Excess Benefit Plan

FIRST NATIONAL BANK OF CORTLAND


EXCESS BENEFIT PLAN


FOR


DAVID R. ALVORD


This sets forth the FIRST NATIONAL BANK OF CORTLAND EXCESS BENEFIT PLAN FOR DAVID R. ALVORD (the "Plan"), established by FIRST NATIONAL BANK OF CORTLAND, a banking organization organized under the laws of the State of New York, having its principal place of business at 65 Main Street, Cortland, New York ("Employer"), for the benefit of DAVID R. ALVORD, residing at 781 Sleepy Hollow, Cortland, New York ("Employee").


RECITALS


It is the intention of this Plan to create a reserve and fund for a benefit for Employee in excess of the benefits payable under Employer's qualified pension and profit sharing plans, and to pay Employee and his Beneficiaries the benefit so calculated, all as provided herein.


NOW, THEREFORE, effective January 1, 1991 ("Effective Date"), Employer hereby establishes the FIRST NATIONAL BANK OF CORTLAND EXCESS BENEFIT PLAN FOR DAVID R. ALVORD (the "Plan") for the exclusive benefit of Employee and his beneficiaries, in accordance with the following terms and conditions:


ARTICLE I


DEFINITIONS


As used in this Plan, the following terms shall have the following meanings, unless a different meaning is stated and clearly indicated in the context where the term is used:


1.01 "Accumulation Fund" shall be the amount determined by crediting to a bookkeeping account the amount in any year which Employer would have contributed to its Pension Plan for Employee's benefit in accordance with the contribution formula expressed therein, but for the limitation imposed under Code Section 401(a)(4) of the Code and the regulations thereunder. The crediting of any deemed contribution to the Accumulation Fund for any year shall occur on the last day of the Plan Year. Interest shall be credited at the end of each year by multiplying the Appreciation Rate (described in Paragraph 1.02) for the Plan Year by the balance in the Accumulation Fund as of the beginning of the Plan Year.


1.02 "Actuarial Assumptions" of the Plan are as follows:


Mortality (1) Valuation - no mortality factor.


(2) Post--retirement mortality determined by reference to
IAM--983 tables.


Discount Rate/ (1) Present value (discount)factor of 8.0% per year. Appreciation Rate
(2) Future value (appreciation or interest) factor of 8.0%
per year.


(3) Pre-retirement and post-retirement interest assumption
of 8.0% per year.


(4) The Appreciation Rate to be applied in any Plan Year
for amounts credited to the Accumulation Fund shall be
the same rate of return as actually experienced under
Employer's Pension Plan for the same Plan Year.


Age (1) Where age is a determining factor, it will be based on
the nearest birthday.


Determination Date (1) The determination date for each year shall be December
31.


Service (1) Service (for this Plan only) shall be deemed to
commence December 9, 1963.


Service shall be determined for full years of service only;
fractions of years will be disregarded.


Dates (1) Date of Birth-- 08/26/40


(2) Date of Hire-- 12/09/63


(3) Normal Retirement Date -09/01/2005.


Annual Benefit or When the term "annual benefit" or "annual payment" is
used Annual Payment herein, it shall mean 12 months of
the actuarially determined monthly benefit or payment.


Reserve Calculation The value of the Reserve, as of a particular Valuation
Date, shall be determined by calculating the actuarial
value of the amounts needed, as of such date, to fully
fund for a hypothetical straight life annuity payment
to Employee in the amount determined under this Plan,
such payment


commencing as of the Early, Normal or Late Retirement
Date.


1.03 "Average Base Compensation" shall mean the Employee's average Salary for the thirty--six month period ending on the Determination Date coinciding with or next following the date of separation from Service. For purposes of determining Average Base Compensation, if Employee's effective separation from Service occurs other than on December 31 of any Plan Year, his Salary for the year of separation shall be calculated by annualizing for that year his Salary through the date of separation.


1.04 "Benefit" means Employee's annual benefit determined under the Plan expressed in the form of an annuity payable during the life of Employee, commencing at his Early, Normal or Late Retirement Date or the date of his death, and paid in the manner set forth in Article VII.


1.05 "Change of Authority of Employee" shall mean a change of duties and responsibilities of Employee with the result that Employee has materially less authority than would normally be attributable to the President, Chief Operating Officer, and Chief Executive Officer of Employer as those duties, responsibilities and authority have been historically performed and exercised by the Chief Executive Officer of Employer.


1.06 "Change of Control of Employer" shall mean any individual, corporation, partnership, trust, association, pool, syndicate or any other form of entity acquiring by sale or transfer, in one or more transactions, voting shares or voting securities of Employer possessing at least 25% of the voting power for the election of Directors. The acquisition of voting shares or voting securities by any person or entity when issued in an exchange in connection with an acquisition by Employer shall be taken into account in determining Change of Control only if such voting shares or securities are issued in exchange for voting shares or securities that would themselves be taken into account in determining Change of Control.


1.07 "Code" shall mean the Internal Revenue Code of 1986, as amended, and any successor provision thereto.


1.08 "Date of Hire" shall mean December 9, 1963.


1.09 "Determination Date" shall mean December 31 of each Plan Year.


1.10 "Early Retirement Date" shall be the first day of the month coinciding with or next following the date on which Employee separates from Service with Employer prior to Normal Retirement Date under any of the circumstances described in Paragraph 5.02.


1.11 "Effective Date" shall be January 1, 1991.


1.12 "Employee" shall mean DAVID R. ALVORD.


1.13 "Employer" shall mean FIRST NATIONAL BANK OF CORTLAND.


1.14 "401(k) Profit Sharing Plan" shall mean the Employer's profit sharing plan qualified under Section 401(a) of the Code and containing a feature allowing elective deferrals of compensation that is governed under Section 401(k) of the Code.


1.15 "Investment Manager" shall mean the comptroller's office of Employer.


1.16 "Late Retirement Date" shall mean the first day of the month coinciding with or next following Employee's actual retirement date after his Normal Retirement Date.


1.17 "Normal Retirement Date" shall mean September 1, 2005.


1.18 "Pension Plan" shall mean Employer's defined contribution pension plan qualified under Code Section 401(a).


1.19 "Plan" shall mean the excess benefit plan established by the Employer as set forth in this document, and as hereafter amended.


1.20 "Plan Year" initially means the period beginning with the Effective Date and ending on December 31, 1991. Thereafter, the Plan Year shall mean the twelve (12) month period beginning on January 1.


1.21 "Primary Social Security Benefit" means the estimated annual amount payable to Employee at the age at which he becomes eligible to receive unreduced Social Security benefits under Title II of the Social Security Act, and amendments thereto, determined as of the date Employee terminates employment or attains his Normal Retirement Date, whichever occurs first. Employee's Primary Social Security Benefit is determined by assuming that his Salary will continue at the same rate until he reaches the age at which he becomes eligible to receive unreduced Social Security benefits.


1.22 "Reserve" shall mean, as of the Effective Date and as of any Valuation Date thereafter, the actuarial value of the amounts needed as of such date (using the Actuarial Assumptions for the Plan) to fully fund for a hypothetical straight life annuity benefit to Employee providing the Benefit payable to Employee under this Plan, such payment commencing as of the Early, Normal or Late Retirement Date. The Reserve shall be calculated initially, and shall be redetermined annually, assuming that Employee will retire at the Normal Retirement Date.


1.23 "Retirement Annuity" shall mean the hypothetical annual straight life annuity payable to Employee until his death which, if it were to commence as of the Early, Normal or Late Retirement Date (whichever is applicable), would require (using the Actuarial Assumptions of the Plan), as of the Valuation Date, a fund equal to the value of the Reserve in order for full funding of the Retirement Annuity to be achieved by the applicable Retirement Date.


1.24 "Retirement Date" shall mean the date Employee separates from service with Employer on account of his Early, Normal or Late Retirement.


1.25 "Salary" shall mean Employee's W--2 wages for services rendered on behalf of Employer during the Plan Year, or for periods prior to the Effective Date of the Plan, the twelve month period corresponding to such Plan Year. Such amount shall be increased or decreased by the following amounts:


(a) There shall be added to Employee's W-2 wages the amount of Employee's elective contributions for the Plan Year to the Employer's 401(k) Profit Sharing Plan which contributions are otherwise excludable from Employee's gross income under Code Section 402(a)(8).


(b) There shall be subtracted from Employee's W-2 wages the amount of any bonuses paid during the Plan Year pursuant to Employer's Executive Incentive Compensation Plan, but not Employee's annual bonus as historically paid to Employee.


(c) Salary shall not include contributions made by Employer under the Plan, payments made by Employer for group life insurance, hospitalization or like benefits, nor contributions made by Employer under any other employee benefit plan it maintains.


1.26 "Service" means any period of time Employee is in the employ of Employer. Employee shall be entitled to a credit for all Service after his Date of Hire and continuing through the date of Employee's separation from Service with Employer. Employee will be credited with full years of Service only. Fractions of years will be disregarded,


1.27 "Trust" shall mean the FIRST NATIONAL BANK OF CORTLAND EXCESS BENEFIT TRUST FOR THE BENEFIT OF DAVID R. ALVORD.


1.28 "Trustee" shall mean the currently acting Trustee of the Trust.


1.29 "Valuation Date" shall mean any date on which an actuarial valuation is to be made including, without limitation, each Determination Date, arid the Early, Normal and Late Retirement Dates.


ARTICLE II


THE TRUST FUND


2.01 Reserve Account. Employer shall establish an account (the "Reserve Account") to which will be credited, as of the Effective Date", an amount equal to the then value of the Reserve. The Reserve Account shall be restated as of each subsequent Valuation Date to reflect the value of the Reserve as of such date.


2.02 Trust Fund. Employer shall establish a Trust Fund to receive the contributions required under the Plan. The Trust Fund shall be managed by the Investment Manager, and shall be held by the Trustee under the provisions of the Trust.


2.03 Employer Contributions. Employer shall, as of the Effective Date, contribute to the Trust liquid and marketable having a fair market value equal to the then value of the Reserve. As of each subsequent Determination Date, Employer shall calculate and contribute an additional contribution to the Trust equal to the difference between the value of the hypothetical Retirement Annuity as of the Determination Date and the balance in the Trust Fund.


2.04 No Right To Trust Assets. The assets of the Trust Fund shall be held separate and apart from other funds of Employer, and shall be used exclusively for the uses and purposes set forth in this Plan. However, neither Employee, any Beneficiary, nor the Plan shall have any preferred claim on, or any title to or beneficial ownership interest in, any assets of the Trust Fund or Trust prior to the time such assets are paid as Benefits under the Plan. All rights created under the Plan and Trust shall be mere unsecured contractual rights of Employee or his Beneficiary against Employer. The Plan is intended to constitute an unfunded deferred compensation arrangement maintained by Employer for the purpose of providing deferred compensation for a key executive of Employer, and shall be construed accordingly.


ARTICLE III


NORMAL RETIREMENT


3.01 Normal Retirement Benefit. Employee shall be entitled to receive, if he retires as of his Normal Retirement Date, a Normal Retirement Benefit in an amount determined as follows:


(a) An amount equal to eighty percent (80%) of Employee's Average Base Compensation calculated as of his Normal Retirement Date, shall be determined.


(b) The amount determined under subparagraph (a) above shall be reduced by the sum of the following "Subtraction Entries":


(i) An amount equal to the annual benefit to be provided Employee by Employer's Pension Plan (other than amounts attributable to Employee's own contribution to the Pension Plan), determined as of the Normal Retirement Date and converted (if necessary) to its actuarial equivalent (using the Actuarial Assumptions for this Plan) as a straight life annuity payable as an annual benefit commencing as of his Normal Retirement Date;


(ii) An amount equal to the annual benefit at Normal Retirement Date to be provided Employee from the vested portion of Employee's account balance in Employer's 401(k) Profit Sharing Plan that is attributable to all Employer contributions other than Employee's elective contributions as described in Code Section 402(a)(8). Such benefit shall be expressed in the form of a straight life annuity (and calculated using the Actuarial Assumptions for this Plan) payable during Employee's life and commencing as of his Normal Retirement Date.


(iii) Beginning on the first day of the month coinciding with or next following the date Employee becomes eligible for his (unreduced) Primary Social Security Benefit, an amount equal to his Primary Social Security Benefit expressed in the form of an actuarially equivalent single life annuity paying annual benefits to Employee, or the pro rata portion thereof payable for the balance of the calendar year in which the reduction under this Paragraph 3.0l(b)(iii) takes effect. No such reduction shall apply to any payment prior to the date Employer becomes eligible for his (unreduced) Primary Social Security Benefit.


(c) There shall be added to the amount determined under subparagraph (a), as reduced by the Subtraction Entries under subparagraph (b), an amount equal to the annual benefit to b ...