A Combination of Cash and Cortland Bancorp Shares. As described below:

a combination of cash and shares of Cortland Bancorp common stock, or

Under the terms of Cortland Bancorp’s 2015 Director Equity Plan, Cortland Bancorp hereby grants to an option to purchase from Cortland Bancorp a total of shares of Cortland Bancorp common stock at the exercise price per share set forth below:

actual or constructive delivery of unrestricted shares of Cortland Bancorp common stock,

Restrictions on Exercise. This Option may not be exercised before the Director Equity Plan is approved by Cortland Bancorp stockholders, or if the issuance of shares upon such exercise or the method of payment of consideration for shares would constitute a violation of any applicable federal or state securities or other law or regulation, including any rule under Part ​ of Title 12 of the Code of Federal Regulations (“Regulation G”) as promulgated by the Federal Reserve Board. As a condition to the exercise of this Option, Cortland Bancorp may require the Optionee to make any representation and warranty to Cortland Bancorp as Cortland Bancorp in its sole discretion considers necessary or appropriate under applicable law.

Optionee's Representations. If this Option and the shares acquirable by exercise of this Option are not registered under the Securities Act of 1933 when this Option is exercised, the Optionee must, if required by Cortland Bancorp, concurrently with the exercise of all or any portion of this Option deliver to Cortland Bancorp an investment representation statement in the customary form, a copy of which is available for Optionee’s review from Cortland Bancorp upon request. Optionee acknowledges and agrees that a certificate or certificates representing shares acquired by exercise of an Option may bear a restrictive legend or legends noting the restrictions on transfer arising under applicable securities laws and the Director Equity Plan.

No Shares will be issued for the exercise of an Option unless the issuance and exercise comply with all relevant provisions of law and the requirements of any stock exchange upon which Cortland Bancorp common stock may then be listed. For income tax purposes shares will be considered transferred to the Optionee on the date the Option is exercised.

The Optionee acknowledges and agrees that the vesting of shares according to the Notice of Grant and section 3 of this Non-Qualified Stock Option Agreement is earned solely by continuing employment or service with Cortland Bancorp. The Optionee acknowledges receipt of a copy of the Director Equity Plan and represents that the Optionee is familiar with its terms and provisions. The Optionee hereby accepts this Option subject to all of those terms and provisions. The Optionee hereby agrees to accept as binding, conclusive, and final all decisions or interpretations of the Board of Directors upon any questions arising under the Director Equity Plan. The Optionee further agrees to notify Cortland Bancorp of any change in the residence address below.

Business Combination Vote. It is acknowledged and agreed that the Company shall not enter into a definitive agreement regarding a proposed initial Business Combination without the prior consent of the Sponsor. The Sponsor and each Insider, with respect to itself or herself or himself, agrees that if the Company seeks shareholder approval of a proposed initial Business Combination, then in connection with such proposed initial Business Combination, it, she or he, as applicable, shall vote all Founder Shares, Private Placement Shares and any Public Shares held by it, her or him, as applicable, in favor of such proposed initial Business Combination (including any proposals recommended by the Board in connection with such proposed initial Business Combination) and not redeem any Public Shares held by it, her or him, as applicable, in connection with such shareholder approval.

To determine whether Awards will be settled in Shares, cash, or in any combination;