Insurance Act, 12 U.S.C. 1813(x), all obligations
under this Agreement shall terminate.

ARTICLE 7

CLAIMS AND REVIEW PROCEDURES

7.1    Claims Procedure. The Bank will notify any person or entity that makes a
claim for benefits under this Agreement (the “Claimant”) in writing, within 90
days after receiving Claimant’s written application for benefits, of his or her
eligibility or noneligibility for benefits under the Agreement. If the Plan
Administrator determines that the Claimant is not eligible for benefits or full
benefits, the notice will state (w) the specific reasons for denial, (x) a
specific reference to the provisions of the Agreement on which the denial is
based, (y) 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 (z) an explanation of the Agreement’s claims review procedure and other
appropriate information concerning steps to be taken if the Claimant wishes to
have the claim reviewed. If the Plan Administrator determines that there are
special circumstances requiring additional time to make a decision, the Bank
will 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.

7.2    Review Procedure. If the Claimant is determined by the Plan Administrator
not to be eligible for benefits, or if the Claimant believes that he or she is
entitled to greater or different benefits, the Claimant will have the
opportunity to have his or her claim reviewed by the Bank by filing a petition
for review with the Bank within 60 days after receipt of the notice issued by
the Bank. The Claimant’s petition must 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 the Bank of the petition, the Plan Administrator
will give the Claimant (and counsel, if any) an opportunity to present his or
her position verbally or in writing, and the Claimant (or counsel) will have the
right to review the pertinent documents. The Plan Administrator will notify the
Claimant of the Plan Administrator’s decision in writing within the 60-day
period, stating specifically the basis of its decision, written in a manner to
be understood by the Claimant, and the specific provisions 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 the Plan Administrator but notice of this deferral will be
given to the Claimant.

ARTICLE 8

ADMINISTRATION OF AGREEMENT

8.1    Plan Administrator Duties. This Agreement shall be administered by a Plan
Administrator consisting of the board or such committee or persons as the board
shall appoint. The Executive may not be a member of the Plan Administrator. The
Plan Administrator shall have the discretion and authority to (x) make, amend,
interpret, and enforce all appropriate rules and regulations for the
administration of this Agreement and (y) decide or resolve any and all questions
that may arise, including interpretations of this Agreement.

8.2    Agents. In the administration of this Agreement, the Plan Administrator
may employ agents and delegate to them such administrative duties as it sees fit
(including acting through a duly appointed representative) and may from time to
time consult with counsel, who may be counsel to the Bank.

 

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8.3    Binding Effect of Decisions. The decision or action of the Plan
Administrator concerning any question arising out of the administration,
interpretation, and application of the Agreement and the rules and regulations
promulgated hereunder shall be final and conclusive and binding upon all persons
having any interest in the Agreement. Neither the Executive nor any Beneficiary
shall be deemed to have any right, vested or unvested, regarding the continuing
effect of any decision or action of the Plan Administrator.

8.4    Indemnity of Plan Administrator. The Bank shall indemnify and hold
harmless the members of the Plan Administrator against any and all claims,
losses, damages, expenses, or liabilities arising from any action or failure to
act with respect to this Agreement, except in the case of willful misconduct by
the Plan Administrator or any of its members.

8.5    Bank Information. To enable the Plan Administrator to perform its
functions, the Bank shall supply full and timely information to the Plan
Administrator on all matters relating to the date and circumstances of the
retirement, death, or Separation from Service of the Executive and such other
pertinent information as the Plan Administrator may reasonably require.

ARTICLE 9

MISCELLANEOUS

9.1    Amendments and Termination. This Agreement may be amended solely by a
written agreement signed by the Bank and by the Executive, except that the
Bank’s Plan Administrator may on its own change the financial condition or
conditions constituting the Performance Goals, which change shall constitute an
amendment of this Agreement, provided that written notice of the change is given
to the Executive as promptly as practicable after the change is adopted by the
Plan Administrator. This Agreement may be terminated by the Bank without the
Executive’s consent. Unless Article 6 provides that the Executive is not
entitled to payment or unless when termination occurs the Executive has already
received payment of benefits under this Agreement, the Bank must pay the Account
Balance in a single lump sum to the Executive if the Bank terminates this
Agreement. The lump-sum termination payment will be made to the Executive
consistent with the terms of the Code section 409A plan-termination exception to
the prohibition against accelerated payment [Rule 1.409A-3(j)(4)(ix)].

9.2    Binding Effect. This Agreement shall bind the Executive and the Bank and
their beneficiaries, survivors, executors, successors, administrators, and
transferees.

9.3    Successors; Binding Agreement. By an assumption agreement in form and
substance satisfactory to the Executive, the Bank shall require any successor
(whether direct or indirect, by purchase, merger, consolidation, or otherwise)
to all or substantially all of the Bank’s business or assets to expressly assume
and agree to perform this Agreement in the same manner and to the same extent
the Bank would be required to perform this Agreement had no succession occurred.

9.4    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
Bank nor does it interfere with the Bank’s right to discharge the Executive. It
also does not require the Executive to remain an employee or interfere with the
Executive’s right to terminate employment at any time.

 

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9.5    Non-Transferability. Benefits under this Agreement may not be sold,
transferred, assigned, pledged, attached, or encumbered.

9.6    Tax Withholding. The Bank shall withhold any taxes that are required to
be withheld from the benefits provided under this Agreement.

9.7    Applicable Law. This Agreement and all rights hereunder shall be governed
by the laws of the State of Ohio, except to the extent the laws of the United
States of America otherwise require.

9.8    Unfunded Arrangement. The Executive and the Beneficiary are general
unsecured creditors of the Bank for the payment of benefits under this
Agreement. The benefits represent the mere promise by the Bank to pay benefits.
The rights to benefits are not subject to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, attachment, or garnishment by
creditors. Any insurance on the Executive’s life is a general asset of the Bank
to which the Executive and the Beneficiary have no preferred or secured claim.

9.9    Entire Agreement. This Agreement constitutes the entire agreement between
the Bank and the Executive concerning the subject matter. No rights are granted
to the Executive under this Agreement other than those specifically set forth.
This Agreement does not supersede or modify the May 8, 2008 Amended Executive
Deferred Compensation Agreement. This Agreement and the May 8, 2008 Amended
Executive Deferred Compensation Agreement are entirely independent of each
other.

9.10    Tax Consequences. The Bank does not insure or guarantee the tax
consequences of payments provided hereunder for matters beyond its control. The
Bank shall not be liable in any way to Executive if any payment or benefit which
is to be provided pursuant to this Agreement and which is considered deferred
compensation subject to Code section 409A otherwise fails to comply with, or be
exempt from, the requirements of Code section 409A.

9.11    Payment of Legal Fees. The Bank is aware that after a Change in Control
management of the Bank could cause or attempt to cause the Bank to refuse to
comply with its obligations under this Agreement or could institute or cause or
attempt to cause the Bank to institute litigation seeking to have this Agreement
declared unenforceable or could take or attempt to take other action to deny the
Executive the benefits intended under this Agreement. In these circumstances the
purpose of this Agreement would be frustrated. The Bank desires that the
Executive not be required to incur the expenses associated with the enforcement
of rights under this Agreement, whether by litigation or other legal action,
because the cost and expense thereof would substantially detract from the
benefits intended to be granted to the Executive hereunder. The Bank desires
that the Executive not be forced to negotiate settlement of rights under this
Agreement under threat of incurring expenses. Accordingly, if after a Change in
Control occurs it appears to the Executive that (x) the Bank has failed to
comply with any of its obligations under this Agreement, or (y) the Bank or any
other person has taken any action to declare this Agreement void or
unenforceable, or instituted any litigation or other legal action designed to
deny, diminish, or to recover from the Executive the benefits intended to be
provided to the Executive hereunder, the Bank irrevocably authorizes the
Executive from time to time to retain counsel of the Executive’s choice, at the
Bank’s expense as provided in this section 9.11, to represent the Executive in
the initiation or defense of any litigation or other legal action, whether by or
against the Bank or any director, officer, stockholder, or other person
affiliated with the Bank, in any jurisdiction. Despite any existing or previous
attorney-client relationship between the Bank and any counsel chosen by the
Executive under this section 9.11, the Bank irrevocably consents to the
Executive entering into an attorney-client relationship with

 

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that counsel, and the Bank and the Executive agree that a confidential
relationship shall exist between the Executive and that counsel. The fees and
expenses of counsel selected from time to time by the Executive as provided in
this section shall be paid or reimbursed to the Executive by the Bank on a
regular, periodic basis upon presentation by the Executive of a statement or
statements prepared by counsel in accordance with counsel’s customary practices,
up to a maximum aggregate amount of $500,000, whether suit be brought or not,
and whether or not incurred in trial, bankruptcy, or appellate proceedings. The
Bank’s obligation to pay the Executive’s legal fees under this section 9.11
operates separately from and in addition to any legal fee reimbursement
obligation the Bank may have with the Executive under any separate employment,
severance, or other agreement between the Executive and the Bank. Despite
anything in this section 9.11 to the contrary however, the Bank shall not be
required to pay or reimburse the Executive’s legal expenses if doing so would
violate section 18(k) of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)]
and Rule 359.3 of the Federal Deposit Insurance Corporation [12 CFR 359.3].

9.12    Severability. If 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 law. If any provision of this Agreement is
held invalid in part, such invalidity shall not affect the remainder of the
provision not held invalid, and the remainder of such provision together with
all other provisions of this Agreement shall continue in full force and effect
to the full extent consistent with law.

9.13    Waiver. A waiver by either party of any of the terms or conditions of
this Agreement in any one instance shall not be considered a waiver of the terms
or conditions for the future or a waiver of any subsequent breach. All remedies,
rights, undertakings, obligations, and agreements contained in this Agreement
shall be cumulative, and none of them shall be in limitation of any other
remedy, right, undertaking, obligation or agreement of either party.

9.14    Captions and Counterparts. Captions in this Agreement are included for
convenience only and shall not affect the interpretation or construction of the
Agreement or any of its provisions. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original and all of
which taken together shall constitute a single agreement.

9.15    Notice. 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. Unless otherwise changed by notice, notice
shall be properly addressed to the Executive if addressed to the address of the
Executive on the books and records of the Bank at the time of the delivery of
such notice, and properly addressed to the Bank if addressed to the Board of
Directors, The Middlefield Banking Company, 15985 East High Street, Middlefield,
Ohio 44062-0035.

 

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IN WITNESS WHEREOF, the Executive and a duly authorized Bank officer have
executed this Executive Deferred Variable Benefit Compensation Agreement as of
the date first written above.

 

EXECUTIVE:    

BANK:

The Middlefield Banking Company

      By:     James R. Heslop, II       Thomas G. Caldwell     Its:   President
and Chief Executive Officer

 

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THE MIDDLEFIELD BANKING COMPANY

EXECUTIVE VARIABLE BENEFIT DEFERRED COMPENSATION AGREEMENT

Beneficiary Designation

I designate the following as beneficiary under this Executive Variable Benefit
Deferred Compensation Agreement of benefits payable after my death.

Primary:                                                                 
                                         
                                         
                                                         

 

 

Contingent:                                          
                                         
                                         
                                                                          

 

 

 

Note: To name a trust as beneficiary, please provide the name of the trustee(s)
and the exact name and date of the trust agreement.

I understand that I may change these beneficiary designations by filing a new
written designation with the Bank. I further understand that the designations
will be automatically revoked if the beneficiary predeceases me, or, if I have
named my spouse as beneficiary and our marriage is subsequently dissolved.

 

Signature:       James R. Heslop, II

 

Date:   July 9, 2018

Received by the Bank this 9th day of July, 2018

 

By:       Thomas G. Caldwell Title:   President and Chief Executive Officer

 

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THE MIDDLEFIELD BANKING COMPANY

EXECUTIVE VARIABLE BENEFIT DEFERRED COMPENSATION AGREEMENT

Schedule A

Performance Goals

The Bank’s board of directors shall establish Performance Goals, which may be
absolute performance targets taking the Bank’s performance only into account, or
relative targets taking the Bank’s performance into account relative to a peer
group of companies, or a combination of both. The measures of performance used
to establish Performance Goals shall not change from one Plan Year to the next
unless the board of directors concludes that compelling reasons exist to use
different or additional measures of performance. If performance relative to a
peer group is used, the peer group analysis selected by the board of directors
shall not be changed from one Plan Year to the next unless the board of
directors concludes that the peer group being employed is no longer
representative of the Bank’s actual peer group of companies.

For the first Plan Year, the Performance Goals are –

 

Performance Target #1

   Performance Goal #1   

Annual Contribution for Achievement of

Performance Goal #1

Bank’s Target Net Income for Plan Year

   $7,662,833   

2.5% of the Executive’s Base Annual Salary

Bank’s Net Income for Plan Year Is

Equal to or Greater than –

   $7,739,461 (101%)   

3.5% of the Executive’s Base Annual Salary

Bank’s Net Income for Plan Year Is

Equal to or Greater than –

   $7,816,090 (102%)   

4.5% of the Executive’s Base Annual Salary

Bank’s Net Income for Plan Year Is

Equal to or Greater than –

   $7,892,718 (103%)   

5.5% of the Executive’s Base Annual Salary

Bank’s Net Income for Plan Year Is

Equal to or Greater than –

   $7,969,346 (104%)   

6.5% of the Executive’s Base Annual Salary

Bank’s Net Income for Plan Year Is

Equal to or Greater than –

   $8,045,975 (105%)   

7.5% of the Executive’s Base Annual Salary

The Bank’s target net income for Performance Goal #1 is $7,662,833. At a
minimum, the Executive is entitled to an Annual Contribution for Performance
Goal #1 equal to 2.5% of Base Annual Salary. For the Executive to receive a
greater Annual Contribution under Performance Goal #1, the Bank’s net income for
the Plan Year must meet or exceed 101% of the Bank’s target net income for the
Plan Year. For every additional 1% that the Bank’s target net income is met or
exceeded in any Plan Year, up to 105%, the Executive’s Annual Contribution
amount also increases by 1%. Thus, the maximum Annual Contribution for
achievement of Performance Goal #1 is 7.5% of the Executive’s Base Annual
Salary. The Bank and the Executive agree that the Bank’s net income for the Plan
Year shall be derived from the quarterly reports of condition filed with the
FDIC under the Federal Deposit Insurance Act section 7(a), 12 U.S.C. 1817(a),
and FDIC rules, 12 CFR Part 304.

 

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Performance Target #2

  

Performance Goal #2

  

Annual Contribution for Achievement of

Performance Goal #2

Bank’s Target Peer Rank

  

Overall Ranking in Top 50% of

FDIC-insured commercial banks having assets between $1 billion and $3 billion

   2.5% of the Executive’s Base Annual Salary

Bank Has An –

  

Overall Ranking in Top 60% of

FDIC-insured commercial banks having assets between $1 billion and $3 billion

   3.5% of the Executive’s Base Annual Salary

Bank Has An –

  

Overall Ranking in Top 70% of

FDIC-insured commercial banks having assets between $1 billion and $3 billion

   4.5% of the Executive’s Base Annual Salary

Bank Has An –

  

Overall Ranking in Top 80% of

FDIC-insured commercial banks having assets between $1 billion and $3 billion

   5.5% of the Executive’s Base Annual Salary

Bank Has An –

  

Overall Ranking in Top 90% of

FDIC-insured commercial banks having assets between $1 billion and $3 billion

   6.5% of the Executive’s Base Annual Salary

Bank Has An –

  

Overall Ranking in Top 100% of

FDIC-insured commercial banks having assets between $1 billion and $3 billion
[ranked #1]

   7.5% of the Executive’s Base Annual Salary

The Bank’s target Peer Rank for Performance Goal #2 is an overall ranking in the
top 50% of all FDIC-insured commercial banks having assets between $1 billion
and $3 billion as reported on the Uniform Bank Performance Report (“UBPR”) as
reported on the Federal Financial Institutions Examination Council’s website at
www.ffiec.gov/UBPR.htm. The UBPR is an analytical tool created for bank
supervisory, examination, and management purposes. In a concise format, the UPBR
shows the impact of management decisions and economic conditions on a bank’s
performance and balance-sheet composition. The performance and composition data
contained in the report can be used as an aid in evaluating the adequacy of
earnings, liquidity, capital, asset and liability management, and growth
management.

At a minimum, the Executive is entitled to an Annual Contribution for
Performance Goal #2 equal to 2.5% of Base Annual Salary. For the Executive to
receive a greater Annual Contribution under Performance Goal #2, the Bank must
have an overall ranking in the top 60% of FDIC-insured commercial banks having
assets between $1 billion and $3 billion as reported on the UBPR for the Plan
Year. For every additional 10% that the Bank’s peer ranking improves in any Plan
Year, up to being ranked first, the Executive’s Annual Contribution amount also
increases by 1%. Thus, the maximum Annual Contribution for achievement of
Performance Goal #2 is 7.5% of the Executive’s Base Annual Salary.

At a minimum, the Executive’s Annual Contribution in any Plan Year shall not be
less than 5% of the Executive’s Base Annual Salary (i.e., the 2.5% of Base
Annual Salary Annual Contribution under Performance

 

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Goal #1 plus the 2.5% of Base Annual Salary Annual Contribution under
Performance Goal #2). At a maximum, the Executive’s Annual Contribution in any
Plan Year shall not exceed 15% of the Executive’s Base Annual Salary (i.e., the
7.5% of Base Annual Salary Annual Contribution under Performance Goal #1 plus
the 7.5% of Base Annual Salary Annual Contribution under Performance Goal #2).

Changes in the Performance Goals approved by the board of directors shall become
effective no more frequently than annually. The Plan Administrator’s
determination that the Performance Goals for a Plan Year have or have not been
achieved shall be conclusive and binding.

 

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