Document:

EX-10.5

 

Exhibit 10.5

CONSULTING AGREEMENT

     CONSULTING
AGREEMENT (this “Agreement”) dated as of December 31, 2005 among F.N.B,
Corporation, a Florida corporation having its principal place of business at One F.N.B.
Boulevard, Hermitage, Pennsylvania 16148 (“FNB”), First National Bank of Pennsylvania, a
national banking association having its principal place of business at One F.N.B.
Boulevard, Hermitage, Pennsylvania 16148 (“FNB Bank”), and Stephen J. Gurgovits, an
individual whose address is 591 Buhl Boulevard, Sharon, Pennsylvania 16146 (the
“Consultant”).

WITNESSETH:

     WHEREAS, FNB Bank is a wholly owned subsidiary of FNB;

     WHEREAS, the Consultant has served for many years as an executive officer of each of
FNB and FNB Bank (collectively, the “Companies”) and is currently serving as President
and Chief Executive Officer of FNB and as Chairman of the Board of FNB Bank pursuant to
the terms and conditions of an Employment Agreement dated as of
December 31, 2005 between
the Employers (as defined in the Employment Agreement) and the Executive (as defined in
the Employment Agreement);

     WHEREAS, upon the earlier of the scheduled retirement of the Executive on December
31, 2008 or the date on which the Employers shall have terminated the employment of the
Executive under the Employment Agreement for other than Cause (as defined in the
Employment Agreement) or the Death or Permanent Disability of the Executive( as defined
in the Employment Agreement) or the Executive shall have terminated his employment under
the Employment Agreement for Good Reason (as defined in the Employment Agreement), the
Companies desire to employ the Consultant to provide consulting services to the
Companies, and the Consultant desires to provide for his rendering of consulting services
to the Companies, all in accordance with the terms and subject to the conditions set
forth in this Agreement; and

     WHEREAS, the parties are entering into this Agreement to set forth and confirm their
respective rights and obligations with respect to the services to be provided to by the
Consultant;

     NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement, the Companies and the Consultant, intending to be
legally bound hereby, mutually agree as follows:

 

 

     1. Consulting Services and Term.

          (a) (i) Effective on the earlier of January 1, 2009 or the date on which the
Employers shall have terminated the employment of the Executive under the Employment
Agreement for other than Cause or the Death or Permanent Disability of the Executive or the
date on which the Executive shall have terminated his employment under the Employment
Agreement for Good Reason (the “Effective Date”), and except as otherwise expressly
provided in this Agreement, this Agreement shall supersede and replace the Employment
Agreement and the Companies shall employ the Consultant to provide consulting services to
the Companies and the Consultant shall provide consulting services to the Companies in
accordance with the terms and subject to the conditions set forth in this Agreement for a term
(the “Term”) that shall commence on the Effective Date and,
subject to paragraphs 1(b), 1(c)
and 1(d), shall expire on the fifth anniversary of the Effective Date.

               (ii) FNB and FNB Bank shall be jointly and severally liable to the Consultant with
respect to (i) all liabilities of FNB Bank to the Consultant under this Agreement and (ii) all
liabilities of FNB to the Consultant under this Agreement; provided, however, that FNB shall not be
responsible for any liability of FNB Bank to the Consultant to the extent that such liability has
been discharged by FNB Bank, and FNB Bank shall not be responsible for any liability of FNB to the
Consultant to the extent that such liability has been discharged by FNB.

          (b) Unless otherwise provided in this Agreement or agreed by the
Companies and the Consultant, all of the terms and conditions of this Agreement shall
continue in full force and effect throughout the Term and, with respect to those terms and
conditions that apply after the Term, after the Term.

          (c) Notwithstanding
paragraph 1(a), the Companies, by action of their
Boards of Directors (the “Boards”) and effective as specified in a written notice thereof to
the Consultant in accordance with the terms of this Agreement, shall have the right to terminate
the Consultant’s employment under this Agreement at any time during the Term, for Cause
(as defined in this Agreement) or other than for Cause or on account of the Consultant’s
death, subject to the provisions of this paragraph 1. As used in this Agreement, “Cause” shall
mean (A) the commission by the Consultant of any activities constituting a violation or
breach under any material federal, state or local law or regulation applicable to the
activities
of FNB Bank or FNB, in each case, after notice thereof from the Companies to the Consultant
and a reasonable opportunity for the Consultant to cease such failure, breach or violation in
all material respects, (B) fraud, breach of fiduciary duty, dishonesty, misappropriation or
other actions that cause intentional material damage to the property or business of FNB Bank
or FNB by the Consultant, (C) the Consultant’s inability to perform his duties under this
Agreement in all material respects other than for physical or mental impairment or illness or
(D) the Consultant’s admission or conviction of, or plea of nolo contendere to, any felony or
any other crime referenced in Section 19 of the Federal Deposit Insurance Act that, in the

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reasonable judgment of the Boards, adversely affects FNB Bank’s or FNB’s reputation or the
Consultant’s ability to carry out his obligations under this Agreement.

          (d) The Consultant shall have the right to terminate his employment under
this Agreement at any time during the Term hereof for Good Reason or without Good
Reason. As used in this Agreement, “Good Reason” shall mean (i) a material breach by either
Company of its respective obligations to the Consultant under this Agreement, which breach
is not cured in all material respects to the reasonable satisfaction of the Consultant within
30
days, in each case following written notice thereof from the Consultant to the Companies or
(ii) any termination of the Consultant’s employment under this Agreement without Cause.

          (e) (i) If (A) the Companies terminate the employment of the Consultant
under this Agreement for any reason other than Cause or the death of the Consultant or (B)
the Consultant terminates his employment under this Agreement for Good Reason, the
Companies shall pay the Consultant’s annual fee for the remainder of the Term.

               (ii) If (A) the Companies terminate the employment of the Consultant under this Agreement
for Cause or (B) the Consultant terminates his employment under this Agreement for any reason other
than Good Reason, the sole obligation of the Companies shall be to pay any accrued obligations
under this Agreement to the Consultant.

          (f) Any notice of termination of this Agreement by the Companies to the
Consultant or by the Consultant to the Companies shall be given in accordance with the
provisions of paragraph 9.

          (g) The Companies agree to reimburse the Consultant for the reasonable fees
and expenses of the Consultant’s attorneys and for court and related costs in any proceeding
to enforce the provisions of this Agreement in which the Consultant is successful on the
merits.

     2. Services of the Consultant.

          (a) The Consultant agrees to provide services to the Companies in connection with merger
and acquisition activities, participation in meetings and other activities of the Pennsylvania
Bankers’ Association and such other assignments and projects that the Consultant and the Companies
mutually agree upon. The Consultant shall report to the Chief Executive Officer of the Companies.
The Consultant agrees to perform such services faithfully, diligently and to the best of the
Consultant’s ability and the Companies shall have the right to direct the manner in which the
Consultant provides his services under this Agreement. The Consultant shall provide on an average
basis over the course of a year up to 20 hours of consulting per week. Except for travel normally
incidental and reasonably necessary to the business of the Companies and the duties of the
Consultant under this

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Agreement, the duties of the Consultant shall be performed from an office location not
greater than 20 miles from Hermitage, Pennsylvania.

          (b) The parties intend that the Consultant shall render services under this Agreement as
an employee of the Companies, and nothing herein shall be construed to be inconsistent with this
relationship or status. The Consultant shall be entitled to all benefits paid by the Companies to
their other executive officers for which the Consultant continues to be eligible, including health
insurance and such benefits as became fully vested while the Consultant was an employee of the
Companies in the capacities of President and Chief Executive Officer of FNB and as Chairman of the
Board of FNB under the Employment Agreement. The fees, benefits and other compensation paid to the
Consultant pursuant to this Agreement shall be subject to and net of any federal, state or local
taxes or contributions imposed under any employment insurance, social security, income tax or other
tax law or regulation with respect to the Consultant’s performance of consulting services under
this Agreement.

     3. Fees.

          (a) As
compensation for the Consultant’s services under this Agreement, the
Companies shall pay the Consultant annual compensation in an amount equal to the sum of
50% of (i) the Base Salary (as defined in the Employment Agreement) of the Executive for the
year ended December 31, 2008, but in no event less than $525,000, and (ii) an amount equal to
that percentage of the amount set forth in clause (i) as is equal to the average percentage
that
the Bonus (as defined in the Employment Agreement) paid to the Executive for the years
ending December 31, 2006, 2007 and 2008 bears to the Base Salary in fact paid to the
Executive for the years ending December 31, 2006, 2007 and 2008. Such annual fee and bonus
shall be paid in 12 equal monthly installments on the first day of each month.

          (b) From and after the Effective Date and throughout the Term:

               (i) The Companies shall provide the Consultant with an automobile at the Companies’ sole
cost and expense. The automobile shall be replaced with a substantially equivalent automobile owned
or leased by FNB or FNB Bank in the future as shall be mutually agreed by the Consultant and the
Compensation Committees of the Boards. The Companies shall bear all gas, insurance, repairs,
maintenance, car telephone and other operating expenses for the automobile.

               (ii) The Companies will pay the annual dues for the Consultant’s membership in one
country club of the Consultant’s choosing. In addition, the Companies shall pay any reasonable club
usage charges related to the Companies’ business upon submission by the Consultant of appropriate
verifying information. The Companies shall also pay any bond, admission or initiation fee that may
be required for membership, provided however that upon refund to the Consultant of all or any
portion of such bond,

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admission or initiation fee, the refunded amount shall be promptly remitted by the Consultant to
the Companies to the extent such bond or fee had been paid by the Companies.

               (iii) The Companies shall provide the Consultant with office facilities and secretarial
services consistent with the Consultant’s stature as a former chief executive officer of the
Companies.

     4. Expenses. The Companies shall promptly reimburse the Consultant for (a) all
reasonable expenses paid or incurred by the Consultant in connection with the performance
of the Consultant’s duties and responsibilities under this Agreement, upon presentation of
expense vouchers or other appropriate documentation therefor, (b) all reasonable
professional expenses, such as licenses and dues and professional educational expenses, paid
or incurred by the Consultant during the Term and (c) the costs of a personal computer,
cellular telephone, blackberry and fax machine for the Consultant’s residence in the Sharon,
Pennsylvania area, including the monthly fees related to such devices.

     5. Indemnification. Notwithstanding anything in the Companies’ certificate of
incorporation or their By-laws to the contrary, the Consultant shall at all times while the
Consultant is providing consulting services to the Companies, and thereafter, be indemnified
by the Companies to the fullest extent permitted by applicable law for any matter in any way
relating to the Consultant’s affiliation with the Companies and/or its subsidiaries; provided,
however, that if the Consultant’s retention shall have been terminated by the Companies for
Cause, then, to the extent required by law, the Companies shall have no obligation
whatsoever to indemnify the Consultant for any claim arising out of the matter for which his
employment shall have been terminated for Cause or for any conduct of the Consultant not
within the scope of the Consultant’s duties under this Agreement.

     6. Confidential
Information. The Consultant understands that in the course of his
retention by the Companies the Consultant will receive confidential information concerning
the business of the Companies and that the Companies desire to protect. The Consultant
agrees that he will not at any time during or after the period of his retention by the
Companies reveal to anyone outside the Companies, or use for his own benefit, any such
information that has been designated as confidential by the Companies or understood by the
Consultant to be confidential without specific written authorization by the Companies. Upon
termination of the retention of the Consultant under this Agreement, and upon the request of
the Companies, the Consultant shall promptly deliver to the Companies any and all written
materials, records and documents, including all copies thereof, made by the Consultant or
coming into his possession during the Term and retained by the Consultant containing or
concerning confidential information of the Companies and all other written materials
furnished to and retained by the Consultant by the Companies for his use during the Term,
including all copies thereof, whether of a confidential nature or otherwise.

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     7. Non-Competition
and Non-Disparagement.

          (a) For the purposes of this Agreement, the term “Competitive Enterprise”
shall mean any federal or state-chartered bank, trust company, savings and loan association,
savings bank, credit union, consumer finance company, bank holding company, savings and
loan holding company, unitary holding company, financial holding company or any of the
foregoing types of entities in the process of organization or application for federal or state
regulatory approval and shall also include other providers of financial services and entities
that offer financial services or products that compete with the financial services and
products
currently or in the future offered by the Companies or their respective subsidiaries or
affiliates.

          (b) For a period of two years (the “Restricted Period”) immediately following
the Companies’ termination of the Consultant’s employment under this Agreement for Cause
or the Consultant’s termination of his retention under this Agreement for other than Good
Reason, the Consultant shall not, provided that the Companies remain in compliance with
their obligations under this Agreement:

               (i) serve as a director, officer, employee or agent of, or act as a consultant or
advisor to, any Competitive Enterprise in any city or county in which the Companies or their
respective subsidiaries or affiliates are then conducting business or maintain an office or
have publicly announced their intention to conduct business or maintain an office;

               (ii) in any way, directly or indirectly, solicit, divert or contact any existing or
potential customer or business of the Companies or any of their respective subsidiaries or
affiliates that the Consultant solicited, became aware of or transacted business with during the
employment of the Consultant by the Companies for the purpose of selling any financial services or
products that compete with the financial services or products currently or in the future offered by
the Companies or their respective subsidiaries and affiliates; or

               (iii) solicit or assist in the employment of any employee of the Companies or their
respective subsidiaries or affiliates for the purpose of becoming an employee of or otherwise
provide services for any Competitive Business Enterprise.

          (c) The Consultant agrees that during and after the period of his employment by the
Companies under this Agreement he will not in any way, directly or indirectly, make any oral or
written statement, comment or other communication designed or intended to impugn, disparage or
otherwise malign the reputation, ethics, competency, morality or qualification of the Companies or
any of their respective subsidiaries or affiliates or any of their respective directors, officers,
employees or customers.

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     8. Entire Agreement; Amendment. This Agreement contains the entire agreement
between the Companies and the Consultant with respect to the consulting services to be
provided pursuant to this Agreement and may not be amended, waived, changed, modified
or discharged except by an instrument in writing executed by the parties hereto.

     9. Notice. Any notice that may be given under this Agreement shall be in writing
and be deemed given when hand delivered and acknowledged or, if mailed, one day after
mailing by registered or certified mail, return receipt requested, or if delivered by an
overnight delivery service, one day after the notice is delivered to such service, to either
party
hereto at their respective addresses stated above, or at such other address as either party
may
by similar notice designate.

     10. No Third Party Beneficiaries. Nothing in this Agreement, express or implied, is
intended to confer upon any person or entity other than the parties (and the Consultant’s
heirs, executors, administrators and legal representatives) any rights or remedies of any
nature under or by reason of this Agreement.

     11. Successor Liability. The Companies shall require any subsequent successor,
whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all of the business or assets of the Companies to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the Companies
would be required to perform it if no such succession had taken place.

     12. No
Attachment. Except as required by law, no right to receive payments under
this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment,
encumbrance, charge, pledge or hypothecation or to execution, attachment, levy or similar
process or assignment by operation of law, and any attempt, voluntary or involuntary, to
effect any such action shall be null, void and of no effect; provided, however, that nothing
in
this paragraph 12 shall preclude the assumption of such rights by executors, administrators
or other legal representatives of the Consultant or his estate and their assigning any rights
hereunder to the person or persons entitled hereto.

     13. Specific Performance. The parties agree that irreparable damage would occur
in the event that any of the provisions of paragraphs 6 or 7 were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed that the
parties
shall be entitled to an injunction or injunctions to prevent breaches of paragraphs 6 or 7 and
to enforce specifically the terms and provisions of paragraphs 6 or 7, this being in addition
to
any other remedy to which any party is entitled at law or in equity.

     14. Severability. The invalidity or unenforceability of any term, phrase, clause,
paragraph, restriction, covenant, agreement or other provision hereof shall in no way affect
the validity or enforceability of any other provision, or any part thereof, but this Agreement
shall be construed as if such invalid or unenforceable term, phrase, clause, paragraph,

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restriction, covenant, agreement or other provision had never been contained herein unless the
deletion of such term, phrase, clause, paragraph, restriction, covenant, agreement or other
provision would result in such a material change as to cause the covenants and agreements contained
herein to be unreasonable or would materially and adversely frustrate the objectives of the parties
as expressed in this Agreement.

     15. Survival of Benefits. Any provision of this Agreement that provides a benefit to
the Consultant and that by the express terms hereof does not terminate upon the expiration
of the Term shall survive the expiration of the Term and shall remain binding upon the
Companies until such time as such benefits are paid in full to the Consultant or his estate.

     16. Construction. This Agreement shall be governed by and construed in
accordance with the internal laws of the Commonwealth of Pennsylvania, without giving
effect to principles of conflict of laws. All headings in this Agreement have been inserted
solely for convenience of reference only, are not to be considered a part of this Agreement
and shall not affect the interpretation of any of the provisions of
this Agreement.

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

	 	 	 	 	 	 	 
	 	 	F.N.B. CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Brian F. Lilly
 

Brian F. Lilly, Chief Financial Officer
	 	 
	 
	 	 	 	 	 	 
	 	 	FIRST NATIONAL BANK OF PENNSYLVANIA	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Gary J. Roberts
 

Gary J. Roberts, President
	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	/s/ Stephen J. Gurgovits
 

	 	 
	 

	 	 	 	Stephen J. Gurgovits	 	 

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                                                                    EXHIBIT 10.1

                       THE CORTLAND SAVINGS & BANKING CO.
                            GROUP TERM CARVE OUT PLAN

     THIS PLAN is made and entered into as of this 23rd day of February, 2001,
by and between The Cortland Savings & Banking Co., an Ohio-chartered,
FDIC-insured member bank with its main offices in Cortland, Ohio (the "Bank")
and the Participant selected to participate in this Plan (the "Participant").

                                  INTRODUCTION

     The Bank wishes to attract and retain highly qualified executives. To
further this objective, the Bank is willing to divide the death proceeds of
certain life insurance policies which are owned by the Bank on the lives of the
participating executives with the designated beneficiary of each insured
participating executive. The Bank will pay the life insurance premiums from its
general assets.

                                    ARTICLE 1
                                   DEFINITIONS

     Whenever used in this Plan, the following terms shall have the meanings
specified:

     1.1 " Base Annual Salary" means the current base annual salary of the
Participant at the earliest of (1) the date of the Participant's death; (2) the
date of the Participant's Disability; (3) the date the Participant's employment
with Cortland Bancorp. or the Bank terminates within one year after a Change of
Control (except for Termination for Cause); (4) the Participant's Early
Retirement Date; or (5) the Participant's Normal Retirement Date. Current Base
Annual Salary shall be defined by reference to compensation of the type that
would be required to be reported by Securities and Exchange Commission Rule
228.402(b) (17 C.F.R. Section 228.402(b)), specifically column (c) of that
rule's Summary Compensation Table (or any successor provision).

     1.2 "Change of Control" means any of the following events occur:

          (a)  The acquisition by a person or persons acting in concert of the
               power to vote twenty-five percent (25%) or more of a class of
               Cortland Bancorp.'s voting securities;

          (b)  The acquisition by a person of the power to direct Cortland
               Bancorp.'s management or policies, if the Board of Directors of
               Cortland Bancorp. has made a determination that such acquisition
               constitutes or will constitute an acquisition of control of
               Cortland Bancorp. for the purposes of the Bank Holding Company
               Act or the Change in Bank Control Act and the regulations
               thereunder;

          (c)  During any period of two (2) consecutive years, individuals who
               at the beginning of such period constitute the Board of Directors
               of Cortland Bancorp. cease for

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<PAGE>

               any reason to constitute at least a majority thereof, provided,
               however, that - for purposes of this clause (c) - each director
               who is first elected by the Board of Cortland Bancorp. (or first
               nominated by that Board for election by shareholders) by a vote
               of at least two-thirds (2/3) of the directors then in office
               shall be deemed to have been a director at the beginning of the
               period;

          (d)  Cortland Bancorp. shall have merged into or consolidated with
               another corporation, or merged another corporation into Cortland
               Bancorp., on a basis whereby less than fifty percent (50%) of the
               total voting power of the surviving corporation is represented by
               shares held by persons who were shareholders of Cortland Bancorp.
               immediately before such merger or consolidation; or

          (e)  Cortland Bancorp. shall have sold substantially all of its assets
               to another person.

     For purposes of this Plan, the term "person" refers to an individual,
corporation, partnership, trust, association, joint venture, pool, syndicate,
sole proprietorship, unincorporated organization or other entity.

     Notwithstanding this definition of Change of Control, a Change of Control
of Cortland Bancorp. shall not be deemed to occur solely because any person
acquires beneficial ownership of more than 25% of Cortland Bancorp.'s voting
securities as a result of the acquisition of Cortland Bancorp. voting securities
by Cortland Bancorp. which reduces the number of Cortland Bancorp.'s voting
securities outstanding; provided, that if after such acquisition by Cortland
Bancorp. such person becomes the beneficial owner of additional Cortland
Bancorp. voting securities that increases the percentage of outstanding Cortland
Bancorp. voting securities beneficially owned by such person, a Change of
Control of Cortland Bancorp shall then occur.

     1.3 "Compensation Committee" means either the Compensation Committee
designated from time to time by the Bank's Board of Directors (as of the date
this Plan is created, the Bank identifies the board committee performing this
function as the Executive Compensation Committee) or a majority of the Bank's
Board of Directors, either of which shall hereinafter be referred to as the
Compensation Committee.

     1.4 "Disability" means, if the Participant is covered by a Bank-sponsored
disability, policy, total disability as defined in such policy without regard to
any waiting period. If the Participant is not covered by such a policy,
Disability means the Participant suffering a sickness, accident or injury which,
in the judgment of a physician satisfactory to the Bank, prevents the
Participant from performing substantially all of the Participant's normal duties
for the Bank. As a condition to any benefits, the Bank may require the
Participant to submit to such physical or mental evaluations and tests as the
Bank's Board of Directors deems appropriate. Any one of the following events
also constitutes Disability: the total and irrecoverable loss of speech or
hearing; the loss of sight of both eyes; the severance of both hands at or above
the wrist; the severance of both feet at or above the ankles; or the severance
of one entire hand and one entire foot.

     1.5 "Early Retirement Age" means the Participant's attaining age 62.

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<PAGE>

     1.6 "Early Termination" means the Termination of Employment before Early
Retirement Age for reasons other than death, Disability, Termination for Cause
or following a Change of Control.

     1.7 "Early Termination Date" means the month, day and year in which Early
Termination Occurs.

     1.8 "Insured" means the individual whose life is insured.

     1.9 "Insurer" means the insurance company issuing the life insurance policy
on the life of the Insured.

     1.10 "Normal Retirement Age" means the Participant attaining age 65.

     1.11 "Normal Retirement Date" means the later of the Normal Retirement Age
or the date that the Participant terminates or is terminated for any reason
other than Termination for Cause.

     1.12 "Participant" means the employee who is designated by the Compensation
Committee as eligible to participate in the Plan, elects in writing to
participate in the Plan using the form attached hereto as Exhibit A, and signs a
Split Dollar Endorsement for the Policy in which he or she is the Insured.

     1.13 "Policy" or "Policies" means the individual insurance policy or
policies adopted by the Compensation Committee for purposes of insuring a
Participant's life under this Plan.

     1.14 "Plan" means this instrument, including all amendments thereto.

     1.15 "Terminated for Cause" or "Termination for Cause" means that the Bank
has terminated the Participant's employment for any of the following reasons:

          (a)  Gross negligence or gross neglect of duties;

          (b)  Commission of a felony or of a gross misdemeanor involving moral
               turpitude; or

          (a)  Fraud, disloyalty, dishonesty or willful violation of any law or
               significant Bank policy committed in connection with the
               Participant's employment and resulting in an adverse effect on
               the Bank. No act, or failure to act, on the Participant's part
               shall be considered "willful" unless he has acted, or failed to
               act, with an absence of good faith and without a reasonable
               belief that his action or failure to act was in the best interest
               of the Bank.

     1.16 "Years of Service" means the total number of twelve-month periods
during which

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<PAGE>

the Participant serves as an employee of the Bank.

                                    ARTICLE 2
                                  PARTICIPATION

     2.1 Eligibility to Participate. The Compensation Committee in its sole
discretion shall designate from time to time Participants that are eligible to
participate in this Plan.

     2.2 Participation. The eligible executive may participate in this Plan by
executing an Election to Participate and a Split Dollar Endorsement. The Split
Dollar Endorsement shall bind the Participant and his or her beneficiaries,
assigns and transferees, to the terms and conditions of this Plan. An
executive's participation is limited to only Policies where he or she is the
Insured. Exhibit B attached hereto sets forth the original Insured Participants
and the Policies on their lives.

     2.3 Termination of Participation. A Participant's rights under this Plan
shall cease and his or her participation in this Plan shall terminate if any of
the following events occur:

          (a)  If the Participant is Terminated for Cause.

          (b)  If the Participant's employment with the Bank is terminated prior
               to the Early Retirement Age for reasons other than Disability or
               Change of Control.

          (c)  If the Participant terminates employment due to Disability and
               thereafter becomes gainfully employed with an entity other than
               the Bank.

In the event that the Bank decides to maintain the Policy after the
Participant's termination of participation in the Plan, the Bank shall be the
direct beneficiary of the entire death proceeds of the Policy.

     2.4 Maintaining the Policy and Endorsement until Death. If any of the
events listed below occur, the Bank shall maintain the Policy in full force and
effect and, in no event, shall the Bank amend, terminate or otherwise abrogate
the Participant's interest in the Policy, unless the Participant agrees pursuant
to section 8.1. The Bank may replace the Policy with a comparable insurance
policy to cover the benefit provided under this Agreement if the Bank and
Participant execute a new Split Dollar Policy Endorsement for a comparable
benefit, which Policy or any comparable policy shall be subject to the claims of
the Bank's creditors.

          (a)  Disability. If the Participant's employment with the Bank is
               terminated due to Disability, except as set forth in section
               2.3(c) herein.

          (b)  Retirement. If the Participant's employment with the Bank is
               terminated on or after Early Retirement Age.

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<PAGE>

          (c)  Change of Control. If the Participant's employment with Cortland
               Bancorp. or the Bank terminates within one year after a Change of
               Control (except for Termination for Cause).

                                    ARTICLE 3
                           POLICY OWNERSHIP/INTERESTS

     3.1 Participant's Interest. With respect to each Policy, the Participant or
the Participant's assignee shall have the right to designate the beneficiary of
one of the following death benefit amounts:

          (a)  Pre-Retirement Death Benefit. If the Participant was employed by
               the Bank at the time of death, the death benefit shall be the
               lesser of : (i) two times the Participant's Base Annual Salary,
               less the Participant's $50,000 group term life insurance benefit
               under the Bank's group term life insurance policy; or (ii)
               $500,000.

          (b)  Post-Retirement Death Benefit. If the Participant was no longer
               employed by the Bank at the time of death, but had terminated
               employment within one year after a Change of Control or had
               terminated employment due to Disability or on or after Early
               Retirement Age, the death benefit shall be the lesser of (i) one
               times the Participant's Base Annual Salary or (ii) $500,000.

The Participant shall also have the right to elect and change settlement options
with the consent of the Bank and the Insurer.

     3.2 Bank's Interest. The Bank shall own the Policies and shall have the
right to exercise all incidents of ownership except that the Bank shall not
sell, surrender or transfer ownership of a Policy so long as a Participant has
an interest in the Policy during the time periods as described in section 3.1.
This provision shall not impair the right of the Bank to terminate this Plan.
With respect to each Policy, the Bank shall be the direct beneficiary of the
remaining death proceeds of the Policy after the Participant's interest is
determined according to section 3.1.

                                    ARTICLE 4
                                    PREMIUMS

     4.1 Premium Payment. The Bank shall pay all premiums due on all Policies.

     4.2 Imputed Income. The Bank shall impute income to the Participant in an
amount equal to the current term rate for the Participant's age multiplied by
the net death benefit payable to the Participant's beneficiary. The "current
term rate" is the minimum amount required to be imputed under Revenue Rulings
64-328 and 66-110, or any subsequent applicable authority.

                                    ARTICLE 5

                                       5

<PAGE>

                                   ASSIGNMENT

     Any Participant may assign without consideration all interests in his or
her Policy and in this Plan to any person, entity or trust. In the event a
Participant shall transfer all of his or her interest in the Policy, then all of
that Participant's interest in his or her Policy and in the Plan shall be vested
in his or her transferee, who shall be substituted as a party hereunder, and
that Participant shall have no further interest in his or her Policy or in this
Plan.

                                    ARTICLE 6
                                     INSURER

     The Insurer shall be bound only by the terms of their corresponding Policy.
Any payments the Insurer makes or actions it takes in accordance with a Policy
shall fully discharge it from all claims, suits and demands of all persons
relating to that Policy. The Insurer shall not be bound by the provisions of
this Plan. The Insurer shall have the right to rely on the Bank's
representations with regard to any definitions, interpretations, or Policy
interests as specified under this Plan.

                                    ARTICLE 7
                                CLAIMS PROCEDURE

     7.1 Claims Procedure. The Bank shall notify any person or entity that makes
a claim against this Plan (the "Claimant"), in writing, within ninety (90) days
of Claimant's written application for benefits, of his or her eligibility or
benefits under this Plan. If the Bank determines that Claimant is not eligible
for benefits or full benefits, the notice shall set forth (1) the specific
reasons for such denial, (2) a specific reference to the provisions of this Plan
on which the denial is based, (3) 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 (4) an explanation of this Plan's claims
review procedure and other appropriate information as to the steps to be taken
if the Claimant wishes to have the claim reviewed. If the Bank determines that
there are special circumstances requiring additional time to make a decision,
the Bank shall notify the Claimant of the special circumstances and the date by
which a decision is expected to be made, and may extend the time for up to an
additional ninety (90) days.

     7.2 Review Procedure. If the Claimant is determined by the Bank not to be
eligible for benefits, or if the Claimant believes that he or she is entitled to
greater or different benefits, the Claimant shall have the opportunity to have
such claim reviewed by the Bank by filing a petition for review with the Bank
within sixty (60) days after receipt of the notice issued by the Bank. Said
petition shall state the specific reasons which the Claimant believes entitles
him or her to benefits or to greater or different benefits. Within sixty (60)
days after receipt by the Bank of the petition, the Bank shall afford the
Claimant (and counsel, if any) an opportunity to present his or her position to
the Bank verbally or in writing, and the Claimant (or counsel) shall have the
right to review the pertinent documents. The Bank shall notify the Claimant of
its decision in writing within the sixty-day period, stating specifically the
basis of its decision, written in a manner calculated to be understood by the
Claimant and the specific provisions of this Plan on

                                       6

<PAGE>

which the decision is based. If, because of the need for a hearing, the
sixty-day period is not sufficient, the decision may be deferred for up to
another sixty (60) days at the election of the Bank, but notice of this deferral
shall be given to the Claimant.

                                    ARTICLE 8
                           AMENDMENTS AND TERMINATION

     8.1 Amendment or Termination of Plan. Except as otherwise provided in
section 2.4 and 8.2, (i) the Bank may amend or terminate the Plan at any time,
and (ii) the Bank may amend or terminate a Participant's rights under the Plan
at any time prior to a Participant's death by written notice to the Participant.

     8.2 Amendment or Termination of Plan Upon Change of Control.
Notwithstanding the provisions of section 8.1, in the event of a Change of
Control, the Bank, or its successor, shall maintain in full force and effect
each Policy that is in existence on the date the Change of Control occurs and
shall not terminate or otherwise abrogate a Participant's interest in the
Policy. However, the Bank may replace the Policy with a comparable insurance
policy to cover the benefit provided under this Agreement. The Policy or any
comparable policy shall be subject to the claims of the Bank's creditors. This
section 8.2 shall apply to all Participants in the Plan on the date the Change
of Control occurs, including but not limited to (i) a retired Participant who
has an interest in a Policy; (ii) a disabled Participant who has an interest in
the Policy; and (iii) a Participant whose employment is terminated as a result
of a Change of Control.

     8.3 Participant Waiver. A Participant may, in the Participant's sole and
absolute discretion, waive his or her rights under the Plan at any time. Any
waiver permitted under this section 8.3 shall be in writing and delivered to the
Board of Directors of the Bank.

                                    ARTICLE 9
                                  MISCELLANEOUS

     9.1 Binding Effect. This Plan in conjunction with each Split Dollar
Endorsement shall bind each Participant and the Bank, their beneficiaries,
survivors, executors, administrators and transferees and any Policy beneficiary.

     9.2 No Guarantee of Employment. This Plan is not an employment policy or
contract. It does not give a Participant the right to remain an employee of the
Bank, nor does it interfere with the Bank's right to discharge a Participant. It
also does not require a Participant to remain an employee nor interfere with a
Participant's right to terminate employment at any time.

     9.3 Applicable Law. The Plan and all rights hereunder shall be governed by
and construed according to the laws of the State of Ohio, except to the extent
preempted by the laws of the United States of America.

     9.4 Notice. Any notice, consent or demand required or permitted to be given
under the provisions of this Plan by one party to another shall be in writing,
shall be signed by the party giving or making the same, and may be given either
by delivering the same to such other party

                                       7

<PAGE>

personally, or by mailing the same, by United States certified mail, postage
prepaid, to such party, addressed to his/her last known address as shown on the
records of the Bank. The date of such mailing shall be deemed the date of such
mailed notice, consent or demand.

     9.5 Entire Agreement. This Plan constitutes the entire agreement between
the Bank and the Participant as to the subject matter hereof. No rights are
granted to the Participant by virtue of this Plan other than those specifically
set forth herein.

     9.6 Administration. The Bank shall have powers which are necessary to
administer this Plan, including but not limited to:

          (a)  Interpreting the provisions of the Plan;

          (b)  Establishing and revising the method of accounting for the Plan;

          (c)  Maintaining a record of benefit payments; and

          (d)  Establishing rules and prescribing any forms necessary or
               desirable to administer the Plan.

     9.7 Designated Fiduciary. For purposes of the Employee Retirement Income
Security Act of 1974, if applicable, the Bank shall be the named fiduciary and
plan administrator under the 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.

     9.8 Severability. If for any reason any provision of this Agreement is held
invalid such invalidity shall not affect any other provision of this Agreement
not held so invalid, and each such other provision shall, to the full extent
consistent with the law, continue in full force and effect. If any provision of
this Agreement shall be held invalid in part, such invalidity shall in no way
affect the rest of such provision, not held so invalid, and the rest of such
provision, together with all other provisions of this Agreement shall, to the
full extent consistent with the law, continue in full force and effect.

     9.9 Headings. The headings of Sections herein are included solely for
convenience of reference and shall not affect the meaning or interpretation of
any provision of this Agreement.

     IN WITNESS WHEREOF, the Bank executes this Plan as of the date indicated
above.

                                        BANK:
                                        THE CORTLAND SAVINGS & BANKING CO.

                                        BY
                                           -------------------------------------
                                        TITLE
                                              ----------------------------------

                                       8

<PAGE>

                                                             _____________, 2002

Name ___________________
Title __________________
The Cortland Savings & Banking Company
[ADDRESS LINE 1]
[ADDRESS LINE 2]

     RE:  PARTICIPATION IN GROUP TERM CARVE OUT PLAN OF THE CORTLAND SAVINGS &
          BANKING COMPANY

Dear [NAME]:

     The purpose of this notice is to inform you of certain changes for your
participation in the Group Term Carve Out Plan dated February 23, 2001 (the
"Plan"), which changes we, the Board of Directors of The Cortland Savings &
Banking Company (the "Bank"), have agreed to. In accordance with the terms of
the Plan, particularly Section 8.1 ("Amendment or Termination of Plan") thereof,
Participants are hereby notified of the following amendments to the Plan. The
changes as expressed in this letter are hereafter known as Amendment No. 1 of
the Plan.

     Except as expressly provided to the contrary herein, all terms defined in
the Plan are used herein with the same meaning as provided therein. The changes
we have agreed to are as follows:

1.2  Article 1.4 ("Disability") of the Plan shall be replaced in its entirety by
     the following:

          "Disability" means the Participant's suffering a sickness, accident or
     injury which has been determined by the carrier of any individual or group
     disability insurance policy covering the Participant, or by the Social
     Security Administration, to be a disability rendering the Participant
     totally and permanently disabled. The Participant must submit proof to the
     Bank of the carrier's or Social Security Administration's determination
     upon the request of the Bank.

1.3  Article 7.1 ("Claims Procedure") of the Plan shall be replaced in its
     entirety by the following:

     7.1  Claims Procedure. A person or beneficiary ("claimant") who has not
          received benefits under the Plan that he or she believes should be
          paid shall make a claim for such benefits as follows:

                                       9

<PAGE>

     7.1.1 Initiation - Written Claim. The claimant initiates a claim by
          submitting to the Bank a written claim for the benefits.

     7.1.2 Timing of Bank Response. The Bank shall respond to such claimant
          within 90 days after receiving the claim. If the Bank determines that
          special circumstances require additional time for processing the
          claim, the Bank 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 Bank expects to render its decision.

     7.1.3 Notice of Decision. If the Bank denies part or all of the claim, the
          Bank shall notify the claimant in writing of such denial. The Bank
          shall write the notification in a manner calculated to be understood
          by the claimant. The notification shall set forth:

          7.1.3.1 The specific reasons for the denial,

          7.1.3.2 A reference to the specific provisions of the Plan on which
               the denial is based,

          7.1.3.3 A description of any additional information or material
               necessary for the claimant to perfect the claim and an
               explanation of why it is needed,

          7.1.3.4 An explanation of the Plan's review procedures and the time
               limits applicable to such procedures, and

          7.1.3.5 A statement of the claimant's right to bring a civil action
               under ERISA [Employees Retirement Income Security Act] Section
               502(a) following an adverse benefit determination on review.

1.4  Article 7.2 of the Plan ("Review Procedure") shall be replaced in its
     entirety by the following:

     7.2  Review Procedure. If the Bank denies part or all of the claim, the
          claimant shall have the opportunity for a full and fair review by the
          Bank of the denial, as follows:

          7.2.1 Initiation - Written Request. To initiate the review, the
               claimant,

                                       10

<PAGE>

               within 60 days after receiving the Bank's notice of denial, must
               file with the Bank a written request for review.

          7.2.2 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 Bank
               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.

          7.2.3 Considerations on Review. In considering the review, the Bank
               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.

          7.2.4 Timing of Bank Response. The Bank shall respond in writing to
               such claimant within 60 days after receiving the request for
               review. If the Bank determines that special circumstances require
               additional time for processing the claim, the Bank 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 Bank expects to render its decision.

          7.2.5 Notice of Decision. The Bank shall notify the claimant in
               writing of its decision on review. The Bank shall write the
               notification in a manner calculated to be understood by the
               claimant. The notification shall set forth:

               7.2.5.1 The specific reason for the denial,

               7.2.5.2 A reference to the specific provisions of the Plan on
                    which the denial is based,

               7.2.5.3 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

               7.2.5.4 A statement of the claimant's right to bring a civil
                    action

                                       11

<PAGE>

                    under ERISA Section 502(a).

     WHEREAS, the Compensation Committee of the Board of Directors of the Bank
has authorized the aforementioned changes to the Plan pursuant to action on
April 16, 2002.

     Except as expressly modified herein, all the terms, covenants, and
provisions of the Plan shall continue in full force and effect.

                                        THE CORTLAND SAVINGS & BANKING COMPANY

                                        ----------------------------------------
                                        By: Rodger W. Platt
                                        Its: President and Chief
                                             Executive Officer

                                       12

<PAGE>

                                    EXHIBIT A

                             ELECTION TO PARTICIPATE

          I, _________________________________ , an eligible employee as
determined in section 2.1 of the Cortland Savings and Banking Co. Group Term
Carve Out Plan (the "Plan") dated as of ___ February 23, 2001, hereby elect to
become a Participant of the Plan in accordance with Section 2.2 of the Plan.
Additionally, I acknowledge that I have read the Plan document and agree to be
bound by its terms.

     Executed this _______________ day of _________________, 2001.

-------------------------------------   ----------------------------------------
Witness                                 Participant

                                       13

<PAGE>

                                    EXHIBIT B
                              LIST OF PARTICIPANTS

<TABLE>
<CAPTION>

PARTICIPANT'S NAME               INSURER                                        POLICY NUMBER
------------------               -------                                        -------------
<S>                             <C>                                             <C>

Marcel Arnal                     Great-West Life & Annuity Ins. Co              85998008

Douglas L. Blay                  Great-West Life & Annuity Ins. Co              85998009

Timothy Carney                   Great-West Life & Annuity Ins. Co              85998010

James Duff                       Great-West Life & Annuity Ins. Co              85998011

Deborah Eazor                    Great-West Life & Annuity Ins. Co              85998012

Thomas Elliott, IV               Great-West Life & Annuity Ins. Co              85998013

Lawrence A. Fantauzzi            Great-West Life & Annuity Ins. Co              85998014

James M. Gasior                  Great-West Life & Annuity Ins. Co              85998015

Robert Horvath                   Great-West Life & Annuity Ins. Co              85998016

Marlene Lenio                    Great-West Life & Annuity Ins. Co              85998017

Steve Mack                       Great-West Life & Annuity Ins. Co              85998018

Mark Mediate                     Great-West Life & Annuity Ins. Co              85998019

Keith Mrozek                     Great-West Life & Annuity Ins. Co              85998020

Pietro Pascale                   Great-West Life & Annuity Ins. Co              85998021

Craig Phythyon                   Great-West Life & Annuity Ins. Co              85998022

Karen Rudge                      Great-West Life & Annuity Ins. Co              85998023

Judy Russell                     Great-West Life & Annuity Ins. Co              85998024

Barbara Sandrock                 Great-West Life & Annuity Ins. Co              85998025

Frank Sedall                     Great-West Life & Annuity Ins. Co              85998026

Stephen A. Telego                Great-West Life & Annuity Ins. Co              85998027

Kimberly Vogt                    Great-West Life & Annuity Ins. Co              85998028

Danny L. White                   Great-West Life & Annuity Ins. Co              85998029
</TABLE>

(group term carve out plan. without split $ endorsement cortland )

                                       14

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