MIDDLEFIELD BANC CORP
EXHIBIT 10.3
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>4
<FILENAME>l06610aexv10w3.txt
<DESCRIPTION>EXHIBIT 10.3
<TEXT>
<PAGE>

                                                                    Exhibit 10.3
                    AMENDED AND RESTATED SEVERANCE AGREEMENT

         This AMENDED AND RESTATED SEVERANCE AGREEMENT (this "Agreement") dated
as of this 12th day of August, 2003, by and between Middlefield Banc Corp., an
Ohio corporation ("Middlefield"), and James R. Heslop, II, Executive Vice
President and Chief Operating Officer of Middlefield (the "Executive"), amends
and restates in its entirety the Severance Agreement dated November 28, 2001 by
and between Middlefield and the Executive.

         WHEREAS, the Executive is an Executive Vice President and Chief
Operating Officer of Middlefield, the Executive is employed by Middlefield and
its subsidiary The Middlefield Banking Company, an Ohio-chartered, FDIC-insured
nonmember bank, and the Executive has made and is expected to continue to make
major contributions to the profitability, growth, and financial strength of
Middlefield and its subsidiaries,

         WHEREAS, Middlefield recognizes that, as is the case for most
companies, the possibility of a Change in Control (as defined in Section 1(c))
exists,

         WHEREAS, Middlefield desires to assure itself of the current and future
continuity of management and desires to establish minimum severance benefits for
certain of its officers and other key employees, including the Executive, if a
Change in Control occurs,

         WHEREAS, Middlefield wishes to ensure that officers and other key
employees are not practically disabled from discharging their duties if a
proposed or actual transaction involving a Change in Control arises,

         WHEREAS, Middlefield desires to provide additional inducement for the
Executive to continue to remain in the ongoing employ of Middlefield and
subsidiary,

         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 Middlefield, is
contemplated insofar as either of Middlefield or any of its subsidiaries is
concerned, and

         WHEREAS, Middlefield's board of directors has approved an amendment of
section 2(a)(1) of the November 28, 2001 Severance Agreement for the purpose of
increasing the lump sum cash severance payment from two times the Executive's
annual compensation to 2.5 times annual compensation, without intending to
modify or amend any other provisions of this Agreement, including but not
limited to the term of the Agreement stated in section 5.

         NOW THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

1.       CHANGE IN CONTROL COMBINED WITH EMPLOYMENT TERMINATION

         (a) TERMINATION OF EXECUTIVE WITHIN TWO YEARS AFTER A CHANGE IN
CONTROL. If a Change in Control occurs during the term of this Agreement and if
either of the following also occurs, the Executive shall be entitled to
severance and termination benefits specified in Section 2 of this Agreement --

         (1)      Termination by Middlefield or Subsidiary: the Executive's
                  employment with Middlefield or its Subsidiary(ies) is
                  involuntarily terminated within two years after a Change in
                  Control, except for termination under Section 4 of this
                  Agreement. For purposes of this Agreement, "Subsidiary" means
                  an entity in

<PAGE>

                  which Middlefield directly or indirectly beneficially owns 50%
                  or more of the outstanding voting securities, or

         (2)      Termination by the Executive for Good Reason: the Executive
                  terminates his employment with Middlefield or Subsidiary(ies)
                  for Good Reason (as defined in Section 3) within two years
                  after a Change in Control.

         If the Executive is removed from office or if his employment terminates
after discussions with a third party regarding a Change in Control commence, and
if those discussions ultimately conclude with a Change in Control, then for
purposes of this Agreement the removal of the Executive or termination of his
employment shall be deemed to have occurred after the Change in Control.

         (b) TERMINATION BY THE EXECUTIVE DURING A 90-DAY PERIOD 12 MONTHS AFTER
A CHANGE IN CONTROL. The Executive shall also be entitled to severance and
termination benefits under Section 2 of this Agreement if he terminates
employment with Middlefield and Subsidiary(ies) for any reason or for no reason
during the 90_day period beginning on the date that is 12 months after a Change
in Control.

         (c) DEFINITION OF CHANGE IN CONTROL. For purposes of this Agreement,
"Change in Control" means any of the following events occur:

         (1)      Merger: Middlefield merges into or consolidates with another
                  corporation, or merges another corporation into Middlefield,
                  and as a result less than a majority of the combined voting
                  power of the resulting corporation immediately after the
                  merger or consolidation is held by persons who were the
                  holders of Middlefield's voting securities immediately before
                  the merger or consolidation. For purposes of this Agreement,
                  the term person means an individual, corporation, partnership,
                  trust, association, joint venture, pool, syndicate, sole
                  proprietorship, unincorporated organization or other entity,

         (2)      Acquisition of Significant Share Ownership: a report on
                  Schedule 13D, Schedule TO, or another form or schedule (other
                  than Schedule 13G), is filed or is required to be filed under
                  Sections 13(d) or 14(d) of the Securities Exchange Act of
                  1934, if the schedule discloses that the filing person or
                  persons acting in concert has or have become the beneficial
                  owner of 15% or more of a class of Middlefield's voting
                  securities (but this clause (2) shall not apply to beneficial
                  ownership of voting shares held by a Subsidiary in a fiduciary
                  capacity),

         (3)      Change in Board Composition: during any period of two
                  consecutive years, individuals who constitute Middlefield's
                  board of directors at the beginning of the two-year period
                  cease for any reason to constitute at least a majority
                  thereof; provided, however, that -- for purposes of this
                  clause (3) -- each director who is first elected by the board
                  (or first nominated by the board for election by stockholders)
                  by a vote of at least two-thirds (2/3) of the directors who
                  were directors at the beginning of the period shall be deemed
                  to have been a director at the beginning of the two-year
                  period, or

         (4)      Sale of Assets: Middlefield sells to a third party
                  substantially all of Middlefield's assets. For purposes of
                  this Agreement, sale of substantially all of Middlefield's
                  assets includes sale of The Middlefield Banking Company.

2.       SEVERANCE AND TERMINATION BENEFITS

         (a) SEVERANCE AND TERMINATION BENEFITS. The severance and termination
benefits to which the Executive is entitled under Section 1 are as follows --

         (1)      Lump Sum Payment: Middlefield shall make a lump sum payment to
                  the Executive in an amount in cash equal to 2.5 times the
                  Executive's annual compensation. For purposes of this
                  Agreement, annual compensation means (a) the Executive's
                  annual base salary on

<PAGE>

                  the date of the Change in Control or the Executive's
                  termination of employment (at whichever date the Executive's
                  current annual base salary is greater), plus (b) the average
                  of the bonuses and incentive compensation earned for the three
                  calendar years immediately preceding the year in which the
                  Change in Control occurs, regardless of when the bonus or
                  incentive compensation is paid. Middlefield recognizes that
                  the bonus and incentive compensation earned by the Executive
                  for a particular year's service might be paid in the year
                  after the calendar year in which the bonus or incentive
                  compensation is earned. The amount payable to the Executive
                  hereunder shall not be reduced to account for the time value
                  of money or discounted to present value. The payment required
                  under this Section 2(a)(1) is payable no later than 5 business
                  days after the date the Executive's employment terminates. If
                  the Executive terminates employment for Good Reason, the date
                  of termination shall be the date specified by the Executive in
                  his notice of termination.

         (2)      Benefit Plans: Middlefield shall cause the Executive to become
                  fully vested in any qualified and non-qualified plans,
                  programs or arrangements in which the Executive participated
                  if the plan, program, or arrangement does not address the
                  effect of a change in control. Middlefield also shall
                  contribute or cause a Subsidiary to contribute to the
                  Executive's Middlefield Banking Company 401(k) Employee
                  Savings and Investment Plan account the matching and voluntary
                  contributions, if any, that would have been made had the
                  Executive's employment not terminated before the end of the
                  plan year.

         (3)      Insurance Coverage: Middlefield shall cause to be continued
                  life, health and disability insurance coverage substantially
                  identical to the coverage maintained for the Executive before
                  his termination. The insurance coverage may cease when the
                  Executive becomes employed by another employer or 24 months
                  after the Executive's termination, whichever occurs first. At
                  the end of the 24-month period, the Executive shall have the
                  option to continue health insurance coverage at his own
                  expense for a period not less than the number of months by
                  which the Consolidated Omnibus Budget Reconciliation Act
                  (COBRA) continuation period exceeds 24 months.

         (b) NO MITIGATION REQUIRED. Middlefield hereby acknowledges that it
will be difficult and could be impossible (1) for the Executive to find
reasonably comparable employment after his employment terminates, and (2) to
measure the amount of damages the Executive suffers as a result of termination.
Additionally, Middlefield acknowledges that its general severance pay plans do
not provide for mitigation, offset or reduction of any severance payment
received thereunder. Accordingly, Middlefield further acknowledges that the
payment of severance and termination benefits by Middlefield under this
Agreement is reasonable and will be liquidated damages, and the Executive shall
not be required to mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise, nor will any profits,
income, earnings or other benefits from any source whatsoever create any
mitigation, offset, reduction or any other obligation on the part of the
Executive hereunder or otherwise.

3.       GOOD REASON

         For purposes of this Agreement, "Good Reason" means the occurrence of
any of the events or conditions described in clauses (a) through (f) hereof
without the Executive's express written consent --

         (a) CHANGE IN OFFICE OR POSITION OR TERMINATION AS A DIRECTOR: failure
to elect or reelect or otherwise to maintain the Executive in the office or
position, or a substantially equivalent office or position, of or with
Middlefield and Subsidiary(ies) that the Executive held immediately before the
Change in Control, or the removal or failure to nominate the Executive as a
director of Middlefield (or any successor thereto) if the Executive shall have
been a director of Middlefield immediately before the Change in Control,

         (b) ADVERSE CHANGE IN THE SCOPE OF HIS DUTIES OR COMPENSATION AND
BENEFITS:

<PAGE>

         (1)      a significant adverse change in the nature or scope of the
                  authorities, powers, functions, responsibilities or duties
                  associated with the Executive's position with Middlefield
                  compared to the nature or scope of the authorities, powers,
                  functions, responsibilities or duties associated with the
                  position immediately before the Change in Control,

         (2)      a reduction in the aggregate of the Executive's annual
                  compensation received from Middlefield, or

         (3)      the termination or denial of the Executive's rights to
                  benefits under Middlefield's or Subsidiary's(ies') benefit,
                  compensation and incentive plans and arrangements or a
                  reduction in the scope or value thereof, which situation is
                  not remedied within 10 calendar days after written notice to
                  Middlefield from the Executive,

         (c) ADVERSE CHANGE IN CIRCUMSTANCES: the Executive determines that a
change in circumstances has occurred after a Change in Control, including
without limitation a change in the scope of the business or other activities for
which the Executive is responsible compared to his responsibilities immediately
before the Change in Control, (1) which renders the Executive substantially
unable to carry out, substantially hinders the Executive's performance of, or
causes the Executive to suffer a substantial reduction in, any of the
authorities, powers, functions, responsibilities or duties associated with the
office or position held by the Executive immediately before the Change in
Control, and (2) which situation is not remedied within 10 calendar days after
written notice to Middlefield from the Executive of such determination. Provided
his determination is made in good faith, the Executive's determination will be
conclusive and binding upon the parties hereto. The Executive's determination
will be presumed to have been made in good faith, unless Middlefield establishes
by clear and convincing evidence that it was not made in good faith,

         (d) LIQUIDATION AND MERGER OF MIDDLEFIELD: the liquidation,
dissolution, merger, consolidation or reorganization of Middlefield or transfer
of all or substantially all of the business or assets of either Middlefield or
The Middlefield Banking Company, unless the successor or successors (by
liquidation, merger, consolidation, reorganization, transfer or otherwise) to
which all or substantially all of the business or assets have been transferred
(directly or by operation of law) assumes all duties and obligations of
Middlefield under this Agreement,

         (e) RELOCATION OF THE EXECUTIVE: Middlefield relocates its principal
executive offices, or requires the Executive to have his principal location of
work changed, to any location that is more than 15 miles from the location
thereof immediately before the Change in Control, or requires the Executive to
travel away from his office in the course of discharging his responsibilities or
duties hereunder at least 20% more (in terms of aggregate days in any calendar
year or in any calendar quarter when annualized for purposes of comparison to
any prior year) than was required of Executive in any of the three full years
immediately before the Change in Control, or

         (f) BREACH OF THIS AGREEMENT: without limiting the generality or effect
of the foregoing, any material breach of this Agreement by Middlefield or any
successor thereto.

4.       TERMINATION FOR WHICH NO SEVERANCE OR TERMINATION BENEFITS ARE PAYABLE

         (a) NO SEVERANCE FOR TERMINATION FOR CAUSE. Anything in this Agreement
to the contrary notwithstanding, under no circumstance shall the Executive be
entitled to severance or termination benefits if his employment terminates for
Cause.

         (1)      Cause Means Commission of Any of the Following Acts: For
                  purposes of this Agreement, "Cause" means the Executive shall
                  have committed any of the following acts --

                  (a)      Fraud, Embezzlement, Theft or Other Crime: an act of
                           fraud, embezzlement or theft in connection with his
                           duties or in the course of his employment with

<PAGE>

                           Middlefield or a Subsidiary, or commission of a
                           felony or commission of a misdemeanor involving moral
                           turpitude,

                  (b)      Negligence, Disloyalty or Violation of Law or Policy:
                           the Executive's gross negligence or gross neglect of
                           duties, disloyalty, dishonesty, or willful violation
                           of any law or significant policy of Middlefield
                           committed in connection with the Executive's
                           employment and resulting in an adverse effect on
                           Middlefield or a Subsidiary,

                  (c)      Disclosure of Trade Secrets: intentional wrongful
                           disclosure of secret processes or confidential
                           information of Middlefield or a Subsidiary, causing
                           material harm to Middlefield or the Subsidiary,

                  (d)      Competing with Middlefield: intentional wrongful
                           engagement in any competitive activity. For purposes
                           of this Agreement, competitive activity means the
                           Executive's participation, without the written
                           consent of a senior executive officer of Middlefield,
                           in the management of any business enterprise if (1)
                           the enterprise engages in substantial and direct
                           competition with Middlefield, (2) the enterprise's
                           revenues derived from any product or service
                           competitive with any product or service of
                           Middlefield or Subsidiary(ies) amounted to 10% or
                           more of the enterprise's revenues for its most
                           recently completed fiscal year, and (3) Middlefield's
                           revenues from the product or service amounted to 10%
                           of Middlefield's revenues for its most recently
                           completed fiscal year. A competitive activity does
                           not include mere ownership of securities in an
                           enterprise and the exercise of rights appurtenant
                           thereto, provided the Executive's share ownership
                           does not give him practical or legal control of the
                           enterprise. For this purpose, ownership of less than
                           5% of the enterprise's outstanding voting securities
                           shall conclusively be presumed to be insufficient for
                           practical or legal control, and ownership of more
                           than 50% shall conclusively be presumed to constitute
                           practical and legal control.

                                    If the Executive is now or hereafter becomes
                           subject to an agreement not to compete with
                           Middlefield or Subsidiary(ies), a breach by the
                           Executive of that other non-competition agreement
                           shall be grounds for denial of severance and
                           termination benefits for Cause under this clause (d)
                           of Section 4(a)(1). But if the Executive engages in a
                           competitive activity under circumstances justifying
                           denial of severance or termination benefits for Cause
                           under this clause (d), that shall not necessarily be
                           grounds for concluding that the Executive has also
                           breached the other non-competition agreement to which
                           he is or may become subject. This clause (d) is not
                           intended to and shall not be construed to supersede
                           or amend any provision of an employment or
                           non-competition agreement to which the Executive is
                           or may become subject. This clause (d) does not grant
                           to the Executive any right or privilege to engage in
                           other activities or enterprises, whether in
                           competition with Middlefield or otherwise, or

                  (e)      Termination for Cause under an Employment Agreement:
                           any actions that have caused the Executive to be
                           terminated for cause under any employment agreement
                           existing on the date hereof or hereafter entered into
                           between the Executive and Middlefield or a
                           Subsidiary.

         (2)      Definition of "Intentional": For purposes of this Agreement,
                  no act or failure to act on the part of the Executive shall be
                  deemed to have been intentional if it was due primarily to an
                  error in judgment or negligence. An act or failure to act on
                  the Executive's part shall be considered 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 best interests of
                  Middlefield.

<PAGE>

         (3)      Termination for Cause Can Occur Solely by Formal Board Action.
                  The Executive shall not be deemed under this Agreement to have
                  been terminated for Cause unless and until there shall have
                  been delivered to the Executive a copy of a resolution duly
                  adopted by the affirmative vote of at least three_fourths
                  (3/4) of the directors of Middlefield then in office at a
                  meeting of the board of directors called and held for such
                  purpose, which resolution shall (a) contain findings that, in
                  the good faith opinion of the board, the Executive has
                  committed an act constituting Cause and (b) specify the
                  particulars thereof in detail. Notice of that meeting and the
                  proposed determination of Cause shall be given to the
                  Executive a reasonable amount of time before the board's
                  meeting. The Executive and his counsel (if the Executive
                  chooses to have counsel present) shall have a reasonable
                  opportunity to be heard by the board at the meeting. Nothing
                  in this Agreement limits the Executive's or his beneficiaries'
                  right to contest the validity or propriety of the board's
                  determination of Cause, and they shall have the right to
                  contest the validity or propriety of the board's determination
                  of Cause even if that right does not exist under any
                  employment agreement of the Executive.

         (b) NO SEVERANCE UNDER THIS AGREEMENT FOR THE EXECUTIVE'S DEATH OR
DISABILITY. Anything in this Agreement to the contrary notwithstanding, under no
circumstance shall the Executive be entitled to severance payments or
termination benefits under this Agreement if --

         (1)      Death: the Executive dies while actively employed by
                  Middlefield or a Subsidiary, or

         (2)      Disability: the Executive becomes totally disabled while
                  actively employed by Middlefield or a Subsidiary. For purposes
                  of this agreement, the term "totally disabled" means that
                  because of injury or sickness, the Executive is unable to
                  perform his duties.

         The benefits, if any, payable to the Executive or his beneficiary(ies)
or estate relating to his death or disability shall be determined solely by such
benefit plans or arrangements as Middlefield or Subsidiary may have with the
Executive relating to death or disability, not by this Agreement.

5.       TERM OF AGREEMENT

         The initial term of this Agreement shall be for a period of three
years, commencing November 28, 2001. On the first anniversary of the November
28, 2001 effective date of this Agreement, and on each anniversary thereafter,
the Agreement shall be extended automatically for one additional year unless
Middlefield's board of directors gives notice to the Executive in writing at
least 90 days before the anniversary that the term of this Agreement will not be
extended. If the board of directors determines not to extend the term, it shall
promptly notify the Executive. References herein to the term of this Agreement
mean the initial term and extensions of the initial term. Unless terminated
earlier, this Agreement shall terminate when the Executive reaches age 65. If
the board of directors decides not to extend the term of this Agreement, this
Agreement shall nevertheless remain in force until its term expires. The board's
decision not to extend the term of this Agreement shall not -- by itself -- give
the Executive any rights under this Agreement to claim an adverse change in his
position, compensation or circumstances or otherwise to claim entitlement to
severance or termination benefits under this Agreement.

6.       THIS AGREEMENT IS NOT AN EMPLOYMENT CONTRACT

         The parties hereto acknowledge and agree that (a) this Agreement is not
a management or employment agreement and (b) nothing in this Agreement shall
give the Executive any rights or impose any obligations to continued employment
by Middlefield or any Subsidiary or successor of Middlefield, nor shall it give
Middlefield any rights or impose any obligations for the continued performance
of duties by the Executive for Middlefield or any Subsidiary or successor of
Middlefield.

7.       PAYMENT OF LEGAL FEES

<PAGE>

         Middlefield desires that the Executive not be required to incur legal
fees and the related costs and expenses associated with the interpretation,
enforcement or defense of Executive's rights under this Agreement by litigation
or otherwise, because the amounts thereof would substantially detract from the
benefits intended to be extended to the Executive under this Agreement.
Therefore, even if the Executive does not prevail in whole or in part in
litigation or other legal action associated with the interpretation, enforcement
or defense of Executive's rights under this Agreement, Middlefield hereby agrees
to pay and be solely financially responsible for any and all attorneys' and
related fees, costs and expenses incurred by the Executive in the litigation or
other legal action, up to a maximum of $500,000. The fees and expenses of
counsel selected by the Executive shall be paid or reimbursed to the Executive
by Middlefield on a regular, periodic basis, upon presentation by the Executive
of a statement or statements prepared by such counsel in accordance with
counsel's customary practices. Anything herein to the contrary notwithstanding,
nothing in this Agreement authorizes Middlefield to pay or the Executive to
demand payment of fees, costs and expenses if and to the extent payment of fees,
costs and expenses constitutes a "prohibited indemnification payment" within the
meaning of Federal Deposit Insurance Corporation Rule 359.1(l)(1) [12 CFR
359.1(l)(1)]. Middlefield's obligation in this Section 7 to pay the Executive's
legal fees operates separately from and in addition to any legal fee
reimbursement obligation Middlefield or a Subsidiary may have under any separate
employment or other agreement between the Executive and Middlefield.

         Middlefield irrevocably authorizes the Executive to retain from time to
time counsel of Executive's choice to advise and represent him in the
interpretation, enforcement or defense of the parties' rights and
responsibilities under this Agreement, if --

         (1)      the Executive concludes that Middlefield has failed to comply
                  with any of its obligations under this Agreement, or

         (2)      if Middlefield or any other person takes or threatens to take
                  any action to declare this Agreement void or unenforceable, or
                  institutes any litigation or other action or proceeding
                  designed to deny, or to recover from, the Executive the
                  benefits provided or intended to be provided to the Executive
                  under this Agreement,

including without limitation the initiation or defense of any litigation or
other legal action, whether by or against Middlefield or any director, officer,
stockholder or other person affiliated with Middlefield, in any jurisdiction.

8.       WITHHOLDING OF TAXES

         Middlefield may withhold from any benefits payable under this Agreement
all Federal, state, local or other taxes as may be required by law, governmental
regulation or ruling.

9.       SUCCESSORS AND ASSIGNS

         (a) THIS AGREEMENT IS BINDING ON MIDDLEFIELD'S SUCCESSORS. This
Agreement shall be binding upon Middlefield and any successor to Middlefield,
including any persons acquiring directly or indirectly all or substantially all
of the business or assets of Middlefield by purchase, merger, consolidation,
reorganization or otherwise. Any such successor shall thereafter be deemed to be
the "Corporation" for purposes of this Agreement. But this Agreement and
Middlefield's obligations under this Agreement are not otherwise assignable,
transferable or delegable by Middlefield. By agreement in form and substance
satisfactory to the Executive, Middlefield shall require any successor to all or
substantially all of the business or assets of Middlefield expressly to assume
and agree to perform this Agreement in the same manner and to the same extent
Middlefield would be required to perform if no such succession had occurred.

         (b) THIS AGREEMENT IS ENFORCEABLE BY THE EXECUTIVE AND HIS HEIRS. This
Agreement will inure to the benefit of and be enforceable by the Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributes and legatees.

<PAGE>

         (c) THIS AGREEMENT IS PERSONAL IN NATURE AND IS NOT ASSIGNABLE. This
Agreement is personal in nature. Without written consent of the other party,
neither party shall assign, transfer or delegate this Agreement or any rights or
obligations under this Agreement except as expressly provided in this Section 9.
Without limiting the generality or effect of the foregoing, the Executive's
right to receive payments hereunder is not assignable or transferable, whether
by pledge, creation of a security interest, or otherwise, except for a transfer
by Executive's will or by the laws of descent and distribution. If the Executive
attempts an assignment or transfer that is contrary to this Section 9,
Middlefield shall have no liability to pay any amount to the assignee or
transferee.

10.      NOTICES

         All notices, requests, demands and other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered by hand
or mailed, certified or registered mail, return receipt requested, with postage
prepaid to the following addresses or to such other address as either party may
designate by like notice.

         (a)If to Middlefield, to:        Middlefield Banc Corp.
                                          15985 East High Street
                                          P.O. Box 35 Middlefield, Ohio 44062
                                                    Attn:  Corporate Secretary

         (b)If to the Executive, to:      Mr. James R. Heslop, II
                                          15985 East High Street
                                          Middlefield, Ohio 44062

and to such other or additional person or persons as either party shall have
designated to the other party in writing by like notice.

11.      CAPTIONS AND COUNTERPARTS

         The headings and subheadings used in this Agreement are included solely
for convenience and shall not affect the interpretation of this Agreement. This
Agreement may be executed in one or more counterparts, each of which shall be
deemed to be an original, but all of which together shall constitute one and the
same agreement.

12.      AMENDMENTS AND WAIVERS

         No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in a writing or
writings signed by the Executive and by Middlefield. No waiver by either party
hereto at any time of any breach by the other party hereto or compliance with
any condition or provision of this Agreement to be performed by such other party
will be deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. No agreements or representations, oral
or otherwise, expressed or implied with respect to the subject matter hereof
have been made by either party that are not set forth expressly in this
Agreement.

13.      SEVERABILITY

         The provisions of this Agreement shall be deemed severable. The
invalidity or unenforceability of any provision shall not affect the validity or
enforceability of the other provisions of this Agreement. Any provision held to
be invalid or unenforceable shall be reformed to the extent (and only to the
extent) necessary to make it valid and enforceable.

14.      GOVERNING LAW

<PAGE>

         The validity, interpretation, construction and performance of this
Agreement shall be governed by and construed in accordance with the substantive
laws of the State of Ohio, without giving effect to the principles of conflict
of laws of such State.

15.      ENTIRE AGREEMENT

         This Agreement constitutes the entire agreement between Middlefield and
the Executive concerning the subject matter hereof. No rights are granted to the
Executive under this Agreement other than those specifically set forth herein.

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.

WITNESSES:                                   MIDDLEFIELD BANC CORP.

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

WITNESSES:                                   EXECUTIVE

                                                 James R. Heslop, II

County of Geauga  )
                  ) ss:
State of Ohio     )

         Before me this          day of           , 2003, personally appeared
the above named Thomas G. Caldwell and James R. Heslop, II, who acknowledged
that they did sign the foregoing instrument and that the same was their free act
and deed.

                                                 _______________________________
(Notary Seal)                                        Notary Public
                                                     My Commission Expires:

</TEXT>
</DOCUMENT>
