Document:

EX-10.1

 

Exhibit 10.1

Amendment No. 3

to

Second Amended and Restated Loan Agreement

Among

Certain Lenders,

HSBC Bank USA, National Association, As Administrative Agent

And

MOOG INC.

     This Amendment No. 3 dated as of March 14, 2008 (“Amendment”) to the Second Amended and
Restated Loan Agreement dated as of October 25, 2006 as amended by Amendment No. 1 and Amendment
No. 2 thereto dated as of March 30, 2007 and as of July 27, 2007, respectively (collectively, the
“Agreement”) is entered into by and among MOOG INC., a New York business corporation (“Borrower”),
certain lenders which are currently parties to the Agreement (“Lenders”), and HSBC BANK USA,
NATIONAL ASSOCIATION, a bank organized under the laws of the United States of America, as
administrative agent for the Lenders (“Administrative Agent”).

RECITALS

     A. Borrower has requested, and the Administrative Agent and the Lenders have agreed to, an
increase in the Maximum Limit under the Revolving Credit from $600,000,000 to $750,000,000, and,
within such Maximum Limit, an increase in the amount available for Swingline Loans from $10,000,000
to $25,000,000.

     B. Borrower has also advised the Administrative Agent and the Lenders that Borrower is
considering making an offering of senior unsecured subordinated notes in an approximate amount up
to $200,000,000 (“Note Offering”), the proceeds of which may be used to temporarily pay down the
Revolving Credit or for other corporate purposes. Borrower has requested that the Administrative
Agent and the Lenders modify the Agreement to permit the Note Offering without diminishing the
basket for Permitted Indebtedness.

     C. Borrower, the Administrative Agent and the Lenders have also agreed to make certain other
modifications to the Agreement, including but not limited to, modifying the matrix used to
determine the Applicable Margin and the Applicable Commitment Fee Rate, extending the Revolving
Credit Maturity Date, changing certain of the Financial Covenants, recognizing Borrower’s newly
formed subsidiary, AMC Delaware Inc., which is contemplated by the Borrower to be used for certain
of its operations in the Philippines, as a Foreign Subsidiary, and making certain other clarifying
modifications, all as set forth in this Amendment.

     D. The Borrower and each of the Guarantors will benefit from the modifications set forth
herein.

 

 

- 2 -

     E. The Administrative Agent and the Lenders are agreeable to the foregoing to the extent set
forth in this Amendment and subject to each of the terms and conditions stated herein.

     NOW, THEREFORE, in consideration of the foregoing and the mutual covenants set forth herein,
and of the loans or other extensions of credit heretofore, now or hereafter made by the Lenders,
to, or for the benefit of the Borrower and its Subsidiaries, the parties hereto agree as follows:

     1. Definitions. Except to the extent otherwise specified herein, capitalized terms
used in this Amendment shall have the same meanings specified in the Agreement.

     2. Modifications.

          (a) The matrix set forth in the existing definition of “Applicable Commitment Fee Rate” is
deleted and the following new matrix is added in its place:

	 	 	 	 	 
	 	 	Leverage	 	 
	Level	 	Ratio	 	Commitment Fee
	 
	 	 	 	 
	1

	 	Greater than 3.25 to 1.0
	 	35bps
	 
	 	 	 	 
	2

	 	> 2.75 to 1.0 but £ 3.25 to 1.0
	 	35bps
	 
	 	 	 	 
	3

	 	> 2.25 to 1.0 but £ 2.75 to 1.0
	 	30bps
	 
	 	 	 	 
	4

	 	> 1.75 to 1.0 but £ 2.25 to 1.0
	 	25bps
	 
	 	 	 	 
	5

	 	> 1.25 to 1.0 but £ 1.75 to 1.0
	 	20bps
	 
	 	 	 	 
	6

	 	£ 1.25 to 1.0
	 	20bps

          (b) The matrix set forth in the existing definition of “Applicable Margin” is
deleted and the following new matrix is added in its place:

	 	 	 	 	 	 	 	 	 
	 	 	Leverage	 	 	 	 
	Level	 	Ratio	 	ABR Option	 	Libor Rate Option
	 
	 	 	 	 	 	 	 	 
	1

	 	Greater than 3.25 to 1.0
	 	 	0	%	 	200 bps
	 
	 	 	 	 	 	 	 	 
	2

	 	> 2.75 to 1.0 but £ 3.25 to 1.0
	 	 	0	%	 	175 bps
	 
	 	 	 	 	 	 	 	 
	3

	 	> 2.25 to 1.0 but £ 2.75 to 1.0
	 	 	0	%	 	150 bps
	 
	 	 	 	 	 	 	 	 
	4

	 	> 1.75 to 1.0 but £ 2.25 to 1.0
	 	 	0	%	 	125 bps
	 
	 	 	 	 	 	 	 	 
	5

	 	> 1.25 to 1.0 but £ 1.75 to 1.0
	 	 	0	%	 	100 bps
	 
	 	 	 	 	 	 	 	 
	6

	 	£ 1.25 to 1.0
	 	 	0	%	 	87.5 bps

 

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          (c) The existing definitions of “Consolidated EBITDA”, “Domestic Subsidiary”, “Foreign
Subsidiary”, “Maximum Limit”, and “Revolving Credit Maturity Date” are deleted and the following
new definitions are added in their place:

“Consolidated EBITDA” — for any period, an amount
equal to (i) the sum of the amounts for such period of
(A) Consolidated Net Income, (B) Consolidated Interest
Expense, (C) provisions for taxes based on income, (D)
total depreciation expense, (E) total amortization
expense, (F) other non-cash items reducing Consolidated
Net Income and (G) non-cash stock related expenses minus
(ii) other non-cash items increasing Consolidated Net
Income for such period. Notwithstanding anything to the
contrary in this definition, for purposes of computing
the Leverage Ratio and the Interest Coverage Ratio
hereunder, or in connection with any pro-forma
calculation required by this Agreement, the term
“Consolidated EBITDA” shall be computed, on a consistent
basis, to reflect purchases and acquisitions by
Permitted Acquisition or otherwise made by Borrower and
the Subsidiaries during the relevant period as if they
occurred at the beginning of such period, and Borrower,
during the twelve (12) month period following the date
of any such acquisition may include in the calculation
hereof the necessary portion of the adjusted historical
results of the entities acquired in acquisitions that
were achieved prior to the applicable date of the
acquisition for such time period as is necessary for
Borrower to have figures on a trailing four fiscal
quarter basis from the date of determination with
respect to such acquired entities.

“Domestic Subsidiary” — means (i) any Subsidiary
having any place of business located in the United
States of America, other than Moog Controls Corporation,
an Ohio corporation, Moog Controls Corporation, a New
York corporation and AMC Delaware Inc, a Delaware
corporation , or (ii) any Subsidiary that is a foreign
sales corporation.

 

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“Foreign Subsidiary”- means (i) any Subsidiary not
having any place of business located in the United
States of America other any Subsidiary that is a foreign
sales corporation, (ii) Moog Controls Corporation, an
Ohio corporation, and (iii) AMC Delaware Inc, a Delaware
corporation.

“Maximum Limit” — the maximum aggregate amount which
the Borrower can borrow under the Revolving Credit which
is $750,000,000.

“Revolving Credit Maturity Date” — March 14, 2013,
which date may be shortened in accordance with Section
8.2 of this Agreement.

          (d) The following new definitions are added to Section 1.1 entitled
“Definitions”, in the appropriate alphabetical locations:

“Amendment No. 3” — the Amendment No. 3 dated as of
March 14, 2008 by and among Borrower, the Administrative
Agent and the Lenders, amending this Agreement.

“Permitted Investment Foreign Jurisdiction” — with
respect to a Foreign Subsidiary, the foreign country in
which the principal place of business of such Foreign
Subsidiary is located, and any of the United States of
America, United Kingdom, Switzerland and any country in
the European Union using the Euro as its currency in
which any other Foreign Subsidiary is located or any
other jurisdiction to which the Administrative Agent
consents in writing.

“Second Subordinated Indenture” — an indenture
(either as a new indenture or a supplement to the
Subordinated Indenture) to be entered into between
Borrower and a trustee acceptable to Administrative
Agent, pursuant to which Borrower intends to issue
additional senior subordinated notes in an aggregate
principal amount of up to $200,000,000 plus or minus an
associated discount or premium with a term and otherwise
in form and content acceptable to Administrative Agent.
The Second Subordinated Indenture shall provide that the
notes issued thereunder will be subordinate at all times
to the Indebtedness of Borrower under this Agreement and
the Loan Documents.

          (e) The following provision is added to the existing definition of “Total Commitment” at the
end thereof:

 

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“The amount of the Total Commitment as of March 14, 2008 is
$750,000,000.”

          (f) Clause (i) of subsection (a) of Section 2.3 entitled “Swingline Loans” is deleted and the
following is added in its place:

“(i) the aggregate principal amount of outstanding
Swingline Loans exceeding $25,000,000 or”

          (g) A new clause (iv) is added at the end of subsection (b) of Section 3.5 entitled
“Conditions to Subsequent Borrowing and Issuance” as follows:

“(iv) if such Loan or Issuance is
being requested upon or following the effectiveness of
the Second Subordinated Indenture, the incurrence of
such Loan or Issuance is permitted by the terms of the
Second Subordinated Indenture and will constitute senior
debt under the Second Subordinated Indenture.”

          (h) Section 6.1 entitled “Consolidated Net Worth” is deleted and the following is added in its
place:

“Consolidated Net Worth. Assure that as of the end
of each fiscal quarter of Borrower ending after the date of
Amendment No. 3, the Consolidated Net Worth of Borrower is
not less than $600.0 Million.”

          (i) Section 6.4 entitled “Consolidated Capital Expenditures” is deleted and the following is
added in its place:

“Consolidated Capital Expenditures. Assure that
Consolidated Capital Expenditures of Borrower do not
exceed $100.0 Million in the aggregate in any one fiscal
year ending after the date of Amendment No. 3.”

          (j) The following additional sentence is added at the end of subsection 7.1(d) entitled
“Subordinated Indebtedness”:

“The unsecured Indebtedness of Borrower that may be incurred
in connection with any notes (including any replacement or
exchange notes) that may be issued pursuant to the Second
Subordinated Indenture, provided the payment of all such
Indebtedness shall be subordinate at all times to payment of
the Indebtedness of Borrower under this Agreement and the
other Loan Documents.”

 

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          (k) Subsection (a) of Section 7.3 entitled “Investments and Guaranty Obligations” is deleted
and the following is added in its place:

“(a) Investments by Borrower or any Subsidiary in (i) cash
and cash equivalents including any readily marketable direct
obligation of the United States, or with respect to a
Foreign Subsidiary, of any Permitted Investment Foreign
Jurisdiction, maturing within one year after the date of
acquisition thereof, (ii) any time deposit maturing within
one year after the date of acquisition thereof and issued by
any banking institution that is authorized to do a banking
business under any statute of the United States or any state
thereof, or with respect to a Foreign Subsidiary is
authorized to do a banking business under any statute of any
Permitted Investment Foreign Jurisdiction, or any political
subdivision thereof, and has a combined capital and surplus
of not less than $100,000,000, (iii) any demand or savings
deposit with any such institution, (iv) any Dollar deposits
in the London Interbank Market with such banking institution
or any subsidiary of any such banking institution, and (v)
any commercial paper rated at least A-1 by Standard & Poor’s
Ratings Group or P-1 by Moody’s Investor Services, Inc.;”

          (l) Clause (ix) of subsection (b) of Section 7.5 entitled “Limitation on Certain Restrictive
Agreements”, is deleted and the following is added in its place:

“(ix) restrictions contained in the Subordinated Indenture
or Second Subordinated Indenture relating to any
Indebtedness permitted under Section 7.1(d).”

          (m) The following is added as new subsection (n) to Section 8.1 entitled “Events of Default”:

“(n) Second Subordinated Indenture. If any event
of default shall occur under the Second Subordinated
Indenture or any Indebtedness under this Agreement shall
fail to be senior to any Indebtedness under the Second
Subordinated Indenture.”

          (n) The existing Exhibit A (form of Revolving Note) Exhibit C (form of Swingline Note),
Exhibit D (form of Request Certificate) and Exhibit E (form of Compliance Certificate) are deleted
and replaced by Exhibits A, C, D and E to this Amendment, respectively.

 

- 7 -

          (o) The existing Schedule 2.1 to the Agreement entitled “Lenders’ Commitments” is deleted and
Schedule 2.1 attached to this Amendment is added in its place.

          2.1 Limitation on Modifications. The foregoing modifications are only applicable and
shall only be effective in the specific instance and for the specific purpose for which made, are
expressly limited to the facts and circumstances referred to herein, and shall not operate as (i) a
waiver of, or consent to non-compliance with any other provision of the Agreement or any other Loan
Document, (ii) a waiver or modification of any right, power or
remedy of either the Administrative Agent or any Lender under the Agreement or any Loan
Document, or (iii) a waiver or modification of, or consent to, any Event of Default or Default
under the Agreement or any Loan Document.

     3. Conditions Precedent. The effectiveness of each and all of the modifications
contained in this Amendment is subject to the satisfaction, in form and substance satisfactory to
the Administrative Agent, of each of the following conditions precedent:

          3.1 Documentation.

                (a) The parties hereto, and each entity making the Reaffirmations set forth in Section 5
hereof, shall have duly executed and delivered to the Administrative Agent seventeen (17) duplicate
originals of this Amendment.

                (b) The Borrower has duly executed and delivered to the Administrative Agent (i) the
Replacement Revolving Notes in favor of each of the Lenders, in the form as set forth on Exhibit A
hereto with all blanks appropriately completed; (ii) a Replacement Swingline Note in favor of the
Swingline Lender, in form as set forth on Exhibit C hereto with all blanks appropriately completed
and (iii) a Replacement Alternative Currency Note, as necessary, for each Lender whose Alternative
Currency Sublimit has been modified pursuant to Schedule 2.1 hereto, in substantially the form as
set forth on Exhibit B to the Agreement with appropriate replacement language and all blanks
appropriately completed.

                (c) The Borrower and each Guarantor shall have executed and delivered to the Administrative
Agent a certificate setting forth the resolutions and other authorizing documents as necessary for
the transactions contemplated by this Amendment, or certifying that no changes have been made to
such resolutions and documents as previously delivered to the Administrative Agent and that the
same continue in full force and effect and are effective for the transactions contemplated by this
Amendment.

                (d) Counsel to the Borrower and each of the Guarantors shall have delivered an opinion to the
Administrative Agent in form and content acceptable to the Administrative Agent, addressed to each
Lender and the Administrative Agent, and covering such matters as are requested by the
Administrative Agent and its counsel with respect to this Amendment and other documents required in
connection herewith.

          3.2 No Default. As of the effective date of this Amendment, no Default or Event of
Default shall have occurred and be continuing.

 

- 8 -

          3.3 Representations and Warranties. The representation and warranties contained in
Section 4 hereof and in the Agreement shall be true correct and complete as of the effective date
of this Amendment as though made on such date, unless they specifically speak as of another date.

          3.4 Fees. Payment by the Borrower to each Lender (including the Administrative Agent)
entitled thereto of all upfront and arrangement fees in accordance with the agreement between the
Borrower and Administrative Agent.

          3.5 Other. The Administrative Agent shall have received such other approvals or
documents as any Lender through the Administrative Agent may reasonably request, and all legal
matters incident to the foregoing shall be satisfactory to the Administrative Agent and its
counsel.

     4. Representations and Warranties of Borrower. The Borrower hereby represents and
warrants as follows:

          4.1 Each of the representations and warranties set forth in the Agreement is true, correct,
and complete on and as of the date hereof as though made on the date hereof, unless they
specifically speak as of another date and the Agreement, as modified by this Amendment, and each of
the other Loan Documents remains in full force and effect.

          4.2 As of the date hereof, there exists and will exist no Default or Event of Default under
the Agreement or any other Loan Document, and no event which, with the giving of notice or lapse of
time, or both, would constitute a Default or Event of Default.

          4.3 The execution, delivery and performance by the Borrower of this Amendment is within the
Borrower’s corporate powers, have been duly authorized by all necessary corporate action, and do
not, and will not, (i) contravene the Borrower’s certificate of incorporation or by-laws, (ii)
violate any law, including without limitation the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, or any rule, regulation (including Regulations T, U or
X of the Board of Governors of the Federal Reserve System) order, writ, judgment, injunction,
decree, determination or award, and (iii) conflict with or result in the breach of, or constitute a
default under, any material contract, loan agreement, mortgage, deed of trust or any other material
instrument or agreement binding on the Borrower or any Subsidiary or any of their properties or
result in or require the creation or imposition of any lien upon or with respect to any of their
properties.

          4.4 This Amendment has been duly executed and delivered by the Borrower and the Guarantors and
is the legal, valid and binding obligation of each of them, enforceable against the Borrower and
each of the Guarantors in accordance with its terms.

          4.5 No authorization or approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body or any other third party is required for (i) the due
execution, delivery or performance by the Borrower and the Guarantors of this

 

- 9 -

Amendment or any other agreement or document related hereto or contemplated hereby to which the Borrower or any of
the Guarantors is or is to be a party or otherwise bound, or (ii) the exercise by the
Administrative Agent or any Lender of its rights under the Agreement as modified by this Amendment.
The Agreement, as modified by this Amendment constitutes the “Credit Agreement” under the
Subordinated Indenture.

     5. Reaffirmations. By their signatures hereto, each of Moog Holding GmbH KG and Moog
Europe Holdings y Cía, S.C.S. (together, the “Negative Pledgors”), and the Borrower and each
Guarantor hereby reaffirms, ratifies and confirms the execution and delivery and all of the terms
and provisions of, as applicable, any Guaranty, any Security Documents, and the Amended and
Restated Negative Pledge Agreements dated as of October 25, 2006 (collectively, the “Transaction
Documents”) to which it is a party, and agrees that the Transaction Documents remain in full force
and effect and that any guaranty, pledge or grant of security contained therein extends to, and
guaranties or provides security for, any and all obligations of the Borrower now or hereafter owing
under the Agreement as modified by this Amendment, including without limitation all obligations of
the Borrower under the Revolving Credit as increased by this Amendment.

     6. Other.

          6.1 The Borrower agrees to pay all out-of-pocket expenses of the Administrative Agent in
connection with the negotiation, preparation and execution of this Amendment including the
reasonable fees and disbursements of counsel to the Administrative Agent.

          6.2 This Amendment may be executed in any number of counterparts and by the parties hereto on
separate counterparts, each of which when so executed and delivered shall be an original, but all
such counterparts shall together constitute one and the same agreement.

          6.3 This Amendment shall be governed by and construed under the internal laws of the State of
New York, as the same may be from time to time in effect, without regard to principles of conflicts
of laws.

[Signature Pages Follow]

 

 

     The parties hereto have caused this Amendment to be duly executed as of the date shown at the
beginning of this Amendment.

	 	 	 	 	 
	 	 	HSBC BANK USA, NATIONAL

ASSOCIATION, as a Lender, the

Swingline Lender and an Issuing Bank
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:
	 	Robert J. McArdle
	 

	 	Title:
	 	Vice President
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	HSBC BANK USA, NATIONAL

	 	 	ASSOCIATION, as Administrative Agent
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:
	 	Robert J. McArdle
	 

	 	Title:
	 	Vice President
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	MANUFACTURERS AND TRADERS TRUST COMPANY, 
	 	 	as Syndication Agent and as a Lender
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:
	 	Mark E. Hoffman
	 

	 	Title:
	 	Vice President
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	BANK OF AMERICA, N.A.,
	 	 	as Co-Documentation Agent and as a Lender
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:
	 	Thomas C. Lillis
	 

	 	Title:
	 	Senior Vice President
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	JPMORGAN CHASE BANK, N.A.,
	 	 	as Co-Documentation Agent and as a Lender
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:
	 	Michael E. Wolfram
	 

	 	Title:
	 	Vice President

Signature Page to Amendment No. 3 to Second Amended and Restated Loan Agreement

 

 

	 	 	 	 	 
	 	 	CITIZENS BANK OF PENNSYLVANIA,
	 	 	as a Lender and as an Issuing Bank
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:
	 	Edward J. Kloecker Jr.
	 

	 	Title:
	 	Senior Vice President
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	BANK OF
TOKYO-MITSUBISHI UFJ TRUST COMPANY, 
	 	 	as a Lender
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:
	 	Joanne Nasuti
	 

	 	Title:
	 	Vice President
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	SOCIETE GENERALE, as a Lender
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:
	 	R.D. Boyd Harman
	 

	 	Title:
	 	Vice President
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	WELLS FARGO BANK, N.A., as a Lender
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:
	 	Thomas J. Grys
	 

	 	Title:
	 	Vice President
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	PNC BANK, NATIONAL ASSOCIATION,
	 	 	as a Lender
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:
	 	Wallace G. Clements
	 

	 	Title:
	 	Vice President

Signature Page to Amendment No. 3 to Second Amended and Restated Loan Agreement

 

 

	 	 	 	 	 
	 	 	COMERICA BANK, as a Lender
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:
	 	Sarah R. West
	 

	 	Title:
	 	Assistant Vice President
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	NATIONAL CITY BANK, as a Lender
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:
	 	Susan J. Dimmick
	 

	 	Title:
	 	Vice President
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	FIFTH THIRD BANK, as a Lender
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:
	 	Jim Janovsky
	 

	 	Title:
	 	Vice President
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	NORTHERN TRUST, as a Lender
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:
	 	Ashish S. Bhagwat
	 

	 	Title:
	 	Vice President
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	FIRST NIAGARA BANK
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:
	 	Penny S. Hokanson
	 

	 	Title:
	 	Vice President

Signature Page to Amendment No. 3 to Second Amended and Restated Loan Agreement

 

 

	 	 	 	 	 
	 	 	MOOG INC., as the Borrower
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:
	 	Timothy P. Balkin
	 

	 	Title:
	 	Treasurer
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	FLO-TORK, INC., as a Guarantor
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:
	 	Timothy P. Balkin
	 

	 	Title:
	 	Treasurer
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	CURLIN MEDICAL INC., as a Guarantor
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:
	 	Timothy P. Balkin
	 

	 	Title:
	 	Treasurer
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	MOOG EUROPE HOLDINGS I LLC, as a Guarantor
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:
	 	Timothy P. Balkin
	 

	 	Title:
	 	Treasurer
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	MOOG EUROPE HOLDINGS II LLC, as a Guarantor
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:
	 	Timothy P. Balkin
	 

	 	Title:
	 	Treasurer
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	FUNDAMENTAL TECHNOLOGY SOLUTIONS, INC., 

as a Guarantor
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:
	 	Timothy P. Balkin
	 

	 	Title:
	 	Treasurer

Signature Page to Amendment No. 3 to Second Amended and Restated Loan Agreement

 

 

	 	 	 	 	 
	 	 	ZEVEX, INC., as a Guarantor
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:
	 	Timothy P. Balkin
	 

	 	Title:
	 	Treasurer
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	QUICKSET INTERNATIONAL, INC.,

as a Guarantor
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:
	 	Timothy P. Balkin
	 

	 	Title:
	 	Treasurer
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	PRIZM ADVANCED COMMUNICATION

ELECTRONICS, INC., as a Guarantor
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:
	 	Timothy P. Balkin
	 

	 	Title:
	 	Treasurer
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	MOOG EUROPE HOLDINGS y Cía , S.C.S.,

as a Negative Pledgor
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:
	 	Stephen A. Huckvale
	 

	 	Title:
	 	Chairman
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	MOOG HOLDING GmbH KG, as a

Negative Pledgor
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:
	 	Gary J. Parks
	 

	 	Title:
	 	Managing Director

Signature Page to Amendment No. 3 to Second Amended and Restated Loan Agreement

 

 

EXHIBIT A

REPLACEMENT REVOLVING NOTE

	 	 	 
	

$                

	 	Buffalo, New York

March 14, 2008

     FOR VALUE RECEIVED, the undersigned, MOOG INC. (“Borrower”) hereby unconditionally promises to
pay, on or before March 14, 2013, to the order of                 (“Lender”) at the
Administrative Agent’s Commercial Banking Department’s office at One HSBC Center, Buffalo, New York
14203, or at the holder’s option, at such other place as may be designated by the holder, in lawful
money of the United States of America, a principal sum equal to the lesser of
                                     ($           ) or the aggregate unpaid principal amount of all
Revolving Loans made by Lender to the Borrower from time to time under a Second Amended and
Restated Loan Agreement, dated of as of October 25, 2006, among the Borrower, HSBC Bank USA,
National Association as administrative agent, for itself, the Lender and other lending institutions
and issuing banks now or hereafter parties thereto, as the same has been and may hereafter be
amended, supplemented, renewed, restated, replaced or otherwise modified from time to time (“Loan
Agreement”) as evidenced by the inscriptions made on the schedule attached hereto, or any
continuation thereof (“Schedule”). The Borrower further promises to pay interest on the unpaid
principal amount hereof from time to time at the rates and at such times as are specified in the
Loan Agreement. All capitalized terms used herein and not otherwise defined herein shall have the
meanings specified in the Loan Agreement.

     The Lender and each holder of this Note are authorized to inscribe on the Schedule, the date
of the making of each Revolving Loan, the amount of each Revolving Loan, the applicable Rate
Options and Interest Periods, all payments on account of principal and the aggregate outstanding
principal balance of this Note from time to time unpaid. Each entry set forth on the Schedule
shall be prima facie evidence of the facts so set forth. No failure by the Lender or any holder of
this Note to make, and no error in making, any inscriptions on the Schedule shall affect Borrower’s
obligation to repay the full principal amount loaned to or for the account of Borrower, or the
Borrower’s obligation to pay interest thereon at the agreed upon rate.

     If any payment on this Note becomes due and payable on a day other than a Business Day, the
maturity thereof shall be extended to the next succeeding Business Day, and the Borrower will pay
interest thereon at the then applicable rate until the date of actual receipt of such installment
by the holder of this Note.

     No failure by the holder to exercise, and no delay in exercising, any right or power hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise by the holder of any
right or powers hereunder preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the holder as herein specified

 

 

- 2 -

are cumulative and not exclusive of any other rights or remedies which the holder may
otherwise have.

     No modification, rescission, waiver, release or amendment of any provision of this Note shall
be made except by a written agreement subscribed by a duly authorized officer of the Borrower and
the holder hereof.

     Borrower waives diligence, presentment, protest and demand, and also notice of protest,
demand, dishonor and nonpayment of this Note.

     This Note evidences a borrowing under the Loan Agreement to which reference is hereby made
with respect to interest rate options and periods, prepayments of principal hereof prior to the
maturity hereof upon the terms and conditions therein specified, and rights of acceleration of the
principal hereof on the occurrence of certain events. The obligations of the Borrower under this
Note, and the obligations of the Guarantors under the Loan Documents, are secured by the Collateral
referred to in the Security Documents.

     Borrower agrees to pay on demand all reasonable costs and expenses incurred by the holder in
enforcing this Note or in collecting the indebtedness evidenced hereby, including, without
limitation, if the holder retains counsel for any such purpose, reasonable attorneys’ fees and
expenses.

     This Note shall be construed under, and governed by, the internal laws of the State of New
York without regard to principles of conflicts of laws.

     This Note is in replacement of and substitution for, but not repayment of, that certain
Replacement Revolving Note from Borrower to Lender in the original maximum principal amount of
$___dated October 25, 2006.

	 	 	 	 	 
	 	MOOG INC.

 	 
	 	By:  	 
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

 

 

	 	 	 	 	 

SCHEDULE

LOANS AND PAYMENTS OF PRINCIPAL

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	AMOUNT OF	 	 	 	 	 	 	 	 	AMOUNT OF	 	 	AGGREGATE	 	 	 	 
	 	TYPE	 	 	DATE LOAN	 	 	LOAN MADE,	 	 	INTEREST	 	 	 	 	 	PRINCIPAL	 	 	UNPAID	 	 	NOTATION	 
	 	OF	 	 	MADE, CON-	 	 	CONTINUED OR	 	 	PERIOD	 	 	DUE	 	 	PAID OR	 	 	PRINCIPAL	 	 	MADE BY	 
	 	LOAN	 	 	TINED OR CONVERTED	 	 	CONVERTED	 	 	DATES	 	 	DATE	 	 	PREPAID	 	 	BALANCE	 	 	AND DATE	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

 

 

EXHIBIT C

REPLACEMENT SWINGLINE NOTE

	 	 	 
	

$25,000,000.00

	 	Buffalo, New York

March 14, 2008

     FOR VALUE RECEIVED, the undersigned, MOOG INC., a New York business corporation having its
principal place of business at Jamison Road and Seneca Street, East Aurora, New York 14052-0018
(“Borrower”) promises to pay, ON DEMAND, to the order of HSBC BANK USA, NATIONAL ASSOCIATION
(“Lender”) at the banking office of the Administrative Agent (as defined in the Loan Agreement, as
hereinafter defined) at One HSBC Center, Buffalo, New York 14203, in lawful money of the United
States and in immediately available funds, the lesser of (i) the principal amount of Twenty-five
Million Dollars ($25,000,000) or (ii) the aggregate amount of all unpaid Swingline Loans made by
Lender to Borrower as shown on the schedule on the reverse side of this Note or any continuation
schedule (“Schedule”) together with interest as provided in the next paragraph. In this Note, any
capitalized term not defined in this Note has the meaning defined in a Second Amended and Restated
Loan Agreement, dated as of October 25, 2006, among the Borrower, HSBC Bank USA, National
Association as administrative agent, for itself, the Lender and other lending institutions and
issuing banks now or hereafter parties thereto, as the same has been and may hereafter be amended,
supplemented, renewed, restated, replaced or otherwise modified from time to time (“Loan
Agreement”).

     From and including the date of this Note to but not including the date the outstanding
principal amount of this Note is paid in full, the Borrower shall pay to the Administrative Agent
for the account of the holder of this Note (“Holder”) interest on such outstanding principal amount
at a rate per year that shall on each day prior to demand be equal to the Prime Rate from time to
time in effect. After an unsatisfied demand for payment, this Note shall bear interest at a per
annum rate of interest equal to 2% in excess of the Prime Rate from time to time in effect. In no
event shall such interest be payable at a rate in excess of the maximum rate of interest permitted
by applicable law. A payment of such interest shall become due on the first day of each calendar
month, beginning on April 1, 2008 and on the date this Note is repaid in full. Interest shall be
calculated on the basis of a 365-day year or 366-day year, as applicable, for the actual number of
days elapsed.

     The Holder is authorized to inscribe on the Schedule the date of each Swingline Loan made
hereunder, each repayment of principal and the aggregate unpaid principal balance of this Note.
Each entry set forth on the Schedule shall be prima facie evidence of the facts so set forth. No
failure by the Holder to make, and no error by the Holder in making, any inscription on the
Schedule shall affect the Borrower’s obligation to repay the full amount advanced on this Note to
or for the account of the Borrower, or Borrower’s obligation to pay interest thereon at this agreed
upon rate.

 

 

- 2 -

     If any payment on this Note becomes due and payable on a day other than a Business Day, the
maturity thereof shall be extended to the next succeeding Business Day, and the Borrower will pay
interest thereon at the then applicable rate until the date of actual receipt of such installment
by the holder of this Note.

     No failure by the holder to exercise, and no delay in exercising, any right or power hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise by the holder of any
right or powers hereunder preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the holder as herein specified are cumulative and
not exclusive of any other rights or remedies which the holder may otherwise have.

     No modification, rescission, waiver, release or amendment of any provision of this Note shall
be made except by a written agreement subscribed by a duly authorized officer of the Borrower and
the holder hereof.

     Borrower waives diligence, presentment, protest and demand, and also notice of protest,
demand, dishonor and nonpayment of this Note.

     This Note is the Swingline Note referred to in the Loan Agreement and is otherwise entitled to
the benefits of the Loan Agreement. The obligations of the Borrower under this Note, and the
obligations of the Guarantors under the Loan Documents, are secured by the Collateral referred to
in the Security Documents.

     Borrower agrees to pay on demand all reasonable costs and expenses incurred by the holder in
enforcing this Note or in collecting the indebtedness evidenced hereby, including, without
limitation, if the holder retains counsel for any such purpose, reasonable attorneys’ fees and
expenses.

     This Note shall be construed under, and governed by, the internal laws of the State of New
York without regard to principles of conflicts of laws.

     This Note is in replacement of and substitution for, but not repayment of, that certain
Swingline Note from Borrower to Lender in the original maximum principal amount of $10,000,000
dated October 25, 2006.

	 	 	 	 	 
	 	 	MOOG INC.
	 
	 	 	 	 
	 

	 	By:
	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:

 

 

EXHIBIT D

REQUEST CERTIFICATE

     The undersigned as Borrower hereby certifies to HSBC Bank USA, National Association, in
accordance with the terms of a Second Amended and Restated Loan Agreement, dated as of October 25,
2006, among Moog Inc., HSBC Bank USA, National Association as administrative agent, for itself, the
Lenders and other lending institutions and issuing banks now or hereafter parties thereto, as the
same may have been and may hereafter be, amended, supplemented, renewed, restated, replaced or
otherwise modified from time to time (“Agreement”) that:

     The undersigned requests or has requested a:

     (Check One)

          o Revolving Loan

          o Alternative Currency Loan

                              to be made to Moog Inc. which will be a

     (Check One)

          o new loan

          o conversion

          o continuation

                              of a

     (Check One)

          o Libor Loan (Only option for Alternative Currency Loan)

          o ABR Loan

                              to a or as a

     (Check One)

          o Libor Loan

          o ABR Loan

 

 

- 2 -

in the amount of $           for an Interest Period, if applicable, of

     (Check One)

          o one month.

          o three months.

          osix months.

The proposed loan/conversion/continuation is to be made on                     ,      .

     The undersigned certifies that as of the date hereof:

     (i) there does not exist any Event of Default, Default or Material Adverse Effect;

     (ii) each representation and warranty made in the Agreement and any Loan Document to which the
Borrower is a party and in any certificate, document or financial or other statement furnished at
any time thereunder is true, correct and complete in all material respects with the same effect as
though such representations and warranties had been made on the date hereof, except to the extent
any such representation and warranty relates solely to an earlier date, or to the extent any such
representation and warranty has been updated in a certificate executed by a Responsible Officer and
received by the Administrative Agent before the date hereof; and

     (iii) the incurrence of the Indebtedness requested in this certificate is permitted by the
terms of the Subordinated Indenture (as defined in the Agreement) and will constitute Senior Debt
and Designated Senior Debt under, and as defined in, the Subordinated Indenture; and

     (iv) if this certificate is executed and delivered by the undersigned upon or following the
effectiveness of the Second Subordinated Indenture (as defined in the Agreement), the incurrence of
the Indebtedness requested in this certificate is permitted by the terms of the Second Subordinated
Indenture and will constitute Senior Debt and Designated Senior Debt under, and as such terms are
defined in, the Second Subordinated Indenture (or if such terms are not defined in the Second
Subordinated Indenture, will have a status under the Second Subordinated Indenture comparable to
that of Senior Debt and the Designated Senior Debt under the Subordinated Indenture).

 

 

- 3 -

     WITNESS the signature of the undersigned authorized signatory of the Borrower this       day of
          ,      .

	 	 	 	 	 
	 	 	MOOG INC.
	 
	 	 	 	 
	 

	 	By:
	 	 
	 

	 	 	 	 
	 

	 	 	 	(Title)

	 	 	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 

 

 

EXHIBIT E

COMPLIANCE CERTIFICATE

     The undersigned hereby certifies to the Administrative Agent and the Lenders, in accordance
with the terms of a Second Amended and Restated Loan Agreement, dated as of October 25, 2006, among
Moog Inc., HSBC Bank USA, National Association as administrative agent, for itself, the Lenders and
other lending institutions and issuing banks now or hereafter parties thereto, as the same may have
been and may hereafter be, amended, supplemented, renewed, restated, replaced or otherwise modified
from time to time (“Agreement”), that:

A. General

     1. Capitalized terms not defined herein shall have the meanings set forth in the Agreement.

     2. Borrower has complied in all material respects with all the terms, covenants and conditions
to be performed or observed by it contained in the Agreement and the Loan Documents, there exists
no Event of Default or Default under the Agreement and there exists no Material Adverse Effect.

     3. The representations and warranties contained in the Agreement, in any Loan Document to
which the Borrower is a party and in any certificate, document or financial or other statement
furnished at any time thereunder are true, correct and complete in all material respects with the
same effect as though such representations and warranties had been made on the date hereof, except
to the extent that any such representation and warranty relates solely to an earlier date (in which
case such representation and warranty shall be true, correct and complete on and as of such earlier
date).

     4. The Indebtedness outstanding under the Agreement constitutes Senior Debt and Designated
Senior Debt under, and as defined in, the Subordinated Indenture, and the Agreement constitutes the
“Credit Agreement” thereunder.

     5. If this Compliance Certificate is being executed and delivered by the undersigned upon or
following the effectiveness of the Second Subordinated Indenture, the Indebtedness outstanding
under the Agreement constitutes Senior Debt and Designated Senior Debt under, and as defined in,
the Second Subordinated Indenture, and the Agreement constitutes the “Credit Agreement” thereunder
(or if any such terms are not so defined in the Second Subordinated Indenture, such outstanding
Indebtedness shall have a status under the Second Subordinated Indenture substantially equivalent
to the status applicable to such terms under the Subordinated Indenture).

 

 

- 2 -

B. Financial Covenants

     1. As of the date hereof or, for such period as may be designated below, the computations,
ratios and calculations asset forth below, are true and correct:

	 	(a)	 	Covenant 6.1. Minimum Consolidated Net Worth

as of           , 20     :

	 	 	 
	Required Amount

	 	$600.0 Million

	 	(b)	 	Covenant 6.2. Interest Coverage Ratio .

	 	 	 
	(i) Consolidated EBITDA

	 	$_________
	 
	 	 
	(ii) Consolidated Capital Interest Expense
	 	 
	

	 	$_________
	 
	 	 
	(iii) Ratio of (i) to (ii)

	 	     ___to 1.0
	 
	 	 
	Required Ratio

	 	£3.0 to 1.0

	 	(c)	 	Covenant 6.3. Leverage Ratio .

	 	 	 
	(i) Consolidated Net Debt

	 	$_________
	 
	 	 
	(ii) Consolidated EBITDA

	 	$_________
	 
	 	 
	(iii) Ratio of (i) to (ii)

	 	     ___to 1.0
	 
	 	 
	Required Ratio

	 	33.5 to 1.0

	 	(d)	 	Covenant 6.4. Consolidated Capital Expenditures .

	 	 	 	 	 
	Consolidated Capital Expenditures

	 	$	_________	 
	 
	 	 	 	 
	Required Amount

	 	3$	100.0	 

     IN WITNESS WHEREOF, the undersigned, a Responsible Officer of the Borrower, has executed and
delivered this certificate on behalf of the Borrower on ___, 20_.

	 	 	 	 	 
	 	 	MOOG INC.
	 
	 	 	 	 
	 

	 	By
	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:

 

 

SCHEDULE 2.1

LENDERS’ COMMITMENTS

	 	 	 	 	 	 	 	 	 
	 	 	Commitment	 	 	Applicable	 
	Lender	 	(In Millions)	 	 	Percentage	 
	HSBC Bank USA, National Association
	 	$	106.250	 	 	 	14.1666666666667	%
	Manufacturers and Traders Trust Company
	 	$	106.250	 	 	 	14.1666666666667	%
	Bank of America, N.A.
	 	$	90.000	 	 	 	12.0000000000000	%
	JPMorgan Chase Bank, N.A.
	 	$	90.000	 	 	 	12.0000000000000	%
	Citizens Bank of Pennsylvania
	 	$	65.000	 	 	 	8.66666666666667	%
	Bank of Tokyo-Mitsubishi UFJ
	 	$	45.000	 	 	 	6.00000000000000	%
	Trust Company
	 	 	 	 	 	 	 	 
	Societe Generale
	 	$	43.750	 	 	 	5.83333333333333	%
	Wells Fargo Bank, N.A.
	 	$	40.000	 	 	 	5.33333333333333	%
	PNC Bank, National Association
	 	$	25.000	 	 	 	3.33333333333333	%
	Comerica Bank
	 	$	25.000	 	 	 	3.33333333333333	%
	National City Bank
	 	$	31.250	 	 	 	4.16666666666667	%
	Fifth Third Bank
	 	$	31.250	 	 	 	4.16666666666667	%
	Northern Trust
	 	$	25.000	 	 	 	3.33333333333333	%
	First Niagara Bank
	 	$	26.250	 	 	 	3.50000000000000	%
	 
	 	 	 	 	 	 	 
	TOTAL
	 	$	750.000	 	 	 	100	%

	 	 	 	 	 	 	 	 	 
	 	 	Amount of Alternative	 	 	 	 
	 	 	Currency Sublimit	 	 	Applicable	 
	Lender	 	(In Millions)	 	 	Percentage	 
	HSBC Bank USA, National Association
	 	$	10.625	 	 	 	14.1666666666667	%
	Manufacturers and Traders Trust Company
	 	$	10.625	 	 	 	14.1666666666667	%
	Bank of America, N.A.
	 	$	9.000	 	 	 	12.0000000000000	%
	JPMorgan Chase Bank, N.A.
	 	$	9.000	 	 	 	12.0000000000000	%
	Citizens Bank of Pennsylvania
	 	$	6.500	 	 	 	8.66666666666667	%
	Bank of Tokyo-Mitsubishi UFJ
	 	$	4.500	 	 	 	6.00000000000000	%
	Trust Company
	 	 	 	 	 	 	 	 
	Societe Generale
	 	$	4.375	 	 	 	5.83333333333333	%
	Wells Fargo Bank, N.A.
	 	$	4.000	 	 	 	5.33333333333333	%
	PNC Bank, National Association
	 	$	2.500	 	 	 	3.33333333333333	%
	Comerica Bank
	 	$	2.500	 	 	 	3.33333333333333	%
	National City Bank
	 	$	3.125	 	 	 	4.16666666666667	%
	Fifth Third Bank
	 	$	3.125	 	 	 	4.16666666666667	%
	Northern Trust
	 	$	2.500	 	 	 	3.33333333333333	%
	First Niagara Bank
	 	$	2.625	 	 	 	3.50000000000000	%
	 
	 	 	 	 	 	 	 
	TOTAL
	 	$	75.000	 	 	 	100	%

 

 

- 2 -

SCHEDULE 2.1 continued

Applicable Lending Offices:

	 	 	 	 	 	 	 	 	 
	 
	 	Lender	 	 	Domestic Lending Office	 	 	Libor Lending Office	 
	 	HSBC Bank USA, 
National
Association

	 	 	One HSBC Center

Buffalo, NY 14203
	 	 	One HSBC Center

Buffalo, NY 14203	 
	 	Manufacturers
and Traders 

Trust Company

	 	 	One Fountain Plaza

12th Floor

Buffalo, NY 14203
	 	 	One Fountain Plaza

12th Floor

Buffalo, NY 14203	 
	 	Bank of America, N.A.

	 	 	70 Batterson Park Road

Farmington, CT 06032
	 	 	70 Batterson Park Road

Farmington, CT 06032	 
	 	JPMorgan Chase Bank, N.A.

	 	 	10 South Dearborn

Floor 07

Chicago, IL 60603-2003
	 	 	10 South Dearborn

Floor 07

Chicago, IL 60603-2003	 
	 	Citizens Bank of
Pennsylvania

	 	 	525
William Penn Place 

Room 153-2440

Pittsburgh, PA 15219
	 	 	100 Sockanosett Crossroads

Cranston, RI 02920	 
	 	Bank of Tokyo-

Mitsubishi UFJ Trust
Company

	 	 	1251
Avenue of the Americas 

12th Floor 

New York, NY 10020
	 	 	1251 Avenue of the Americas 

12th Floor 

New York, NY 10022	 
	 	Societe Generale

	 	 	1221
Avenue of Americas 

12th Floor 

New York, NY 10022
	 	 	1221 Avenue of Americas 

12th Floor 

New York, NY 10022	 
	 	Wells Fargo Bank, N.A.

	 	 	1700 Lincoln Street

Denver, CO 80203
	 	 	1700 Lincoln Street

Denver, CO 80203	 
	 	PNC Bank, National Association

	 	 	Two Tower Center Boulevard

21st Floor

East Brunswick, NJ 08816
	 	 	Two Tower Center Boulevard

21st Floor

East Brunswick, NJ 08816	 
	 	Comerica Bank

	 	 	One Detroit Center, 9th Floor

500 Woodward Avenue

Detroit, MI 48226
	 	 	One Detroit Center, 9th Floor

500 Woodward Avenue

Detroit, MI 48226	 
	 	National City Bank

	 	 	20 Stanwix Street

19th Floor

Pittsburgh, PA 15222
	 	 	20 Stanwix Street

19th Floor

Pittsburgh, PA 15222	 
	 	Fifth Third Bank

	 	 	600 Superior Avenue East

3rd Floor

Cleveland, OH 44114
	 	 	600 Superior Avenue East

3rd Floor

Cleveland, OH 44114	 
	 	Northern Trust

	 	 	50 S. LaSalle 

Chicago, IL 60675
	 	 	50 S. LaSalle 

Chicago, IL 60675	 
	 	First Niagara Bank

	 	 	726 Exchange Street 

Suite 900

Buffalo, NY 14210
	 	 	726 Exchange Street 

Suite 900

Buffalo, NY 14210	 
	 

 

 

- 4 -

SCHEDULE 2.1 continued

ISSUING BANKS’ COMMITMENT

	 	 	 
	 	 	Letter of Credit
	Issuing Banks	 	Commitment
	HSBC Bank USA, National Association
and Citizens Bank of Pennsylvania

	 	For both Issuing Banks, an aggregate
of $75,000,000EX-10.3

 

Exhibit 10.3

Cortland Bancorp

Amended Director Retirement Agreement

     This Amended Director Retirement Agreement (this “Agreement”) is entered into as of
this 18th day of December, 2007, by and between Cortland Bancorp (the “Company”), a bank holding
company located in Cortland, Ohio, and Jerry A. Carleton, a director of the Company (the
“Director”).

     Whereas, to encourage the Director to remain a member of the Company’s board of
directors, the Company entered into a Director Retirement Agreement dated as of July 26, 2005, with
the Director, providing for specified retirement benefits for the Director after termination of
director service, payable from the Company’s general assets,

     Whereas, none of the conditions or events included in the definition of the term
“golden parachute payment” that is set forth in section 18(k)(4)(A)(ii) of the Federal Deposit
Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal Deposit Insurance Corporation Rule
359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)] exists or, to the best knowledge of the Company, is
contemplated insofar as the Company or the Cortland Savings and Banking Company is concerned, and

     Whereas, the Company and the Director intend that this Agreement shall amend and
restate in its entirety the July 26, 2005 Director Retirement Agreement.

     Now Therefore, in consideration of the foregoing premises and other good and valuable
consideration, the receipt and acceptance of which are hereby acknowledged, the Director and the
Company hereby agree as follows.

Article 1

Definitions

     1.1 “Accrual Balance” means the liability that should be accrued by the Company under
generally accepted accounting principles (“GAAP”) for the Company’s obligation to the Director
under this Agreement, by applying Accounting Principles Board Opinion No. 12, as amended by
Statement of Financial Accounting Standards No. 106, and the calculation method and discount rate
specified hereinafter. The Accrual Balance at Normal Retirement Age shall equal the present value
of the normal retirement benefits. The discount rate means the rate used by the Plan Administrator
for determining the Accrual Balance. The rate is based on the yield on a 20-year corporate bond
rated Aa by Moody’s, rounded to the nearest 1/4%. The Plan Administrator may adjust the discount
rate to maintain the rate within reasonable standards according to GAAP.

     1.2 “Beneficiary” means each designated person, determined according to Article 4, or the
estate of the deceased Director, entitled to benefits, if any, at the Director’s death.

 

 

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

     1.4 “Change in Control” means a change in control as defined in Code section 409A and rules,
regulations, and guidance of general application thereunder issued by the Department of the
Treasury, including –

     (a) Change in ownership: a change in ownership of the Company occurs on the date any
one person or group accumulates ownership of Company stock constituting more than 50% of the
total fair market value or total voting power of Company stock,

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

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

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

     1.6 “Disability” means, because of a medically determinable physical or mental impairment that
can be expected to result in death or that can be expected to last for a continuous period of at
least 12 months, (x) the Director is unable to engage in any substantial gainful activity, or (y)
the Director is receiving income replacement benefits for a period of at least three months under
an accident and health plan. Medical determination of disability may be made either by the Social
Security Administration or by the provider of an accident or health plan covering employees of the
Company or its subsidiaries. Upon request of the Plan Administrator, the Director must submit
proof to the Plan Administrator of the Social Security Administration’s or provider’s
determination.

     1.7 “Early Termination” means Separation from Service before Normal Retirement Age for reasons
other than death, Disability, or Termination for Cause. Early Termination excludes a Separation
from Service governed by section 2.4.

2

 

     1.8 “Effective Date” means March 1, 2005.

     1.9 “Normal Retirement Age” means the Director’s 70th birthday.

     1.10 “Plan Administrator” or “Administrator” means the plan administrator described in Article
7.

     1.11 “Plan Year” means each 12-month period from the Effective Date of this Agreement.

     1.12 “Separation from Service” means the Director’s service as a director and independent
contractor to the Company and any member of a controlled group, as defined in Code section 414,
terminates for any reason, other than because of a leave of absence approved by the Company or the
Director’s death. For purposes of this Agreement, if there is a dispute about the status of the
Director or the date of the Director’s Separation from Service, the Company shall have the sole and
absolute right to decide the dispute unless a Change in Control shall have occurred.

     1.13 “Termination for Cause” or “Cause” means the Director is not nominated by the board or
nominating committee for reelection as a director after the expiration of his current term, or the
Director is removed from the board of directors, in either case –

     (a) because of the Director’s gross negligence or gross neglect of duties, or

     (b) because of the Director’s commission of a felony, or commission of a misdemeanor
involving moral turpitude, or

     (c) because of the Director’s fraud, disloyalty, dishonesty, or willful violation of
any law or significant policy of the Company committed in connection with the Director’s
service and resulting in an adverse effect on the Company, or

     (d) because the Director is removed from service or permanently prohibited from
participating in the Company’s or the Cortland Savings and Banking Company’s affairs by an
order issued under section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act [12 U.S.C.
1818(e)(4) or (g)(1)].

Article 2

Lifetime Benefits

     2.1 Normal Retirement. For Separation from Service on or after Normal Retirement Age, the
Company shall pay to the Director the benefit described in this section 2.1 instead of any other
benefit under this Agreement. However, no benefits shall be payable if this Agreement terminates
under Article 5.

     2.1.1 Amount of benefit. The annual benefit under this section 2.1 is $10,000.

3

 

     2.1.2 Payment of benefit. Beginning with the month immediately after the month in
which the Director’s Separation from Service occurs, the Company shall pay the annual
benefit to the Director in 12 equal monthly installments on the first day of each month.
The annual benefit shall be paid to the Director for ten years.

     2.2 Early Termination. After Early Termination, the Company shall pay to the Director the
benefit described in this section 2.2 instead of any other benefit under this Agreement. However,
no benefits shall be payable if this Agreement terminates under Article 5. Neither the Director
nor the Company shall be entitled to elect in the 12-month period after a Change in Control between
the benefit under this section 2.2 versus the benefit under section 2.4. If the Director’s
Separation from Service occurs within 12 months after a Change in Control, no benefit shall be
payable under this section 2.2 and the Director shall instead be entitled to the benefit under
section 2.4 or, if the Director first attained Normal Retirement Age, section 2.1.

     2.2.1 Amount of benefit. The annual benefit under this section 2.2 is calculated as
the amount that fully amortizes the Accrual Balance existing at the end of the month
immediately before the month in which Separation from Service occurs, amortizing that
Accrual Balance over ten years and taking into account interest at the discount rate or
rates established by the Plan Administrator.

     2.2.2 Payment of benefit. Beginning with the month immediately after the month in
which the Director attains Normal Retirement Age, the Company shall pay the annual benefit
to the Director in 12 equal monthly installments on the first day of each month. The annual
benefit shall be paid to the Director for ten years.

     2.3 Disability Benefit. If the Director’s Separation from Service occurs because of
Disability before Normal Retirement Age, the Company shall pay to the Director the benefit
described in this section 2.3 instead of any other benefit under this Agreement.

     2.3.1 Amount of benefit. The annual benefit under this section 2.3 is calculated as
the amount that fully amortizes the Accrual Balance existing at the end of the month
immediately before the month in which Separation from Service occurs, amortizing that
Accrual Balance over ten years and taking into account interest at the discount rate or
rates established by the Plan Administrator.

     2.3.2 Payment of benefit. Beginning with the month immediately after the month in
which the Director attains Normal Retirement Age, the Company shall pay the annual benefit
to the Director in 12 equal monthly installments on the first day of each month. The annual
benefit shall be paid to the Director for ten years.

     2.4 Change in Control. If the Director’s Separation from Service occurs within 12 months
after a Change in Control, the Company shall pay to the Director the benefit described in this
section 2.4 instead of any other benefit under this Agreement. However, no benefits shall be
payable under this Agreement if this Agreement terminates under Article 5. Neither the Director
nor the Company shall be entitled to elect in the 12-month period after a Change in Control between
the benefit under this section 2.4 versus the Early Termination benefit under section 2.2.

4

 

If the Director’s Separation from Service occurs within 12 months after a Change in Control, no
benefit shall be payable under section 2.2 and the Director shall instead be entitled to the
benefit under this section 2.4. But if the Director shall have attained Normal Retirement Age when
Separation from Service within 12 months after a Change in Control occurs, the Director shall be
entitled solely to the benefit provided by section 2.1, not this section 2.4.

     2.4.1 Amount of benefit. The benefit under this section 2.4 is the Accrual Balance on
the date of the Director’s Separation from Service.

     2.4.2 Payment of benefit. The Company shall pay this benefit to the Director in a
single lump sum three days after the Director’s Separation from Service.

     2.5 Lump-Sum Payout of Remaining Normal Retirement Benefit, Early Termination Benefit, or
Disability Benefit When a Change in Control Occurs. If a Change in Control occurs while the
Director is receiving the Normal Retirement Age benefit under section 2.1, the Company shall pay
the remaining salary continuation benefits to the Director in a single lump sum three days after
the Change in Control. If a Change in Control occurs after Separation from Service but while the
Director is receiving or is entitled at Normal Retirement Age to receive the Early Termination
benefit under section 2.2 or the Disability benefit under section 2.3, the Company shall pay the
remaining salary continuation benefits to the Director in a single lump sum three days after the
Change in Control. The lump-sum payment due to the Director as a result of a Change in Control
shall be an amount equal to the Accrual Balance amount corresponding to the particular benefit when
the Change in Control occurs.

     2.6 Annual Benefit Statement. Within 120 days after the end of each Plan Year the Plan
Administrator shall provide or cause to be provided to the Director an annual benefit statement
showing benefits payable or potentially payable to the Director under this Agreement. Each annual
benefit statement shall supersede the previous year’s annual benefit statement. If there is a
contradiction between this Agreement and the annual benefit statement concerning the amount of a
particular benefit payable or potentially payable to the Director under sections 2.2, 2.3, or 2.4
hereof, the amount of the benefit determined under the Agreement shall control.

     2.7 Savings Clause Relating to Compliance with Code Section 409A. If any provision of this
Agreement would subject the Director to additional tax or interest under Code section 409A, the
Company shall reform the provision. However, the Company shall maintain to the maximum extent
practicable the original intent of the applicable provision without subjecting the Director to
additional tax or interest, and the Company shall not be required to incur any additional
compensation expense as a result of the reformed provision.

     2.8 One Benefit Only. Despite anything to the contrary in this Agreement, the Director and
Beneficiary are entitled to one benefit only under this Agreement, which shall be determined by the
first event to occur that is dealt with by this Agreement. Except as provided in section 2.5 or
Article 3, subsequent occurrence of events dealt with by this Agreement shall not entitle the
Director or Beneficiary to other or additional benefits under this Agreement.

5

 

Article 3

Death Benefits

     3.1 Death Before Normal Retirement Age and Before Separation from Service. If the Director
dies before Normal Retirement Age and before Separation from Service, 30 days after the Director’s
death the Company shall pay to the Director’s Beneficiary in a single lump sum an amount equal to
the Accrual Balance on the date of the Director’s death.

     3.2 Death After Normal Retirement Age but Before Separation from Service. If the Director
dies after Normal Retirement Age but before Separation from Service, the Company shall for a period
of ten years pay to the Director’s Beneficiary the Normal Retirement Benefit specified in section
2.1.

     3.3 Death Before Normal Retirement Age but After Separation from Service. (a) After payments
begin. If, a Separation from Service before Normal Retirement Age having previously occurred, the
Director dies after Early Termination benefits under section 2.2 or Disability benefits under
section 2.3 begin but before receiving all such payments, the Company shall pay the remaining
benefits to the Director’s Beneficiary at the same time and in the same amounts the payments would
have been made to the Director had the Director survived.

     (b) Before payments begin. If, a Separation from Service before Normal Retirement Age having
previously occurred, the Director is entitled at Normal Retirement Age to the Early Termination
benefit under section 2.2 or the Disability benefit under section 2.3 but dies before the benefit
payments begin, the Company shall pay to the Director’s Beneficiary the Early Termination benefit
under section 2.2 or the Disability benefit under section 2.3, as the case may be, but the benefit
payments shall begin on the first day of the month immediately after the month in which the
Director’s death occurs.

     3.4 Death After Separation from Service After Normal Retirement Age. (a) After payments
begin. If, a Separation from Service on or after Normal Retirement Age having previously occurred,
the Director dies after benefit payments under section 2.1 begin but before receiving all such
payments, the Company shall pay the remaining benefits to the Director’s Beneficiary at the same
time and in the same amounts the payments would have been made to the Director had the Director
survived.

     (b) Before payments begin. If, a Separation from Service on or after Normal Retirement Age
having previously occurred, the Director is entitled to the benefit under section Article 2.1 but
dies before the benefit payments begin, beginning with the month immediately after the month in
which the Director’s death occurs the Company shall pay to the Director’s Beneficiary the Normal
Retirement benefit under section 2.1.

Article 4

Beneficiaries

     4.1 Beneficiary Designations. The Director shall have the right to designate at any time a
Beneficiary to receive any benefits payable under this Agreement after the Director’s

6

 

death. The Beneficiary designated under this Agreement may be the same as or different from the
beneficiary designation under any other benefit plan of the Company in which the Director
participates.

     4.2 Beneficiary Designation: Change. The Director shall designate a Beneficiary by completing
and signing the Beneficiary Designation Form and delivering it to the Plan Administrator or its
designated agent. The Director’s Beneficiary designation shall be deemed automatically revoked if
the Beneficiary predeceases the Director or if the Executive names a spouse as Beneficiary and the
marriage is subsequently dissolved. The Director shall have the right to change a Beneficiary by
completing, signing, and otherwise complying with the terms of the Beneficiary Designation Form and
the Plan Administrator’s rules and procedures, as in effect from time to time. Upon the acceptance
by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations
previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last
Beneficiary Designation Form filed by the Executive and accepted by the Plan Administrator before
the Director’s death.

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

     4.4 No Beneficiary Designation. If the Director dies without a valid beneficiary designation,
or if all designated Beneficiaries predecease the Director, then the Director’s spouse shall be the
designated Beneficiary. If the Director has no surviving spouse, the benefits shall be made to the
personal representative of the Director’s estate.

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

Article 5

General Limitations

     5.1 Termination for Cause. Despite any contrary provision of this Agreement, the Company
shall not pay any benefit under this Agreement and this Agreement shall terminate if the Director’s
Separation from Service is the result of Termination for Cause. Likewise, no benefits shall be
paid under the Split Dollar Agreement and Endorsement, as amended, between the Company and the
Director and the Split Dollar Agreement and Endorsement, as amended, also shall terminate if
Separation from Service is the result of Termination for Cause. The board of directors or a duly
authorized committee of the board shall have the sole and absolute right to determine whether the
bases for denial of benefits for cause exist. Benefits may be denied for cause regardless of
whether the Director continued to serve as a director after the board or committee made its
determination not to nominate the Director for reelection.

7

 

     5.2 Misstatement. The Company shall not pay any benefit under this Agreement if the Director
has made any material misstatement of fact on any application for life insurance purchased by the
Company.

     5.3 Removal. If the Director is removed or permanently prohibited from participating in the
Company’s or the Cortland Savings and Banking Company’s affairs by an order issued under section
8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or (g)(1), all
obligations of the Company under this Agreement shall terminate as of the effective date of the
order, and the Split Dollar Agreement and Endorsement, as amended, also shall terminate.

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

     5.5 FDIC Open-Bank Assistance. All obligations under this Agreement shall terminate, except
to the extent determined that continuation of the contract is necessary for the continued operation
of the Cortland Savings and Banking Company, when the Federal Deposit Insurance Corporation enters
into an agreement to provide assistance to or on behalf of the Cortland Savings and Banking Company
under the authority contained in section 13(c) of the Federal Deposit Insurance Act. 12 U.S.C.
1823(c). Any rights of the parties that have already vested shall not be affected by such action,
however.

Article 6

Claims and Review Procedures

     6.1 Claims Procedure. The Company shall notify any person or entity that makes a claim for
benefits under this Agreement (the “Claimant”) in writing, within 90 days of Claimant’s written
application for benefits, of his or her eligibility or noneligibility for benefits under the
Agreement. If the Company determines that the Claimant is not eligible for benefits or full
benefits, the notice shall set forth (w) the specific reasons for such denial, (x) a specific
reference to the provisions of the Agreement on which the denial is based, (y) a description of any
additional information or material necessary for the Claimant to perfect his or her claim, and a
description of why it is needed, and (z) an explanation of the Agreement’s claims review procedure
and other appropriate information as to the steps to be taken if the Claimant wishes to have the
claim reviewed. If the Company determines that there are special circumstances requiring
additional time to make a decision, the Company 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 90 days.

     6.2 Review Procedure. If the Claimant is determined by the Company 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 Company by filing a
petition for review with the Company within 60 days after receipt of the notice issued

8

 

by the Company. Said petition shall state the specific reasons, which the Claimant believes
entitle him or her to benefits or to greater or different benefits. Within 60 days after receipt
by the Company of the petition, the Company shall afford the Claimant (and counsel, if any) an
opportunity to present his or her position to the Company verbally or in writing, and the Claimant
(or counsel) shall have the right to review the pertinent documents. The Company shall notify the
Claimant of its decision in writing within the 60-day period, stating specifically the basis of its
decision, written in a manner to be understood by the Claimant and the specific provisions of the
Agreement on which the decision is based. If, because of the need for a hearing, the 60-day period
is not sufficient, the decision may be deferred for up to another 60 days at the election of the
Company, but notice of this deferral shall be given to the Claimant.

Article 7

Administration of Agreement

     7.1 Plan Administrator Duties. This Agreement shall be administered by a Plan Administrator
consisting of the Company’s board of directors or such committee or person(s) as the board shall
appoint. The Director may be a member of the Plan Administrator. The Plan Administrator shall
also have the discretion and authority to (x) make, amend, interpret, and enforce all appropriate
rules and regulations for the administration of this Agreement and (y) decide or resolve any and
all questions, including interpretations of this Agreement, as may arise in connection with the
Agreement.

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

     7.3 Binding Effect of Decisions. The decision or action of the Plan Administrator about any
question arising out of the administration, interpretation, and application of the Agreement and
the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all
persons having any interest in the Agreement. No Director or Beneficiary shall be deemed to have
any right, vested or nonvested, regarding the continued use of any previously adopted assumptions,
including but not limited to the discount rate and calculation method employed in the determination
of the Accrual Balance.

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

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

9

 

Article 8

Miscellaneous

     8.1 Amendment and Termination. This Agreement may be amended solely by a written agreement
signed by the Company and by the Director. Except as provided in Article 5, this Agreement may be
terminated solely by a written agreement signed by the Company and by the Director.

     8.2 Binding Effect. This Agreement shall bind the Director and the Company, and their
beneficiaries, survivors, executors, successors, administrators, and transferees.

     8.3 No Guarantee of Service. This Agreement is not a contract for services. It does not give
the Director the right to remain a Director of the Company nor does it interfere with the right of
the Company’s shareholders not to re-elect the Director or the right of shareholders or the Board
to remove an individual as a director of the Company. The Agreement also does not require the
Director to remain a director or interfere with the Director’s right to terminate service at any
time.

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

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

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

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

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

     8.9 Entire Agreement. This Agreement and the Split Dollar Agreement and Endorsement, as
amended, constitute the entire agreement between the Company and the Director concerning the
subject matter hereof. No rights are granted to the Director under this

10

 

Agreement other than those specifically set forth herein. This Agreement amends and restates in
its entirety the Director Retirement Agreement dated as of July 26, 2005.

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

     8.11 Captions and Counterparts. Captions and section headings in this Agreement are included
solely for convenience of reference and shall not affect the meaning or interpretation of any
provision of this Agreement. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one and the same
instrument.

     8.12 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. If to the Company, notice shall
be given to the board of directors, Cortland Bancorp, 194 W. Main Street, P.O. Box 98, Cortland,
Ohio 44410-1466, or to such other or additional person or persons as the Company shall have
designated to the Director in writing. If to the Director, notice shall be given to the Director
at the address of the Director appearing on the Company’s records, or to such other or additional
person or persons as the Director shall have designated to the Company in writing.

     In Witness Whereof, the Director and a duly authorized Company officer have executed
this Amended Director Retirement Agreement as of the date first written above.

	 	 	 	 	 	 	 	 	 
	Director	 	 	 	Cortland Bancorp	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

Jerry A. Carleton

	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 	 	 

11

 

Beneficiary Designation

Cortland Bancorp

Amended Director Retirement Agreement

     I, Jerry A. Carleton, designate the following as beneficiary of any death benefits under this
Amended Director Retirement Agreement:

	 	 	 
	Primary:
	 	 
	 

	 	 
	 
	 	 
	 
	 	 
	 
	 
	 	 
	 
	 	 
	Contingent:
	 	 
	 

	 	 
	 
	 	 
	 
	 	 
	 

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

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

	 	 	 	 	 
	Signature:
	 	 	 	 
	 

	 	 

Jerry A. Carleton
	 	 

Date:                                                        , 200             
       

     Received
by the Company
this                    
day of
                                        , 200
                    .

     By:                                                            

     Title:                                                            

12

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