Exhibit 10.8
FARMERS & MERCHANTS BANK OF CENTRAL CALIFORNIA
EXECUTIVE INDEXED RETIREMENT AGREEMENT
THIS AGREEMENT isa adopted this 1st day of January 2003, 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
To attract, retain and reward quality Executives and to provide a
potentially higher level of retirement income, the Company is willing to provide
the Executive with this Executive Indexed Retirement Agreement. The Company will
pay the benefits from its general assets.
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" shall mean 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 of control of the Company of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A (or in response to any similar item on any
similar schedule or form) promulgated under the Securities Exchange Act of 1934
(the "Act"), provided, however, that without limitation, such a Change of
Control shall be deemed to have occurred if:
1.2.1 any person or group (as such terms are used in connection with
Sections 13(d) and 14(d) of the Act) is or becomes the "beneficial owner"
(as defined in Rule 13d-3 and 13d-5 under the Act), directly or indirectly,
of securities of the Company representing forty percent (40%) or more of
the combined voting power of the Company's then outstanding securities; or
1.2.2 the Company is a party to a merger, consolidation, sale of
assets or other reorganization, or a proxy contest, as a consequence of
which members of the Board of Directors in office immediately prior to such
transaction or event constitute less than a majority of the Board of
Directors thereafter.
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1.3 "Disability" means the Executive suffering a sickness, accident or
injury which has been determined by the carrier of any individual or group
disability insurance policy covering the Executive, or by the Social Security
Administration, to be a disability rendering the Executive totally and
permanently disabled. The Executive must submit proof to the Company of the
carrier's or Social Security Administration's determination upon the request of
the Company.
1.4 "Normal Retirement Age" means the Executive's sixty-fifth (65th)
birthday.
1.5 "Normal Retirement Date" means the later of Normal Retirement Age or
Termination of Employment.
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" means the Executive ceases to be employed
by the Company for any reason, voluntary or involuntary, other than a leave of
absence approved by the Company.
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 "Years of Employment" means the total number of twelve-month periods
during which the Executive has been employed on a full-time basis by the
Company, inclusive of any leave of absence approved by the Company.
Article 2
Retirement Account
2.1 Simulated Investments. The Company shall establish two Simulated
Investments in the amount of $___________ as of January 1, 2003, as follows:
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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 Bill 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 Bill rate for
the previous month of December according to Bloomberg. 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.
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 until Termination of Employment, but not beyond Normal Retirement Age,
will be:
2.2.1 Prior to November 1, 2003: fifty percent (50%) of the sum
determined by subtracting the value of Simulated Investment Number Two from
the value of Simulated Investment Number One and dividing the difference by
the Adjustment Rate.
2.2.2 Effective November 1, 2003: one hundred percent (100%) of the
sum determined by subtracting the value of Simulated Investment Number Two
from the value of Simulated Investment Number One and dividing the
difference by the Adjustment Rate.
Benefit Calculation Example
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Simulated 50% of Excess Amount
Investment #1* Simulated Gain*** Allocated to
6.0% Investment #2 (Simulated the Participant's
(Tax-Preferred 4.3% Investment #1 Retirement
Asset) (Taxable Asset) minus #2 / 2) Account**
------------------------------------------------------------------------
Asset Allocation: $1,000,000 (1) (2) (3) (4)
- ---------------------------------------------------------------------------------------------------------------------
Pre-Tax Income 60,000 43,000
After-Tax Income (42.046% tax) 60,000 24,920 17,540 $30,265
- ---------------------------------------------------------------------------------------------------------------------
*Year end cash value of the life insurance policy. Cash Value is the policy
earning minus the mortality charge. **The amount allocated to the Participant's
Retirement Account is calculated by taking the excess gain (17,540) and dividing
this number by one (1) minus the company's highest marginal tax rate (currently
42.046%) For Example: 1-.42046 = .57954. Therefore 17,540/.57954 = 30,265.
***After November 1, 2003 this would be 100% of excess gain.
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In addition, the annual amount added to the Retirement Account shall never
be less than one percent (1%) of Simulated Investment Number One.
2.3 Statement of Accounts. The Company shall provide to the Executive,
within sixty (60) days after each Plan Year, a statement setting forth the
Executive's Retirement Account balance.
2.4 Accounting Device Only. The Retirement Account and Simulated
Investments are solely devices for measuring amounts to be paid under this
Agreement. They are not a trust fund of any kind. The Executive is a general
unsecured creditor of the Company for the payment of benefits. The benefits
represent the mere Company promise to pay such benefits. 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.
Article 3
Normal Retirement
Upon the Executive attaining their Normal Retirement Date, the Company
shall pay a benefit to the Executive which is equal to the Executive's
Retirement Account balance as of the month ending immediately following the
Executive's Normal Retirement Date. The Company shall pay the benefit to the
Executive as elected on Appendix B.
Article 4
Early Termination of Employment
Upon the Executive's Termination of Employment prior to Normal Retirement
Age and prior to completing five (5) Years of Employment for any reason other
than Change of Control or Disability, the Company shall not pay a benefit to the
Executive under this Agreement.
Upon the Executive's Termination of Employment prior to Normal Retirement
Age and after completing five (5) Years of Employment for any reason other than
Termination for Cause, the Company shall pay a benefit to the Executive which is
equal to the Executive's Retirement Account balance as of the month ending
immediately following the Executive's Termination of Employment. The Company
shall pay the benefit to the Executive as elected on Appendix B.
Upon the Executive's Termination 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 to the Executive a benefit equal to the Retirement Account
balance as of the month immediately following the Executive's Disability. The
Company shall pay the benefit to the Executive as elected on Appendix B.
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Article 6
Change of Control
Upon a Change of Control the Executive shall be entitled to receive a
benefit in the amount of the present value of $___________, "N" years in the
future applying a discount value of "Y". For purposes of this calculation, "N"
is defined as the number of years between the Executive's age on the date that
the Change of Control event occurs and his/her sixty-fifth (65th) birthday, and
"Y" is the 5-year Treasury Bill rate on the date that the Change of Control
event occurs. The Company shall pay the benefit to the Executive as elected on
Appendix B.
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Change of Control Benefit Calculation Example
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Date of Change of Control Event January 1, 2007
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Date of Birth of Executive MM/DD/YYYY
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Age of Executive at Change of Control Event __
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N= __
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Y=* 5%
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Future Value of Benefit at Age 65** $_______
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Present Value of Benefit at Date of COC Event $_______
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* assumed for purposes of this example
**This amount has been established only for purposes of Article 6 and is based
upon the estimated benefit that will be available to the Executive upon reaching
age 65. The actual benefit available at age 65 in the event of Normal Retirement
will be determined according to Article 2.
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Article 7
Death Benefits
The company shall not pay a death benefit under this Agreement if the
executive elects to have their benefit paid in any manner other than a lump-sum
death benefit. A death benefit may be provided according to the terms of a
separate Split Dollar Agreement entered into by the Company and the Executive.
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.
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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 Claims Procedure. Any person or entity ("claimant") who has not
received benefits under this Agreement that he or she believes should be paid
shall make a claim for such benefits as follows:
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 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,
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(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.
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
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(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.
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 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.
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 promise by the Company 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 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.
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12.8 Entire Agreement. This Agreement constitutes the entire agreement
between the Company and the Executive as to the subject matter hereof. 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.
12.10 Named Fiduciary. The Company 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.
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 _______________________________
Title _______________________________
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Appendix A
Simulated Policy Data
FARMERS & MERCHANTS BANK OF CENTRAL CALIFORNIA
EXECUTIVE INDEXED RETIREMENT AGREEMENT
Name of Executive:_____________
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Insurance Carrier: Clarica Life Insurance Company
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Policy Type: Universal Life, No Load
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Product Name:
-------------------------------- ----------------------------------------
Insured's Sex and Age:
-------------------------------- ----------------------------------------
Classification:
-------------------------------- ----------------------------------------
Initial Face Amount:
-------------------------------- ----------------------------------------
Single Premium Amount:
-------------------------------- ----------------------------------------
Issue Date:
-------------------------------- ----------------------------------------
Death Benefit Option:
-------------------------------- ----------------------------------------
-------------------------------- ----------------------------------------
Insurance Carrier: Jefferson-Pilot Life Insurance Company
-------------------------------- ----------------------------------------
Policy Type: Universal Life, No Load
-------------------------------- ----------------------------------------
Product Name:
-------------------------------- ----------------------------------------
Insured's Sex and Age:
-------------------------------- ----------------------------------------
Classification:
-------------------------------- ----------------------------------------
Initial Face Amount:
-------------------------------- ----------------------------------------
Single Premium Amount:
-------------------------------- ----------------------------------------
Issue Date:
-------------------------------- ----------------------------------------
Death Benefit Option:
-------------------------------- ----------------------------------------
-------------------------------- ----------------------------------------
Insurance Carrier: New York Life Insurance Company
-------------------------------- ----------------------------------------
Policy Type: Universal Life, No Load
-------------------------------- ----------------------------------------
Product Name:
-------------------------------- ----------------------------------------
Insured's Sex and Age:
-------------------------------- ----------------------------------------
Classification:
-------------------------------- ----------------------------------------
Initial Face Amount:
-------------------------------- ----------------------------------------
Single Premium Amount:
-------------------------------- ----------------------------------------
Issue Date:
-------------------------------- ----------------------------------------
Death Benefit Option:
-------------------------------- ----------------------------------------
-------------------------------- ----------------------------------------
Insurance Carrier: West Coast Life Insurance Company
-------------------------------- ----------------------------------------
Policy Type: Universal Life, No Load
-------------------------------- ----------------------------------------
Product Name:
-------------------------------- ----------------------------------------
Insured's Sex and Age:
-------------------------------- ----------------------------------------
Classification:
-------------------------------- ----------------------------------------
Initial Face Amount:
-------------------------------- ----------------------------------------
Single Premium Amount:
-------------------------------- ----------------------------------------
Issue Date:
-------------------------------- ----------------------------------------
Death Benefit Option:
-------------------------------- ----------------------------------------
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Appendix B
Form of Benefit Payment
FARMERS & MERCHANTS BANK OF CENTRAL CALIFORNIA
EXECUTIVE INDEXED RETIREMENT AGREEMENT
Executive
- -------------------------------------------------------------------------------
I elect to receive the Benefits under Article 3 of the Agreement in the
following manner: [Initial One]
____ Payable in a lump sum within forty-five (45) days after the Normal
Retirement Date.
____ Payable over _____ years [insert number of years, not to exceed 25 years]
in equal monthly installments commencing with the month following the
Normal Retirement Date, determined by calculating a fixed annuity for the
number of years chosen using the Retirement Account Balance, crediting
interest on the unpaid balance as determined in accordance with Section
2.1.2.
____ Payable in a lump sum to my beneficiary upon my death, crediting interest
on the unpaid balance as determined in accordance with Section 2.1.2.
____ Payable over _____ years [insert number of years, not to exceed 25
years] in equal monthly installments commencing
____________________________, determined by calculating a fixed annuity
for the number of years chosen using the Retirement Account Balance,
crediting interest on the unpaid balance as determined in accordance
with Section 2.1.2.
I understand that I may change the manner in which this benefit is paid to me at
any time up to thirteen (13) months prior to Retirement and I accept any tax
consequences relating to said change.
Signature ______________________________ Date _______________________
Executive
- -------------------------------------------------------------------------------
I elect to receive the Benefits under Article 4 of the Agreement in the
following manner: [Initial One]
____ Payable in a lump sum within forty-five (45) days after Termination of
Employment.
____ Payable over _____ years [insert number of years, not to exceed 25 years]
in equal monthly installments commencing with the month following
Termination of Employment, determined by calculating a fixed annuity for
the number of years chosen using the Retirement Account Balance, crediting
interest on the unpaid balance as determined in accordance with Section
2.1.2.
____ Payable in a lump sum to my beneficiary upon my death, crediting interest
on the unpaid balance as determined in accordance with Section 2.1.2.
____ Payable over _____ years [insert number of years, not to exceed 25 years]
in equal monthly installments commencing ____________________________,
determined by calculating a fixed annuity for the number of years chosen
using the Retirement Account Balance, crediting interest on the unpaid
balance as determined in accordance with Section 2.1.2.
I understand that I may change the manner in which this benefit is paid to me at
any time up to thirteen (13) months prior to Termination of Employment and I
accept any tax consequences relating to said change.
Signature ______________________________ Date _____________________
Executive
- -------------------------------------------------------------------------------
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I elect to receive the Benefits under Article 5 of the Agreement in the
following manner: [Initial One]
____ Payable in a lump sum within forty-five (45) days after Termination of
Employment following a Disability.
____ Payable over _____ years [insert number of years, not to exceed 25 years]
in equal monthly installments commencing with the month following
Termination of Employment following a Disability, determined by calculating
a fixed annuity for the number of years chosen using the Retirement Account
Balance, crediting interest on the unpaid balance as determined in
accordance with Section 2.1.2.
____ Payable in a lump sum to my beneficiary upon my death, crediting interest
on the unpaid balance as determined in accordance with Section 2.1.2.
____ Payable over _____ years [insert number of years, not to exceed 25 years]
in equal monthly installments commencing ____________________________,
determined by calculating a fixed annuity for the number of years chosen
using the Retirement Account Balance, crediting interest on the unpaid
balance as determined in accordance with Section 2.1.2.
I understand that I may change the manner in which this benefit is paid to me at
any time up to thirteen (13) months prior to Termination of Employment following
a Disability and I accept any tax consequences relating to said change.
Signature ______________________________ Date _______________________
Executive
- -------------------------------------------------------------------------------
I elect to receive the Change of Control Benefit under Article 6 of the
Agreement in the following manner: [Initial One]
____ Payable in a lump sum within forty-five (45) days after a Change of Control
(as defined in Article 1.2).
____ Payable over _____ years [insert number of years, not to exceed 25 years]
in equal monthly installments commencing with the month following a Change
of Control, determined by calculating a fixed annuity for the number of
years chosen using the Change of Control Benefit, crediting interest on the
unpaid balance as determined in accordance with Section 2.1.2.
____ Payable in a lump sum to my beneficiary upon my death, crediting interest
on the unpaid balance as determined in accordance with Section 2.1.2.
____ Payable over _____ years [insert number of years, not to exceed 25 years]
in equal monthly installments commencing _________________________,
determined by calculating a fixed annuity for the number of years chosen
using the Change of Control Benefit, crediting interest on the unpaid
balance as determined in accordance with Section 2.1.2.
I understand that I may change the manner in which this benefit is paid to me at
any time up to 13 months prior to a Change of Control event occurring and I
accept any tax consequences relating to said change.
Signature ______________________________ Date _______________________
Executive
- ------------------------------------------------------------------------------
Received by the Company this _____ day of _____________, 2003.
By ____________________________________ Title __________________________
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Beneficiary Designation
FARMERS & MERCHANTS BANK OF CENTRAL CALIFORNIA
EXECUTIVE INDEXED RETIREMENT AGREEMENT
I designate the following as beneficiary of benefits under this Agreement
payable following my death:
Primary: _____________________________________________________________________
Relationship: _________________________________________________________________
Contingent: __________________________________________________________________
Relationship: ________________________________________________________________
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 Company. 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 ________________________________
Date _________________________________
Received by the Company this ________ day of ___________________, 2003.
By ______________________________________
Title _____________________________________
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